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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☑☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material |
ARROW ELECTRONICS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
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| No fee required. | |
☐ | Fee paid previously with preliminary materials. |
☐ | Fee computed on table |
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OUR |
200 Inverness Drive West |
March 28, 201826, 2024
Dear Shareholder:
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You are invited to Arrow’sArrow Electronics, Inc.’s (“Arrow” or the “Company”) Annual Meeting of Shareholders (“Annual Meeting”) on Thursday,Wednesday, May 10, 2018.7, 2024. The formal notice of the Annual Meeting and the Proxy Statement soliciting your vote at the Annual Meeting appear on the following pages.
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The matters scheduled to be considered at the Annual Meeting are: |
| Arrow’s Board | ||
> | the election of the directors named in the Proxy Statement to serve as members of Arrow’s Board of | | | |
> | the ratification of the | | | |
> | the holding of an advisory vote | | | |
These matters are discussed more fully in the Proxy Statement. | | | ||
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Under the rules adopted by the United StatesU.S. Securities and Exchange Commission (“SEC”), we are furnishing proxy materials to our shareholders online rather than mailing printed copies to each shareholder. Accordingly, you will not receive a printed copy of the proxy materials unless you request one. The Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting (the “Notice”(“Notice”) includes instructions on how to access and review the proxy materials, and how to access your proxy card and vote online. If you would like to receive a printed copy of ourthe proxy materials, please follow the instructions included in the Notice.
Please make sure you vote whether or not you plan to attend the Annual Meeting. You can cast your vote in person at the Annual Meeting, online by following the instructions on either the proxy card or the Notice, by telephone, or, if you received paper copies of ourthe proxy materials, by mailing your proxy card in the postage-paidpostage - paid return envelope.
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WHEN:
WHERE: The Englewood, Colorado AGENDA: 1. Elect the directors named in the Proxy Statement to serve as members of Arrow’s Board of Directors 2. Ratify the appointment of Ernst & Young LLP as Arrow’s independent registered public accounting firm for the fiscal year ending December 31, 3. Hold an advisory vote 4. Transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
| NOTICE OF ANNUAL MEETING | ||||||||
| | March You are invited to Arrow’s Annual Shareholders can vote online, by telephone, by completing and returning the proxy card, or by attending the Annual Meeting. The Notice and the proxy card | ||||||||
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The proxy materials and Arrow’s | ||||||||
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| Carine L. Jean-Claude Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be Held on May 7, 2024
LETTER FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
First and foremost, thank you for your continued investment and confidence in Arrow Electronics.
At Arrow, our diverse team of employees across the world works to bridge the gap between what’s possible and the practical technologies to make it happen. We guide innovation forward by driving demand and expanding addressable markets for our suppliers and customers via our technology-centric focus, go-to-market expertise, and supply chain services capabilities. We enable our suppliers to distribute their technologies and help our customers to source, build upon, and leverage these technologies to grow their businesses and enhance their overall competitiveness. We are a trusted partner in a complex value chain and are uniquely positioned through our electronics components and IT content portfolios to increase stakeholder value.
Through our Five Years Out mindset, we consistently inspire and deliver on our purpose: We enable technology solutions that make a positive difference in people’s lives; we guide the power of innovation to make the world better. Further, we understand the vital role we each play for the good of our business and stakeholders. Our talented global and multicultural workforce powers our performance and value to all.
In 2023, we delivered solid financial results despite a challenging market environment. Though several of the external factors we navigated were unfavorable, the team made great progress on our value-added offerings, in which we have invested to drive structural margin improvements for the business. We were able to accomplish these results while maintaining our relentless focus on delivering excellence for our customers and suppliers, as well as our unwavering commitment to demonstrating our core Arrow values. We are: ethical in how we conduct business; open-minded and courageous as we engage stakeholders; results-oriented and accountable for the quality and outcome of our work; innovative to grow value for stakeholders; and customer - centric to earn trust, loyalty, and repeat business.
As we move through an ongoing cyclical correction and weaker macro demand environment, we are optimistic regarding the overall industry backdrop. We believe longer-term technology trends will benefit Arrow especially since we are at the center of large and growing markets, driven by the electrification of everything including renewable energy, artificial intelligence, and autonomous vehicles. Going forward, the Board and management team remain focused on enhancing more accretive growth initiatives and prudently managing our cost structure and working capital portfolio to emerge from this period in a position to continue to generate long-term value for our shareholders, suppliers, and customers.
I invite you to read more about Arrow’s corporate governance and executive compensation practices in the following pages. As always, we welcome your input and value your support.
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| Sincerely, | |
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| Sean J. Kerins | |
| President and Chief Executive Officer | |
ARROW ELECTRONICS, INC.Annual Meeting of ShareholdersANNUAL MEETING OF SHAREHOLDERSTo Be Held May 10, 2018TO BE HELD MAY 7, 2024
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In Connection with the 2018 Annual Meeting Information
THE PURPOSE OF THIS PROXY STATEMENT
The Board of Directors of Arrow, Electronics, Inc., a New York corporation, (“Arrow” or the “Company”), is furnishing this Proxy Statement to shareholders of record to solicit proxies to be voted at the 2018 Annual Meeting. By returning a completed proxy card, or voting over theby telephone or internet, you are giving instructions on how your shares are to be voted at the Annual Meeting. TheThis Proxy Statement isand the form of proxy are first being made available through www.proxyvote.com.to shareholders of record on or about March 26, 2024.
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| | Invitation to the Shareholders of record at the close of business on March 11, 2024, are invited to attend the Annual Meeting on Tuesday, May 7, 2024, beginning at 8:00 a.m. MT. The Annual Meeting will be held at: The Inverness Denver, a Hilton Golf & Spa Resort 200 Inverness Drive West | |
Please vote your shares by telephone or online, or if you received printed copies of the proxy materials, complete, sign, and date your proxy card and return it promptly in the postage-paid return envelope provided. If your shares are held in “street name” (that is, in the name of a bank, broker, or other holder of record), Unless you indicate otherwise, the persons named as proxies on the proxy card will vote your shares represented in a properly executed proxy card “FOR” all of the nominees for director named in this Proxy Statement, “FOR” the ratification of the appointment of Ernst & Young LLP as Arrow’s independent registered public accounting firm for the fiscal year ending December 31, 2024, and “FOR” approval of the named executive officer compensation as described in the Compensation Discussion and Analysis (“CD&A”) section contained herein. | | | |
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Only shareholders of record of Arrow’s common stock at the close of business on March 12, 2018 (the “Record11, 2024 (“Record Date”) are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 87,633,88653,978,667 shares of Arrow common stock outstanding. Each share of common stock is entitled to one vote on each matter properly brought before the Annual Meeting. The presence in person or by proxy of a majority of the shares entitled to vote at the Annual Meeting shallwill constitute a quorum.
For those who hold shares as a participant in Arrow’s 401(k) Plan, the shareholder has the right to direct Vanguard Fiduciary Trust Company (the “Trustee”), who is the holderA complete list of record, howshareholders entitled to vote the shares of common stock credited to the participant’s account at the Annual Meeting. If voting instructions for the shares of common stock in the 401(k) Plan are not received, those sharesMeeting will be voted byopen to the Trustee inexamination of any shareholder during the same proportions as the shares for which voting instructions were received from other participants in the 401(k) Plan. Voting (including any revocations) by 401(k) Plan participants will close at 11:59 p.m. Eastern Time on May 7, 2018. The Trustee will then vote all shares of common stock held in the 401(k) Plan by the established deadline. For all other shareholders, voting (including any revocations) will close at 11:59 p.m. Eastern Time on May 9, 2018.Annual Meeting.
The person giving a proxy may revoke it at any time prior to the time it is voted at the Annual Meeting by giving written notice to Arrow’s Corporate Secretary, Gregory Tarpinian,Carine L. Jean-Claude, at Arrow Electronics, Inc., 92019151 East Dry Creek Road,Panorama Circle, Centennial, Colorado 80112. If the proxy was given by telephone or through the internet, it may be revoked in the same manner.by voting again via telephone or internet. You may also revokewithdraw your proxy by attending the Annual Meeting and voting in person. If your shares are held in “street name,” you must contact the record holder of the shares regarding how to revoke your proxy.
Arrow pays the cost of soliciting proxies. Arrow has retained D.F. King & Co., Inc. to assist in soliciting proxies at an anticipated cost of approximately $20,000, plus expenses. Arrow will supply soliciting materials to the brokers, fiduciaries, and other nomineescustodians holding Arrow common stock in a timely manner so that the brokers, fiduciaries, and other nomineescustodians may send the materialmaterials to each beneficial owner. Arrow will reimburse the brokers, fiduciaries, and other nomineescustodians for their expenses in so doing. In addition to this solicitation by mail, the Board, employees, and agents of the Company may solicit proxies in person, by electronic transmission, or by telephone.
2024 ANNUAL |
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PROPOSAL | BOARD’S VOTING RECOMMENDATION | ||
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| Ratification of the appointment of Ernst & Young LLP as Arrow’s independent registered public accounting firm for the fiscal year ending December 31, | FOR | |
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3 | Advisory vote | FOR | |
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Shareholders can vote online, by telephone, by completing and returning the proxy card, or by attending the Annual Meeting. The Notice and the proxy card have detailed instructions for voting, including voting deadlines. | |||
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Arrow’s Board | |||
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CERTAIN SHAREHOLDERS
HOLDERS OF MORE THAN 5% OF COMMON STOCK
The following Tabletable sets forth certain information with respect to the only shareholders known to the Company to own beneficially more than 5% of the outstanding common stock of Arrow as of March 12, 2018.11, 2024, unless otherwise noted.
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Name and Address |
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of Beneficial Owner |
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BlackRock Inc. (1) |
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55 East 52nd Street |
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New York, New York 10055 |
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| 9.5 | % |
The Vanguard Group (2) |
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Malvern, Pennsylvania 19355 |
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Wellington Management Group LLP (3) |
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Boston, Massachusetts 02210 |
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270 Park Avenue |
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New York, New York 10017 |
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Boston Partners (5) |
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Boston, Massachusetts 02108 |
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BlackRock, Inc. (1) |
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50 Hudson Yards | | | | | |
New York, New York 10001 | | 5,469,589 | | 10.13 | % |
The Vanguard Group (2) | | | | | |
100 Vanguard Boulevard | | | | | |
Malvern, Pennsylvania 19355 | | 6,211,177 | | 11.51 | % |
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2024 ANNUAL |
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SHAREHOLDINGS OF DIRECTORS AND EXECUTIVE OFFICERS AND DIRECTORS
The following Tabletable shows as of March 12, 2018, the beneficial ownership of the Company’s common stock, as of March 11, 2024, for each director and director nominee, each of the “Named Executive Officers” (the Chief Executive Officer,identified in the Chief Financial Officer,CD&A and each of the other three most highly compensatedall directors, director nominees, and executive officers of the Company, referred to as the “NEOs”), and other executive officers who file Section 16(a) reports.a group.
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Shares of Common Stock Beneficially Owned | Shares of Common Stock Beneficially Owned | Shares of Common Stock Beneficially Owned | ||||||||||||||||||
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| | Currently | | Common | | Acquirable | | Total | | % of Outstanding | | |||||||||
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| Owned (1) |
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| Ownership |
| Common Stock | | |
Sean J. Kerins | | 142,094 | | — | | — | | 142,094 | | * | | |||||||||
Steven H. Gunby | | — | | 17,855 | | 2,722 | | 20,577 | | * | | |||||||||
William F. Austen | | 2,970 | | 1,469 | | 1,520 | | 5,959 | | * | | |||||||||
Fabian T. Garcia | | — | | 2,720 | | 1,520 | | 4,240 | | * | | |||||||||
Gail E. Hamilton | | 101 | | 22,119 | | 1,520 | | 23,740 | | * | | |||||||||
Michael D. Hayford | | — | | — | | — | | — | | * | | |||||||||
Andrew C. Kerin | | — | | 25,915 | | 1,520 | | 27,435 | | * | | |||||||||
Carol P. Lowe | | — | | 4,523 | | 1,520 | | 6,043 | | * | | |||||||||
Mary T. McDowell | | — | | — | | 1,520 | | 1,520 | | * | | |||||||||
Gerry P. Smith | | — | | 3,896 | | 1,520 | | 5,416 | | * | | |||||||||
Rajesh K. Agrawal | | 6,894 | | — | | — | | 6,894 | | * | | |||||||||
Gretchen K. Zech | | 65,160 | | — | | — | | 65,160 | | * | | |||||||||
Kristin D. Russell | | 10,765 | | — | | — | | 10,765 | | * | | |||||||||
Carine L. Jean-Claude | | 15,585 | | — | | — | | 15,585 | | * | | |||||||||
Michael J. Long |
| 473,768 |
| — |
| — |
| * |
| | 87,017 | | — | | — | | 87,017 | | * | |
Christopher D. Stansbury |
| 41,662 |
| — |
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Sean J. Kerins |
| 65,273 |
| — |
| — |
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Andrew D. King |
| 52,912 |
| — |
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| * |
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Gretchen K. Zech |
| 46,929 |
| — |
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Barry W. Perry |
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| 57,956 |
| — |
| * |
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Philip K. Asherman |
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| 28,332 |
| — |
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Steven H. Gunby |
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| 220 |
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Gail E. Hamilton |
| 91 |
| 22,605 |
| — |
| * |
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Richard S. Hill |
| 4,891 |
| 28,463 |
| — |
| * |
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M.F. (Fran) Keeth |
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| 36,392 |
| — |
| * |
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Andrew C. Kerin |
| 4,891 |
| 19,426 |
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| * |
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Stephen C. Patrick |
| — |
| 46,869 |
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| * |
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Total Executive Officers’ and Directors’ Beneficial Ownership as a group (18 individuals) |
| 892,090 |
| 240,263 |
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| 1.3 | % | |||||||||||
Kirk D. Schell | | — | | — | | — | | — | | * | | |||||||||
Total Directors’, Director Nominees', and Current Executive Officers’ Beneficial Ownership as a Group (15 individuals) | | 250,274 | | 78,497 | | 13,362 | | 342,133 | | 0.6 | % | |||||||||
*Represents holdings of less than 1%.
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| (1) | Includes |
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| Includes common stock units deferred by non-management directors and restricted stock units granted under the Omnibus Incentive Plan. |
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PROXY STATEMENT HIGHLIGHTS
COMPANY OVERVIEW
Arrow is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Arrow has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers. These product offerings, coupled with a range of services, solutions, and software, help industrial and commercial customers introduce innovative products, reduce time to market, and enhance overall competitiveness.
Arrow believes that economic success comes from more than just financial growth. As technology’s benefits reach more people, Arrow’s addressable market continues to expand, promoting a healthy economy.
BOARD Leadership Transition
In 2023, Mr. Long concluded his term as Executive Chair of the Board following the 2023 annual shareholder meeting.
In connection with this transition, the Board appointed Mr. Gunby to serve as independent Board Chair based on his independence, deep understanding of Arrow’s business, valuable contributions to the Board during his tenure as a director, and relevant background and experience.
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EXECUTIVE COMPENSATION HIGHLIGHTS
Components of 2023 Compensation Program
CEO | Other NEOs | Description | ||||||
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CASH | | | | | | | | |
Annual Cash Incentive Compensation | ||||||||
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| | > Annual cash incentives are performance-based rewards for the attainment of pre-established financial and strategic targets > Based on financial and quantitative strategic metrics – Absolute EPS (70%) and Strategic Goals (30%) | ||
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EQUITY | ||||||||
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CORPORATE GOVERNANCE HIGHLIGHTs
Arrow believes that good corporate governance is critical to achieving long-term shareholder value. The following table highlights some of Arrow’s corporate governance practices and policies:
● ● ● ● ● ● ● ● ● | ● ● ● ● ● ● ● |
● Annual election of directors ● Annual advisory say-on-pay vote ● All director nominees other than our CEO are independent ● Independent Board Chair ● Independent committees ● Limit on directorships a Board member can hold ● Rigorous stock ownership guidelines for directors and certain key executives ● Anti-hedging and anti-pledging policy ● Ongoing succession planning for executive leadership team and directors ● 44% new directors since 2021 ● Proxy access rights for shareholders | ● Board committee oversight of environmental, social, and governance (“ESG”) matters ● Annual Board and committee self-assessments and individual director peer evaluations ● Resignation policy for directors not receiving a majority vote (see description below under subheading “Director Resignation Policy”) ● Active shareholder engagement (see description below under subheading “Shareholder Feedback and 2023 Say-on-Pay”) ● Adoption of Dodd-Frank compensation clawback policy and retention of existing incentive compensation clawback policy ● Worldwide Code of Business Conduct and Ethics, applicable to all directors, officers, and employees ● No shareholder rights plan (“poison pill”) |
COmmitment to board diversity
The Arrow Board prioritizes diversity in its recruitment of directors and has retained a recruitment firm to assist the Board in actively identifying and evaluating potential diverse Board candidates with the expectation that candidate slates should include women and candidates of underrepresented race/ethnicity in addition to other diverse characteristics, which both supplement and complement the existing Board. Arrow is committed to building a Board with a wide range of skills, experience, expertise, and diversity. Arrow’s Board consists of highly engaged, independent, and diverse directors that are actively involved in, among other things, strategic, risk, and management oversight.
Board Refreshment
The Board believes the fresh perspectives brought by newer directors are critical to a forward-looking and strategic-minded Board when appropriately balanced with the deep understanding of Arrow’s business and independent institutional knowledge provided by longer-serving directors. Accordingly, Arrow has maintained a deliberate mix of new and longer-tenured directors on the Board, and the Corporate Governance Committee is focused on ensuring the optimal mix of tenures, backgrounds, skills, and perspectives for Arrow. Since 2019, Arrow has added six new directors – Messrs. Austen, Smith, Garcia, and Kerins, and Mses. Lowe and McDowell – each of whom have different backgrounds and experiences to further enhance the oversight of Arrow’s strategic goals and initiatives and contribute to the development and expansion of the Board’s knowledge and capabilities. As part of the Board’s active and comprehensive Board refreshment efforts, the Board has nominated a new director, Michael D. Hayford, for election to the Board at the Annual Meeting.
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Snapshot of Director Nominees
Below is a snapshot of the expected composition of Arrow’s Board immediately following the Annual Meeting, assuming the election of the ten (10) nominees named in this Proxy Statement. The slate of ten (10) director nominees includes three (3) female nominees and one (1) ethnically diverse nominee.
Skill/Experience | Nominees |
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| Leadership Experience | 10 | |
| Risk Management Experience | 6 | |
| Global Business and Operations Experience | 10 | |
| Financial Experience | 8 | |
| Legal and Regulatory Oversight Experience | 2 | |
| Technology and Cybersecurity Experience | 8 | |
| Supply Chain Management Experience | 5 | |
| Crisis Management Experience | 6 | |
| Strategy and M&A Experience | 10 | |
| Brand and Marketing Experience | 6 | |
| Corporate Governance Experience | 7 | |
| Human Capital Experience | 8 | |
| Environmental and Climate Strategy Experience | 5 | |
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ENVIRONMENTAL, SOCIAL, AND GOVERNANCE OVERVIEW
At Arrow, we believe that doing good is good for business and our global community. We monitor and manage our ESG opportunities and impacts and engage with shareholders and other stakeholders with the goal of creating a better tomorrow and assuring the long-term viability of our Company.
To demonstrate Arrow’s commitment to the importance of these efforts, quantitative performance objectives related to carbon emission reduction and diversity and equality-related measures were components of our executive annual cash incentive plan for 2022 and 2023. Arrow intends to continue to evolve and integrate ESG into our strategy and operations and related disclosures.
To learn more, please refer to our 2023 ESG Report, available on our website at arrow.com/ESG. The 2023 ESG Report details Arrow’s ESG-related annual goals, progress updates, metrics, and initiatives. We invite you to review the 2023 ESG Report and share your thoughts with us at ESG@arrow.com.
Information on the Company’s website, including our ESG Reports, is not incorporated by reference into, and does not form part of, this Proxy Statement or any other report or document Arrow files with the SEC.
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PROPOSAL 1: ELECTION OF DIRECTORS
THE BOARD RECOMMENDS A VOTE “FOR” ALL OF THE NOMINEES NAMED BELOW.
If elected by our shareholders at the Annual Meeting, each nominee will serve for a one-year term expiring at our 2025 annual meeting of shareholders. Each nominee for election as a member of the Board of Directors of Arrow (the “Board”) is to be elected todirector will hold office until his or her successor has been elected and qualified or until the next Annual Meeting.director’s earlier resignation or removal.
All nominees identified below, except Michael D. Hayford, are current members of the Board. AllThey have been recommended for re-election to the Board by the Corporate Governance Committee and approved and nominated for re-election by the Board. The Board does not anticipate that any of the nominees named below will be unable or unwilling to serve as a director. If any nominee should refuse or be unable to serve, the proxy will be voted for a person designated by the Board, or in lieu thereof, the Board may reduce the number of directors. In accordance with the Company’s bylaws,by-laws (the “By-laws”), the nineten (10) nominees receiving a plurality of votes cast at the Annual Meeting will be elected directors, subject to the Director Resignation Policy described below.
An uncontested election of directors is not considered “routine” under the New York Stock Exchange (“NYSE”) rules. As a result, if a shareholder holds shares in “street name” through a broker, fiduciary, or other nominee,custodian, the broker, fiduciary, or nomineecustodian is not permitted to exercise voting discretion with respect to this proposal. For this reason, if a shareholder“street name” holder does not give histhe broker, fiduciary, or her broker or nomineecustodian specific instructions, the shareholder’s shares will not be voted on this proposal. If youproposal, which is referred to as a “broker non-vote.” Broker non-votes and withholding authority to vote to “abstain,” your shares will be counted as present at the meeting, and your abstentionfor a director nominee will have no effect on the effectoutcome of this proposal (though a vote againstdirector nominee that receives a greater number of “WITHHELD” votes than “FOR” votes in an uncontested election is required by the proposal.Board’s Director Resignation Policy to tender his or her resignation to the Board, as discussed in greater detail below under the heading “Director Resignation Policy”).
In accordance with the Company’s corporate governance guidelines,Corporate Governance Guidelines, members of the Board should have the following skills and abilities:
| > | the education, business experience, and current insight necessary to understand the Company’s business; |
| > | the ability to evaluate and oversee direction, performance, and guidance for the success of the Company; |
| > | the ability to primarily represent the interests of the Company’s shareholders while being attuned to the needs of the Company’s employees, the communities in which it operates, and other stakeholders, insofar as such conditions impact long-term shareholder value; |
| > | the ability to devote the necessary interest and time to fulfill all director responsibilities over a period of years, including committing to prepare for, attend, and meaningfully participate in substantially all scheduled Board and Board committee meetings; |
| > | independence and strength of conviction coupled with the ability to leave behind personal prejudice so as to be open to different points of view; |
| > | the willingness and ability to appraise the performance of executive management objectively and constructively and, when necessary, recommend appropriate changes; |
| > | avoid any activity or interest that might, or might appear to, conflict with his or her fiduciary responsibilities to the Company, except in unusual circumstances and then only with the formal approval of disinterested directors; and |
| > | all other criteria established by the Board from time to time, including functional skills or other attributes which will contribute to the development and expansion of the Board’s knowledge and capabilities. |
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BOARD NOMINATIONS AND SUCCESSION
During the course of the year, the Corporate Governance Committee discusses Board succession and evaluates potential Board candidates. The Corporate Governance Committee has retained a third-party recruitment firm to assist in identifying and evaluating potential Board nominees.
The Company’s annual director nomination process involves formal assessments of qualifications, skills, and attributes necessary for successful contributions at the Board, Board committee, and individual director levels. This process assists the Board in determining who it should nominate to stand for election. In addition, the Corporate Governance Committee continually evaluates potential new candidates for Board membership, which is taken into account when it recommends nominees for election.
The Company uses the following process for assessing needs, identifying candidates, and nominating new director candidates for election.
| > | Conduct Board and Committee Evaluations. As required by the Company’s Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation Committee, and the Corporate Governance Committee, the Board and each Board committee conduct annual self-evaluations of the effectiveness of the Board and each such committee. |
| > | Review Board and Committee Composition and Establish Search Priorities. Utilizing the results of the Board and Board committee self-evaluations and taking into account the Company’s strategic interests, its industry and market, the qualifications set forth in the Company’s Corporate Governance Guidelines, and other relevant considerations, the Corporate Governance Committee, in consultation with the Board, identifies the desired skills, attributes, expertise, experience, and background that would enable one or more additional directors to add value to the Board and its committees. If the Corporate Governance Committee determines to initiate a director search, it may engage a director search firm and provide the parameters for the search. |
| > | Review Director Candidates. Once a director search identifies potentially suitable candidates, the Corporate Governance Committee, with input from the entire Board, makes a list of final candidates. This list also includes any candidates duly submitted by shareholders. The Board Chair, Chief Executive Officer, and selected members of the Corporate Governance Committee then meet with each candidate to evaluate his or her suitability for Board membership in relation to the skills, attributes, expertise, experience, and background desired of a new director. |
| > | Recommendation and Nomination of Candidates for Board. If, based on the above review process, the Corporate Governance Committee identifies one or more suitable potential Board candidates, the Corporate Governance Committee will recommend the candidate(s) to the Board, and the Board will determine whether to nominate such candidate(s) for election by the shareholders at the next annual shareholder meeting; provided that any vacancy on the Board may be filled by a majority vote of the current Board, and any director elected by the Board to fill a vacancy will serve until the next annual shareholder meeting. |
| > | Director Election at Annual Meeting and Committee Assignments. All director nominees obtaining a plurality of the votes cast at the annual shareholder meeting will be elected to serve on the Board. At the Board meeting immediately following the annual shareholder meeting, the Corporate Governance Committee will make recommendations regarding, and the Board will ultimately approve, the committee assignments for the elected directors, including the committee chairs. |
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The below graphic summarizes the factors the Corporate Governance Committee considers in evaluating potential candidates for Board membership.
As a result of our comprehensive recruitment efforts, in 2023, the Company welcomed one new director to the Board, Ms. McDowell, who was elected to the Board at the 2023 annual shareholder meeting. In February 2024, the Corporate Governance Committee also recommended for nomination, and the Board nominated, Michael D. Hayford for election to the Board at the Annual Meeting. Mr. Hayford was identified by the Company’s business. Members ofthird - party executive recruitment firm and, if elected to the Board must be ableat the Annual Meeting, will bring deep public - company and technology industry experience to evaluate and oversee its direction and performance for the Company’s continued success. The directors should also possess such functional skills, corporate leadership, and international experience required to contribute toBoard, as further described below under the development and expansionheading “Biographies of the Board’s knowledge and capabilities. Moreover, the directors should have the willingness and ability to objectively and constructively appraise the performance of executive management and, when necessary, recommend appropriate changes.Director Nominees.”
The Corporate Governance Committee has a thoughtful policy regarding diversity. considers shareholder recommendations of Board nominees as well as those recommended by current directors, officers, employees, and others. Such recommendations may be submitted to Arrow’s Chief Governance, Sustainability, and Human Resources Officer, Gretchen Zech, at Arrow Electronics, Inc., 9151 East Panorama Circle, Centennial, Colorado 80112, who will forward them to the Corporate Governance Committee. Possible candidates suggested by shareholders are evaluated by the Corporate Governance Committee in the same manner as other candidates.
DIVERSITY
Whenever the Corporate Governance Committee evaluates a potential candidate for Board membership, it considers that individual in the context of the composition of the Board as a whole. TheWhile the Company does not have a formal diversity policy, the Board believes that its membership should reflect diversity in its broadest sense to include, among other factors, age, gender, geography, ethnicity/race, and consistentcultural viewpoints. Consistent with that philosophy, the Board doeshas taken measures to diversify its makeup:
| > | All but one of the Company’s director nominees (i.e., Mr. Kerins) are independent and have a broad range of experience in varying fields, including, among others, software development and sales, business strategy consulting, hospitality services, consumer products, electronics and computer hardware manufacturing and distribution, business services, and telecommunication products and cloud services. |
| > | 30% of the director nominees are women, and 10% are racially/ethnically diverse. |
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| > | A majority of the Company’s director nominees hold or have held directorships at other U.S. public companies. |
| > | Eight of the director nominees, including the Company’s CEO, have served as chief executive officers, and all have demonstrated superb leadership, intellectual, and analytical skills gained from deep experience in management, finance, and corporate governance. |
| > | The Board has retained a recruitment firm to assist the Corporate Governance Committee in actively identifying and evaluating potential diverse Board candidates and sets clear expectations that candidate slates should include women and candidates of underrepresented race/ethnicity in addition to other diverse characteristics, which both supplement and complement the existing Board. |
The Corporate Governance Committee is focused on continued diversity on the Board as it believes that the varied perspectives and experiences resulting from having a diverse Board enhance the quality of decision making. In particular, the Board is committed to identifying and evaluating highly qualified Board candidates who are women and/or are from an under-represented community as well as candidates with other diverse backgrounds, industry experience, and other unique characteristics. For example, three recent additions to the Board, Mary T. McDowell, Carol P. Lowe, and Fabian T. Garcia, have collectively added valuable gender, ethnic, and geographic/cultural diversity.
The Corporate Governance Committee recognizes the evolving support for boards to achieve a target of 30% women representation. The Board currently has 33% gender diversity. If all of the Company’s director nominees are elected at the Annual Meeting, the Board would have 30% gender diversity. Over the course of 2024, the Board expects to continue to work closely with the Corporate Governance Committee to identify potential additions to the Board and expects to consider a candidate’sin its evaluation potential candidates’ diversity characteristics that may supplement and complement the existing Board. None of the Company’s director candidates are discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis proscribed by law.
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Director Nominee Diversity and Experience Matrix*
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10 Director Nominees: | William | Fabian | Steve | Gail | Michael | Andrew | Sean | Carol | Mary | Gerry | |
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Leadership | Leadership experience facilitates effective oversight of management, informs development of Company strategy, and enhances the Board’s succession planning process. | ||||||||||
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Risk Management | Experience assessing and managing risk enables directors to effectively oversee and mitigate the most significant risks facing Arrow. | ||||||||||
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Global Business and Operations | Background and experience managing global relationships and engaging with international stakeholders supports the Board’s oversight of key risks involving our global customer and supplier bases and of strategic decision-making relating to our complex worldwide business. | ||||||||||
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Financial | Demonstrated financial experience enables in-depth analysis of our financial statements and informed decision-making regarding our capital structure, financial transactions, and financial reporting processes. | ||||||||||
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Legal and Regulatory | Experience with legal and regulatory oversight enables directors to effectively oversee compliance with legal and regulatory requirements and the related policies, procedures, and controls for ensuring such compliance. | ||||||||||
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Technology and Cybersecurity | Experience navigating the ever-changing technology landscape enables sharpened oversight of the innovative products, services, and systems central to our business and supports the Company’s long-term strategic planning. Experience with privacy and information security and cybersecurity oversight is critical to helping Arrow manage and plan to defend against significant cybersecurity risks. | ||||||||||
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Supply Chain Management | Substantial knowledge of supply chain management enables enhanced oversight of our product and service offerings and sharpens focus on our business strategy to be the premier, technology-centric, go-to-market, and supply chain services company on the planet. | ||||||||||
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Crisis Management | In conjunction with the Board’s oversight of Arrow’s overall enterprise risk management, crisis management experience allows the Board to assist the Company in mapping out a crisis response plan and navigating a crisis in the rare event one should occur. | ||||||||||
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Strategy and M&A | Experience in strategic planning and mergers and acquisitions is critical in formulating and implementing Arrow’s continued growth strategy. | ||||||||||
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Brand and Marketing | Brand and marketing experience enables the Board to provide valuable insight into the alignment of brand definition with Arrow’s long-term strategy as a driver of value. | ||||||||||
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Corporate Governance | Directors with experience in corporate governance assist the Company in implementing effective and compliant corporate governance practices for the benefit of our various stakeholders in the continually evolving corporate governance landscape. | ||||||||||
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Human Capital | Human capital management experience supports the Board’s oversight of the development, implementation, and effectiveness of practices, policies, and strategies relating to Arrow’s workforce, including talent attraction and development, corporate culture, and diversity and inclusion. | ||||||||||
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Environmental and Climate Strategy | Experience in climate change risk management strategies and other climate-related issues enables enhanced Board oversight of environmental and climate related policies, strategies, compliance, and priorities. | ||||||||||
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10 Director Nominees: | William | Fabian | Steve | Gail | Michael Hayford | Andrew | Sean | Carol | Mary | Gerry |
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Age | 65 | 64 | 66 | 74 | 64 | 60 | 62 | 58 | 59 | 60 |
Years on the Board | 4 | 3 | 7 | 16 | 0 | 14 | 2 | 3 | 1 | 4 |
* This matrix illustrates the experience, education, gender, race, ethnicity, geographic location,skills, qualifications, and differencecharacteristics of viewpoint when evaluating his or her qualificationsthe individuals nominated for election to the Board. Board at the Annual Meeting, based on information self-reported to the Company by each applicable individual.
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BIOGRAPHIES OF DIRECTOR NOMINEES
Based on theeach nominee’s experience, attributes, and skills, which exemplify the sought-after characteristics described above, the BoardCorporate Governance Committee has concluded that each nominee possesses the appropriate qualifications to serve as a director of the Company.
Independent Board Chair | Steven H. Gunby | Age: 66 | Director Since: 2017 | ||
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● Senior Partner and Global Leader of Transformation from ● Senior Partner and Chairman, North and South America from 2003 to 2009. ● Held other major managerial roles in his capacity as a Senior Partner and Managing Director, | Breakthru Beverage Group LLC ● A director (a private company) from 2016 to 2018. | ||
REASONS FOR NOMINATION
CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●FTI Consulting, Inc. | |||
Independent Director Committees: Compensation & Corporate Governance (Chair) |
| Age: 65 Director Since: 2020 | |
CAREER HIGHLIGHTS | |||
Bemis Company, Inc., a global manufacturer of flexible packaging products and pressure-sensitive materials ● President, Chief Executive Officer, and director from 2014 until Bemis was acquired by Amcor Limited in 2019. ● Executive Vice President and Chief Operating Officer from 2013 to 2014. ● Group President of Global Operations from 2012 to 2013. ● Vice President of Operations from 2004 to 2012. | Morgan Adhesives Company ● President and Chief Executive Officer from 2000 to 2004. General Electric Company ● Various positions from 1980 to 2000. Tennant Company ● A director (a public company) from 2007 to 2022. Arconic Corporation ● A director (a public company) from 2020 to 2023. | ||
REASONS FOR NOMINATION As President and CEO of Bemis, a complex global material science and manufacturing company, Mr. Austen gained expertise in global manufacturing and operations, together with experience in international mergers and acquisitions and business integration. The Board believes that Mr. Austen’s experience with building high-performance, cross-functional teams coupled with his engineering background make him particularly valuable in guiding strategy for the Company’s engineering services. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●None | |||
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Independent Director Committees: Compensation | Fabian T. Garcia | Age: 64 Director Since: 2021 | |
CAREER HIGHLIGHTS | |||
Unilever PLC., a British multinational consumer goods company ● President, Personal Care, and member of the Unilever Leadership Executive since 2022. ● President, Unilever North America, and member of the Unilever Leadership Executive from 2020 to 2022. The Boston Consulting Group, an American global management consulting firm ● Senior Advisor for consumer-packaged goods from 2018 to 2019. Revlon, Inc. ● President, Chief Executive Officer, and director from 2016 to 2018. Colgate-Palmolive Company ● Various positions from 2003 to 2016, beginning as President, Asia Pacific & Greater Asia Division, continuing as President, Latin America & Global Sustainability, and culminating as Chief Operating Officer, Global Innovation and Growth. | The Timberland Company ● Senior Vice President, International Relations, from 2002 to 2003. Chanel Ltd. ● President, APAC and Member of the Executive Committee from 1996 to 2001. Procter & Gamble Company ● Various positions in the U.S., Japan, Taiwan, Venezuela, and Colombia, from 1980 to 1994. Kimberly-Clark Corporation ● A director (a public company) from 2011 to 2019. | ||
REASONS FOR NOMINATION Mr. Garcia is a global business leader with a strong track record and deep experience, including his tenure as a public company CEO, with a keen understanding of global business strategy, international innovation and growth, geopolitical sensitivities, and financial, operational, and strategic leadership skills. The Board believes that Mr. Garcia’s multicultural and global experience is especially valuable in guiding the Company’s international strategy and fostering sustainable business practices and an inclusive corporate culture. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●None | |||
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Independent Director Committees: Audit & Corporate Governance | Gail E. Hamilton | Age: 74 Director Since: 2008 | |
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Symantec Corporation ● Executive Vice President Compaq Computer Corporation ● Vice President and Hewlett-Packard Company ● General Manager of the Telecom Platform Division | OpenText Corporation ● A director Ixia (acquired by Keysight Technologies in 2017) ● A director (a public company) from 2005 to 2017. Westmoreland Coal ● A director | ||
REASONS FOR NOMINATION Ms. Hamilton was responsible for designing, manufacturing, and selling electronic systems for more than 20 years. While at Symantec, a leading software company, Ms. Hamilton oversaw the profit and loss and operations of the enterprise and consumer business. In that role, she was responsible for business planning and helped steer the company through an aggressive acquisition strategy. She also oversaw Symantec’s cybersecurity function and services. The Board believes that Ms. Hamilton’s experience at Symantec CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●Open Text Corporation | |||
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| Age: 64 Director Since: -- | |
CAREER HIGHLIGHTS | ||||
● Chief Executive Officer from ● A director (public company) from 2018 to 2023. Motive Partners ● Founder and Senior Advisor from 2015 to 2018. Fidelity National Information Services, Inc. ● Executive Vice President and Chief Financial Officer from 2009 to 2013. National Infrastructure Advisory Council, an executive-branch council focused on critical infrastructure security and resilience ● Member since 2022 (appointed by the President of the United States). | Metavante Technologies, Inc. ● A director (public company) from 2007 to 2009. ● President and Chief Operating Officer from 2007 to 2009. ● Chief Financial Officer from 2001 to 2006. ● Other senior positions of increasing seniority from 1992 to 2001. Endurance International Group Holdings ● A director (public company) from 2013 West Bend Mutual Insurance Company ● A director (private company) from 2006 to 2018. | |||
REASONS FOR NOMINATION Mr.
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Independent Director Committees: Compensation & Corporate Governance | Andrew C. Kerin | Age: 60 Director Since: 2010 | |
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● Chief Executive Officer The Brickman Group, Ltd. ● Chief Executive Officer and a director | Aramark Corporation ● Executive Vice President ● Executive Vice President ● Elected as an executive officer ● President, Aramark Healthcare and ● A number of other management roles within Aramark Corporation. Under his leadership were all of Aramark’s food, hospitality, and facilities businesses, including the management of professional services in healthcare institutions, universities, schools, business locations, entertainment and sports venues, correctional facilities, and hospitality venues. | ||
REASONS FOR NOMINATION Mr. Kerin brings over 30 years of experience leading business service companies and building service teams across the globe. The Board believes that Mr. Kerin’s CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●None | |||
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President and Chief Executive Officer | Sean J. Kerins | Age: 62 Director Since: 2022 | |
CAREER HIGHLIGHTS | |||
Arrow Electronics, Inc. ● President, Chief Executive Officer, and director since 2022. ● Chief Operating Officer from 2020 to 2022. ● President, Global Enterprise Computing Solutions from 2014 to 2020. ● President, North American Enterprise Computing Solutions from 2010 to 2014. ● Vice President, Storage and Networking from 2007 to 2010. | EMC Corporation ● Several sales, marketing, and professional services roles around the world from 1997 to 2007. Other Experience ● Various roles with Coopers & Brand Consulting and General Motors. | ||
REASONS FOR NOMINATION Mr. Kerins has served for 17 years at the Company in progressively more senior leadership and executive roles. The Board believes Mr. Kerins brings value to the Board from his comprehensive understanding of the Company’s business and deep institutional knowledge of the Company. The Board believes that in Mr. Kerins’ role as CEO of the Company, Mr. Kerins can effectively communicate Board priorities to Company management and provide insight and feedback to the Board on behalf of Company management. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●None | |||
Independent Director Committees: Audit (Chair) & Corporate Governance | Carol P. Lowe | Age: 58 Director Since: 2021 | |
CAREER HIGHLIGHTS | |||
FLIR Systems, Inc., a thermal imaging company ● Executive Vice President and Chief Financial Officer from 2017 to 2021. Sealed Air Corporation ● Senior Vice President and Chief Financial Officer from 2011 to 2017. Carlisle Companies Incorporated ● President, Carlisle Food Service Products in 2011. ● President, Trail King Industries from 2008 to 2011. ● Vice President and Chief Financial Officer from 2004 to 2008. | TCW Special Purpose Acquisition Corp. ● A director (a public company) from 2021 to 2022. EMCOR Group, Inc. ● A director (a public company) since 2017. Other Experience ● A director of Duravant (a private company) since 2023. ● A director of Novolex (a private company) since 2021. ● Member of the Board of Visitors and Finance Committee, Fuqua School of Business since 2017. | ||
REASONS FOR NOMINATION Ms. Lowe has valuable experience and a depth of knowledge in many aspects of finance, as well as business services, strategic planning, business development, and information technology. The Board believes that her record of instilling knowledge-based, performance-driven cultures throughout her career enables her to provide insightful contributions to the Company. Ms. Lowe is considered an “audit committee financial expert” as the term is defined in Item 407(d) of Regulation S-K. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●EMCOR Group, Inc. | |||
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| Age: 59 Director Since: 2023 | |
CAREER HIGHLIGHTS | |||
Mitel Networks Corporation, a global provider of telecommunication products and cloud services ● President and Chief Executive Officer from 2019 to 2021. ● A director (private company) from 2019 to 2022, and Board Chair from 2021 to 2022. Polycom, Inc., an audio and video technology developer ● Chief Executive Officer and a director (private company) from 2016 to 2018. The Informa Group plc ● A director (UK public company) since 2018. ● Senior Independent Director since 2021. | Bazaarvoice, Inc. ● A director (public company) from 2014 to 2016, and Compensation Committee Chair from 2015 to 2016. UBM plc. ● A director (UK public company) from 2014 to 2018. Autodesk, Inc. ● A director (public company) since 2010. ● Compensation Committee Chair since 2012. Other Experience: ● Served as Executive Vice President at Nokia from 2004 to 2012. ● Served in various executive, managerial, and other positions with Compaq Computer Corporation and Hewlett-Packard Company. | ||
REASONS FOR NOMINATION Ms. McDowell has strong strategic and operational leadership experience developed over an extensive career in the technology industry, owing to her previous roles as chief executive officer of two global technology-focused organizations and the chair of a corporate board of directors. The Board believes that this background allows Ms. McDowell to effectively contribute to the Board’s overall leadership structure and provide valuable insights into the Company’s core businesses and the markets in which they operate. Ms. McDowell also has a proven track record leading strategic transformations and implementing cutting-edge innovation in the fast-moving technology space, including for global businesses with diverse product lines and extensive distribution networks, which the Board believes will help the Company develop, refine, and implement the Company’s growth strategy. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●Autodesk, Inc. ●The Informa Group plc (London Stock Exchange) | |||
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Independent Director Committees: Compensation (Chair) | Gerry P. Smith | Age: 60 Director Since: 2020 | |
CAREER HIGHLIGHTS | |||
● Chief Executive Officer and director (a public company) since 2017. Zero100, a global coalition accelerating progress to zero-percent carbon and 100% digital supply chains ● Founding member of Lenovo Group Limited ● Executive Vice ● Executive Vice President and President of ● Chief Operating Officer of the Personal Computing Group and Enterprise ● President of the Americas from 2013 to 2015. | Lenovo Group Limited (continued) ● President, North America and Senior Vice President, Global Operations from 2012 to 2013. ● Senior Vice President of Global Supply Chain from 2006 to 2012. Dell Inc. ● Served in a number of roles from 1994 to 2006. | ||
REASONS FOR NOMINATION Mr.
●The ODP Corporation | |||
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The Board has adopted a Director Resignation Policy which provides that in an uncontested election, any director nominee that receives a greater number of votes “withheld”“WITHHELD” from his or her election than votes “for”“FOR” his or her election must tender a letter of resignation to the Board within five days of the certification of the shareholder vote.vote for consideration by the Corporate Governance Committee. The Corporate Governance Committee must then consider whether to recommend that the Board accept or reject the director’s resignation and promptly make such a recommendationrecommendation. The Board must then take action with respect to the Board. The Board will then consider the resignation and, within 90 days following the date of the shareholders’ meeting at which the election occurred shalland then publicly disclose its decision.decision in a Form 8-K filed with the SEC. A director whose resignation is under consideration may not participate in any deliberationthe deliberations of the Corporate Governance Committee or Board regarding his or her resignation. The Director Resignation Policy can be found under “Governance Documents” at the “Leadership &and Governance” sublinksub-link of the Investor Relations dropdowndrop-down menu on investor.arrow.com.
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2024 ANNUAL |
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PROXY STATEMENT |
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TheIn 2023, the Board meets inmet in: (i) general sessions withpresided over by the Chairman ofExecutive Chair (for sessions prior to the 2023 annual shareholder meeting) and independent Board presiding, inChair (for sessions after the 2023 annual shareholder meeting), (ii) meetings limited to non-managementnon- management directors (which are ledmeetings were presided over by the Lead Director)Independent Director prior to the 2023 annual shareholder meeting and presided over by the independent Board Chair after the 2023 annual shareholder meeting), and (iii) in its three various committees. Committee meetings are open to all members of the Board.Board other than management directors during the sessions of the non-management directors of such committee meetings.
Committee memberships and chair assignments are reviewed no less than annually by the Corporate Governance Committee, which makes appointmentcommittee appointments and chair recommendations to the Board.
The Tabletable below reflectsshows current committee memberships for calendar year 2017.as of the date of this Proxy Statement.
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C= Chair M= Member
| (1) | Mr. Gunby was appointed to serve as independent Board Chair at the meeting of the Board immediately following the 2023 annual shareholder meeting. |
BOARD LEADERSHIP STRUCTURE
The Board annually elects a Chair after taking into account the recommendation of the Corporate Governance Committee following its annual review of the Board’s leadership structure, which typically takes place immediately after the annual shareholder meeting.
Among other responsibilities, the Board Chair:
| ● | acts as the key liaison between the Board and management; |
| ● | sets timing, location, and agendas for meetings of the Board (in consultation with senior management of the Company and committee chairs); |
| ● | sets the agenda and chairs all executive sessions of the independent directors; |
| ● | presides over Board and shareholder meetings; |
| ● | works closely with the Corporate Governance Committee to recommend committee chairs and committee assignments; |
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(1)
| ● | assists the Corporate Governance Committee in evaluating whether to nominate additional directors for Board membership; and |
| ● | may call special meetings of the Board. |
The Company does not require the separation of its Chair and CEO positions, but they are currently separate. The Board believes it is in the best interests of the Company to determine the separation of its Chair and CEO position based upon the circumstances at the time. As described under “Proxy Statement Highlights – Board Leadership Transition” above, in 2023 Mr. Gunby was appointedLong concluded his service as Executive Chair and a board member effective December 12, 2017.
(2)Mr. Hanson retired as a board member effective December 13, 2017.
In accordance withof the Company’s corporate governance guidelines,Board at the conclusion of the 2023 annual shareholder meeting on May 17, 2023, and the Board appointed Mr. Perry to serveGunby as independent Board Chair immediately following the Lead Director. The Lead Director chairs2023 annual shareholder meeting.
In situations where the Board meetings when the ChairmanChair is not present. He also chairs the sessions of the non-management directors held in connection with each regularly scheduled Board meeting. The Lead Director serves as a liaison between the Chairman and the independent, non-management directors, and reviews and approves Board agendas and meeting schedules. The Lead Director has the authority to call meetings of the non-management directors.
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CHIEF EXECUTIVE OFFICER AND CHAIRMAN POSITIONS
The Company’s Chief Executive Officer currently serves as Chairman of the Board. In his position as Chief Executive Officer, Mr. Long has primary responsibility for the day-to-day operations of the Company and provides consistent leadership on the Company’s key strategic objectives. In his role as Chairman, he sets the strategic priorities forCorporate Governance Guidelines suggest the Board presides over its meetings, and communicates its findings and guidance to management. The Board believes that the combination of these two roles is the most appropriate structure for the Company at this time because: (i) this structure provides more consistent communication and coordination throughout the organization, which results inappoint a more effective and efficient implementation of corporate strategy; (ii) it unifies the Company’s strategy behind a single vision; (iii) the Chief Executive Officer is the most knowledgeable member of the Board regarding risks the Company may be facing and, in his role as Chairman, is able to facilitate the Board’s oversight of such risks; (iv) the structure has a long-standing history of serving the Company’s shareholders well through many economic cycles, business challenges, and succession of multiple leaders; (v) the Company’s current corporate governance processes, including those set forth in the various Board committee charters and corporate governance guidelines, preserve and foster independent communication amongst non-management directors as well as independent evaluations of and discussions with the Company’s senior management, including the Company’s Chief Executive Officer; and (vi) the role of the Lead Director, which fosters better communication among non‑management directors, fortifies the Company’s corporate governance practices, making the separation of the positions of Chairman of the Board and Chief Executive Officer unnecessary at this time.Independent Director.
COMMITTEES
In compliance with the pay ratio disclosure requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company determined that the 2017 annual total compensation of the median compensated of all its employees who were employed as of December 31, 2017, other than its CEO, Mr. Long, was $53,310; Mr. Long’s 2017 annual total compensation was $10,994,551, and the ratio of these amounts was 1-to-206.
The following summarizes the methodology, material assumptions, adjustments, and estimates the Company used for calculating the CEO pay ratio:
> Employee Measurement Date: The Company utilized the entire global population of approximately 19,000 eligible employees on December 31, 2017.
> Exclusions: The number of US and non-US employees prior to exemption were approximately 7,000 and 12,000, respectively. Employees from the following non-US jurisdictions that collectively constitute 5% or less of the total global workforce were excluded: India, Indonesia, Latvia, Lithuania, Malaysia, Ukraine, and Vietnam. The total number of employees excluded was approximately 900. Therefore, the total number of US and non-US employees used in the final analysis was 7,000 and 11,100, respectively.
> Compensation Time Period: The Company measured compensation for the above employees using the 12-month period ending December 31, 2017.
> Consistently Applied Compensation Measure: Target total cash (base + target bonus) was selected as the consistently applied compensation measure used to identify the median employee. The Company used existing data from its global Human Resource information system to identify the median employee. Base pay for hourly employees was calculated based on a reasonable estimate of hours worked (including overtime) in 2017, and on salary levels for all remaining employees.
> Determining the Median Employee: Using this methodology, the Company determined that its median employee was a full-time, hourly employee, with wages and overtime pay for the 12-month period ending December 31, 2017 in the amount of $50,919.
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> Determining Median Employee’s Pay for CEO Ratio: With respect to its median employee, the Company then identified and calculated the elements of such employee’s compensation for fiscal 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation in the amount of $53,310. The difference between such employee’s wages and the employee’s annual total compensation represents the estimated value of such employee’s retirement-related benefits, which is $2,391.
> Determining CEO’s Pay for CEO Ratio: With respect to the annual total compensation of its CEO, the Company used the amount reported in the “Total” column of its 2017 Summary Compensation Table included in this Proxy Statement.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on Arrow’s payroll and employment records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Each of the committees of the Board operates under a charter, copies of which are available under “Governance Documents” at the “Leadership &and Governance” sublinksub-link of the Investor Relations drop downdrop-down menu on investor.arrow.com. As a matterinvestor.arrow.com.
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Audit Committee
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Current Members |
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Gail E. Hamilton
| | auditor |
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Key Activities in 2023 | ||
● Supervised Arrow’s ethics and compliance program, including regular review of whistleblower hotline complaints ● Received regular cybersecurity updates from management and discussed cybersecurity risk ● Reviewed and recommended to the Board expansion of the Company’s share repurchase program and approval of other financing transactions ● Reviewed and recommended to the Board updates to its committee charter ● Received regular updates from management on legal and regulatory developments ● Adopted improvements to the Company’s disclosure controls and procedures, including relating to evaluation of cybersecurity incidents for required disclosure | ||
* | The Board has determined that Ms. Lowe is qualified as an “audit committee financial expert,” as the term is defined in Item 407(d) of Regulation S-K. |
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The Board has determined that Mrs. Keeth and Mr. Patrick are qualified as “audit committee financial experts,” as the term is defined in Item 407(d) of Regulation S-K.
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William F. Austen Fabian T. Garcia Andrew C. Kerin | | |
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Key Activities in 2023 | ||
● Managed compensation-related decisions to facilitate successful leadership transitions ● Received regular updates from management on the Company’s human capital strategy and oversaw the development of the human-capital related disclosures in Arrow’s ESG report ● Reviewed and recommended to the Board the adoption of a Dodd-Frank compensation clawback policy, updates to its existing incentive compensation clawback policy, and updates to its committee charter | ||
The Compensation Committee may delegate authority from time to time to a subcommittee of one or more members of the Compensation Committee or to the CEO, if and when the Committee deems appropriate and in accordance with its charter and applicable rules and regulations. In 2017,2023, the Compensation Committee directly engaged Pearl Meyer & Partners (“Pearl Meyer”) as a consultant to examine and report exclusively to the Compensation Committee on best practices in the alignment of compensation programs for the Chief Executive OfficerCEO and other members of senior management by providing competitive benchmarking data, analyses, and recommendations with regard to plan design and target compensation. In addition, Pearl Meyer & Partnersprovides guidance to the Corporate Governance Committee regarding non-management director compensation. Pearl Meyer does not provide any other services to the Company. TheseThe Company has determined that the services to the Compensation Committeerendered by Pearl Meyer have not raisedand do not raise any conflicts of interest.
Corporate Governance Committee
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Corporate Governance Committee
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Current Members | |
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William F. Austen, Chair Gail E. Hamilton Andrew C. Kerin
| | implements, and monitors Arrow’s Corporate Governance Guidelines or to fill existing or expected director vacancies |
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Key Activities in 2023 | ||
● Recommended the appointment of an independent Board Chair ● Identified, reviewed, and recommended for the Board’s nomination, a new ● Reviewed the Company’s ESG developments and oversaw the preparation and publication of the Company’s ESG report ● Reviewed and recommended to the Board approval of updates to the Company’s Worldwide Code of Business Conduct and Ethics, Corporate Governance Guidelines, its committee charter, and various other internal policies and procedures ● Helped facilitate certain management changes during 2023 by recommending such changes to the Board ● Reviewed and recommended to the Board modifications to the compensation of the Company’s independent Board Chair to ensure the compensation for | ||
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The Corporate Governance Committee considers shareholder recommendations of nominees for membership on the Board as well as those recommended by current directors, Company officers, employees, and others. Such recommendations may be submitted to Arrow’s Secretary, Gregory Tarpinian, at Arrow Electronics, Inc., 9201 East Dry Creek Road, Centennial, Colorado 80112, who will forward them to the Corporate Governance Committee. Possible candidates suggested by shareholders are evaluated by the Corporate Governance Committee in the same manner as other possible candidates.
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SUCCESSION PLANNING
The Corporate Governance Committee retains the services ofBoard takes a third-party executive recruitment firm to assist its members in the identificationproactive approach toward succession planning and evaluation of potential nominees for the Board. The Corporate Governance Committee’s initial review of a potential candidate is typically based on any written materials provided to it. The committee then determines whether to interview the nominee. If warranted,talent management. In conjunction with the Corporate Governance Committee, the Chairmanindependent directors meet multiple times a year in executive sessions to evaluate succession planning for the CEO. The Board also reviews the annual performance of each member of the senior management team as well as succession planning for these executive roles with the CEO. Additionally, the CEO provides meaningful in- person opportunities for the Board to interact with key members of management beyond the Company’s executive officers on a regular basis. The Board has a confidential plan to address any unexpected short-term absence of the CEO and other executives.
The Board considers diversity as an important factor in the Company’s succession plans and supports management’s efforts to enhance all aspects of diversity throughout the Company. As of January 1, 2024, 50% of the members of the Company’s executive committee (“Executive Committee”), which is the Company’s senior leadership team, who identified their gender or race/ethnicity, were diverse based on gender or race/ethnicity.
The Board, in conjunction with the Corporate Governance Committee, also performs ongoing succession planning for directors. The Corporate Governance Committee meets routinely to discuss board composition, including Board recruitment efforts, and identifies and evaluates potential director nominees. If the Board’s director nominees included in this Proxy Statement are elected at the Annual Meeting, 50% of the Company’s directors will be new since 2021. The Corporate Governance Committee also actively considers rotation of independent directors through the Board’s committees to introduce fresh perspectives and broaden and diversify the views and experiences represented on the Board’s committees.
ENTERPRISE RISK MANAGEMENT
Board Oversight of Risk Management
The Board, as a whole and through its committees, is responsible for oversight of risk management, as provided in the Company’s Corporate Governance Guidelines. The oversight responsibility of our Board and its committees is enabled by management reporting processes, including an annual Company-wide risk assessment, which are designed to provide visibility to the Board and Chief Executive Officer,its committees about the Lead Director,identification, assessment, and others, as appropriate, interviewmanagement of critical risks and management’s risk mitigation strategies. In order to most effectively evaluate the potential nominees.
The Corporate Governance Committee’s expectations as tovarious categories of risks facing the specific qualities and skills required for directors, including those nominated by shareholders, are set forth in Section 4 of Arrow’s Corporate Governance Guidelines (available at the “Leadership & Governance” sublink of the Investor Relations drop down menu on investor.arrow.com).
The role ofCompany, the Board has delegated to its committees oversight of risks associated with each committee’s respective area of responsibility, as summarized below.
Each committee meets in executive sessions with key management personnel and representatives of outside advisors, as needed, to discuss identified risks and evaluate anticipated future risks. For example, each year the Compensation Committee engages Pearl Meyer to conduct a risk assessment on the Company’s executive compensation programs.
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Board/Committee | Primary Areas of Risk Oversight |
Board | On an ongoing basis, the full Board oversees enterprise-level risks, including strategic, operational, compliance, financial, and other matters that may present material risk to Arrow’s financial performance, operations, plans, prospects, or reputation. |
Audit Committee | > internal control over financial reporting > legal and regulatory compliance > data privacy and cybersecurity > financial management, tax, and treasury |
Compensation Committee | > executive compensation programs > recoupment > human capital management > pay equity |
Corporate Governance Committee | > CEO succession planning > Board recruitment, composition, and succession planning > governance policies > ESG |
Management’s Role | |
Members of the Executive Committee and other senior management regularly report to the Board regarding the Company’s risks and opportunities (see additional detail immediately below). | |
Arrow’s Approach to Enterprise Risk Management
Our enterprise risk management (“ERM”) framework is designed to promoteidentify risks that may impact the best interests of the Companyenterprise and its shareholders by overseeing the management of Arrow’s business, assets,manage those risks and affairs.opportunities to ensure we are able to execute our short- and long-term strategy. Management is responsible for the day-to-day analysisdesign and reviewexecution of the risks facing the Company, including timely identification ofCompany’s ERM framework, implementing risk and risk controls related to significant business activities,management strategies, and developing programspolicies, controls, processes, and recommendationsprocedures to determine the sufficiency of risk identification, the balance of potential risk to potential reward,identify and the appropriate manner in which to control risk. manage risks.
The Board implements its risk oversight responsibilities by having management provide regular briefing and information sessions on the significant risks that the Company faces and how the Company seekshas delegated to control those risks when appropriate. In some cases, risk oversight in specific areas is the responsibility of a Board committee, such as: the Audit Committee the primary responsibility for overseeing the ERM framework designed by management. The Audit Committee’s charter provides that it will, at least annually, review and discuss with management the Company’s ERM function, including related policies, processes, and systems of internal control, as well as material risks and management’s mitigation plan.
An important element of our Board’s oversight of issues related to internal controls over financial reportinginvolves regular interaction among our Board, its committees, and regulatory compliance;senior management regarding the Corporate Governance Committee’s oversight of the Board’s succession planningCompany’s risk exposures and governance; and the Compensation Committee’s oversight of risks related to compensation programs. Arrow’s Chief Executive Officermitigation efforts. Our CEO has the ultimate management authority for enterprise risk management,ERM, including responsibility for capability development, risk identification and assessment, and policies and governance, as well as strategies and actions to address enterprise risk. The CEO communicates regularly with the Board on such matters.
In addition, our internal audit department periodically reports to the Audit Committee on its evaluation of management’s effectiveness in addressing risks by providing a comprehensive review of certain business and related risks. The internal audit department also conducts an annual survey of employees and of the Executive Committee to assist in identifying and evaluating risks. These surveys are reviewed by the Board and assist the Board in its conduct of an annual review of strategic and enterprise risks, which covers risks experienced over both the short- and long-term as well as anticipated future risks.
Our Chief Compliance Officer, who reports to our Chief Legal Officer, also regularly updates the Audit Committee on legal and compliance matters and risks.
More information about specific risks facing the Company is set forth in the Company’s other SEC filings, including under the section entitled “Risk Factors” in the Company’s most recent Annual Report on Form 10-K.
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The Company believes that its executive compensation program reflects an appropriate mix of compensation elements and balances currentannual and long-term performance objectives, cash and equity compensation, and risks and rewards associated with executive roles. The following features of the Company’s executive incentive compensation program illustrate this point:
> performance goals and objectives reflect a balanced mix of performance measures to avoid excessive weight on a certain goal or performance measure;
> annual and long-term incentives provide a defined range of payout opportunities (ranging from 0% to 200% of target for annual cash incentives for the NEOs and 0% to 185% for long-term incentives);
> total direct compensation levels are heavily weighted on long-term, equity-based incentive awards that vest over a number of years;
> equity incentive awards that vest over a number of years are granted annually so executives always have unvested awards that could decrease significantly in value if the business is not managed for the long-term;
> the Company has implemented meaningful executive stock ownership guidelines so that the component of an executive’s personal wealth that is derived from compensation from the Company is significantly tied to the long-term success of the Company; and
> the Compensation Committee retains discretion to adjust compensation based on the quality of Company and individual performance and adherence to the Company’s ethics and compliance programs, among other things.
| > | |||
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| performance goals and objectives reflect a balanced mix of performance measures to avoid excessive weight on any specific goal or performance measure; | |
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| > | total direct compensation levels are heavily weighted on long-term, equity-based incentive awards that vest over a number of years; |
| > | equity incentive awards that vest over a number of years are granted annually so executives always have unvested awards that could decrease significantly in value if the business is not managed for the long-term; |
| > | the Company has executive stock ownership guidelines so that a component of an executive’s personal wealth that is derived from compensation from the Company is tied to the long-term success of the Company; and |
| > | the Compensation Committee retains negative discretion to adjust certain compensation based on the quality of Company and individual performance and adherence to the Company’s ethics and compliance programs, among other things. |
Based on the above combination of program features, the Company believes that: (i) its executives are encouraged to manage the Company in a prudent manner;prudently and (ii) its incentive programs are not designed in a manner that encourages executives to take risks that are inconsistent with the Company’s or its shareholders’ best interests.
Further, at the Compensation Committee’s request, in 2017, Pearl Meyer & Partners conducted an assessment ofannually assesses the risks associated with the Company’s annual cash incentives and long-term incentive programs,incentives, the results of which wereare discussed by the Compensation Committee in its meeting in May 2017.Committee. In 2023, Pearl Meyer did not recommend any plan design changes to mitigate risk exposure further. The Compensation Committee concluded that the overall design of the Company’s compensation programs maintained an appropriate level of risk. Pearl Meyer & Partners did not suggest any plan design changes to further mitigate risk exposure.
It is the Company’s opinion that its compensation policies and practices for all employees aredo not likely to create risks that could have a material adverse effect on the Company. The Company delivers to its entire employee base, in the aggregate, most of its compensation in the form of base salary with smaller portions delivered in the form of cash incentives and long-term incentives. The Company’s cash incentive compensation plans, which represent the primary variable component of compensation, have been designed to drive the performance of employees working in management, sales, and sales-related roles. These plans are typically tied to the achievement of sales/financial and strategic goals that include maximums thatdesigned to prevent “windfall” payouts.
INDEPENDENCE
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ENVIRONMENTAL, SOCIAL, AND GOVERNANCE OVERSIGHT
The Board, through its committees, oversees the Company’s ESG programs, policies, practices, risks and opportunities, measures, objectives and performance, as summarized below:
Committee | Areas of Responsibility |
Audit Committee | > Reviews disclosures containing ESG metrics > Monitors appropriateness of internal control procedures and methodologies used to prepare or develop ESG metrics |
Compensation Committee | > Oversees human capital management matters and related disclosures > Reviews human capital-related ESG goals and targets |
Corporate Governance Committee | > Primarily responsible for ESG oversight > Makes recommendations to the Board regarding integration of ESG matters into the Company’s business strategy and operations (to the extent not delegated to other committees) > Coordinates with Audit Committee and Compensation Committee to ensure ESG disclosures comply with applicable law |
For additional information on oversight of Arrow’s ESG program by the Board, Board committees, and management, including Arrow’s 2023 ESG Report, please refer to the Environmental, Social, and Governance section of our website at arrow.com/company/purpose/environmental-social-governance. Information on the Company’s website, including our ESG Reports, is not incorporated by reference into, and does not form part of, this Proxy Statement or any other report or document Arrow files with the SEC.
INFORMATION SECURITY, PRIVACY, AND COMPLIANCE OVERSIGHT
The Audit Committee oversees Arrow’s management of privacy, security, and cybersecurity risks. The Audit Committee receives and reviews cybersecurity reports from Corporate Audit, Legal and Compliance, Information Technology, and Enterprise Security on a regular basis. These reports include updates on cybersecurity risks, technical developments in addressing cybersecurity risks, regulatory updates, and the results of recent audits and reviews.
The Company’s corporate governance guidelines provideChief Information Officer and Chief Security Officer regularly report to the Audit Committee on the current state of the Company’s cybersecurity program. The Company has established written policies and procedures to ensure that significant cybersecurity incidents are immediately investigated, addressed through the coordination of various internal departments, and publicly reported (to the extent required by applicable law). If management determines a material cybersecurity incident has occurred, the Company’s policies require management to promptly inform the Board.
For more information regarding the Company’s cybersecurity program, see Item 1C of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
BOARD AND COMMITTEE ASSESSMENTS
In accordance with the Company’s Corporate Governance Guidelines, the Board assesses its processes and performance at least annually. During this assessment, the directors evaluate the Board’s contribution and review areas where the Board and/or management believe a better contribution could be made. If desired by any director, the independent directors will meet in executive session to discuss Board processes and performance without the CEO or any management directors in attendance. The Corporate Governance Committee oversees the Board’s self-assessment process. Pursuant to the Company’s Corporate Governance Guidelines and the committee charters, the Audit Committee, Corporate Governance Committee, and Compensation Committee each conduct an annual performance evaluation of their respective committees.
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DIRECTORS’ ADDITIONAL BOARD SERVICE
The Company believes that directors may broaden their experience by serving on other boards, which may be a benefit to the Company, provided that service on additional boards does not detract from a director’s ability to fulfill their obligations to the Company and its Board.
In identifying individuals for potential nomination to the Board, the Corporate Governance Committee considers an array of factors outlined in the Corporate Governance Guidelines, specifically including whether such person would have the interest and time available to fulfill his or her responsibilities as a director over a period of years and be able to attend substantially all scheduled Board and committee meetings and the annual shareholder meeting and be fully prepared at such meetings.
Under the Corporate Governance Guidelines, the Corporate Governance Committee will not nominate a director candidate who serves, or would serve, on more than four (4) public company boards (including the Company’s Board).
The Corporate Governance Guidelines also require the Chief Executive Officer to inform the Board in advance of a desire to accept a position on another company’s board of directors, and the Corporate Governance Committee will determine if such board service is appropriate under the circumstances. In any event, the Chief Executive Officer may not serve on more than two (2) public company boards of directors (including the Company’s Board).
Additionally, under the Audit Committee Charter, no member of the Audit Committee may serve on more than three (3) public company audit committees (including the Company’s Audit Committee).
All of our 2024 director nominees are compliant with the Company’s limitations on other public company board service, as described above.
INDEPENDENCE
The Company’s Corporate Governance Guidelines state that the Board should consist primarily of independent non-management(non-management) directors. For a director to be considered independent under the guidelines, the Board must determine that the director does not have any direct or indirect material relationshipsrelationship with the Company and that he or sheCompany. Further, the Board determines whether any director is not involved in any activity or interest that conflicts with or might appear to conflict with his or hertheir fiduciary duties. A non-management director must also meet the independence standards in the New York Stock ExchangeNYSE listing rules,standards, which the Board has adopted as its standard.standard, as set forth in Arrow’s Corporate Governance Guidelines.
The Board evaluated the independence of each current director and each director nominee, and has determined that all of its directors and nominees,such persons, other than Mr. Long,Kerins, satisfy both the New York Stock Exchange’sNYSE’s independence requirements and the Company’s guidelines. Mr. Kerins was determined not to be independent by virtue of his employment with the Company.
As required by the Company’s corporate governance guidelinesCorporate Governance Guidelines and the New York Stock Exchange’sNYSE’s listing rules, all members of the Audit, Compensation, and Corporate Governance Committees are independent. Non-management directors and all members of the Audit Committee and Compensation Committee also satisfy the independence requirements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a present or former employee of the Company. Additionally, no member of the Compensation Committee has a relationship that requires disclosure of a Compensation Committee interlock.
MeetingsandAttendance
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MEETINGSANDATTENDANCE
Consistent with the Company’s corporate governance guidelines,Corporate Governance Guidelines, it is the general practice of the Board for all of its non-managementnon- management directors to meet separately (without Company management present) either prior to or after each regularly scheduled Board meeting, with the Lead Director presiding.meetings. In 2017,2023, these non-management director meetings totaled fourfive in number.
During 2017,2023, there were sixfive meetings of the Board, eight meetings of the Audit Committee, four meetings of the Compensation Committee, and four meetings of the Corporate Governance Committee. All of the directors attended 75% or more of all of the meetings of the Board and the committees on which they served. It isThe Company encourages its directors to be present at the policyCompany’s annual meetings of shareholders. In 2023, all directors standing for reelection attended the Board that allannual meeting of its members attend the Annual Meeting absent exceptional cause, and all members of the Board did soshareholders telephonically or in 2017.person.
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The independent,For 2023, the non-management members of the Board (that is, all members except Mr. Long)Messrs. Kerins and Long, who did not receive any compensation for their Board service) received cash fees at the following fees in cash:below annualized rates. After considering market data and the input from Pearl Meyer, during 2023, the Corporate Governance Committee approved adjustments to the director compensation program, also set forth below:
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2023 Non-Management Director Compensation | 2023 Non-Management Director Compensation | |||||||
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| | On or after May 17 | |||
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Annual fee |
| $ | 100,000 | $ | 100,000 |
| $ | 110,000 |
Annual fee for service as Corporate Governance Committee Chair |
| $ | 10,000 | $ | 10,000 | | $ | 15,000 |
Annual fee for service as Compensation or Audit Committee Chair |
| $ | 20,000 | |||||
Annual fee for service as Compensation Committee Chair | $ | 20,000 | | $ | 25,000 | |||
Annual fee for service as Audit Committee Chair | $ | 25,000 | | $ | 30,000 | |||
In addition to the cash fees for 2023, our non-management directors received restricted stock unit (“RSU”) awards during 2023.
On May 16, 2023, each non-management director receivesserving on such date who also served on the Board for the 2021-2022 service year received a special grant of RSUs valued at $175,000, based on the fair market value of Arrow common stock on such date, with immediate vesting. The individuals receiving such grant were Messrs. Austen, Gunby, Kerin, Patrick, Perry, and Smith and Mses. Hamilton and Krzeminski. In light of Mr. Perry’s service as Lead Independent Director for the 2021-2022 service year, he received an additional award amount of $30,000. These additional RSU grants were made due to a change in the timing of the annual RSU grant to directors. Until 2022, Arrow directors received the stock-award component of their compensation as a fully vested RSU grant following each year's annual meeting of shareholders for the director's service over the prior year. As a result of this practice, directors who did not stand for re-election at the end of the year did not receive their full and intended compensation for their service. Starting in February 2022, the Board adopted a new compensation practice of granting unvested stock awards at the beginning of each service year, with that service year starting the day following the annual meeting of shareholders and continuing until the day of the next annual meeting of shareholders. In 2023, the Board noted that in the process of making this switch, non-management directors who served during the 2021-2022 service year had not received the equity compensation for their service during that period and issued the one-time corrective RSU awards to the non - management directors who were then-serving and impacted by the prior non-payment.
On May 17, 2023, each non-management director serving on such date, received a standard annual grant of restricted stock units (“RSUs”)RSUs valued at $150,000,$185,000 (increased from $175,000 in 2022), based on the fair market value of Arrow common stock on the date of grant. Further, as the Lead Director receives anotherindependent Board Chair, Mr. Gunby, received an additional
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aggregate annual award of RSUs valued at $30,000$150,000 (as a sum of two separate awards on May 17, 2023, and September 13, 2023) with such grants made in recognition of the additional responsibilities associated with such position.position and to bring the Company’s independent Board Chair compensation closer in line with the Company’s peers.
The annual grant of RSUs as well as the grants to Mr. Gunby are scheduled to vest and become non-forfeitable on the day before the annual meeting of shareholders the year following grant. The awards will be distributed based on an annual election made by each non-management director that is either (i) the earlier of May 7, 2024, or the day before the Company’s 2024 annual shareholder meeting (which day shall in any event occur during the 2024 calendar year), or (ii) following the grantee’s separation from service provided that he or she continuously served on the Board from the grant date through the vesting date. If the grantee’s service with the Board is terminated for any or no reason prior to the vesting date (other than death, disability, or involuntary termination without cause following a change of control), the RSUs will be forfeited.
The following Tabletable shows the total dollar value of compensation receivedgranted or earned by all non-management directors in or in respect of 2017.to 2023. Mr. Kerins and Mr. Long did not receive any compensation for their Board service during 2023 and have been excluded from the table. Please see the “2023 Summary Compensation Table” for the compensation received by Messrs. Kerins and Long with respect to 2023.
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Non-Management Director Compensation | ||||||||
Name |
| Fees Earned |
| Stock Awards |
| All Other |
| Total |
Barry W. Perry |
| 90,281 |
| 180,000 |
| — |
| 270,281 |
Philip K. Asherman |
| 100,281 |
| 150,000 |
| — |
| 250,281 |
Steven H. Gunby |
| — |
| — |
| — |
| — |
Gail E. Hamilton |
| 95,281 |
| 150,000 |
| 600 |
| 245,881 |
John N. Hanson |
| 100,281 |
| 150,000 |
| — |
| 250,281 |
Richard S. Hill |
| 90,281 |
| 150,000 |
| 1,500 |
| 241,781 |
M.F. (Fran) Keeth |
| 110,281 |
| 150,000 |
| — |
| 260,281 |
Andrew C. Kerin |
| 95,281 |
| 150,000 |
| 300 |
| 245,581 |
Stephen C. Patrick |
| 90,281 |
| 150,000 |
| — |
| 240,281 |
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2023 Non-Management Director Compensation | ||||||
| | Fees Earned | | | | |
Name |
| or Paid in Cash |
| Stock Awards |
| Total |
William F. Austen | | 117,500 | | 360,000 | | 477,500 |
Fabian T. Garcia | | 105,000 | | 185,000 | | 290,000 |
Steven H. Gunby | | 115,000 | | 510,000 | | 625,000 |
Gail E. Hamilton | | 105,000 | | 360,000 | | 465,000 |
Andrew C. Kerin | | 105,000 | | 360,000 | | 465,000 |
Laurel J. Krzeminski (1) | | 50,000 | | 175,000 | | 225,000 |
Carol P. Lowe | | 115,000 | | 185,000 | | 300,000 |
Mary T. McDowell | | 55,000 | | 185,000 | | 240,000 |
Stephen C. Patrick (2) | | 85,837 | | 360,000 | | 445,837 |
Barry W. Perry (3) | | 50,000 | | 205,000 | | 255,000 |
Gerry P. Smith | | 117,500 | | 360,000 | | 477,500 |
| (1) |
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| (2) | Stephen C. Patrick served as a non-management director in 2023 from January 1 to June 5, 2023. |
| (3) |
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| (4) | Messrs. |
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| (5) | Amounts |
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2023 Non-Management Directors | ||||||
| | Unvested | | | | |
Name |
| or |
| Deferred |
| Unexercised |
William F. Austen | | 1,520 | | 1,469 | | — |
Fabian T. Garcia | | 1,520 | | 2,720 | | — |
Steven H. Gunby | | 2,722 | | 17,614 | | — |
Gail E. Hamilton | | 1,520 | | 22,119 | | — |
Andrew C. Kerin | | 1,520 | | 25,674 | | — |
Laurel J. Krzeminski | | — | | — | | — |
Carol P. Lowe | | 1,520 | | 4,216 | | — |
Mary T. McDowell | | 1,520 | | — | | — |
Stephen C. Patrick | | — | | 20,007 | | — |
Barry W. Perry | | — | | 23,753 | | — |
Gerry P. Smith | | 1,520 | | 3,896 | | — |
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Under the terms of the Non-Employee Director Deferred Compensation Plan, non-management directors may defer the payment of all or a portion of their annual retainers until the end of their service on the Board. Unless the director chooses a different amount, is chosen by the director, 50% of the director’s annual retainer fee is automatically deferred and converted tointo units of Arrow common stock. The units held by each director are included under the heading “Common Stock Units” in the Sharestable labeled “Shares of Common Stock Beneficially Owned Table.Owned.” The amounts deferred by each director for 2017,2023, to the extent there arewere any amounts deferred, are included under the headingcolumn “Fees Earned” onin the Non-Managementtable labeled “2023 Non- Management Director Compensation Table.Compensation” above. All deferrals under the Planplan will be paid after terminationupon separation of director service onfrom the Board.
For stock awards outlined in the table labeled “2023 Non-Management Director Compensation, Table,” each director is given the option to have histheir RSUs converted to shares (i) on the first anniversary of the grant date or her RSUs(ii) following the grantee’s separation from service provided that they continuously served on the Board from the grant date through the vesting date. Messrs. Austen, Kerin, and Patrick and Mses. Hamilton and McDowell elected to have their 2023 RSU awards converted to shares one year after the grant. Ms. Hamilton and Messrs. Hanson, Hill, and Kerin have selected that option for their 2017 grants.
DIRECTOR STOCK OWNERSHIP BY DIRECTORSGUIDELINES
The Board believes that stock ownership by its directors strengthens their commitment to the long-termCompany’s long - term future of the Company and further aligns their interests with those of the shareholders generally. As a result, the corporate governance guidelinesCorporate Governance Guidelines specifically state that directors are expected, over time, to own beneficialbeneficially shares of the Company’s common stock having a value of at least three times their annual retainer fee (including shares owned outright, andvested shares of restricted stock or RSUs, and common stock units in a deferred compensation account). AllAs of the Record Date, all directors either own the required number of shares or, in the case of recently appointed directors, are in compliance with thisaccumulating and retaining shares at a pace sufficient to meet the requirement.
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The Audit Committee represents and assists the Board by overseeing: (i) the Company’s financial statements and internal controls; (ii) the independent registered public accounting firm’s qualifications and independence; and (iii) the performance of the Company’s corporate audit function and of its independent registered public accounting firm.
TheOn the date of the adoption of this Report, the Audit Committee currently consistsconsisted of three directors, all of whom areconsidered independent in accordance with New York Stock ExchangeNYSE listing standards and other applicable regulations. The Board has determined that committee members Mrs. Keeth and Mr. Patrick aremember Ms. Lowe is an “audit committee financial experts”expert” as defined by the SEC.
Company management has the primary responsibility for the preparation of the financial statements and for the reporting process, including the establishment and maintenance of Arrow’s system of internal controlcontrols over financial reporting. The Company’s independent registered public accounting firm is responsible for auditing the financial statements prepared by management, expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles (“GAAP”), and auditing the Company’s internal controlcontrols over financial reporting.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with both management and the independent registered public accounting firm the Company’s quarterly earnings releases, Quarterly Reports on Form 10-Q, and the 20172023 Annual Report on Form 10-K. Such reviews included a discussion of critical or significant accounting policies, the reasonableness of significant judgments, the quality (not just the acceptability) of the accounting principles, the reasonableness and clarity of the financial statement disclosures, and such other matters as the independent registered public accounting firm is required to review with the Audit Committee under the standards promulgated by the Public Company Accounting Oversight Board. The Audit Committee also discussed with both management and the Company’s independent registered public accounting firm the design and efficacy of the Company’s internal control over financial reporting.
In addition, the Audit Committee received from and discussed with representatives of the Company’s independent registered public accounting firm the written disclosure and the letter required by the applicable requirements of the Public Company Accounting Oversight Board (regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence) and considered the compatibility of non-audit services rendered to Arrow with the independence of the Company’s independent registered public accounting firm. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended, and as adopted byapplicable requirements of the Public Company Accounting Oversight Board in Rule 3200T.and the SEC.
The Audit Committee also discussed with the independent registered public accounting firm and Arrow’s corporate audit group the overall scope and plans for their respective audits. The Audit Committee periodically met with the independent registered public accounting firm, with and without management present, to discuss the results of their work, their evaluations of Arrow’s internal controls, and the overall quality of Arrow’s financial reporting.
In reliance on these reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20172023, for filing with the SEC.
M.F. (Fran) Keeth, Chair
Gail E. Hamilton
Stephen C. Patrick
Carol P. Lowe, Chair | | ||
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Mary T. McDowell | |
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PRINCIPAL ACCOUNTING FIRM FEES
The aggregate fees billed by Arrow’s principal accounting firm, Ernst & Young LLP (“EY”), for auditing the annual financial statements and the Company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and related regulations included in the Annual Report on Form 10‑K,10-K, the reviews of the quarterly financial statements included in the Quarterly Reports on Form 10-Q, statutory audits, assistance with and review of documents filed with the SEC, and consultations on certain accounting and reporting matters for each of the last two fiscal years are set forth as “Audit Fees” in the Tabletable below.
Also set forth for the last two fiscal years are “Audit-Related Fees.” Such fees are for services rendered in connection with business acquisitions, employee benefit plan audits and other accounting consultations. “Tax Fees” relate to assistance with tax return preparation, tax audits, and compliance in various tax jurisdictions around the world. “Other“All Other Fees” referrefers to advice, planning, and consultingservices other than as set forth above. Ernst & Young LLPDuring 2023 and 2022, all other fees primarily included accounting publication and online accounting research subscriptions. EY did not provide any services to the Company related to financial information systems design or implementation, nor did it provide any personal tax work or other services for any of the Company’s executive officers or members of the Board.implementation.
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| 2017 |
| 2016 | ||||||||
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| 2023 |
| 2022 | ||||||||
Audit Fees |
| $ | 9,195,135 |
| $ | 8,094,050 | | $ | 12,072,893 | | $ | 11,396,015 |
Audit-Related Fees |
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| 238,652 |
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| 182,879 | |
| 438,108 | |
| 456,799 |
Tax Fees |
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| 1,883,030 |
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| 660,608 | |
| 726,902 | |
| 292,490 |
Other Fees |
|
| 7,155 |
|
| 2,000 | ||||||
All Other Fees | |
| 8,000 | |
| 8,473 | ||||||
Total |
| $ | 11,323,972 |
| $ | 8,939,537 | | $ | 13,245,903 | | $ | 12,153,777 |
The amounts in the Tabletable above do not include fees charged by Ernst & Young LLPEY to Marubun/Arrow, a joint venture between the Company and the Marubun Corporation. Audit fees for Marubun/Arrow totaled $446,514$521,609 in 2017,2023, and $430,088$510,935 in 2016.2022.
ConsistentThe Audit Committee’s policy is to pre-approve all audit, audit-related, and permissible non-audit services to be performed by Arrow’s independent registered public accounting firm. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget by category. In accordance with the Audit Committee charter, audit, audit-related,audit - related, tax, and other services performed by EY during 2023 and 2022 were approved by the Audit Committee, or by a designated member thereof. The Audit Committee has determined that the provision of the non-audit services described above is compatible with maintaining Ernst & Young LLP’sEY’s independence.
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PROPOSAL 2: RATIFICATION OFAUDITORSINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE AUDIT COMMITTEE AND THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP.
Shareholders are asked to ratify the appointment of Ernst & Young LLP (“EY”) as Arrow’s independent registered public accounting firm for the fiscal year ending December 31, 2018.2024. Although the Audit Committee has the sole authority to appoint the independent registered public accounting firm, as a matter of good corporate governance, the Board submits its selection to our shareholders for ratification. If the shareholders do not ratify EY, the Audit Committee will reconsider the appointment. Arrow expects that representatives of Ernst & Young LLPEY will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and that they will be available to answer appropriate inquiries raised atinquiries.
Receipt of a majority of votes cast is required to approve this proposal. For purposes of determining the Annual Meeting.number of votes cast with respect to Proposal 2, only those votes cast “FOR” or “AGAINST” are included. Abstentions and broker non-votes are counted only for purposes of determining whether a quorum is present at the Annual Meeting. Because Proposal 2 is considered a “routine” proposal under NYSE rules, no broker non-votes are expected on this proposal.
As required by its charter, the Audit Committee annually reviews the qualifications, performance, and independence of EY in determining whether to retain EY or engage another independent registered public accounting firm as our Company’s independent auditor. As part of that review, the Audit Committee considers, among other things:
| > | The quality and efficiency of the current and historical services provided by EY; |
| > | EY’s capability and expertise in handling the breadth and complexity of our Company’s global operations; |
| > | The quality and candor of EY’s communications with the Audit Committee; |
| > | EY’s reputation for integrity and competence in the fields of accounting and auditing; |
| > | EY’s independence from our Company, including EY’s rigorous process for monitoring and maintaining independence and partner rotations, and Arrow’s own evaluation of EY’s independence and our pre-approval policies and controls; |
| > | The appropriateness of EY’s fees; and |
| > | EY’s tenure as our Company’s independent accountants, including the benefits of having a long-tenured auditor. |
Benefits of Long-tenured Auditor
| > | Higher audit quality – Through more than 48 years of experience with our Company, EY has gained deep institutional knowledge of and expertise regarding Arrow’s global operations and businesses, accounting policies and practices, and internal control over financial reporting. |
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| > | Avoids costs associated with a new independent accountant – Onboarding a new independent accountant is costly and requires a significant time commitment that could distract from management’s focus on financial reporting and controls. |
PROPOSAL 3: ADVISORY VOTE ON
EXECUTIVE COMPENSATION
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE EXECUTIVE COMPENSATION AS DISCLOSED IN THIS PROXY STATEMENT.
The Board of Directors has decidedBased on this evaluation, the Audit Committee believes that EY is independent and well-qualified to serve as our Company’s independent registered public accounting firm. Further, the Company will hold an advisory vote each year in connection with its Annual Meeting, until the next vote on the frequency of shareholder votes on the compensation of the NEOs, which will be 2023, or untilAudit Committee and the Board of Directors otherwise determines that a different frequency for such advisory votesbelieve it is in the best interests of Arrow and our Company’s shareholders to retain EY as our Company’s independent registered public accounting firm for fiscal 2024.
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PROPOSAL 3: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
In accordance with the shareholders.requirements of Section 14A of the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Board is asking shareholders to approve the following advisory resolution at the Annual Meeting:
Shareholders have an opportunity to cast“RESOLVED that the shareholders of the Company approve, on an advisory vote onbasis, the compensation of the NEOs. This proposal, commonly known as “say-on-pay,” gives shareholdersCompany’s Named Executive Officers disclosed in the opportunity to approve, reject, or abstain from voting with respect toCD&A, the Summary Compensation Table and the related tables, notes, and narrative in the Proxy Statement for the Company’s executive compensation programsAnnual Meeting.”
Although the vote is not binding, the Compensation Committee values the opinions expressed by the Company’s shareholders and policies andwill carefully consider the compensation paid to the NEOs.
The Company is requesting shareholder approvaloutcome of the vote when making future compensation of its NEOs as disclosed in this Proxy Statement. Proposal 3 requiresdecisions for the affirmative voteCompany’s NEOs.
Receipt of a majority of the votes cast at the Annual Meeting.is required to approve this proposal. For purposes of determining the number of votes cast with respect to this Proposal 3, only those votes cast “FOR” or “AGAINST” are included. Abstentions and broker non-votes are counted only for purposes of determining whether a quorum is present at the Annual Meeting. As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, this is an advisory vote, which means that this proposal is not binding on the Company. The Compensation Committee, however, values the opinions expressed by the Company’s shareholders and will carefully consider the outcome of the vote when making future compensation decisions for the Company’s NEOs.
The Company asks that you review in detail the disclosuredisclosures contained in this Proxy Statement regarding compensation of the Company’s NEOs (including the Company’s Compensation Discussion and Analysis,CD&A), the compensation tables, and the narrative disclosures that accompany such tables) and indicate your support for the compensation of the Company’s NEOs that is described in this Proxy Statement.
Based onIn accordance with the foregoing, and as a matteradvisory vote cast by shareholders at the annual meeting of good corporate governance,shareholders held in 2023, the Board is asking shareholdersdetermined that we will hold this advisory vote to approve the compensation paid to the Company’s NEOs every year until the next required frequency vote is held. Accordingly, it is expected that the next say - on - pay vote following advisory resolutionthe Annual Meeting will occur at the 2018 Annual Meeting:2025 annual meeting of shareholders.
“RESOLVED that the shareholders
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2024 ANNUAL |
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PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION
This Compensation Discussion and Analysis the Summary Compensation Table and the related tables, notes, and narrative in the Proxy Statement for the Company’s 2018 Annual Meeting.”
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REPORT OF THE COMPENSATION COMMITTEE
The substantive discussion of the material elements of all of the Company’s executive compensation programs and the determinations by the Compensation Committee with respect to compensation and executive performance for 2017 are contained in the Compensation Discussion and Analysis that follows below. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the management representatives responsible for its preparation and the Compensation Committee’s advisors. In reliance on these reviews and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the definitive Proxy Statement on Schedule 14A for Arrow’s 2018 Annual Meeting for filing with the SEC and be incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
Philip K. Asherman, Chair
Richard S. Hill
Barry W. Perry
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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)
This CD&A explains the executive compensation program for the Company’s NEOsNamed Executive Officers (“NEOs”) listed below. The CD&A also describes how the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to fiscal 2017.Committee determined 2023 executive compensation, the elements of our executive compensation program, and the compensation of each of our NEOs.
Named Executive Officers | ||||
Name | Title | |||
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| Senior Vice President, Chief Financial Officer | |||
| | Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer | ||
Kristin D. Russell | | President, | ||
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| Senior Vice President, Chief | |||
Michael J. Long (1) | Former Executive Chair | |||
Kirk D. Schell (2) | | Former President, Global Components | ||
| (1) | Mr. Long concluded his term as Executive Chair following the 2023 annual shareholder meeting and remained as a non-executive employee assisting on transition matters until July 5, 2023. |
| (2) | Mr. Schell ceased being an executive officer of the Company effective August 16, 2023, and left the Company effective August 31, 2023. |
EXECUTIVE SUMMARY
2023 Business Strategy and Performance Highlights
Arrow guides innovation forward by driving demand and expanding addressable markets for our suppliers and customers via our technology-centric focus, go-to-market expertise, and supply chain services capabilities. We enable our suppliers to distribute their technologies and help our customers to source, build upon, and leverage these technologies to grow their businesses and enhance their overall competitiveness. We are a trusted partner in a complex value chain, and we believe that we are uniquely positioned through our electronics components and IT content portfolios to increase value for stakeholders.
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2017 Business Strategy and Highlights
Industrial automation, edge computing, cloud computing, connected devices, home automation, smart cities, and growing electronic content for transportation, are some of the important opportunities for the Company. Investments in engineering, technical sales, digital, and software (including cloud) capabilities position the Company to take advantage of these opportunities. Through a network of more than 345 locations serving over 80 countries, the Company aggregates disparate sources of electronics components, infrastructure software, and IT hardware to increasingly provide complete solutions for customers and suppliers. The Company’s goal is to leave no segments of the market underserved in terms of the products it offers and services it provides. The Company aims to accelerate its customers’ time to market, and to drive growth on behalf of its suppliers.
Financial Performance Achievements
The Company delivered unprecedented growth and strong results in 2017. Sales in 2017 increased $3 billion, grew 13% compared to 2016, and reached an all-time record level of $26.8 billion. Gross profit of $3.4 billion, operating income of $928 million, and non-GAAP earnings per share (“EPS”) on a diluted basis of $7.56 also achieved all-time records. Non-GAAP EPS increased by $.93 and grew 14% compared to 2016. The Company delivered on its financial objectives to grow sales faster than the market, increase markets served, and grow profits faster than sales.
The Company’s organic investments, acquisitions, and strong execution resulted in 29% three-year adjusted EPS growth. This growth was third highest of the eight companies among Arrow and its Peer Group. Three-year average return on invested capital (“ROIC”) was 2.7 percentage points above the three-year weighted average cost of capital (“WACC”). Total shareholder return for the three-year period was 39% compared to 29% for the Peer Group and 38% for the S&P 500 stock index.
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Financial Performance Results
Following a record year in 2022, Arrow experienced a market environment of excess inventory throughout the supply chain in 2023 leading to softer demand in our components business and a mixed IT-spending environment for our enterprise computing solutions business. Despite this backdrop, we executed well and remain optimistic that longer-term technology trends will benefit Arrow. Throughout the year, Arrow helped customers navigate supply chain challenges so they could optimize their production schedules, bring new electronic products to market, and securely manage their applications and data as they transitioned to an IT as-a-service model. In doing so, Arrow deepened customer and supplier relationships and solidified its position as a trusted partner. 2023 financial results include:
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Sales totaled $33.1 billion for the year, down 11% from 2022 | |
| $750 M Returned approximately $750 million in cash to shareholders by repurchasing approximately 6.1 million shares of common stock |
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| $4.1 b Gross profit of $4.1 billion, down 14% from 2022 | |
| $1.5 B Operating income of $1.5 billion, down 29% from 2022 |
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The Company believes that a non-GAAP EPS calculation is appropriate in assessing and understanding the company’s operating performance and trends in the Company’s business because it removes financial information outside the company’s core operating results. For example, in the fourth quarter of 2017, the Company recognized a net, non-cash charge related to U.S. tax reform that reduced reported net income by $125 million and reported EPS on a diluted basis by $1.40. As a result, all references to EPS in this Proxy Statement are to non-GAAP EPS.
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| $15.84 Earnings per share (“EPS”) on a diluted basis of $15.84, down 27% from 2022 |
Strategic Performance AchievementsResults
The Company’s diverse worldwide customer base consists of original equipment manufacturers, value-added resellers, Managed Service Providers, contract manufacturers, and other commercial customers. In 2017, the Company expanded its customer base from 125,000 to 150,000, and no customer contributed more than 2% of sales.
In 2017, the Company entered into several significant new distribution agreements intended to help the Company maintain its leadership position in the electronic component and information technology solutions markets. These agreements include relationships with semiconductor, passive electromechanical component, information technology hardware and software, and cloud-based solution providers. The Company continues to expand and diversify the products, solutions, and services it can offer. No single supplier’s products contributed more than 8% of sales.
The Company’sWe believe that our investments in key strategic growth areas have started to yield returns. Digital, internet of things (“IoT”), and sustainable technology solutions each contributed to the Company’s growth in 2017.
Over the past three years,create opportunities for long-term shareholder value for the Company completed 16and further enhance Arrow’s value proposition in helping customers create and manage their products. Key strategic acquisitionsperformance highlights in 2023 include:
| > | In demand creation, we added engineering resources throughout 2023, which helped demand creation revenue outpace the rest of the portfolio; |
| > | Our engineering services have been gaining traction across attractive verticals such as renewable energy, automotive, and medical devices. As a result, full-year engineering services revenue grew meaningfully; |
| > | In supply chain services, we expanded our customer base in 2023 with further penetration in the data center and automotive verticals. Looking ahead, we see additional opportunities to extend this offering to other verticals and original equipment manufacturers; |
| > | We’ve maintained our differentiated focus on interconnects, passives, and electromechanical components, a margin accretive growth area within our components business; and |
| > | In our ECS business, over the course of the year, we enhanced our digital distribution platform, ArrowSphere, while onboarding new channel partners and supplier lines, demonstrating our commitment to the market’s transition to IT-as-a-Service. |
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Shareholder Feedback and 2023 Say-On-Pay
We regularly engage with our shareholders to broaden product and service offerings, to further expand geographic reach, and to increase digital capabilities to meet the evolving needs of customers and suppliers.
2017 Shareholder Engagement and Say-On-Pay
In 2017, the Company’shear their views on our executive compensation program and consider their input, along with emerging best practices each year, as we evaluate our executive compensation program. Our say-on-pay proposal at our 2023 annual shareholder meeting received approximately 93% support, reflecting shareholder confidence in the overall philosophy and design of our executive compensation program.
In the fall of 2023, we conducted broad shareholder outreach, requesting meetings with 35 shareholders representing approximately 72% of shares then outstanding, and engaging in meetings with shareholders representing approximately 17% of shares then outstanding. Our independent Board Chair, Steve Gunby, participated in meetings with shareholders representing approximately 11% of shares then outstanding. Shareholder engagement acceptance was lower than in prior years, with shareholders representing an additional 27% of our then-shareholder base declining an engagement meeting and noting that they were satisfied with Arrow’s profile.
During these engagements, shareholders expressed their continued support for 2016 was submittedArrow’s executive compensation program, noting appreciation for the pay-for-performance alignment. We emphasized that Arrow’s executive compensation program did not change year over year and conveyed that the Compensation Committee’s objective is to an advisory votemaintain a program that advances the Company’s strategy and is aligned with shareholders’ interests. Additionally, shareholders were interested in understanding the Committee’s approach to setting executive targets and evaluating performance in a more cyclical business, and given the macroeconomic environment, we have enhanced the disclosure related to 2023 in the CD&A.
As a result of shareholder feedback, we enhanced our disclosure regarding PSU performance metrics in the year of the shareholders and it received the support of approximately 89% of the total votes cast at the Annual Meeting. Based on the high level of approval received from shareholders and the Compensation Committee's determination that the Company’s existing programs were operating properly, the Company made no significant changes to its executive compensation programsaward (see chart “Performance Metrics for 2023 PSU Grants” under subheading “Long-Term Incentive Awards” section later in 2017. The Compensation Committee continues to carefully consider any shareholder feedback in its executive compensation decisions.this CD&A).
Best Compensation Practices and Policies
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2023 Executive Compensation Program At-A-Glance
The Compensation Committee took several actions in 2017 to ensure market-competitive NEOOur executive compensation emphasizingprogram emphasizes performance-based compensation programs tiedand is designed to tie directly to the drivers of value creation for the Company’s shareholders.shareholders, as summarized below.
Key Elements | ||
Pay Element | Form | Performance Metric |
Base Salary | Cash | > Base salary is set at market-competitive levels |
Annual Cash Incentives | Cash | > 70% Absolute EPS(1) > 30% Strategic Goals |
LTIP | 50%- PSUs | > 60% three-year Relative EPS Growth(1) > 40% three-year Average Return on Invested Capital (“ROIC”) minus the Weighted Average Cost of Capital (“WACC”)(1) |
50%- RSUs | > Stock price performance | |
| (1) | Represents a non-GAAP measure; for further detail and reconciliation to the closest GAAP measure, refer to the Appendix to this Proxy Statement. |
Incentive Plans: A Closer Look at the Performance Metrics
The Compensation Committee targets a competitive positioningdiscusses metric selection regularly. The focus of NEO salaries relative toour annual and long-term incentives is achieving profitable growth and driving long-term shareholder value creation by supporting the defined Peer Group, the larger general industry, and individual professional development. following key objectives:
| > | To generate EPS growth in excess of our competitors’ EPS growth and market expectations; |
| > | To grow EPS at a rate that provides the capital necessary to support the Company’s business strategy; |
| > | To focus on strategic goals that will differentiate Company performance over time; and |
| > | To allocate and deploy capital effectively so that ROIC exceeds the Company’s WACC. |
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As such, Messrs. Stansburywe use a carefully balanced mix of quantifiable absolute and King were provided with salary increases to align themrelative financial, strategic, and operational metrics across our incentive plans ─ with a competitive market position.
Annual Cash Incentives (“MICP”)
Annual cash incentives are basedheavier emphasis on the achievementEPS because of two key performance measures: EPS and strategic goals. For 2017, the Company’s EPS grew by 14%, accounting for the majority of the annual cash incentive payout while achievement on strategic goals was 100%. This resulted in awards that were above target levels for the NEOs.
Long-Term Incentive Plan (“LTIP”)
The majority of the compensation delivered to the NEOs continues to be in the form of equity under the LTIP. In 2017, the NEOs were awarded an LTIP grant with a mixture of 50% performance stock units (“PSUs”), 25% RSUs, and 25% stock options. The Committee believes the use of these equity vehicles createsits strong alignment with shareholder value. Recognizing that EPS is used as a metric in both the annual and long-term incentives, the Compensation Committee balances EPS with other metrics designed to support the Company’s shareholders by linking NEO compensation closelybusiness strategy and align with shareholder interests. In addition, the way EPS is measured and balanced with other performance metrics to stock performance andsupport our goals works differently under each of the effectiveincentive plans, as outlined below:
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Annual Cash Incentives | Long Term Incentives |
Absolute EPS Weighted 70% > Defined as a pre-determined range of Company performance targets for the fiscal year > Driven by specific Company initiatives designed to improve financial performance results > Easily understood by stakeholders Strategic Goals Weighted 30% > Places focus on goals that are critical to our strategic growth > For 2023, underscores our commitment to managing our environmental and social impacts in operations and measured against: o Environmental Strategy: reduction of Scope 1 and 2 emissions of Arrow’s EMEA fleet and at specified facilities o Human Capital Strategy – diversity and equality measures: goals linked to the Company’s diversity and inclusion principles > Are dynamic and expected to change on an annual basis depending on the relevant business priorities for the performance year o The Compensation Committee determines specific, measurable targets that are aligned with the Company’s strategy > Provides balance to Absolute EPS | Three-Year Relative EPS Growth Weighted 60% > Defined as Arrow’s three-year EPS growth as compared to the EPS growth of Arrow’s Peer Group > Holds management accountable to outperform peers over the performance period > Supports the creation of long-term shareholder value Operational Metrics: Focus on Efficiency Weighted 40% > Measures performance based on Arrow’s three-year average ROIC in excess of its three-year WACC > Helps mitigate variance from economic cycles, which market-based metrics would introduce > Incentivizes prudent use of capital and rewards value creation Threshold Trigger: Net Income Vesting contingent upon a Net Income threshold of greater than zero |
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The performance period for the 2015 PSU awards concluded at the end of fiscal year 2017. The Company’s EPS growth relative to its peer companies and efficient use of capital resulted in a payout at 143% of target for these PSUs.
WHAT GUIDES THE COMPANY’SOUR PROGRAM
As a large global provider of technology solutions operating in a highly competitive market, the Company views itswe view our people as critical assets and key drivers of itsour success. The Company’s executive compensation program is designed to motivate, attract, retain, and retainmotivate talented executives who are capable of successfully leading the Company’s complex global operations and creating long-term shareholder value.
The program is structured to support Arrow’s strategic goals and reinforce high performance with a clear emphasis on accountability and performance-based pay for achievement of stated goals.achieving established targets. As such, a significant portion of total direct compensation (“TDC”) is directly linked to the Company’s short- and long-term performance in the form of cash and equity-based incentive awards. This providesallows executives with an opportunity to earn above medianabove-median compensation if the Company delivers superior results orin excess of performance targets and below - median compensation when performance targets are not achieved. The portion of pay tied to performance is consistent with Arrow’s executive compensation philosophy and market practices.
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The Principal Elements of Pay: Total Direct Compensation Pay
The Company’s compensation philosophy is supported by the following principal elements of pay:pay support the Company’s compensation philosophy:
Pay Element | Form | |
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| What It Does |
Base Salary | Cash | Provides a competitive rate |
Annual Cash Incentive | Cash | Rewards individuals for performance if they attain pre-established financial and strategic targets |
Long-Term Incentive | Equity | Promotes a balanced focus on driving performance, retaining talent, and aligning the interests of the Company’s executives with those of its shareholders. |
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The Company’s Decision-Making Process
The Role of the Compensation Committee
The Compensation Committee is comprised of independent, non-management members of the Board. The Compensation Committee works very closely with its independent consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, a copy of which is available at the “Leadership & Governance” sublink of the Investor Relations drop down menu on investor.arrow.com.
The Compensation Committee is responsible for developing and reviewing Arrow’s executive compensation philosophy. It implements that philosophy through compensation programs and plans designed to further Arrow’s strategy; drive long-term, profitable growth; and increase shareholder value. The Compensation Committee reviews and approves the corporate goals and objectives relevant to executive compensation and, subject to review and ratification by the other non-management members of the Board, reviews and approves the compensation and benefits for the CEO and the Company’s other NEOs. In making its decisions,NEOs active at the Compensation Committee also reviewsend of fiscal 2023. Annual and long-term incentives play a significant role in the NEOs’ overall compensation at Arrow. We believe that annual and long-term incentives are essential to linking pay to performance, aligning compensation with organizational strategies and financial goals, and rewarding executives for the creation of eachshareholder value.
For fiscal 2023, in the aggregate, 81% of the NEOsNEOs’ target TDC was at risk and tied to corporate performance, measured by Absolute EPS, ROIC, WACC, and strategic ESG goals (86% for the Company as a whole. It also considersCompany’s CEO and an average of 78% for the compensationother continuing NEOs).
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The Compensation Committee considers performance reviews prepared byfollowing charts reflect the CEO for his direct reports and conducts its own performance reviewdistribution of the CEO. The Compensation Committee reviews the Company’s performance on the metrics relevant to the execution of its strategy and evaluates the CEO’s performance in light of that execution. For NEOs other than the CEO, the Compensation Committee’s review includes input provided by the CEO. The CEO’s compensation is evaluated in executive session without the CEO present. All decisions regarding NEO compensation are ultimately made by the Compensation Committee (subject to ratification by the Board in the caseelements of the CEO’s compensation).and other NEOs’ target TDC based on grant date values.
Target Total Direct Compensation
Compensation Committee meetings are regularly attended by the Company’s CEO, the Chief Legal Officer, the Chief Human Resources Officer,“Other NEOs” chart excludes Messrs. Long and the Chief Financial Officer. EachSchell as they were not executive officers of the management attendees provides the Compensation Committee with his or her specific expertise and the business and financial context necessary to understand and properly target financial and performance metrics. None of the members of management are present during the Compensation Committee’s deliberations regarding their own compensation, but the Company’s independent compensation consultant, Pearl Meyer & Partners, may participate in those discussions.Company at year-end.
The Role of the Independent Compensation Consultant
The Compensation Committee has selected and engaged Pearl Meyer & Partners as its independent compensation consultant to provide the Committee with expertise on various compensation matters, including competitive practices, market trends, and specific program design. Additionally, Pearl Meyer & Partners provides the Committee with competitive data regarding market compensation levels at the 25th, 50th, and 75th percentiles for total compensation and for each major element of compensation.
Pearl Meyer & Partners reports directly to the Compensation Committee and does not provide any other services to the Company or its management. The Committee annually assesses the independence and any potential conflicts of interest of compensation advisors in accordance with applicable law and New York Stock Exchange listing standards. Pearl Meyer & Partners’ services to the Compensation Committee have not raised any conflicts of interests between the Committee, Arrow, and Arrow management.
To ensure that executive compensation plans and levels are appropriate and competitive, the Compensation Committee reviews analyses on peer company practices at various times throughout the year. Information on
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total compensation levels is considered in the context of peer performance analyses in order to effectively link compensation to absolute and relative performance. Through this process, and with input from its independent compensation consultant and management, the Compensation Committee determines appropriate benchmarking targets each year.
The Compensation Committee believes targeting TDC at the market 50th percentile is appropriate. For the purpose of Arrow’s annual competitive benchmarking study, Pearl Meyer & Partners reviews compensation data of the Peer Group (as defined below), as well as general industry survey data published by third parties. General industry survey data serves as a broader reference point for specific business units where the breadth and relevance of Peer Group data is not as comprehensive as desired, and in cases where the NEO’s position and responsibilities are broader than the typical benchmarks.
The Compensation Committee evaluates the appropriateness of each NEO’s compensation as positioned around the market 50th percentile based on factors that include Company and business unit performance, job scope, individual performance, time in position, and other relevant factors. To the extent the Compensation Committee deems that the compensation level associated with an NEO’s position versus the market is not aligned with the relevant factors, the Compensation Committee may choose to modify one or more of the NEO’s compensation components.
The Compensation Committee, with input from its independent compensation consultant, annually reviews and approves the compensation Peer Group to ensure it continues to meet the Company’s objectives. At the Compensation Committee’s request, Pearl Meyer & Partners conducted a comprehensive review of the Peer Group used in 2017. The Peer Group companies reflect a combination of direct and broader industry peers and are as follows:
√ | Heavy emphasis on variable compensation | × | No guaranteed salary increases or incentive guarantees |
| Balance of annual and long-term compensation to discourage short-term risk-takingat the expense of long-term results | × | No employment contracts containing multi-year guarantees for salary increases, non-performance-based bonuses, or equity compensation |
| All long-term stock unit incentives vest based on performance | × | No “single trigger” change in control cash payments or equity vesting |
| Rigorous stock ownership guidelines | × | No incentive plan payouts without justifiable performance linkage |
| Meaningful quantitative goals for performance-based annual and long-term compensation | × | No option backdating, repricing, or cash-out of underwater options |
| Clawback policies covering cash and equity incentive compensation | × | No dividends or dividend equivalents paid on unvested PSUs or RSUs |
| Annual say-on-pay advisory vote | × | No golden parachute tax gross-ups |
| Quantitative strategic goals in annual cash incentive plan | × | No speculative trading, hedging on derivative transactions, or pledging of Company stock |
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Overall Peer Group Data (Millions) | ||||
Percentile |
| Revenue* |
| Market Cap |
25th |
| 7,803 |
| 2,892 |
50th |
| 18,231 |
| 3,742 |
75th |
| 22,218 |
| 4,752 |
Arrow |
| 26,813 |
| 7,113 |
Percentile Rank |
| 87% |
| 91% |
* Trailing Twelve Months |
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√ | Limited perquisites | × | No tax reimbursements on executive perquisites |
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The Compensation Committee also reviews other benchmarking data when deemed necessary and appropriate. This data can cover a variety of areas such as equity vesting practices, the prevalence of performance metrics among peer companies, types of equity vehicles used by peer companies, severance practices, equity burn rates, and any other market data the Compensation Committee believes it needs to consider when evaluating the Company’s executive compensation program.
THE 20172023 EXECUTIVE COMPENSATION PROGRAM IN DETAIL
This sectionpart of the CD&A provides details about the three principal elements of pay ―— base salary, annual cash incentive awards, and long-term incentive awards. Arrow’s pay-for-performance focusculture is evident indemonstrated by the substantially greater weight given to incentive-based compensation versuscompared to fixed compensation.
Pay Element | Form | Performance Metric |
Base Salary | Cash | > Base salary is set at market-competitive levels and considers individual and Company performance, among other factors |
Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain talent. To attract the necessary executive talent and maintain a stable executive team, the Compensation Committee generally targets executive officer base salaries at approximately the 50th percentile for comparable jobs at similar companies. In making base salary decisions for the NEOs other than the CEO, the Compensation Committee considers its independent compensation consultant’s guidance, the CEO’s recommendations, each NEO’s position and its importance to the success of the Company, the NEO’s level of responsibility within the Company, as well as a number of other factors, including:
| > | individual performance; |
| > | Company or business unit performance; |
| > | job responsibilities; |
| > | time in role; and |
> Individual performance;
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> Job responsibilities;
> Relevant benchmarking data; and
> Internal budget guidelines.
| > | relevant benchmarking data, which includes Peer Group and third-party general industry survey data. |
Subject to ratification by the Board, the CEO’s base salary is determined by the Compensation Committee in executive session based on its evaluation of histhe CEO’s individual performance, the Company’s performance, and relevant benchmarking data. The Compensation Committee, in
In consultation with its independent compensation consultant, the Compensation Committee met in December 20162022 to conduct its annual review of base salaries and determineddetermine the appropriate annual2023 base salary rate for each then current NEONEO. As a result of its review, the Compensation Committee approved a 13% increase to be as follows:
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| 2016 |
| 2017 | ||
Michael J. Long |
| $ | 1,150,000 |
| $ | 1,150,000 |
Christopher D. Stansbury |
| $ | 500,000 |
| $ | 550,000 |
Sean J. Kerins |
| $ | 550,000 |
| $ | 550,000 |
Andrew D. King |
| $ | 500,000 |
| $ | 525,000 |
Gretchen K. Zech |
| $ | 455,000 |
| $ | 455,000 |
In 2017, Messrs. StansburyMs. Jean-Claude’s base salary, effective January 1, 2023, based on individual performance, time in the role, and King received salary increases of 10% and 5%, respectively. These increases were intended to keep salaries competitive and consistent with the Company’s compensation philosophy and the performancerelevant benchmarking data. None of the incumbent.other NEOs received base salary adjustments.
The table below provides an overview of the base salaries of the NEOs as of the fiscal year end (or, in the case of Messrs. Long and Schell, as of their departure dates):
| | | | | | | | |
Name |
| 2022 |
| 2023 |
| % Change | ||
Sean J. Kerins | | $ | 1,000,000 | | $ | 1,000,000 | | 0% |
Rajesh K. Agrawal | | $ | 700,000 | | $ | 700,000 | | 0% |
Gretchen K. Zech | | $ | 675,000 | | $ | 675,000 | | 0% |
Kristin D. Russell | | $ | 550,000 | | $ | 550,000 | | 0% |
Carine L. Jean-Claude (1) | | $ | 400,000 | | $ | 450,000 | | 13% |
Michael J. Long | | $ | 1,000,000 | | $ | 1,000,000 | | 0% |
Kirk D. Schell | | $ | 500,000 | | $ | 500,000 | | 0% |
| (1) | Ms. Jean-Claude received a 13% increase effective January 1, 2023, as a result of the Compensation Committee's annual review, as described above. |
Annual Cash Incentives
Pay Element | Form | Performance Metric | |
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| > 70% Absolute EPS > 30% Strategic Goals |
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Annual Cash Incentives: The Management Incentive Compensation Plan (“MICP”)
Arrow’sCompany’s annual cash incentives are designed to reward individuals for performance against pre-established targets that arepre - established metrics set by the Compensation Committee at the beginning of the year. Each of the Company’s NEOsNEO is assigned an annual cash incentive target. Annualtarget based on the NEO’s level of responsibility, ability to impact overall results, and relevant benchmarking data. Actual annual cash incentive targets are established based on market compensation analysis within the context of targeting TDC at the 50th percentile, provided that the actual incentive levelsawards may be higher or lower than the 50th percentilemarket since awards are based upon a number of factors, such as Company and individual performance. Actual award payouts depend on the achievement ofresults against pre-established performance objectivesmetrics and can range from 0% to 200%170% of target award amounts. Target annual award opportunities were established by the NEO’s level of responsibility and his or her ability to impact overall results. The Compensation Committee also considers market data in setting target award amounts.
2017 MICP Performance Objectives and Results
The annual cash incentive target.
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In consultation with its independent compensation consultant, the Compensation Committee met in December 2022 to conduct its annual review of annual cash incentives and determine the 2023 annual cash incentives for each NEO. As a result of its review and commensurate with the NEOs followsadjustment to her base salary, the structure of the Company’s MICP, which is based onCompensation Committee approved a combination of financial and strategic goals. The financial goals account for 70% and the strategic goals account for 30% of the total13% increase to Ms. Jean-Claude’s annual cash incentive award.
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The 2017 annual cash incentive metrics and results against those metrics were as follows:
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| Weighting |
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| Achievement % |
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Arrow EPS |
| $ | 4.91 - 8.19 | ** |
| 125.00 | % |
| 70 | % |
| 87.50 | % |
Strategic Goals |
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| 0 - 200 | % |
| 100.00 | % |
| 30 | % |
| 30.00 | % |
Total |
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| 100 | % |
| 117.50 | % |
** Achievement of each performance metric at the midpoint of the performance range would result in a payout of 100% of the target opportunity for such metric and all other payments are interpolated based on the applicable performance range. For example, with respect to the EPS metric, if EPS equals $6.55, the resulting payout would be 100% of the target opportunity. Achievement below $4.91 or above $8.19 would result in payouts of 0% or 200% of the target opportunity, respectively, on that performance metric.
The Company attained an EPS performance of $6.96, resulting in an achievement percentage of 125.0% for each of the NEO’s financial goals. The NEOs can also earn between 0% and 200% of the 30% strategic component of the MICP based on the Compensation Committee’s evaluation of each individual’s performance against his or her pre-established, strategic goals. The strategic goals are designed to be specific and measurable and to further the objectives of the Company. For 2017, the strategic component of the MICP was based on team performance goals.
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The Compensation Committee applied the same basic methodology described above to Mr. Long, including the 70% financial component based on the above EPS performance range. He attained 125.0% achievement on his financial goal. The Compensation Committee tied the 30% strategic component for Mr. Long’s annual cash incentive to team contributions made relative to the Company’s strategic business imperatives. Based on the Compensation Committee’s assessment of Mr. Long’s successful performance on his strategic objectives, it awarded him 100.0% on his strategic goals. This resulted in a total weighted achievement percentage of 117.5% for Mr. Long and an annual cash incentive of $1,997,500.targets.
The table below provides a summary of the awards earnedannual cash incentive targets for each NEO for fiscal 2022 and 2023:
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Name |
| 2022 |
| 2023 |
| % Change | ||
Sean J. Kerins | | $ | 2,000,000 | | $ | 2,000,000 | | 0% |
Rajesh K. Agrawal | | $ | 700,000 | | $ | 700,000 | | 0% |
Gretchen K. Zech | | $ | 675,000 | | $ | 675,000 | | 0% |
Kristin D. Russell | | $ | 550,000 | | $ | 550,000 | | 0% |
Carine L. Jean-Claude (1) | | $ | 400,000 | | $ | 450,000 | | 13% |
Michael J. Long (2) | | $ | 2,000,000 | | $ | 2,000,000 | | 0% |
Kirk D. Schell | | $ | 500,000 | | $ | 500,000 | | 0% |
| (1) | Ms. Jean-Claude’s annual cash incentive target increased effective January 1, 2023, as a result of the Compensation Committee’s annual review, as described above. |
| (2) | Mr. Long’s annual cash incentive target above represents his opportunity at the beginning of 2023. His actual payout was prorated for his period of service from January 1, 2023 to July 5, 2023 and determined based on the Company’s achievement of the relevant performance goals. |
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2023 Annual Cash Incentive Performance Goals and Results
For fiscal 2023, the annual cash incentive for each of the NEOs was based on a combination of financial and strategic goals weighted at 70% and 30%, respectively.
The 2023 annual cash incentive metrics and results against the targets of those metrics are summarized below.
Financial Goals. Each NEO can earn between 0% and 200% of the target award linked to our financial goals based on actual performance against annual financial targets. The Compensation Committee selected Absolute EPS to reinforce the Company’s overall profit objectives based on the rationale that Absolute EPS is a primary driver of shareholder value creation.
Coming off a record performance year in 2022, the 2023 Absolute EPS target setting process was informed by the macroeconomic indicators and market forecasts for a global recessionary environment impacting Arrow’s business at the time, including:
| ● | general market conditions in the Asia region; |
| ● | IT spend softness in North America; |
| ● | industry concerns about supply chain normalization resulting in elevated customer inventory levels; |
| ● | declines in the shortage market from its peak; |
| ● | rising geo-political tensions; and |
| ● | rising interest rates. |
The Compensation Committee had knowledge of the potential disruption such factors could have on the Company based on similar historical cyclical downturns. With these considerations in mind, the Compensation Committee set the 2023 Absolute EPS target approximately 17% below prior-year Absolute EPS results. This reduction was similar in relative size to the profit decline that occurred during the recent semiconductor market slowdown in 2019. While the target was set below prior-year actuals, it was aligned with the annual business plan and set well ahead of market expectations at that time, reflecting the Compensation Committee’s commitment to setting challenging performance goals. The Compensation Committee believed that the targets were rigorous and would appropriately incentivize our executives.
At the end of the performance period, the actual Absolute EPS result declined 26% relative to the prior year, confirming the difficult market environment anticipated by the Compensation Committee when setting 2023 targets. The Compensation Committee evaluated the resulting achievement outcomes, which were below target and determined that the financial goals had appropriately aligned incentives with the actual performance of the Company and the leadership team in a challenging market environment and concluded that pay and performance were reasonably aligned.
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| | | Performance Range | | | ||
| | | (% of Target Payout) | | Payout | ||
| | | Threshold | Target | Maximum | Actual | as a % of |
Metric |
| Weighting | (25%) | (100%) | (200%) | Result | Target |
Absolute EPS | | 70.0% | $14.41 | $19.21 | $24.01 | $17.06 | 66.41% |
Note: Payouts are linearly interpolated for performance between threshold and maximum. For performance below threshold, there is no payout earned.
Strategic Goals. Each NEO can earn between 0% and 100% of the target award for these metrics based on actual performance against the annual strategic goals. Strategic metrics and goals are intended to be dynamic and expected to change annually depending on the relevant business priorities for the performance year. Each year, the Compensation Committee determines specific performance objectives that are designed to be rigorous and support the long-term success of the Company’s strategy.
We believe our ESG strategy and achievements can enhance the long-term sustainability and financial performance of our Company. To demonstrate Arrow’s commitment to the importance of these efforts, the Compensation Committee established performance objectives related to carbon emissions reduction and the Company’s diversity and equality measures as components of our executive annual cash incentive plan for 2023. Our environmental strategy goal was to reduce carbon emissions by 5% across Arrow’s EMEA fleet and at ten specified facilities in 2023 (representing 40% of Arrow’s square footage). Our human capital strategy goals measured success in our efforts towards fostering a diverse talent pipeline to grow diverse representation in Company leadership.
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| | | | Performance Range | | | | | ||
| | | | (% of Target Payout) | | | | Payout | ||
| | | | Threshold | | Target/Maximum | | Actual | | as a % of |
Metric |
| Weighting |
| (75%) |
| (100%) |
| Result |
| Target |
Environmental Strategy: | | | | | | | | | | |
Reduction of Metric Tons of CO2 Equivalent (1) (2) | | 15.0% | | 0.0% | | -5.0% | | -40.0% | | 100% |
Human Capital Strategy - diversity and equality measures: | | | | | | | | | | |
Leadership Global: Growth in Gender Representation (1) (3) | | 7.5% | | 0.0 points | | 0.25 points | | -0.73 points | | 0% |
Leadership US: Growth in Underrepresented Race/Ethnicity Representation (1) (3) | | 7.5% | | 0.0 points | | 0.25 points | | 0.12 points | | 87% |
| (1) | Payouts are linearly interpolated for performance between threshold and target, with no payout for performance below the threshold and no additional award for achieving above-target performance. |
| (2) | Payout at cut-in is 75% of the incentive target for maintaining the prior year's carbon emissions level; up to 100% of the incentive target for achieving a 5.0% reduction in the metric tons of CO2 equivalent. |
| (3) | Payout at cut-in is 75% of the incentive target for maintaining the prior year's diversity and equality percentages; up to 100% of the incentive target for growing representation of women leaders globally and leaders who are of underrepresented race/ethnicity in the U.S. by 0.25 points. |
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The performance achievement related to our environmental strategy exceeded the maximum performance targets. The performance achievements related to our human capital strategy were below the relevant targets. The Compensation Committee evaluated the resulting formulaic outcomes and determined that the goals had appropriately aligned leadership team incentives with the actual performance of the Company and concluded that pay and performance were reasonably aligned.
Award Payouts. The Absolute EPS and strategic ESG goal performance byachievements resulted in an overall award payout of 68.01%, which, under its negative discretion review and determination authority, the Compensation Committee approved. The table below sets forth the 2023 annual cash incentive awards paid to each NEO:NEO.
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Name |
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| of Target |
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| (30% Weighting) |
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Michael J. Long |
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| 1,700,000 |
| 125.0% |
| 100.0% |
| 1,997,500 |
| 117.50% | |||||||||||||
Christopher D. Stansbury |
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| 550,000 |
| 125.0% |
| 100.0% |
| 646,250 |
| 117.50% | |||||||||||||
Sean J. Kerins |
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| 500,000 |
| 125.0% |
| 100.0% |
| 587,500 |
| 117.50% | | $ | 2,000,000 | | 66.41% | | 71.75% | | 68.01% | | $ | 1,360,200 | |
Andrew D. King |
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| 475,000 |
| 125.0% |
| 100.0% |
| 558,125 |
| 117.50% | |||||||||||||
Rajesh K. Agrawal | | $ | 700,000 | | 66.41% | | 71.75% | | 68.01% | | $ | 476,070 | ||||||||||||
Gretchen K. Zech |
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| 455,000 |
| 125.0% |
| 100.0% |
| 534,625 |
| 117.50% | | $ | 675,000 | | 66.41% | | 71.75% | | 68.01% | | $ | 459,068 | |
Kristin D. Russell | | $ | 550,000 | | 66.41% | | 71.75% | | 68.01% | | $ | 374,055 | ||||||||||||
Carine L. Jean-Claude | | $ | 450,000 | | 66.41% | | 71.75% | | 68.01% | | $ | 306,045 | ||||||||||||
Michael J. Long (1) | | $ | 1,019,200 | | 66.41% | | 71.75% | | 68.01% | | $ | 693,158 | ||||||||||||
Kirk D. Schell (2) | | $ | 500,000 | | — | | — | | — | | $ | — | ||||||||||||
| (1) | Mr. Long’s annual cash incentive award was prorated for his period of service from January 1, 2023 to July 5, 2023 and determined based on the Company’s achievement of the relevant performance goals. In anticipation of his upcoming retirement, the award was approved by the Compensation Committee on May 17, 2023, as an exception to the Management Incentive Compensation Plan’s requirement to be employed by Arrow on the day the annual cash incentive awards are paid. |
| (2) | In connection with his separation, Mr. Schell received a severance payment determined based on the Company’s achievement of the financial targets for the full fiscal year and the strategic performance goals achieved through the date of his separation. Please see “Kirk D. Schell – Separation Benefits” under the heading “2023 Potential Payouts Upon Termination” for a discussion of the compensation payable to Mr. Schell in connection with his separation. |
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Long-term incentive awards (also referred to as “LTIP”) are designed to promote a balanced focus on driving performance, retaining talent, and aligning the interests of the Company’s NEOs with those of its shareholders. Under the LTIP, awards are expressed in dollars and normallyare customarily granted annually. TheFor 2023, the annual LTIP includesawards for NEOs, other than Mr. Long, included a mix of PSUs, stock options,Performance Stock Units (“PSUs”) and RSUs. For Mr. Long, his LTIP award was delivered entirely in the form of RSUs.
LTIP Equity Mix | |||||||||||||||
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Form | Performance Metric | Rationale | Detail | ||||||||||||
50% - PSUs | > 60% three-year Relative EPS Growth > 40% three-year average ROIC minus three-year WACC > Stock price performance | > Incents and rewards long-term performance > Supports retention | |||||||||||||
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50% - RSUs |
| > Supports retention
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>
RSUs are | ||||||||||||
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2017
2023 Target LTIP Award Opportunities
The Company’s annual long-term incentives are designed to incentivize and reward individuals for strong performance by the Company based on pre-established metrics set by the Compensation Committee.
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The Compensation Committee makes LTIP award decisions for executives based on input fromevaluates the CEO (other than for himself),CEO’s performance and also considers prior grant history, the Compensation Committee’s own assessment of each executive’shis contribution, potential contribution, performance during the prior year, peer compensation benchmarking analysis, and the long-term incentive award practices of the Peer Group discussed above. The target LTIP award level is set at approximately the 50th percentile of the benchmark data gathered and adjusted by the Compensation Committee’s assessment of each executive based on the elements described above.
The Compensation Committee also evaluates the Chief Executive Officer’s performance in light of the factors discussed above to determine his annual long-term incentive award. That award (which is then ratified by the Board’s independent directors).
The Compensation Committee also makes LTIP award decisions for other executives based on the abovementioned factors and those forinput from the other NEOs for 2017CEO, and each NEO is assigned an annual long-term incentive target based on the NEO’s level of responsibility, ability to impact overall results, and relevant benchmarking data. These awards are set forth below. For more detail, including the expense to the Company associated with each grant, see the table labeled “2023 Grants of Plan-Based Awards Table.Awards” below.
The Compensation Committee generally makesand senior management monitor the Company’s equity grant practices to evaluate whether such policies comply with governing regulations and are consistent with good corporate practices. When making regular annual equity grants, the Compensation Committee’s practice is to approve them at the first regularly scheduled Board meeting of the calendar year. Hiring and promotion grants are made at the next regularly scheduled meetingyear as part of the annual compensation review and after results for the preceding fiscal year become available. In addition, the Board or Compensation Committee may make grants at any time during the year it deems appropriate, including with respect to new hires or transitions.
We believe that follows such an event, and in instances where retention awards or other ad-hoc awards are advisable, grants are made at the appropriate meeting. All stock option grants are made with exercise prices equal to the value of the Company stock on the grant date closing price to ensure participants derive value only as shareholders realize corresponding gains over an extended time period. None of the options granted by the Company, as discussed throughout this Proxy Statement, have been repriced, replaced, or modified in any way since the time of the original grant. The Company’s three-year average burn rate of 1.19%0.61% of weighted average basic common shares outstanding reflects its prudent management of equity shares used under its LTIP.
In consultation with its independent compensation consultant, the Compensation Committee met in December 2022 to conduct its annual review of LTIP awards and to determine the 2023 annual LTIP award for each NEO. As a result of its review, the Compensation Committee approved an increase in Mr. Kerins’ LTIP award to reflect his promotion to President and CEO as well as a decrease in Mr. Long’s LTIP award based on his role as Executive Chair, consistent with market and peer practices. In addition, the Compensation Committee approved an 8% and 21% increase to Mses. Russell and Jean-Claude’s annual long-term incentive awards, respectively, effective February 15, 2023, based on individual performance, time in the role, and relevant benchmarking data.
The 2017table below provides a summary of the grant-date values of the annual long-term incentive awards for each participating NEO.
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Name |
| 2022 |
| 2023 |
| % Change | ||
Sean J. Kerins (1) | | $ | 3,500,000 | | $ | 4,000,000 | | 14% |
Rajesh K. Agrawal (2) | | $ | n/a | | $ | 2,200,000 | | 0% |
Gretchen K. Zech | | $ | 1,500,000 | | $ | 1,500,000 | | 0% |
Kristin D. Russell (3) | | $ | 1,200,000 | | $ | 1,300,000 | | 8% |
Carine L. Jean-Claude (4) | | $ | 700,000 | | $ | 850,000 | | 21% |
Michael J. Long (5) | | $ | 6,000,000 | | $ | 3,000,000 | | -50% |
Kirk D. Schell (6) | | $ | n/a | | $ | 1,500,000 | | 0% |
| (1) | For 2023, Mr. Kerins’ award was increased to reflect his promotion to President and CEO consistent with market and peer practices. For 2022, Mr. Kerins’ award value reflects his annual LTIP award on February 16, 2022 and an additional award granted on June 1, 2022 to align his total LTIP award value closer to market and peer practices for his role as President and CEO. |
| (2) | Mr. Agrawal joined the Company on September 6, 2022, and he did not receive an annual long-term incentive award in 2022. |
| (3) | For 2023, Ms. Russell’s annual long-term incentive award increased effective February 15, 2023, as a result of the Compensation Committee’s annual review, as described above. |
| (4) | For 2023, Ms. Jean-Claude’s annual long-term incentive award increased effective February 15, 2023, as a result of the Compensation Committee’s annual review, as described above. |
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| (5) | For 2023, Mr. Long’s award was reduced based on his role as Executive Chair consistent with market and peer practices. |
| (6) | Mr. Schell joined the Company on May 12, 2022, and he did not receive an annual long-term incentive award in 2022. |
The 2023 LTIP awards were granted as follows:
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Name |
| PSUs |
| Stock Options |
| RSUs |
| PSUs |
| RSUs |
Sean J. Kerins | | 16,083 | | 16,082 | ||||||
Rajesh K. Agrawal | | 8,845 | | 8,846 | ||||||
Gretchen K. Zech | | 6,031 | | 6,031 | ||||||
Kristin D. Russell | | 5,227 | | 5,227 | ||||||
Carine L. Jean-Claude | | 3,417 | | 3,418 | ||||||
Michael J. Long |
| 40,617 |
| 74,981 |
| 20,309 | | — | | 24,124 |
Christopher D. Stansbury |
| 6,770 |
| 12,498 |
| 3,384 | ||||
Sean J. Kerins |
| 7,785 |
| 14,370 |
| 3,893 | ||||
Andrew D. King |
| 7,447 |
| 13,746 |
| 3,723 | ||||
Gretchen K. Zech |
| 6,363 |
| 11,747 |
| 3,182 | ||||
Kirk D. Schell | | 6,031 | | 6,031 | ||||||
A Closer Look at PSUs: 20172023 Grants
The 20172023 PSU awards are tied to Arrow’s three-year (2017-2019)(2023-2025) EPS growth as compared to the EPS growth of Arrow’s Peer Group (see the “The Role of Peer Companies” section below in this CD&A) and Arrow’s three-yearthree - year average ROIC in excess of its three-year WACC. The calculation of WACC is defined as the sum of the after-tax cost of each capital component times its weight. The Compensation Committee chose EPSthese performance metrics and ROIC as performance metricsthe range of payouts in order to reward participants for successfully balancing profit maximization and the efficient use of capital, both key drivers in creating shareholder value.
The Compensation Committee established the PSU performance goals to encourage strong, focused performance. Given the economic and market conditions at the time the targets were set, the target payout levels were designed to be challenging but achievable, while payouts at the maximum levels were designed to be stretch goals.
The three-year Relative EPS variableGrowth metric is weighted at 60%, and the ROIC/three-year average ROIC minus three- year WACC variablemetric is weighted at 40%. At the end of the performance period, the Compensation Committee reviews the outcome of the payout within the context of the Company’s overall performance during the period, including an evaluation of the underlying metrics, and may implement a downward adjustment to the payout if the Compensation Committee concludes that an adjustment would be appropriate to align pay outcomes with performance.
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Performance Stock Unit Payout Matrix (January 1, 2023 - December 31, 2025)
| (1) | There will be no payout if ROIC minus WACC is less than zero, except when determined otherwise in the Compensation Committee’s discretion. |
| (2) | The nine companies comprising the Peer Group are Avnet, Inc., CDW Corporation, Celestica Inc., Flex Ltd., Hewlett Packard Enterprise Company, HP Inc., Jabil Inc., TD SYNNEX Corporation, and Wesco International, Inc. |
Provided the Company achieves a non-GAAP net income as adjusted, of greater than zero during the grant year, participants may earn up to 185% of their targeted PSUs based on performance against the matrix below,pre-established performance goals, subject to the individual’s continued employment through the applicable vesting date and any rights provided under the applicable award agreement, Severance Policy (as defined below), and Participation Agreements.Agreements (as defined below).
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Performance Payout for 20152021 PSU Grants (January 1, 2021 – December 31, 2023)
Three-year average ROIC in excess of three-year WACC (40%).Results are measured at the end of the three - year performance period against Arrow’s internal target, which was set to exceed Arrow’s three-year WACC by 1.5% (as shown in the table below) and is based on an enduring value creation standard.
Three-year Relative EPS Growth (60%). Results are measured by the change in Arrow’s EPS during the performance cycle as compared to the companies in the Peer Group and the relative ranking determines the payout as a percentage of target as shown in the table below.
The Table below applies to 2015 PSU grants
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| 3-YEAR ROIC-WACC (40%) |
| PAYOUT AS PERCENT OF TARGET* | ||||||||||||||
Maximum (200%) |
| 3.0%+ |
| 80% |
| 95% |
| 119% |
| 137% |
| 146% |
| 152% |
| 164% |
| 185% |
Target (100%) |
| 1.5% |
| 40% |
| 55% |
| 79% |
| 97% |
| 106% |
| 112% |
| 124% |
| 145% |
Threshold (50%) |
| > 0% |
| 20% |
| 35% |
| 59% |
| 77% |
| 86% |
| 92% |
| 104% |
| 125% |
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| < 0% |
| 0% |
| 15% |
| 39% |
| 57% |
| 66% |
| 72% |
| 84% |
| 105% |
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* Payout interpolated between levels |
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Forperformance period for the PSUs granted in 2015, the performance period2021 was completed at the end of calendar year 2017, with theJanuary 1, 2021, to December 31, 2023. The payout level was approved by the Compensation Committee in February 2018 based on the three-year (2015-2017) results, which include three years of audited financial statements in accordance with GAAP. During 2016, one of the companies initially selected as a member of the Company’s Peer Group, Ingram Micro, was acquired. Sufficient financial data for that company is no longer available. As a result, the Compensation Committee decided to remove Ingram Micro from the Peer Group and reduce the number of Peer Group companies by one. Based on the revised Peer Group, the2024. The Company determined that its EPS growth ranked 3rdfifth among the reporting companies.companies (a weighted result of 60%). The Company’s average ROIC exceeded its WACC by 2.7%7.93% during the same period.period (a weighted result of 80%). As a result, in February 2018,2024, the 2015-2017 PSUs granted in 2021 vested at 143%140% of the target levels. number of PSUs.
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Performance Stock Unit Payout Matrix (January 1, 2021 - December 31, 2023)
| (1) | There will be no payout if ROIC minus WACC is less than zero, except when determined otherwise in the Compensation Committee’s discretion. |
| (2) | The nine companies comprising the Peer Group are Avnet, Inc., CDW Corporation, Celestica Inc., Flex Ltd., Hewlett Packard Enterprise Company, HP Inc., Jabil Inc., TD SYNNEX Corporation, and Wesco International, Inc. |
Restricted Stock Units
Grants of RSUs represent 25%50% of the LTIP value for the participating NEOs and generally vest in 25% increments on each of the first four anniversaries of the grant date, of grant contingent upon the Company achieving positive net income as adjusted, greater than zeroin the fiscal year of the initial grant and subject to the individual’s continued employment through the applicable vesting date.date and any rights provided under the applicable award agreement, Severance Policy (as defined below), and Participation Agreements (as defined below). RSUs are intended to provide the NEOs with the economic equivalent of a direct ownership interest in the Company during the vesting period and provide the Company with significant retention security regardless of post-grant share price volatility.security.
Stock OptionsTHE COMPANY’S DECISION-MAKING PROCESS
Stock option grants also represent 25%The Role of the LTIP valueCompensation Committee
The Compensation Committee is comprised of independent, non-employee directors. The Compensation Committee works very closely with its independent consultant and vestmanagement to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in 25% incrementsits charter, a copy of which is available under “Governance Documents” at the “Leadership and Governance” sub-link of the Investor Relations drop-down menu oninvestor.arrow.com.
The Compensation Committee is responsible for developing and reviewing Arrow’s executive compensation philosophy. It implements that philosophy through compensation programs and plans designed to further Arrow’s strategy, drive long-term profitable growth, and increase shareholder value. The Compensation Committee reviews and approves the corporate goals and objectives relevant to executive compensation and, subject to review and ratification by the other non-employee directors, reviews and approves the compensation and benefits for the CEO. In making its decisions, the Compensation Committee reviews the performance of each of the first four anniversariesNEOs and the Company as a whole. It considers the compensation of other Company executives, levels of responsibility, prior experience, breadth of knowledge, job performance, and benchmarking data in reviewing target total compensation levels.
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The Compensation Committee considers performance reviews prepared by the CEO for his direct reports and conducts its own performance review of the date of grant, subjectCEO. The Compensation Committee reviews the Company’s performance on the metrics relevant to the individual’s continued employment throughexecution of its strategy and evaluates the applicable vesting date.performance of the CEO in light of that execution. The Company grants stock optionsCompensation Committee evaluates the compensation of the CEO in an executive session without the CEO present, and then the Compensation Committee recommends the CEO’s compensation to the Board for ratification. For NEOs other than the CEO, the Compensation Committee’s review includes input provided by the CEO; however, all decisions regarding NEO compensation are ultimately made by the Compensation Committee (subject to ratification by the Board in the case of the CEO’s compensation).
The Role of Management
Compensation Committee meetings are regularly attended by the Company’s CEO, the Chief Governance, Sustainability, and Human Resources Officer, the Chief Financial Officer, and the Chief Legal Officer. Each of the management attendees provides the Compensation Committee with his or her specific expertise and the business and financial context deemed necessary to understand and properly target financial and performance metrics. None of the members of management are present during the Compensation Committee’s deliberations regarding their own compensation, but the Company’s independent compensation consultant, Pearl Meyer, may participate in those discussions. For NEOs other than the CEO, the Compensation Committee considers, among other things, the input provided by the CEO.
The Role of the Independent Compensation Consultant
The Compensation Committee has selected and engaged Pearl Meyer as its independent compensation consultant to provide the NEOsCompensation Committee with expertise on various compensation matters, including competitive practices, market trends, and specific program design. Additionally, Pearl Meyer provides the Compensation Committee with competitive data regarding market compensation levels at the 25th, 50th, and 75th percentiles for total compensation and each major compensation element.
Pearl Meyer reports to the Compensation Committee and, other than advising the Corporate Governance Committee on non-employee director compensation, does not provide any other services to the Company or its management. The Compensation Committee annually assesses compensation advisors' independence and potential conflicts of interest in accordance with applicable law and NYSE listing standards. Based on its assessment, the Compensation Committee determined that Pearl Meyer’s services have not raised any conflicts of interest.
The Role of Peer Companies
While the Compensation Committee believes targeting TDC around the market median is appropriate, target TDC levels can range from below-to above-market based on factors such as experience and performance of the individual and the Company or applicable business unit over time. For Arrow’s annual competitive benchmarking study, Pearl Meyer reviews compensation data of the Peer Group, as well as general industry survey data published by third parties.
The Compensation Committee evaluates the appropriateness of each NEO’s compensation based on factors such as Company and business unit performance, job scope, individual performance, time in position, and alignment with comparable positions at companies in the Peer Group. To the extent the Compensation Committee deems that the compensation level associated with a strong incentiveNEO’s position versus the market (one measure of which is the Peer Group) is not aligned with the relevant factors, the Compensation Committee may choose to drive long-term stock appreciation for the benefitmodify one or more of the NEO’s compensation components.
With input from its independent compensation consultant, the Compensation Committee annually reviews and approves the compensation Peer Group to evaluate whether it continues to meet the Company’s shareholders. Each stock option grant allowsobjectives, based on the holderprocess set forth below under “Peer Group Selection Process.” Based on the Compensation
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Committee’s review during 2022, no changes were made to acquire sharesthe Peer Group for 2023 as the peer group continues to be viewed as appropriately aligned with Arrow’s business and the factors set forth below.
Peer Group Selection Process
Set an initial list of companies |
| Screened initial list with established criteria |
| Performed a robust analytical review that considered: |
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> Other technology distributors > GICS code to determine industry relevance > Use of capital > Geographic footprint | > Industry similarity > Peer similarity > Size similarity > Business model alignment | > Market cap > Revenue > Market cap to revenue ratio > Return on invested capital > Gross margin > Dividend yield > Total shareholder return |
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2023 PEER GROUP (the “Peer Group”) | |
> Avnet, Inc. | > Flex, Ltd. | > Jabil Inc. |
> CDW Corp. | > HP Enterprise Co. | > TD SYNNEX Corp. |
> Celestica Inc. | > HP Inc. | > WESCO International Inc. |
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2023 Peer Group Data (Millions) | ||||
Percentile |
| Revenue (1) |
| Market Cap |
25th |
| 23,192 | | 7,154 |
Median |
| 29,261 | | 11,422 |
75th |
| 33,367 | | 20,648 |
Arrow |
| 33,107 | | 6,578 |
Percentile Rank |
| 67% | | 22% |
| (1) | Trailing Twelve Months. Source: Company reports and S&P Capital IQ market data. |
The Compensation Committee also reviews other benchmarking data of companies outside of the Company atPeer Group when deemed necessary and appropriate. This data can cover a fixed exercise price (Arrow’s closing share price on grant date) over a ten-year term, providing value onlyvariety of areas, such as equity vesting practices, the prevalence of performance metrics among peer companies, types of equity vehicles used by peer companies, severance practices, equity burn rates, and any other market data the Compensation Committee believes it needs to the extent thatconsider when evaluating the Company’s share price appreciates during that period.executive compensation program.
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OTHER PRACTICES, POLICIES, AND GUIDELINES
The Compensation Committee recognizes the importance of equity ownership by delivering a significant portionmajority of the NEOs’ total compensation in the form of equity. To further align the interests of the Company’s executives with those of shareholders, the Company requires its NEOs to hold specified amounts of Arrow equity. The NEOs are requiredequity as summarized below:
Position | Ownership Requirement |
CEO | 5x base salary |
Other NEOs | 3x base salary |
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If the ownership requirement has not been met by the fifth anniversary of the date the NEO became subject to hold Arrow equity valued at athe ownership requirement multiple, then 100% of three times their base salaries, except the CEO, who must hold five times his base salary. Until the specified levels of ownership are achieved, the NEOs are required to retain an amount equal to 50% of the net shares acquired annually through vestingfrom employee equity awards must be retained until the requirements are met. Shares that count towards the ownership requirement include shares owned and vested and unvested RSUs. Non-Qualified Stock Options, whether vested or unvested, and unvested PSUs do not count towards the ownership requirement. As of RSUs, PSUs,the Record Date, all NEOs currently meet the stock ownership requirements.
Clawback Policies
The Board believes that it is in the Company’s and its shareholders’ best interests to create and maintain a culture that emphasizes integrity and accountability and reinforces the Company’s pay-for-performance compensation philosophy.
The Board has (i) adopted a new clawback policy structured to comply with the NYSE listing standards (the “Dodd-Frank Compensation Clawback Policy”) and (ii) retained the Company’s existing clawback policy applicable to executive officers (amended to prevent duplication of any recoveries required under the Dodd - Frank Compensation Clawback Policy) and other members of senior management not otherwise subject to the Dodd-Frank Compensation Clawback Policy (the “Incentive Compensation Clawback Policy”).
The Company will continue to monitor its clawback policies to evaluate whether they remain consistent with applicable laws and update them as deemed necessary.
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Dodd-Frank Compensation Clawback Policy
The Dodd-Frank Compensation Clawback Policy applies to the Company’s Chief Executive Officer; Chief Financial Officer; Chief Accounting Officer; President, Global Enterprise Computing Solutions; President, Global Components; Chief Governance, Sustainability, and Human Resources Officer; and Chief Legal Officer and Secretary (for purposes of this section, “executive officers”).
The Dodd-Frank Compensation Clawback Policy provides that in the event of an accounting restatement that either (a) results from material noncompliance with financial reporting requirements under federal securities laws (commonly referred to as a “Big R” restatement) or (b) would result in a material misstatement if the error was corrected or left uncorrected in the current period (commonly referred to as a “little r” restatement, and together with a “Big R” restatement, a “Restatement”), the Company must recoup all incentive-based compensation (on a pre-tax basis) received by executive officers at any time employed in the applicable performance period in excess of the amount that would have otherwise been received if the calculation were based on those results in the Restatement. The recoupment period covers the three completed fiscal years immediately preceding the date on which the Company is required to prepare the Restatement.
Additionally, the Dodd-Frank Compensation Clawback Policy prohibits the Company from indemnifying or reimbursing the covered employee for any loss under the Dodd-Frank Compensation Clawback Policy.
Incentive Compensation Clawback Policy
The Incentive Compensation Clawback Policy is additive, and not duplicative, of the Dodd-Frank Compensation Clawback Policy. The Incentive Compensation Clawback Policy permits the Company, acting through its Compensation Committee, to recoup specific executive compensation from its executive officers (without duplication of any recoupment under the Dodd-Frank Compensation Clawback Policy), vice-president managers, and other members of senior management, in the event of (i) a Restatement or (ii) an executive’s involvement in specified misconduct under the Incentive Compensation Clawback Policy (“Misconduct”).
In the event of a Restatement, the Compensation Committee may require an employee to reimburse the Company or to forfeit any excess incentive compensation (which could include PSUs and RSUs under the LTIP) received by the employee during the three completed fiscal years immediately preceding the date on which the Company is required to prepare a Restatement. In the event of Misconduct, the Compensation Committee may require an employee to reimburse the Company or to forfeit any and all incentive compensation if the Misconduct occurred during any of the three fiscal years preceding the grant, payment, vesting, or settlement of the incentive compensation.
Consistent with the Dodd-Frank Compensation Clawback Policy, the Incentive Compensation Clawback Policy prohibits the Company from indemnifying or reimbursing the covered employee for any loss under the Incentive Compensation Clawback Policy.
Insider Trading Policy
The Company believes that it is essential to (i) prevent insider trading, (ii) prevent the appearance of insider trading, (iii) prevent the misuse of insider information, and (iv) protect the Company’s reputation for integrity and ethical conduct.
The Company’s insider trading policy prohibits directors and all other employees from transacting in the Company securities while aware of material nonpublic information. Specific individuals who are at a greater risk of possessing material nonpublic information, including directors and executive leadership, are restricted to transacting in Company securities only during open trading windows, with certain exceptions for, among other things, scheduled trades under a contract, instruction, or plan intended to satisfy the conditions of Exchange Act Rule 10b5-1(c) (a “10b5-1 plan”), vesting of stock, transactions resulting from domestic-relations orders, and surrender or withholding of shares to satisfy taxes.
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and shares received as a resultThe Company’s open trading windows commence on the opening of the exercise of stock options. Shares that count toward satisfactionmarket on the first day after the filing with the SEC of the stock ownership requirements include:
> Shares owned directly and indirectly;
> Shares ownedCompany’s Quarterly Report on behalfForm 10-Q or Annual Report on Form 10-K, as applicable, until the close of the market on the fifteenth calendar day prior to the last day of the then-current quarter. The Chief Legal Officer may also impose special trading blackout periods due to the occurrence of material developments known to the Company but not yet publicly disclosed.
Under the insider-trading policy, directors and executive leadership must also preclear their trades (unless done under an existing 10b5-1 plan) or the 401(k) Plan;adoption or modifications of any 10b5-1 plans with the Company’s Chief Legal Officer.
In 2023, the Company updated its Insider Trading Policy to implement the mandatory cooling-off periods required by the new SEC rules for first trades made under 10b5-1 plans. The Company implemented the longer cooling-off period required by the SEC for officers and directors to apply to all Arrow employees. The Company also updated the Insider Trading Policy to treat gifts of Arrow securities as covered transactions and prohibit insiders’ use of overlapping 10b5-1 plans (except for the purpose of selling Arrow securities to satisfy tax withholding obligations arising from the vesting of certain equity awards).
Anti-Hedging and Anti-Pledging Policy
> PSUs (after any performance conditions have been satisfied);
> Unvested RSUs (after any performance conditions have been satisfied); and
> The “in-the-money” value of vested stock options.
The Company’s anti-hedging and anti-pledging policy provides that directors, executive officers, and certain other employeescorporate officers and senior executives may not directly or indirectly engage in transactions that would have the effect of reducing the economic risk of holding the Company’s securities. The Company’s policy prohibits themcovered individuals from engaging in short-term trading, buyingcertain derivatives transactions in the Company’s securities, such as options, puts, calls, or selling putsimilar instruments; prepared variable forward contracts; equity swaps or call options, short sales,other equity derivatives; zero cost dollars; exchange funds or entering into hedging“swap funds,” “spread betting” transactions (i.e., transactions speculating on the open market with respect to their ownership of Company securities.share price movement) or other speculative transactions; and participation in certain pooled investment partnerships. The policy also prohibits the pledging of companyCompany securities or the holding of Company securities in margin accounts since securities held in a margin account may be sold by the broker without the customer'scustomer’s consent if the customer fails to meet a margin call, and any such margin sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company securities. The policy is reviewed annually and, if needed, updated by the Compensation Committee each year. The Company’s Chief Legal Officer, in certain limited circumstances, may approve in advance specific transactions which would otherwise be prohibited by the policy. To date, no such exception has arisen or been granted.Committee. A copy of the policy is available under “Governance Documents” at the “Leadership &and Governance” sublinksub-link of the Investor Relations drop downdrop-down menu on investor.arrow.com.
Severance Policy and Change ofin Control Agreements
The Company has a policy for severance (the “Severance(“Severance Policy”) and a change in control retention agreement (the “Change(“Change in Control Retention Agreement”) for its executives. In connection with his departure, Mr. Schell became eligible for separation benefits under the Severance Policy based on his termination without cause. The Severance Policy corresponding Participant Agreements, and Change in Control Retention Agreements, including a quantification of the benefits that Mr. Schell received in connection with his termination, are described in detail in the section entitledheading “Agreements and Potential PaymentsPayouts upon Termination or Change in Control.”
Retirement Programs and Other Benefits
In keeping with its total compensation philosophy and in light of the need to provide a totalcomprehensive compensation and benefitbenefits package that is competitive within the industry, the Compensation Committee believes that the retirement and other benefit programs discussed below are critical elements of the compensation package made available to the Company’s NEOs.
The NEOs participate in the Arrow Electronics, Inc. 401(k) Savings Plan, which is available to all of Arrow’s U.S. employees. Company contributions to the Arrow Electronics, Inc. 401(k) Savings Plan on behalf of the NEOs are included under the heading “All Other Compensation” in the table labeled “2023 Summary Compensation Table,” and
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specified under the headingcolumn “401(k) Plan Company Contribution” onin the Alltable labeled “All Other Compensation — Detail Table. Annually, the Company considers whether to provide a discretionary contribution to the 401(k) Plan for all of Arrow’s U.S. employees, subject to Compensation Committee approval.Detail.”
Supplemental Executive Retirement Plan (“SERP”)
The Company maintains the Arrow Electronics, Inc. SERP, a non-qualified, unfunded retirement plan in which all NEOs employed by the Company as of December 31, 2017, all then-current NEOs2023 participated, the details of which are discussed under the heading “SERP” immediately preceding the Pension Benefits Table. The Company has placed approximately“Supplemental Executive Retirement Plan.”
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$93 million in various investments and trusts to cover the ongoing costs of SERP payouts for both current and former executives.
All ofExecutives, including the NEOs, participate in Arrow’s Management Insurance Program.Program (“MIP”). The Board determines participant eligibility, and each NEO employed by the Company as of December 31, 2023, participates in the MIP. In the event of the death of ana participating executive, the Company provides aan after - tax death benefit (after tax) to the executive’s named beneficiary equal to four times the executive’s annual target cash compensation.compensation (after giving effect to a tax assistance benefit included in the program). The benefit generally ends upon separation from service, butservice. However, the MIP benefit is extended until the first day of the seventh month following separation from service in the event the participating executive’s actual commencement of benefit payments under the SERP will beis delayed pursuant to Section 409A of the Internal Revenue Code.Code since no SERP benefit is payable if a participant dies prior to commencement of benefit payments.
Tax and Accounting Considerations
66 |
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COMPENSATION COMMITTEE REPORT
A varietyThe substantive discussion of tax and accounting considerations influence the Compensation Committee’s development and implementationmaterial elements of all of the Company’s compensation and benefit plans. Among them is Section 162(m) of the Internal Revenue Code, which historically limited to $1 million the amount of non-performance-based compensation that Arrow may have deducted on its U.S. income tax returns for its CEO and NEOs other than the CFO.
As part of the Tax Cuts and Jobs Act (the “Tax Act”) signed into law by President Trump on December 22, 2017, this exemption from Section 162(m) limitation for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that any compensation paid to the Company’s CEO, CFO and NEOs (“covered employees”) in excess of $1 million will now be nondeductible, subject to transition rules. Additionally, under the Tax Act’s revised Section 162(m) rules, once the individual becomes a covered employee for any taxable year, that individual will remain a covered employee for all future years thereby increasing the number of employees subject to the executive compensation limitation rules under Section 162(m) of the Internal Revenue Code.
For 2017, the Company’s incentive awards were generally designed to meet these Section 162(m) requirements so that Arrow could deduct the allowed executive compensation expenses. However, despite the Compensation Committee’s efforts to structure the executive compensation programs in a manner intended to be exempt from Section 162(m) limitations, because ofand the ambiguities and uncertainties of the application and interpretation of the Tax Act’s new Section 162(m), including the uncertain scope of the transition relief, no assurance can be currently given that all compensation intended to be deductible in fact will be under the new Section 162(m) of the Internal Revenue Code.
As required, shareholders approved the basis for performance goals for awards made to NEOs, and such performance goals are subject to an advisory vote as part of Proposal 3 above.
> The annual cash incentive plan included a maximum award based on a formula approveddeterminations by the Compensation Committee with respect to complycompensation and executive performance for 2023 are contained in the CD&A above. The Compensation Committee has reviewed and discussed the CD&A with the requirements of Section 162(m) of the Internal Revenue Code. The formula is basedCompany’s management. In reliance on a net income above a pre-established target levelthese reviews and sales divided by net working capital. Once this maximum annual cash incentive amount is determined,discussions, the Compensation Committee may exercise negative discretion to reduce the amounts to be paid to NEOs otherwise determined pursuantrecommended to the methodology described above.
> PSUs awarded to the NEOs were subject to performance criteria that requiredBoard that the Company achieve an annual net income, as adjusted, greater than zero,CD&A be included in which case an award of up to 185% maythe definitive Proxy Statement on Schedule 14A for Arrow’s 2024 Annual Meeting for filing with the SEC and be approvedincorporated by the Compensation Committee. The Committee may then exercise negative discretion to reduce the amount of the award. In so doing, the Committee considersreference in the Company’s three-year EPS growth as compared toAnnual Report on Form 10-K for the EPS growth of Arrow’s Peer Group and Arrow’s three-year ROIC in excess of its three-year WACC determined pursuant to the methodology described abovefiscal year ended December 31, 2023.
Gerry P. Smith, Chair
> RSUs awarded to the NEOs were subject to performance criteria that required that the Company achieve an annual net income, as adjusted, greater than zero (in the grant year) or the award would be canceled.William F. Austen
Fabian T. Garcia
Andrew C. Kerin
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PROXY STATEMENT |
> Stock options awarded to the NEOs were granted with an exercise price equal to the closing market price of the Company’s common stock on the grant date, such that all value realized by the NEOs upon exercise would be based on share appreciation following the date of grant.
Even though the Tax Act eliminated the exception for performance-based compensation, among other things, the Compensation Committee’s policy, in general, is still to maximize the tax deductibility of compensation paid to executive officers under the Internal Revenue Code. The Compensation Committee recognizes, however, that in order to effectively support corporate goals, not all amounts may qualify for deductibility. Therefore, the Compensation Committee will continue to take into account all applicable facts and circumstances in exercising its business judgment with respect to appropriate compensation plan design.
As discussed below in the section entitled “Agreements and Potential Payments upon Termination or Change in Control,” the Company’s relevant agreements and policies contain provisions as appropriate in order to avoid penalties to executives under Section 409A of the Internal Revenue Code. The Company provides no tax gross-ups in connection with Sections 280G and 4999 of the Internal Revenue Code in the event of a change in control of the Company.
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COMPENSATION OF THE
NAMED EXECUTIVE OFFICERS
2023 SUMMARY COMPENSATION TABLE
The following Tabletable provides certain summary information concerning the compensation of the NEOs.
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| Pension |
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| Non-Equity |
| Value & |
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| Stock |
| Option |
| Incentive |
| NQDC |
| All Other |
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| Salary |
| Bonus |
| Awards |
| Awards |
| Compensation |
| Earnings |
| Compensation |
| Total |
Name |
| Year |
| ($) |
| ($) |
| ($)(1) |
| ($)(2) |
| ($)(3) |
| ($)(4) |
| ($)(5)(6) |
| ($) |
Michael J. Long |
| 2017 |
| 1,150,000 |
| — |
| 4,499,994 |
| 1,499,995 |
| 1,997,500 |
| 1,827,312 |
| 19,750 |
| 10,994,551 |
Chairman, President, and Chief Executive Officer |
| 2016 |
| 1,150,000 |
| — |
| 4,124,977 |
| 1,374,994 |
| 1,750,000 |
| 1,910,516 |
| 14,919 |
| 10,325,406 |
|
| 2015 |
| 1,150,000 |
| — |
| 3,937,489 |
| 1,312,496 |
| 1,600,000 |
| 2,432,164 |
| 28,455 |
| 10,460,604 |
Christopher D. Stansbury |
| 2017 |
| 550,000 |
| — |
| 749,974 |
| 250,022 |
| 646,250 |
| 275,647 |
| 22,723 |
| 2,494,616 |
Senior Vice President, |
| 2016 |
| 452,308 |
| — |
| 762,424 |
| 87,500 |
| 428,273 |
| — |
| 16,456 |
| 1,746,961 |
Sean J. Kerins |
| 2017 |
| 550,000 |
| — |
| 862,537 |
| 287,472 |
| 587,500 |
| 483,745 |
| 14,246 |
| 2,785,500 |
President, Global Enterprise Computing Solutions |
| 2016 |
| 550,000 |
| — |
| 750,011 |
| 249,999 |
| 383,310 |
| 349,523 |
| 14,316 |
| 2,297,159 |
|
| 2015 |
| 500,000 |
| — |
| 674,980 |
| 225,000 |
| 373,120 |
| 113,039 |
| 14,760 |
| 1,900,899 |
Andrew D. King |
| 2017 |
| 525,000 |
| — |
| 825,016 |
| 274,989 |
| 558,125 |
| 322,173 |
| 15,037 |
| 2,520,340 |
President, Global Components |
| 2016 |
| 500,000 |
| — |
| 1,249,981 |
| 249,999 |
| 320,640 |
| 53,098 |
| 172,112 |
| 2,545,830 |
Gretchen K. Zech |
| 2017 |
| 455,000 |
| — |
| 704,994 |
| 234,999 |
| 534,625 |
| 454,760 |
| 15,135 |
| 2,399,513 |
Senior Vice President, |
| 2016 |
| 455,000 |
| — |
| 1,017,433 |
| 172,496 |
| 467,422 |
| 309,485 |
| 14,481 |
| 2,436,317 |
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| | | | | | | | | | | | Change in | | | | | | |
| | | | | | | | | | | | Pension | | | | | | Total |
| | | | | | | | | | Non-Equity | | Value & | | | | | | Without |
| | | | | | | | Stock | | Incentive | | NQDC | | All Other | | | | Change in |
| | | | Salary | | Bonus | | Awards | | Compensation | | Earnings | | Compensation | | Total | | Pension |
Name |
| Year |
| ($) |
| ($) |
| ($)(1) |
| ($)(2) |
| ($)(3) |
| ($)(4) |
| ($) |
| Value ($)(5) |
Sean J. Kerins | | 2023 | | 1,000,000 | | — | | 4,000,040 | | 1,360,200 | | 2,517,506 | | 14,068 | | 8,891,814 | | 6,374,308 |
President and Chief Executive Officer | | 2022 | | 895,833 | | — | | 3,500,063 | | 2,514,584 | | 533,030 | | 34,715 | | 7,478,225 | | 6,945,195 |
| | 2021 | | 750,000 | | — | | 2,300,083 | | 1,275,000 | | 1,027,429 | | 16,654 | | 5,369,166 | | 4,341,737 |
Rajesh K. Agrawal | | 2023 | | 700,000 | | — | | 2,200,053 | | 476,070 | | 370,369 | | 13,200 | | 3,759,692 | | 3,389,323 |
Senior Vice President, Chief Financial Officer | | 2022 | | 226,155 | | — | | 4,000,087 | | 1,190,000 | | — | | — | | 5,416,242 | | 5,416,242 |
Gretchen K. Zech | | 2023 | | 675,000 | | — | | 1,500,030 | | 459,068 | | 971,404 | | 16,700 | | 3,622,202 | | 2,650,798 |
Senior Vice President, Chief Governance, | | 2022 | | 658,333 | | — | | 1,500,092 | | 1,133,334 | | — | | 14,400 | | 3,306,159 | | 3,306,159 |
Sustainability, and Human Resources Officer | | 2021 | | 500,000 | | — | | 1,300,061 | | 850,000 | | 373,549 | | 11,922 | | 3,035,532 | | 2,661,983 |
Kristin D. Russell | | 2023 | | 550,000 | | — | | 1,300,060 | | 374,055 | | 368,525 | | 17,954 | | 2,610,594 | | 2,242,069 |
President, Enterprise Computing Solutions | | | | | | | | | | | | | | | | | | — |
Carine L. Jean-Claude | | 2023 | | 450,000 | | — | | 850,000 | | 306,045 | | — | | 16,700 | | 1,622,745 | | 1,622,745 |
Senior Vice President, Chief Legal Officer and Secretary | | | | | | | | | | | | | | | | | | — |
Michael J. Long | | 2023 | | 511,539 | | — | | 3,000,061 | | 693,158 | | 1,024,122 | | 155,808 | | 5,384,688 | | 4,360,566 |
Former Executive Chair of the Board | | 2022 | | 1,133,333 | | — | | 6,000,112 | | 4,235,834 | | — | | 180,743 | | 11,550,022 | | 11,550,022 |
| | 2021 | | 1,320,000 | | — | | 6,000,028 | | 5,406,000 | | — | | 154,810 | | 12,880,838 | | 12,880,838 |
Kirk D. Schell | | 2023 | | 333,333 | | — | | 1,500,030 | | — | | — | | 516,688 | | 2,350,051 | | 2,350,051 |
Former President, Global Components | | 2022 | | 333,333 | | — | | 2,500,075 | | 566,666 | | — | | 101,683 | | 3,501,757 | | 3,501,757 |
| (1) |
| Amounts shown under the heading “Stock Awards” reflect the aggregate grant date fair values of such awards computed in accordance with FASB ASC Topic 718, excluding |
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| (2) |
| The amounts shown under “Non-Equity Incentive Compensation” are the actual amounts paid for the achievement of both the financial and strategic goals related to the NEO’s |
| (3) |
| The amounts shown under the |
| (4) |
| See the All Other Compensation — Detail |
| (5) | The Total Without Change in Pension Value represents total compensation, as determined under applicable SEC rules, minus the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column for the applicable year. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column required under SEC rules and are not a substitute for total compensation. The change in pension value is subject to many external variables, such as interest rates, assumptions about life expectancy and changes in the discount rate determined at each year end, which are functions of economic factors and actuarial calculations that are not related to the Company’s performance and are outside the control of the Compensation Committee. |
68 |
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2024 ANNUAL |
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PROXY STATEMENT |
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ALL OTHER COMPENSATION — DETAIL
ThisFrom the table labeled “2023 Summary Compensation Table,” this table further sets forth the individual elements comprising each NEO’s 20172023 “All Other Compensation” fromCompensation.”
| | | | | | |
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| Other |
| 401(k) Plan Company |
| Total |
Name |
| ($) |
| Contribution ($) |
| ($) |
Sean J. Kerins | | 868 | | 13,200 | | 14,068 |
Rajesh K. Agrawal | | — | | 13,200 | | 13,200 |
Gretchen K. Zech | | 3,500 | | 13,200 | | 16,700 |
Kristin D. Russell | | 4,754 | | 13,200 | | 17,954 |
Carine L. Jean-Claude | | 3,500 | | 13,200 | | 16,700 |
Michael J. Long (1) | | 142,608 | | 13,200 | | 155,808 |
Kirk D. Schell (2) | | 503,488 | | 13,200 | | 516,688 |
| (1) | This amount represents (i) Arrow’s contributions to Mr. Long’s account under the Arrow Electronics, Inc. 401(k) Savings Plan in the amount of $13,200 and (ii) personal air travel expenses in the amount of $142,608, which represent the incremental cost to Arrow for Mr. Long’s personal use of Arrow’s fractionally-owned aircraft based on hourly flight charges and other variable costs incurred by Arrow for such use, including, without limitation, variable fuel charges, departure fees, and landing fees. |
| (2) | This amount represents (i) Arrow’s contributions to Mr. Schell’s account under the Arrow Electronics, Inc. 401(k) Savings Plan in the amount of $13,200 (where the Company match is subject to a service requirement); (ii) cash severance in the amount of $166,667, an additional severance payment, determined based on the Company’s achievement of the financial targets for the full fiscal year and the strategic performance goals achieved through the date of his separation in the amount of $304,090, and a severance benefits subsidy in the amount of $30,998; and (iii) a sales recognition event. |
For perquisite disclosure purposes, we determine the Summary Compensation Table above.
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| 401(k) Company |
| Total |
Name |
| ($)(1) |
| Contribution ($)(2) |
| ($) |
Michael J. Long |
| 7,675 |
| 12,075 |
| 19,750 |
Christopher D. Stansbury |
| 10,648 |
| 12,075 |
| 22,723 |
Sean J. Kerins |
| 2,171 |
| 12,075 |
| 14,246 |
Andrew D. King |
| 2,962 |
| 12,075 |
| 15,037 |
Gretchen K. Zech |
| 3,060 |
| 12,075 |
| 15,135 |
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Certain NEOs have been accompanied by family members during business travel on aircraft (of which the Company owns fractional shares) at noaggregate incremental cost to the Company.Company of the NEOs' personal flights on our fractionally-owned aircraft by calculating the average variable aircraft operating costs per hour for the aircraft, which includes the hourly rate, fuel, landing fees, trip-related repairs and maintenance, catering, and other miscellaneous expenses. The fractional program operator's monthly overhead and fixed cost fee are excluded from the calculation. The calculated average variable operating cost per hour is multiplied by the total number of personal flight hours for each NEO. Occasionally, a spouse or other guest may accompany NEOs on corporate aircraft when the aircraft is already scheduled for business purposes and can accommodate additional passengers. In those cases, there is no aggregate incremental cost to the Company, and, as a result, no amount is reflected in the “2023 Summary Compensation Table.” The value of the personal use of a fractionally-owned or chartered corporate aircraft by our NEOs or their guests is included in their personal income in accordance with applicable tax regulations. As noted in the table titled All Other Compensation – Detail above, Mr. Long is the only NEO who used Arrow’s fractionally-owned aircraft in 2023.
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| 69 | |
2023 GRANTS OF PLAN-BASED AWARDS
The following Tabletable provides information regarding the annual cash incentives, PSUs, and RSUs andawarded in 2023. No stock options awardedwere granted in 2017.2023.
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Grants of Plan-Based Awards | Grants of Plan-Based Awards | Grants of Plan-Based Awards | ||||||||||||||||||||||||||||||||||||||||||||
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| Under Equity Incentive Plan |
| of Shares |
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| and | ||||||||||||||||||||||||||||||||
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| | | | | | | | | | | | | | | | | | Awards: | | Awards: | | Exercise | | Fair Value | ||||||||||||||||||||||
| | | | | | Estimated Possible Payouts Under | | Estimated Future Payouts | | Number | | Number of | | or Base | | of Stock | ||||||||||||||||||||||||||||||
| | | | | | Non-Equity Incentive Plan | | Under Equity Incentive Plan | | of Shares | | Securities | | Price of | | and | ||||||||||||||||||||||||||||||
| | | | | | Awards (1) | | Awards (2) | | of Stock | | Underlying | | Option | | Option | ||||||||||||||||||||||||||||||
| | | | Approval | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | or Units | | Options | | Awards | | Awards | ||||||||||||||||||||||
Name |
| Grant Date |
| ($) |
| ($) |
| ($) |
| (#) |
| (#) |
| (#) |
| (#)(3) |
| (#)(4) |
| ($/Sh) |
| ($)(5) |
| Grant Date |
| Date |
| ($) |
| ($) |
| ($) |
| (#) |
| (#) |
| (#) |
| (#)(3) |
| (#) |
| ($/Sh) |
| ($)(4) |
Michael J. Long |
| 2017 |
| 425,000 |
| 1,700,000 |
| 3,400,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||
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| 2/21/2017 |
| — |
| — |
| — |
| 6,093 |
| 40,617 |
| 75,141 |
| — |
| — |
| 73.86 |
| 2,999,972 | ||||||||||||||||||||||||
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| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| 20,309 |
| — |
| 73.86 |
| 1,500,023 | ||||||||||||||||||||||||
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| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 74,981 |
| 73.86 |
| 1,499,995 | ||||||||||||||||||||||||
Christopher D. Stansbury |
| 2017 |
| 137,500 |
| 550,000 |
| 1,100,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||
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| 2/21/2017 |
| — |
| — |
| — |
| 1,016 |
| 6,770 |
| 12,525 |
| — |
| — |
| 73.86 |
| 500,032 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,384 |
| — |
| 73.86 |
| 249,942 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 12,498 |
| 73.86 |
| 250,022 | ||||||||||||||||||||||||
Sean J. Kerins |
| 2017 |
| 125,000 |
| 500,000 |
| 1,000,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — | | 2023 | | | | 800,000 | | 2,000,000 | | 3,400,000 | | — | | — | | — | | — | | — | | — | | — |
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| 2/21/2017 |
| — |
| — |
| — |
| 1,168 |
| 7,785 |
| 14,402 |
| — |
| — |
| 73.86 |
| 575,000 | ||||||||||||||||||||||||
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| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,893 |
| — |
| 73.86 |
| 287,537 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 14,370 |
| 73.86 |
| 287,472 | ||||||||||||||||||||||||
Andrew D. King |
| 2017 |
| 118,750 |
| 475,000 |
| 950,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| 1,117 |
| 7,447 |
| 13,777 |
| — |
| — |
| 73.86 |
| 550,035 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,723 |
| — |
| 73.86 |
| 274,981 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 13,746 |
| 73.86 |
| 274,989 | ||||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | 3,217 |
| 16,083 | | 29,754 | | — | | — | | — | | 2,000,082 | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 16,082 | | — | | — | | 1,999,958 | ||||||||||||||||||||||
Rajesh K. Agrawal | | 2023 | | | | 280,000 | | 700,000 | | 1,190,000 | | — | | — | | — | | — | | — | | — | | — | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | 1,769 | | 8,845 | | 16,363 | | — | | — | | — | | 1,099,964 | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 8,846 | | — | | — | | 1,100,089 | ||||||||||||||||||||||
Gretchen K. Zech |
| 2017 |
| 113,750 |
| 455,000 |
| 910,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — | | 2023 | | | | 270,000 | | 675,000 | | 1,147,500 | | — | | — | | — | | — | | — | | — | | — |
|
| 2/21/2017 |
| — |
| — |
| — |
| 954 |
| 6,363 |
| 11,772 |
| — |
| — |
| 73.86 |
| 469,971 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,182 |
| — |
| 73.86 |
| 235,023 | ||||||||||||||||||||||||
|
| 2/21/2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 11,747 |
| 73.86 |
| 234,999 | ||||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | 1,206 | | 6,031 | | 11,157 | | — | | — | | — | | 750,015 | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 6,031 | | — | | — | | 750,015 | ||||||||||||||||||||||
Kristin D. Russell | | 2023 | | | | 220,000 | | 550,000 | | 935,000 | | — | | — | | — | | — | | — | | — | | — | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | 1,045 | | 5,227 | | 9,670 | | — | | — | | — | | 650,030 | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 5,227 | | — | | — | | 650,030 | ||||||||||||||||||||||
Carine L. Jean - Claude | | 2023 | | | | 180,000 | | 450,000 | | 765,000 | | — | | — | | — | | — | | — | | — | | — | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | 683 | | 3,417 | | 6,321 | | — | | — | | — | | 424,938 | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 3,418 | | — | | — | | 425,062 | ||||||||||||||||||||||
Michael J. Long (5) | | 2023 | | | | 800,000 | | 2,000,000 | | 3,400,000 | | — | | — | | — | | — | | — | | — | | — | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — |
| — | | — | | — | | — | | — | | — | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 24,124 | | — | | — | | 3,000,061 | ||||||||||||||||||||||
Kirk D. Schell | | 2023 | | | | 200,000 | | 500,000 | | 850,000 | | — | | — | | — | | — | | — | | — | | — | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | 1,206 | | 6,031 | | 11,157 | | — | | — | | — | | 750,015 | ||||||||||||||||||||||
| | 2/15/2023 | | | | — | | — | | — | | — | | — | | — | | 6,031 | | — | | — | | 750,015 | ||||||||||||||||||||||
| (1) |
|
|
| (2) |
| These columns indicate the potential number of units |
| (3) |
| This column reflects the number of RSUs granted in |
| (4) |
|
|
| Grant date fair values for |
| (5) | Mr. Long’s annual cash incentive target above represents his opportunity at the beginning of 2023. His actual payout was prorated for his period of service from January 1, 2023 to July 5, 2023 and determined based on the Company’s achievement of the relevant performance goals. |
70 |
| |
2024 ANNUAL |
| |
PROXY STATEMENT |
|
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below titled “2023 Outstanding Equity TableAwards at Fiscal Year-End” shows: (i) the number of outstanding stock option awards that are vested and unvested as of December 31, 2017;2023; (ii) the exercise price and expiration date of thesethose options; (iii) the aggregate number and value of all unvested RSUs as of December 31, 2017 of all unvested restricted stock or units;2023; and (iv) the aggregate number and value of all PSUs as of December 31, 2017 of all performance shares or units2023, granted under a performance plan whose performance period has not yet been completed.
The values ascribed to the awards in the Tabletable below may or may not be realized by their recipients, depending on the share prices at the time of vesting or exercise and the achievement of the metrics upon which the performance awardsPSUs depend. Each amount in this Table isThe award values are based on the closing market price of the Company’s common stock on December 29, 2017,2023, which was $80.41.$122.25. For each NEO, the fair value of stock awards and stock option awards at the date of grant, based upon the probable outcome of performance conditions, if applicable, is included in the “2023 Summary Compensation TableTable” above. For additional information regarding the impact of a change in control of the Company on equity awards, see under the sectionheading below entitled “Non-Qualified“Performance Stock Option,Unit, Restricted Stock Unit, and PerformanceNon-Qualified Stock UnitOption Award Agreements.”
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Outstanding Equity Awards at Fiscal Year-End | ||||||||||||||||||||
| Option Awards |
| Stock Awards | |||||||||||||||||
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| Equity |
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| Equity Incentive |
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| Incentive |
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| Plan Awards: |
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| Market |
| Plan Awards; |
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| Market or |
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| Value of |
| Number of |
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| Payout Value |
|
| Number of |
| Number of |
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| Number of |
| Shares or |
| Unearned |
|
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| of Unearned |
|
| Securities |
| Securities |
|
|
|
|
|
|
| Shares or |
| Units of |
| Shares, Units |
|
|
| Shares, Units |
|
| Underlying |
| Underlying |
|
|
|
|
|
|
| Units of |
| Stock Held |
| or Other |
|
|
| or Other |
|
| Unexercised |
| Unexercised |
| Option |
| Option |
| Stock |
| Stock Held |
| That Have |
| Rights That |
|
|
| Rights That |
|
| Options – |
| Options – |
| Exercise |
| Expiration |
| Award |
| That Have |
| Not Yet |
| Have Not |
| Vesting |
| Have Not Yet |
|
| Exercisable |
| Unexercisable |
| Price |
| Date |
| Grant |
| Not Vested |
| Vested |
| Yet Vested |
| Dates |
| Vested |
Name |
| (#) |
| (#) |
| ($)(1) |
| (1) |
| Date |
| (#)(2) |
| ($)(2) |
| (#)(3) |
| (4) |
| ($)(3) |
Michael J. Long |
| 45,929 |
| 15,309 |
| 56.71 |
| 02/17/2024 |
| 02/18/2014 |
| 5,510 |
| 443,059 |
| — |
| 02/18/2018 |
| — |
|
| 34,368 |
| 34,366 |
| 62.13 |
| 02/16/2025 |
| 02/17/2015 |
| 10,562 |
| 849,290 |
| — |
| (a) |
| — |
|
| 20,460 |
| 61,380 |
| 56.43 |
| 02/22/2026 |
| 02/23/2016 |
| 18,274 |
| 1,469,412 |
| — |
| (b) |
| — |
|
| — |
| 74,981 |
| 73.86 |
| 02/19/2027 |
| 02/21/2017 |
| 20,309 |
| 1,633,047 |
| — |
| (c) |
| — |
|
| — |
| — |
| — |
| — |
| 02/17/2015 |
| — |
| — |
| 42,250 |
| 02/17/2018 |
| 3,397,323 |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| — |
| — |
| 48,733 |
| 02/23/2019 |
| 3,918,621 |
|
| — |
| — |
| — |
| — |
| 02/21/2017 |
| — |
| — |
| 40,617 |
| 02/21/2020 |
| 3,266,013 |
Christopher D. Stansbury |
| 19,528 |
| 6,509 |
| 60.97 |
| 09/14/2024 |
| 09/15/2014 |
| 4,100 |
| 329,681 |
| — |
| 9/15/2018 |
| — |
|
| 2,292 |
| 2,290 |
| 62.13 |
| 02/16/2025 |
| 02/17/2015 |
| 704 |
| 56,609 |
| — |
| (a) |
| — |
|
| 1,302 |
| 3,906 |
| 56.43 |
| 02/22/2026 |
| 02/23/2016 |
| 1,162 |
| 93,436 |
| — |
| (b) |
| — |
|
| — |
| 12,498 |
| 73.86 |
| 02/19/2027 |
| 02/21/2017 |
| 3,384 |
| 272,107 |
| — |
| (c) |
| — |
|
| — |
| — |
| — |
| — |
| 05/11/2016 |
| 8,234 |
| 662,096 |
| — |
| 05/11/2020 |
| — |
|
| — |
| — |
| — |
| — |
| 02/17/2015 |
| — |
| — |
| 2,817 |
| 02/17/2018 |
| 226,515 |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| — |
| — |
| 3,101 |
| 02/23/2019 |
| 249,351 |
|
| — |
| — |
| — |
| — |
| 02/21/2017 |
| — |
| — |
| 6,770 |
| 02/21/2020 |
| 544,376 |
Sean J. Kerins |
| 5,094 |
| — |
| 38.69 |
| 02/24/2021 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 8,707 |
| — |
| 40.15 |
| 02/19/2022 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 8,687 |
| — |
| 41.56 |
| 02/17/2023 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 5,283 |
| 1,760 |
| 56.71 |
| 02/17/2024 |
| 02/18/2014 |
| 633 |
| 50,900 |
| — |
| 2/18/2018 |
| — |
|
| 5,892 |
| 5,891 |
| 62.13 |
| 02/16/2025 |
| 02/17/2015 |
| 1,810 |
| 145,542 |
| — |
| (a) |
| — |
|
| 3,720 |
| 11,160 |
| 56.43 |
| 02/22/2026 |
| 02/23/2016 |
| 3,322 |
| 267,122 |
| — |
| (b) |
| — |
|
| — |
| 14,370 |
| 73.86 |
| 02/19/2027 |
| 02/21/2017 |
| 3,893 |
| 313,036 |
| — |
| (c) |
| — |
|
| — |
| — |
| — |
| — |
| 07/30/2014 |
| 8,478 |
| 681,716 |
| — |
| 07/30/2018 |
| — |
|
| — |
| — |
| — |
| — |
| 02/17/2015 |
| — |
| — |
| 7,243 |
| 02/17/2018 |
| 582,410 |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| — |
| — |
| 8,861 |
| 02/23/2019 |
| 712,513 |
|
| — |
| — |
| — |
| — |
| 02/21/2017 |
| — |
| — |
| 7,785 |
| 02/21/2020 |
| 625,992 |
| | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2023 Outstanding Equity Awards at Fiscal Year-End | ||||||||||||||||||||
| | Option Awards | | Stock Awards | ||||||||||||||||
| | | | | | | | | | | | | | | | | | Equity | | Equity Incentive |
| |
| | |
| |
| |
| |
| |
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| Incentive |
| Plan Awards: |
| | | | | | | | | | | | | | | | Market | | Plan Awards; | | Market or |
| | | | | | | | | | | | | | | | Value of | | Number of | | Payout Value |
| | | | Number of | | Number of | | | | | | | | Number of | | Shares or | | Unearned | | of Unearned |
| | | | Securities | | Securities | | | | | | | | Shares or | | Units of | | Shares, Units | | Shares, Units |
| | | | Underlying | | Underlying | | | | | | | | Units of | | Stock Held | | or Other | | or Other |
| | | | Unexercised | | Unexercised | | Option | | Option | | Stock | | Stock Held | | That Have | | Rights That | | Rights That |
| | Option | | Options – | | Options – | | Exercise | | Expiration | | Award | | That Have | | Not Yet | | Have Not | | Have Not Yet |
| | Grant | | Exercisable | | Unexercisable | | Price | | Date | | Grant | | Not Vested | | Vested | | Yet Vested | | Vested |
Name |
| Date(1) |
| (#)(1) |
| (#)(1) |
| ($)(1) |
| (1) |
| Date |
| (#)(2) |
| ($)(2) |
| (#)(3) |
| ($)(3) |
Sean J. Kerins | | 02/17/2015 | | 11,783 | | — | | 62.13 | | 02/16/2025 | | — | | — | | — | | — | | — |
| | 02/23/2016 | | 14,880 | | — | | 56.43 | | 02/22/2026 | | — | | — | | — | | — | | — |
| | 02/21/2017 | | 14,370 | | — | | 73.86 | | 02/19/2027 | | — | | — | | — | | — | | — |
| | 02/20/2018 | | 14,054 | | — | | 81.95 | | 02/18/2028 | | — | | — | | — | | — | | — |
| | 02/19/2019 | | 16,538 | | — | | 81.05 | | 02/16/2029 | | — | | — | | — | | — | | — |
| | 02/19/2020 | | 13,659 | | 4,552 | | 79.22 | | 02/19/2030 | | 02/19/2020 | | 1,183 | | 144,622 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | 5,398 | | 659,906 | | — | | — |
| | | | — | | — | | — | | — | | 02/16/2022 | | 6,753 | | 825,554 | | — | | — |
| | | | — | | — | | — | | — | | 06/01/2022 | | 3,754 | | 458,927 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 16,082 | | 1,966,025 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | — | | — | | 10,798 | (4) | 1,320,056 |
| | | | — | | — | | — | | — | | 02/16/2022 | | — | | — | | 9,006 | (5) | 1,100,984 |
| | | | — | | — | | — | | — | | 06/01/2022 | | — | | — | | 5,007 | (6) | 612,106 |
| | | | — | | — | | — | | — | | 02/15/2023 | | — | | — | | 16,083 | (7) | 1,966,147 |
Rajesh K. Agrawal | | | | — | | — | | — | | — | | 09/14/2022 | | 30,267 | | 3,700,141 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 8,846 | | 1,081,424 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | — | | — | | 8,845 | (7) | 1,081,301 |
Gretchen K. Zech | | 02/21/2017 | | 2,936 | | — | | 73.86 | | 02/19/2027 | | — | | — | | — | | — | | — |
| | 02/20/2018 | | 10,810 | | — | | 81.95 | | 02/18/2028 | | — | | — | | — | | — | | — |
| | 02/19/2019 | | 14,331 | | — | | 81.05 | | 02/16/2029 | | — | | — | | — | | — | | — |
| | 02/19/2020 | | 11,839 | | 3,946 | | 79.22 | | 02/19/2030 | | 02/19/2020 | | 1,025 | | 125,306 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | 3,051 | | 372,985 | | — | | — |
| | | | — | | — | | — | | — | | 02/16/2022 | | 4,405 | | 538,511 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 6,031 | | 737,290 | | | | |
| | | | — | | — | | — | | — | | 02/17/2021 | | — | | — | | 6,103 | (4) | 746,092 |
| | | | — | | — | | — | | — | | 02/16/2022 | | — | | — | | 5,873 | (5) | 717,974 |
| | | | — | | — | | — | | — | | 02/15/2023 | | — | | — | | 6,031 | (7) | 737,290 |
Kristin D. Russell | | 02/19/2020 | | — | | 1,821 | | 79.22 | | 02/19/2030 | | 02/19/2020 | | 473 | | 57,824 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | 2,347 | | 286,921 | | — | | — |
| | | | — | | — | | — | | — | | 02/16/2022 | | 3,524 | | 430,809 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 5,227 | | 639,001 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | — | | — | | 4,694 | (4) | 573,842 |
| | | | — | | — | | — | | — | | 02/16/2022 | | — | | — | | 4,699 | (5) | 574,453 |
| | | | — | | — | | — | | — | | 02/15/2023 | | — | | — | | 5,227 | (7) | 639,001 |
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Outstanding Equity Awards at Fiscal Year-End | ||||||||||||||||||||
| Option Awards |
| Stock Awards | |||||||||||||||||
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| Equity |
|
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| Equity Incentive |
|
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| Incentive |
|
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| Plan Awards: |
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| Market |
| Plan Awards; |
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| Market or |
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| Value of |
| Number of |
|
|
| Payout Value |
|
| Number of |
| Number of |
|
|
|
|
|
|
| Number of |
| Shares or |
| Unearned |
|
|
| of Unearned |
|
| Securities |
| Securities |
|
|
|
|
|
|
| Shares or |
| Units of |
| Shares, Units |
|
|
| Shares, Units |
|
| Underlying |
| Underlying |
|
|
|
|
|
|
| Units of |
| Stock Held |
| or Other |
|
|
| or Other |
|
| Unexercised |
| Unexercised |
| Option |
| Option |
| Stock |
| Stock Held |
| That Have |
| Rights That |
|
|
| Rights That |
|
| Options – |
| Options – |
| Exercise |
| Expiration |
| Award |
| That Have |
| Not Yet |
| Have Not |
| Vesting |
| Have Not Yet |
|
| Exercisable |
| Unexercisable |
| Price |
| Date |
| Grant |
| Not Vested |
| Vested |
| Yet Vested |
| Dates |
| Vested |
Name |
| (#) |
| (#) |
| ($)(1) |
| (1) |
| Date |
| (#)(2) |
| ($)(2) |
| (#)(3) |
| (4) |
| ($)(3) |
Andrew D. King |
| 2,377 |
| — |
| 38.69 |
| 02/24/2021 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 2,875 |
| — |
| 40.15 |
| 02/19/2022 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 2,764 |
| — |
| 41.56 |
| 02/17/2023 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 4,593 |
| 1,531 |
| 56.71 |
| 02/17/2024 |
| 02/18/2014 |
| 551 |
| 44,306 |
| — |
| 02/18/2018 |
| — |
|
| 3,601 |
| 3,600 |
| 62.13 |
| 02/16/2025 |
| 02/17/2015 |
| 1,106 |
| 88,933 |
| — |
| (a) |
| — |
|
| 3,720 |
| 11,160 |
| 56.43 |
| 02/22/2026 |
| 02/23/2016 |
| 3,322 |
| 267,122 |
| — |
| (b) |
| — |
|
| — |
| 13,746 |
| 73.86 |
| 02/19/2027 |
| 02/21/2017 |
| 3,723 |
| 299,366 |
| — |
| (c) |
| — |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| 8,860 |
| 712,433 |
| — |
| 02/23/2020 |
| — |
|
| — |
| — |
| — |
| — |
| 02/17/2015 |
| — |
| — |
| 4,426 |
| 02/17/2018 |
| 355,895 |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| — |
| — |
| 8,861 |
| 02/23/2019 |
| 712,513 |
|
| — |
| — |
| — |
| — |
| 02/21/2017 |
| — |
| — |
| 7,447 |
| 02/21/2020 |
| 598,813 |
Gretchen K. Zech |
| 7,393 |
| — |
| 40.15 |
| 02/19/2022 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 7,897 |
| — |
| 41.56 |
| 02/17/2023 |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 5,512 |
| 1,837 |
| 56.71 |
| 02/17/2024 |
| 02/18/2014 |
| 661 |
| 53,151 |
| — |
| 02/18/2018 |
| — |
|
| 4,256 |
| 4,254 |
| 62.13 |
| 02/16/2025 |
| 02/17/2015 |
| 1,307 |
| 105,096 |
| — |
| (a) |
| — |
|
| 2,567 |
| 7,700 |
| 56.43 |
| 02/22/2026 |
| 02/23/2016 |
| 2,292 |
| 184,300 |
| — |
| (b) |
| — |
|
| — |
| 11,747 |
| 73.86 |
| 02/19/2027 |
| 02/21/2017 |
| 3,182 |
| 255,865 |
| — |
| (c) |
| — |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| 8,860 |
| 712,433 |
| — |
| 02/23/2020 |
| — |
|
| — |
| — |
| — |
| — |
| 02/17/2015 |
| — |
| — |
| 5,231 |
| 02/17/2018 |
| 420,625 |
|
| — |
| — |
| — |
| — |
| 02/23/2016 |
| — |
| — |
| 6,114 |
| 02/23/2019 |
| 491,627 |
|
| — |
| — |
| — |
| — |
| 02/21/2017 |
| — |
| — |
| 6,363 |
| 02/21/2020 |
| 511,649 |
| | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2023 Outstanding Equity Awards at Fiscal Year-End | ||||||||||||||||||||
| | Option Awards | | Stock Awards | ||||||||||||||||
| | | | | | | | | | | | | | | | | | Equity | | Equity Incentive |
| |
| | |
| |
| |
| |
| |
| |
| |
| Incentive |
| Plan Awards: |
| | | | | | | | | | | | | | | | Market | | Plan Awards; | | Market or |
| | | | | | | | | | | | | | | | Value of | | Number of | | Payout Value |
| | | | Number of | | Number of | | | | | | | | Number of | | Shares or | | Unearned | | of Unearned |
| | | | Securities | | Securities | | | | | | | | Shares or | | Units of | | Shares, Units | | Shares, Units |
| | | | Underlying | | Underlying | | | | | | | | Units of | | Stock Held | | or Other | | or Other |
| | | | Unexercised | | Unexercised | | Option | | Option | | Stock | | Stock Held | | That Have | | Rights That | | Rights That |
| | Option | | Options – | | Options – | | Exercise | | Expiration | | Award | | That Have | | Not Yet | | Have Not | | Have Not Yet |
| | Grant | | Exercisable | | Unexercisable | | Price | | Date | | Grant | | Not Vested | | Vested | | Yet Vested | | Vested |
Name |
| Date(1) |
| (#)(1) |
| (#)(1) |
| ($)(1) |
| (1) |
| Date |
| (#)(2) |
| ($)(2) |
| (#)(3) |
| ($)(3) |
Carine L. Jean - Claude | | 02/21/2017 | | 2,187 | | — | | 73.86 | | 02/19/2027 | | — | | — | | — | | — | | — |
| | 02/20/2018 | | 1,891 | | — | | 81.95 | | 02/18/2028 | | — | | — | | — | | — | | — |
| | 02/19/2019 | | 2,204 | | — | | 81.05 | | 02/16/2029 | | — | | — | | — | | — | | — |
| | 02/19/2020 | | 1,367 | | 455 | | 79.22 | | 02/19/2030 | | 02/19/2020 | | 118 | | 14,426 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | 328 | | 40,098 | | — | | — |
| | | | — | | — | | — | | — | | 02/16/2022 | | 2,055 | | 251,224 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 3,418 | | 417,851 | | | | |
| | | | — | | — | | — | | — | | 02/17/2021 | | — | | — | | 657 | (4) | 80,318 |
| | | | — | | — | | — | | — | | 02/16/2022 | | — | | — | | 2,741 | (5) | 335,087 |
| | | | — | | — | | — | | — | | 02/15/2023 | | — | | — | | 3,417 | (7) | 417,728 |
Michael J. Long (8) | | | | — | | — | | — | | — | | 02/19/2020 | | 4,733 | | 578,609 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | 14,082 | | 1,721,525 | | — | | — |
| | | | — | | — | | — | | — | | 02/16/2022 | | 17,619 | | 2,153,923 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 24,124 | | 2,949,159 | | — | | — |
| | | | — | | — | | — | | — | | 02/17/2021 | | — | | — | | 28,167 | (4) | 3,443,416 |
| | | | — | | — | | — | | — | | 02/16/2022 | | — | | — | | 23,493 | (5) | 2,872,019 |
Kirk D. Schell (9) | | | | — | | — | | — | | — | | 05/11/2022 | | 13,518 | (10) | 1,652,576 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | 6,031 | | 737,290 | | — | | — |
| | | | — | | — | | — | | — | | 02/15/2023 | | — | | — | | 6,031 | (7) | 737,290 |
| (1) |
| These columns reflect the grant date, number of options exercisable and unexercisable, exercise price, and expiration date |
| (2) |
| These columns reflect the number of unvested |
| (3) |
| These columns show the number of shares |
| (4) |
|
|
| (5) | These PSUs were awarded on February 16, 2022, and vest upon the Compensation Committee’s certification of our Company’s cumulative achievement of specific three-year EPS growth goals compared to the EPS growth of Arrow’s Peer Group and Arrow’s three-year average ROIC in excess of its three-year WACC over the 2022 to 2024 performance period. Due to the cumulative goals, the amounts reported in this column are based on target achievement of the applicable performance goals. |
| (6) | These PSUs were awarded on June 1, 2022, and vest upon the Compensation Committee’s certification of our Company’s cumulative achievement of specific three-year EPS growth goals compared to the EPS growth of Arrow’s Peer Group and Arrow’s three-year average ROIC in excess of its three-year WACC over the 2022 to 2024 performance period. Due to the cumulative goals, the amounts reported in this column are based on target achievement of the applicable performance goals. |
| (7) | These PSUs were awarded on February 15, 2023, and vest upon the Compensation Committee’s certification of our Company’s cumulative achievement of specific three-year EPS growth goals compared to the EPS growth of Arrow’s Peer Group and Arrow’s three-year average ROIC in excess of its three-year WACC over the 2023 to 2025 performance period. Due to the cumulative goals, the amounts reported in this column are based on target achievement of the applicable performance goals. |
| (8) | In connection with Mr. Long’s retirement, equity award vesting |
| (9) | In exchange for Mr. Schell signing a general release of claims in favor of the Company, Mr. Schell’s unvested equity awards |
| (10) | These RSUs were awarded on May 11, 2022, and |
72 |
| |
2024 ANNUAL |
| |
PROXY STATEMENT |
|
TableThe following table sets forth the maximum potential number of ContentsPSUs which may be awarded to each of the NEOs for PSU awards granted in 2023, 2022, and 2021. For more information, please see the “Long-Term Incentive Awards” section in the CD&A.
Maximum Performance Stock Units Name 2021 2022 2023 Sean J. Kerins 19,976 25,924 29,754 Rajesh K. Agrawal — — 16,363 Gretchen K. Zech 11,291 10,865 11,157 Kristin D. Russell 8,684 8,693 9,670 Carine L. Jean-Claude 1,215 5,071 6,321 Michael J. Long 52,109 43,462 — Kirk D. Schell — — 11,157 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK VESTED AND OPTIONS EXERCISED AND STOCK VESTED IN 2017
The following Tabletable provides information concerning the value realized by each NEO upon the vesting of RSUs and PSUs and the exercise of stock options andduring 2023.
The value realized on the vesting of restrictedRSUs and performance units during 2017.
PSUs is based on the number of shares vesting and the closing market price of the Company’s common stock on the vesting date. The value realized on the exercise of stock options shown below is based on the difference between the exercise price per share paid by the executive and the closing market price of the Company’s common stock on the exercise date. The value realized on the vesting of restricted and performance units is based on the number of shares vesting and the closing market price of the Company’s common stock on the vesting date.
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||
| | | | | | | | | |||||||||||
Options Exercised and Stock Vested | Options Exercised and Stock Vested | Options Exercised and Stock Vested | |||||||||||||||||
|
|
|
| Option Awards |
| Stock Awards | |||||||||||||
|
|
|
| Number of |
|
|
| Number of |
|
| |||||||||
|
|
|
| Shares Acquired |
| Value Realized |
| Shares Acquired |
| Value Realized | |||||||||
|
|
|
| on Exercise |
| on Exercise |
| on Vesting |
| on Vesting | |||||||||
| | | Option Awards | | Stock Awards | ||||||||||||||
| | Number of |
| | | Number of |
| | |||||||||||
| | Shares Acquired | | Value Realized | | Shares Acquired | | Value Realized | |||||||||||
| | on Exercise | | on Exercise | | on Vesting | | on Vesting | |||||||||||
Name |
| Award Type |
| (#) |
| ($) |
| (#) |
| ($) |
| (#) |
| ($) |
| (#) |
| ($) | |
Sean J. Kerins | | 7,043 | | 465,930 | | 20,944 | | 2,591,101 | |||||||||||
Rajesh K. Agrawal | | — | | — | | 10,089 | | 1,290,988 | |||||||||||
Gretchen K. Zech | | — | | — | | 15,771 | | 1,948,892 | |||||||||||
Kristin D. Russell | | 3,475 | | 130,785 | | 8,245 | | 1,018,775 | |||||||||||
Carine L. Jean-Claude | | — | | — | | 2,364 | | 292,166 | |||||||||||
Michael J. Long |
| RSUs |
| — |
| — |
| 24,101 |
| 1,770,814 | | 49,288 | | 2,815,641 | | 111,332 | | 13,755,518 | |
|
| 2014 PSUs — 3 Yr |
| — |
| — |
| 61,716 |
| 4,558,344 | |||||||||
|
| Stock Options |
| 190,865 |
| 6,076,371 |
| — |
| — | |||||||||
Christopher D. |
| RSUs |
| — |
| — |
| 4,840 |
| 380,383 | |||||||||
Stansbury |
| 2014 PSUs — 3 Yr |
| — |
| — |
| — |
| — | |||||||||
|
| Stock Options |
| — |
| — |
| — |
| — | |||||||||
Sean J. Kerins |
| RSUs |
| — |
| — |
| 3,474 |
| 255,228 | |||||||||
|
| 2014 PSUs — 3 Yr |
| — |
| — |
| 7,097 |
| 524,184 | |||||||||
|
| Stock Options |
| 11,793 |
| 586,256 |
| — |
| — | |||||||||
Andrew D. King |
| RSUs |
| — |
| — |
| 2,475 |
| 181,802 | |||||||||
|
| 2014 PSUs — 3 Yr |
| — |
| — |
| 6,171 |
| 455,790 | |||||||||
|
| Stock Options |
| — |
| — |
| — |
| — | |||||||||
Gretchen K. Zech |
| RSUs |
| — |
| — |
| 2,831 |
| 208,002 | |||||||||
|
| 2014 PSUs — 3 Yr |
| — |
| — |
| 7,406 |
| 547,007 | |||||||||
|
| Stock Options |
| — |
| — |
| — |
| — | |||||||||
Kirk D. Schell | | — | | — | | 6,760 | | 802,412 | |||||||||||
|
| ||
|
| 73 | |
2023 NONQUALIFIED DEFERRED COMPENSATION
The Executive Deferred Compensation Plan (“EDCP”) was frozen to new contributions as of December 31, 2019. Carine L. Jean-Claude, who was an NEO during the year, had an outstanding balance under the EDCP. Ms. Jean-Claude is the only NEO that participated in the EDCP. The EDCP allows participants to direct their plan assets among the same investment choices as available under the Arrow Electronics, Inc. 401(k) Savings Plan. Distribution options include in-service withdrawals or lump sum payments made at the time of separation from service.
| | | | | | | | | | | | | | | |
| | | | | | | | | | | Aggregate | | Aggregate | ||
| | Executive | | Registrant | | Aggregate | | Withdrawals/ | | Balance at | |||||
| | Contributions | | Contributions | | Earnings | | Distributions | | December 31, | |||||
Name |
| in 2023 |
| in 2023 |
| in 2023 |
| in 2023 |
| 2023 | |||||
Sean J. Kerins | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Rajesh K. Agrawal | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Gretchen K. Zech | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Kristin D. Russell | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Carine L. Jean-Claude | | $ | — | | $ | — | | $ | 38,446 | | $ | — | | $ | 215,196 |
Michael J. Long | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Kirk D. Schell | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Arrow maintains a non-qualified Supplemental Executive Retirement Plan under which the Company will pay pension benefits to certain employees upon retirement or as a result of certain other termination events. AsTwelve current executives participate in the SERP as of December 31, 2017, there were 10 current executives participating in the SERP.2023. The Board determines participant eligibility, and each NEO employed by the eligibilityCompany as of the NEOs who participate. Each of the NEOsDecember 31, 2023, participates in the SERP.
The typical gross SERP benefit is calculated by multiplying 2.5% of final average compensation (salary plus targeted incentive compensation) by the participant’s years of credited service (SERP participation) up to a maximum of 18eighteen years. Final average compensation is ordinarily the highest average of any three years during the participant’s final five years of service. Both final average compensation and service are frozen as of normal retirement date (generally age 60, unless otherwise specified in written notice to a participant from the Board). The gross benefit is reduced by the value of hypothetical defined contribution plan contributions and 50% of Social Security.Security benefits.
The benefit described above is payable at normal retirement age 60 for participants who remain in service until that time. In addition, participants are eligible for early retirement at age 55 or when combined years of age and service equals at least 72, if later. Benefits are reduced by 7% perfor each year that retirement precedes age 60.normal retirement age. Except as provided below, no benefits are payable for termination prior to retirement eligibility.eligibility, and no benefits are payable if a retired participant dies before payments commence. The normal form of benefits provided is a single life annuity with 60sixty monthly payments guaranteed. Other monthly annuity payment forms are also available. At this time, among the NEOs, only Mr. Long has met eligibility for early retirement.
The years of credited service for each of the NEOs and the present value of their respective accumulated benefits as of December 31, 20172023, are set out onin the following Table.table. None of the NEOs received any payments under the SERP in or with respect to 2017.2023. As of December 31, 2023, Mr. Kerins was the only NEO eligible for normal retirement. The present value calculation assumes each recipient remains employed until normal
74 |
| |
retirement age (generally at age 60). or December 31, 2023, for those beyond normal retirement age. The remainder of the assumptions underlying the calculation of the present value of the benefits are discussed in Note 13 to the Company’s Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2017.2023.
| | | | | | |
Pension Benefits | ||||||
| | Number of Years of | | Present Value of | | Payments During |
| | Credited Service | | Accumulated Benefit | | Last Fiscal Year |
Name |
| (#) |
| ($) |
| ($) |
Sean J. Kerins | | 9.58 | | 7,324,332 | | — |
Rajesh K. Agrawal | | 1.25 | | 370,369 | | — |
Gretchen K. Zech | | 12.08 | | 3,979,867 | | — |
Kristin D. Russell | | 2.83 | | 555,802 | | — |
Carine L. Jean-Claude | | 2.50 | | — | | — |
Michael J. Long | | 18.00 | | 16,446,707 | | — |
Kirk D. Schell (1) | | — | | — | | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits | ||||||
|
| Number of Years of |
| Present Value of |
| Payments During |
|
| Credited Service |
| Accumulated Benefit |
| Last Fiscal Year |
Name |
| (#) |
| ($) |
| ($) |
Michael J. Long |
| 18.00 |
| 20,236,736 |
| — |
Christopher D. Stansbury |
| 1.58 |
| 275,647 |
| — |
Sean J. Kerins |
| 3.58 |
| 946,307 |
| — |
Andrew D. King |
| 2.00 |
| 375,271 |
| — |
Gretchen K. Zech |
| 6.08 |
| 1,365,792 |
| — |
| (1) | As Mr. Schell was not eligible for retirement at the time of his departure, Mr. Schell forfeited his SERP benefits. |
The SERP provides that if a participant’s employment is terminated involuntarily without “cause” or voluntarily for “good reason,” in either case within two years after a “change in control” of the Company, the participant will receive an annual benefit under the SERP upon reaching age 60. The payment amount of the payment is based on the amount accrued up to the time of the termination. No payments will be made if the participant is not yet age 50 at the time of the “change in control” related termination.
|
|
|
|
|
Should a participant become disabled before retiring, his or hertheir accrued SERP benefits will generally commence at age 60, subject to reduction for Company-paid disability benefits received for the same payment period and for termination prior to age 60.
Benefits under the SERP may terminate, with no further obligation to the recipient, if the participant becomes involved in any way with an entity whichthat competes with Arrow (except for limited ownership of stock in a publicly-tradedpublicly traded company).
The present values of the SERP benefitsbenefit accrued through year-end by the NEOs in the event of termination, death, disability, or a change in control of the Company are set forth onin the table labeled “2023 Potential Payouts Upon Termination Table.Termination” below.
The Company maintains an Executive Deferred Compensation Plan (“EDCP”) in which deferred income as well as investment gains on the deferred amounts are nontaxable to the executive until distributed.
A participating executive may defer up to 80% of salary and 100% of incentive compensation. The participant chooses from a selection of mutual funds and other investments in which the deferred amount is then deemed to be invested. Earnings on the amounts deferred are defined by the returns actually obtained by the “deemed investment” and added to the account. The “deemed investment” is used solely for this purpose and the participant has no ownership interest in it. The deferred compensation and the amount earned are general assets of the Company, and the obligation to distribute the amounts according to the participants’ designation is a general obligation of the Company. None of the NEOs participated in the EDCP in 2017.
|
| ||
|
| 75 | |
AGREEMENTS AND POTENTIAL PAYOUTS
UPON TERMINATION OR CHANGE IN CONTROL
The Company does not enter into employment agreements with senior management. The Company does, however, have a common Severance Policy and an “ExecutiveExecutive Change in Control Retention Agreement”Agreement for its executives.
Under the current Severance Policy, upon an involuntary termination of employment of any of the NEOs without “cause,” the Company willwould pay such NEO a pro ratapro-rata portion of his or her MICPtheir annual cash incentive with respect to the year of termination plus his or hertheir base salary and MICP awardsannual cash incentive (prorated as applicable) for a period of 18eighteen months (24(twenty-four months for the Chief Executive Officer)CEO) (in each case, the “Severance Period”). Salary continuation payments would be made in accordance with the Company’s customary payroll practices. MICP amounts,Annual cash incentive awards, if any, would be paid on the date they are normally paid to the Company’s then-current executives. Each NEO also would receive continuation of health care benefit coverage at the same level of coverage through the Severance Period or equivalent benefits, as determined in the sole reasonable discretion of the Compensation Committee. The Company will also reimburse the NEO for the cost of outplacement services up to a maximum of $50,000 ($75,000 for the Chief Executive Officer)CEO). The Severance Policy imposes an affirmative duty on each NEO to seek substitute employment that is reasonably comparable to such NEO’s employment with the Company in order to mitigate the severance payments and benefits provided under the Severance Policy. The Company can offset certain of those sums earned elsewhere. The Severance Policy is subject to change at the discretion of the Compensation Committee.
As a condition to receiving these benefits, the Severance Policy requires the NEO to execute a general release of claims and a restrictive covenants agreement in favor of the Company. UnderGenerally, under the restrictive covenants agreement, the NEO must agree to covenants providing for (i) the confidentiality of the Company’s information, (ii) non-competition in specified businesses and industries, and (iii) non-solicitation of the Company’s employees and customers for a period equal to the relevant Severance Period.
In the case of termination of the NEO’s employment without “cause,” his or hertheir outstanding equity-based awards would continue to vest through the duration ofthroughout the Severance Period. Equity-based awards that do not vest prior tobefore the end of the Severance Period would be forfeited. Vested stock options would remain exercisable until the earlier of the expiration of the Severance Period or the expiration date as provided in the applicable award agreement.
InUnvested equity-based awards held by NEOs would vest in the event of death or disability of an NEO, all of his or her unvested equity-based awards would vest as of the date of death or disability. Vested stock options would remain exercisable until the expiration date of such stock option,the Severance Period, or if earlier, the expiration date, as provided in the applicable award agreement. Also, any shares to which an NEO is entitled by reason of a vested PSU would be delivered within thirty days following the date of his or hertheir death or disability.
76 |
| |
2024 ANNUAL |
| |
PROXY STATEMENT |
|
In connection with the Severance Policy, eachEach NEO who consented to the early termination of his or hertheir employment and change ofin control agreements in 2013 was eligible to enter into a Participation Agreement with the Company.Company (“Participation Agreement”). Under the Participation Agreement, the Company: (i) is prohibited from modifying or amending certain terms of the Severance Policy as they relate to that NEO and (ii) will provide severance benefits upon termination for “good reason” at a benefit level equal to that provided under the Severance Policy and upon an involuntary termination of employment without “cause” of such NEO. Mr. Long“Good reason” terminations include the executive terminating as a result of the Company reducing the executive’s base salary or incentive target; any adverse change in the executive’s position; and any material diminution in the executive’s duties, responsibilities, or authority. Ms. Zech arewas the only current NEOs who wereNEO eligible to enter into a Participation Agreements and they both did so.Agreement, which she did. The Company does not expect to enter into any such Participation Agreements in the future.
CHANGE IN CONTROL RETENTION AGREEMENTS
Each of the continuing NEOs is a party to a Change in Control Retention Agreement. The purpose of the Change in Control Retention Agreements is to provide the NEOs with certain compensation and benefits in the event of an involuntary termination of employment without “cause” or resignation for “good reason,” in either case within 24twenty-four (24) months following a “change in control.” If an NEO receives benefits under his or herTermination for “cause” is defined in each Change in Control Retention Agreement heto include terminations for a felony conviction; willful failure to perform duties; willful misconduct; and willful failure to abide by any lawful policy adopted by the Company. “Good reason” is defined in each Change in Control Retention Agreement to include the executive terminating as a result of the Company reducing the executive’s base salary or she will not receive severance payments underincentive target or the Severance PolicyCompany failing to pay any compensation to the executive when due; any adverse change in the executive’s position; and any material diminution in the executive’s duties, responsibilities, or Participation Agreement (if applicable).authority.
Under the Change in Control Retention Agreements, the NEOs are eligible for compensation and benefits if, within two yearstwenty-four (24) months following a “changechange in control, date,” the NEO’s employment is terminated without “cause” by the Company or for “good reason” by the executive, each as defined in the Change in Control Retention Agreement. In such event, the terminated NEO is entitled to receive a lump sum cash payment in the aggregate of the following amounts: (i) all unpaid base salary, earned vacation, and earned but unpaid benefits and awards through the date of termination; (ii) three times (forfor the Chief Executive Officer)CEO or two times (forfor all other NEOs)NEOs the sum of (a) the greater of such NEO’s annual base salary in effect immediately prior to the change in control date or the date of termination and (b) the greater of such NEO’s target MICP awardannual cash incentive in effect immediately prior to the change in control date or the date of termination; (iii) a pro rata MICP paymentpro-rata annual cash incentive award for the calendar year of termination (determined based on the basis of actual performance); and (iv) continuation of coverage under the Company’s health care plan for a period not to exceed 24twenty-four months (36(thirty-six months for the Chief Executive Officer)CEO).
The estimated payments that the NEOs would receive under their respective Change in Control Retention Agreements are set forth in the table labeled “2023 Potential Payouts Upon Termination Table.Termination” below. However, the severance payments to the NEOs pursuant to Change in Control Retention Agreements may be limited in certain circumstances. Specifically, the Change in Control Retention Agreements provide that if an amount payable to an NEO would be treated as an “excess parachute payment,”payment” and would therefore reduce the tax deductibility by the Company and result in an excise tax being imposed on the NEO, then the severance payment will be reduced to a level sufficient to avoid these adverse consequences. However, if the severance payment amountamounts payable to the NEO, taking into account the effect of all of the applicable taxes, including the excise tax imposed, would be greater than the amount payable if the amount were reduced as described above, the NEO willwould receive this greater amount, without consideration for the impact this payment may have on the Company’s tax deductibilitytax-deductibility of such payment.
The Change in Control Retention Agreement does not affect the rights and benefits to which NEOs are entitled under any of the Company’s equity compensation plans, which such rights and benefits are governed by the terms and conditions of the relevant plans and award agreements.
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IMPACT OF SECTION 409A OF THE INTERNAL REVENUE CODE
Each of the Change in Control Retention Agreements between the Company and the NEOs has provisions that ensure complianceare intended to comply with Section 409A of the Internal Revenue Code by deferring any payment due upon termination of employment for up to six months to the extent required by Section 409A of the Internal Revenue Code and addingCode. The Change in Control Retention Agreements also include an interest component to the amount due for the period of deferral (at the then-current six-monthsix- month Treasury rate).
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2023 POTENTIAL PAYOUTS UPON TERMINATION
The following Tabletable sets forth the estimated payments and value of benefits that each of the NEOs would be entitled to receive under his or hertheir Change in Control Retention Agreement and the Severance Policy, including theMs. Zech’s Participation Agreements, as applicable,Agreement, in the event of the termination of employment under various scenarios, assuming that the termination occurred on December 31, 2017.2023. The amounts represent the entire value of the estimated liability, even if some or all of that value has been disclosed elsewhere in this Proxy Statement. Actual amounts that the Company may pay out and the assumptions used in arriving at such amounts can only be determined at the time of each such executive’sNEO’s termination or the change in control and could differ materially from the amounts set forth below.
None of theThe NEOs isare not entitled to receive any payment at, following, or in connection with the termination of his or hertheir employment for cause.
In both the Tabletable below and the Share-Based Award Agreement Terms Related to Post-Employment Scenarios Tabletable which follows it:
> Death refers to the death of the executive;
> Disability refers to the executive becoming permanently and totally disabled during the term of employment;
> Termination Without Cause or Resignation for Good Reason means that the executive is asked to leave the Company for some reason other than “cause” (as defined in the Severance Policy) or the executive voluntarily leaves the Company for “good reason” (as defined in the Participation Agreement, if applicable, which generally includes the Company failing to allow the executive to continue in a then-current or an improved position, or where the executive’s reporting relationship is changed so that he or she no longer reports to the Chief Executive Officer, and as further defined in each applicable Participation Agreement);
Michael J. Long – Retirement Benefits As noted in the CD&A of this Proxy Statement, effective May 17, 2023, Mr. Long ceased to be an executive officer of the Company and > Change in Control Termination> Disability refers to the executive becoming permanently and totally disabled during the term of employment; > Termination Without Cause or Resignation for Good Reason means that the executive is asked to leave the Company for some reason other than “cause” (as defined in the Severance Policy) or the executive voluntarily leaves the Company for “good reason” (as defined in Ms. Zech’s Participation Agreement, which generally includes the Company failing to allow the executive to continue in a then-current or an improved position, or where the executive’s reporting relationship is changed so that the executive no longer reports to the CEO, and as further defined in Ms. Zech’s Participation Agreement); > Change in Control Termination means the occurrence of both a change in control of the Company and the termination of the executive’s employment without “cause” or resignation for “good reason” within two years following the change in control; and > Retirement means the executive’s voluntary departure at or after retirement age as defined by the Company’s SERP (typically, age 60). As of December 31, 2023, Mr. Kerins was the only NEO eligible for normal retirement, while Ms. Jean-Claude was eligible for early retirement. Each executive is eligible for early retirement in the event that such executive reaches the age of 55 and the combined years of age and service equals at least seventy-two. the terminationformally retired as an employee of the executive’s employment without “cause” or resignation for “good reason” within two years following the changeCompany effective July 5, 2023. In connection with Mr. Long’s retirement, equity award vesting continues in control; and
> Retirement means the executive’s voluntary departure at or after retirement age as defined by the Company’s SERP (typically, age 60). Each executive is eligible for early retirementaccordance with their respective vesting schedules, subject to forfeiture in the event that such executive reachesof a non-compete violation. The following equity awards are expected to vest (the estimated values are based on the ageCompany’s closing stock price as of 55December 29, 2023 and assuming target performance in the combined yearscase of agethe PSUs): 51,660 PSUs valued at $6,315,435 and service equals60,558 RSUs valued at least 72.$7,403,216. In addition, the Compensation Committee approved an exception to the Management Incentive Compensation Plan’s requirement to be employed by Arrow on the day the annual cash incentive awards are paid and, as a result of this approval, Mr. Long was eligiblereceived a pro-rated annual cash incentive award for early retirementthe period January 1, 2023, through July 5, 2023, based on the Company’s achievement of the relevant performance goals in the amount of $693,158. Mr. Long will also receive benefits under the SERP with a value of $16,446,707 as of December 31, 2017.2023, as described further above under “Supplemental Executive Retirement Plan.”
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Kirk D. Schell – Separation Benefits
As noted in the CD&A of this Proxy Statement, effective August 16, 2023, Mr. Schell ceased to be an executive officer of the Company and left the Company effective August 31, 2023. Due to his termination without cause and in exchange for Mr. Schell signing a general release of claims in favor of the Company, he became eligible for certain benefits pursuant to the Severance Policy during his eighteen-month severance period, which is expected to end on February 28, 2025. Pursuant to the Severance Policy, Mr. Schell is eligible to receive monthly salary continuation payments, adjusted severance period bonuses based on annual cash incentive targets, and continued vesting of his unvested equity awards in accordance with their respective vesting schedules during the severance period. During 2023, Mr. Schell received salary continuation payments in the amount of $166,667 and is eligible to receive up to $583,334 of additional salary continuation payments through February 2025. Mr. Schell received a severance payment in the amount of $304,090 based on his 2023 annual cash incentive target. The first portion of the payment was prorated for the period he was actively employed and based on the Company’s achievement of the financial goals and the strategic performance goals. The second portion of the payment was prorated for the first four months of his severance period through December 31, 2023, and based only on the Company’s achievement of the financial goals. Mr. Schell may receive additional severance period bonuses based only on the Company’s achievement of financial goals and prorated for the remainder of the severance period. Assuming 100% achievement of the financial goals, Mr. Schell would be eligible to receive $406,560 of additional severance period bonus payments in the future. The following equity awards are expected to vest during the severance period (the estimated values are based on the Company’s closing stock price as of December 29, 2023): 9,775 RSUs valued at $1,194,994, with the remainder of his unvested equity awards being forfeited. Mr. Schell received a severance benefit subsidy in the amount of $30,998 and is eligible to receive reimbursement for outplacement services up to $50,000. Further, as Mr. Schell was not eligible for retirement at the time of his departure, he will not receive any SERP benefit payments.
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Potential Payouts Upon Termination | ||||||||||||
| | | | | | | | Termination | | | | |
| | | | | | | | Without Cause | | | | |
| | | | | | | | or | | Change in | | |
| | | | | | | | Resignation for | | Control | | |
| | | | Death | | Disability | | Good Reason | | Termination | | Retirement |
Name |
| Benefit |
| ($) (1) |
| ($) (2) |
| ($) (3) (4) |
| ($) (5) |
| ($) (6) (7) |
Sean J. Kerins | | Severance Payment |
| — | | — | | 2,000,000 | | 9,000,000 | | — |
| | Prorated Annual Cash Incentive |
| 2,000,000 | | 2,000,000 | | 2,000,000 | | 2,000,000 | | — |
| | Annual Cash Incentive (Severance) | | — | | — | | 2,800,000 | | — | | — |
| | TOTAL Annual Cash Incentives |
| 2,000,000 | | 2,000,000 | | 4,800,000 | | 2,000,000 | | — |
| | Performance Stock Unit Awards (8) |
| 4,999,292 | | 4,999,292 | | 4,999,292 | | 4,999,292 | | 4,999,292 |
| | Non-Qualified Stock Option Awards (8) |
| 195,873 | | 195,873 | | 195,873 | | 195,873 | | 195,873 |
| | Restricted Stock Unit Awards (8) |
| 4,055,033 | | 4,055,033 | | 4,055,033 | | 4,055,033 | | 4,055,033 |
| | TOTAL Long-Term Incentive Awards |
| 9,250,198 | | 9,250,198 | | 9,250,198 | | 9,250,198 | | 9,250,198 |
| | Management Insurance Benefit | | 12,000,000 | | — | | — | | — | | — |
| | Welfare Benefits Continuation | | — | | 3,532 | | 14,324 | | 21,487 | | — |
| | Outplacement Services |
| — | | — | | 75,000 | | — | | — |
| | Supplemental Executive Retirement Plan |
| — | | 7,250,682 | | 7,324,332 | | 7,250,682 | | 7,324,332 |
| | TOTAL |
| 23,250,198 | | 18,504,412 |
| 23,463,854 |
| 27,522,367 |
| 16,574,530 |
Rajesh K. Agrawal | | Severance Payment |
| — | | — | | 1,050,000 | | 2,800,000 | | — |
| | Prorated Annual Cash Incentive |
| 700,000 | | 700,000 | | 700,000 | | 700,000 | | — |
| | Annual Cash Incentive (Severance) |
| — | | — | | 735,000 | | — | | — |
| | TOTAL Annual Cash Incentives |
| 700,000 | | 700,000 | | 1,435,000 | | 700,000 | | — |
| | Performance Stock Unit Awards (8) |
| 1,081,301 | | 1,081,301 | | — | | 1,081,301 | | — |
| | Non-Qualified Stock Option Awards (8) | | — | | — | | — | | — | | — |
| | Restricted Stock Unit Awards (8) |
| 4,781,564 | | 4,781,564 | | 1,774,214 | | 4,781,564 | | — |
| | TOTAL Long-Term Incentive Awards |
| 5,862,865 | | 5,862,865 | | 1,774,214 | | 5,862,865 | | — |
| | Management Insurance Benefit | | 5,600,000 | | — | | — | | — | | — |
| | Welfare Benefits Continuation | | — | | 10,191 | | 30,998 | | 41,331 | | — |
| | Outplacement Services |
| — | | — | | 50,000 | | — | | — |
| | Supplemental Executive Retirement Plan |
| — | | 303,775 | | — | | 366,127 | | — |
| | TOTAL |
| 12,162,865 | | 6,876,831 | | 4,340,212 | | 9,770,323 | | — |
Gretchen K. Zech | | Severance Payment | | — | | — | | 1,012,500 | | 2,700,000 | | — |
| | Prorated Annual Cash Incentive | | 675,000 | | 675,000 | | 675,000 | | 675,000 | | — |
| | Annual Cash Incentive (Severance) | | — | | — | | 708,750 | | — | | — |
| | TOTAL Annual Cash Incentives | | 675,000 | | 675,000 | | 1,383,750 | | 675,000 | | — |
| | Performance Stock Unit Awards (8) | | 2,201,356 | | 2,201,356 | | 1,464,066 | | 2,201,356 | | — |
| | Non-Qualified Stock Option Awards (8) | | 169,796 | | 169,796 | | 169,796 | | 169,796 | | — |
| | Restricted Stock Unit Awards (8) | | 1,774,092 | | 1,774,092 | | 1,226,045 | | 1,774,092 | | — |
| | TOTAL Long-Term Incentive Awards | | 4,145,244 | | 4,145,244 | | 2,859,907 | | 4,145,244 | | — |
| | Management Insurance Benefit | | 5,400,000 | | — | | — | | — | | |
| | Welfare Benefits Continuation | | — | | 6,694 | | 20,362 | | 27,149 | | — |
| | Outplacement Services | | — | | — | | 50,000 | | — | | — |
| | Supplemental Executive Retirement Plan | | — | | 2,584,898 | | — | | 3,933,098 | | — |
| | TOTAL | | 10,220,244 | | 7,411,836 | | 5,326,519 | | 11,480,491 | | — |
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Potential Payouts Upon Termination | ||||||||||||
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| Termination Scenario | ||||||||
|
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| Termination |
|
|
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|
|
|
|
|
|
|
| Without "Cause" or |
| Change in |
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| Resignation |
| Control |
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|
|
| Death |
| Disability |
| for "Good Reason" |
| Termination |
| Retirement |
Name |
| Benefit |
| ($) |
| ($) |
| ($) (1) |
| ($) |
| ($) |
Michael J. Long |
| Severance Payment (2) |
| — |
| — |
| 2,300,000 |
| 8,550,000 |
| — |
|
| Settlement of MICP Bonus Award |
| — |
| — |
| 2,380,000 |
| — |
| — |
|
| Settlement of Pro Rata MICP Bonus Award |
| — |
| — |
| 1,700,000 |
| 1,700,000 |
| — |
|
| Settlement of Performance Awards |
| 10,581,956 |
| 10,581,956 |
| 7,315,943 |
| 10,581,956 |
| — |
|
| Settlement of Stock Options |
| 2,954,052 |
| 2,954,052 |
| 2,217,855 |
| 2,954,052 |
| — |
|
| Settlement of Restricted Awards (3) |
| 4,394,809 |
| 4,394,809 |
| 3,088,468 |
| 4,394,809 |
| — |
|
| Accrued Vacation Payout |
| 88,462 |
| 88,462 |
| 88,462 |
| 88,462 |
| 88,462 |
|
| Management Insurance Benefit |
| 11,400,000 |
| — |
| — |
| — |
| — |
|
| Welfare Benefits Continuation |
| — |
| 7,326 |
| 29,711 |
| 44,566 |
| — |
|
| SERP |
| — |
| 19,697,421 |
| — |
| 19,697,421 |
| 19,996,276 |
|
| Other |
| — |
| — |
| 75,000 |
| — |
| — |
|
| Total |
| 29,419,279 |
| 37,724,026 |
| 19,195,439 |
| 48,011,266 |
| 20,084,738 |
Christopher D. Stansbury |
| Severance Payment (2) |
| — |
| — |
| 825,000 |
| 1,579,388 |
| — |
|
| Settlement of MICP Bonus Award |
| — |
| — |
| 577,500 |
| — |
| — |
|
| Settlement of Pro Rata MICP Bonus Award |
| — |
| — |
| 550,000 |
| 550,000 |
| — |
|
| Settlement of Performance Awards |
| 1,020,242 |
| 1,020,242 |
| 475,866 |
| 1,020,242 |
| — |
|
| Settlement of Stock Options |
| 343,924 |
| 343,924 |
| 271,778 |
| 343,924 |
| — |
|
| Settlement of Restricted Awards (3) |
| 1,413,929 |
| 1,413,929 |
| 584,661 |
| 1,413,929 |
| — |
|
| Accrued Vacation Payout |
| 42,308 |
| 42,308 |
| 42,308 |
| 42,308 |
| — |
|
| Management Insurance Benefit |
| 4,400,000 |
| — |
| — |
| — |
| — |
|
| Welfare Benefits Continuation |
| — |
| 7,326 |
| 22,283 |
| 29,711 |
| — |
|
| SERP |
| — |
| 83,840 |
| — |
| 270,945 |
| — |
|
| Other |
| — |
| — |
| 50,000 |
| — |
| — |
|
| Total |
| 7,220,403 |
| 2,911,569 |
| 3,399,396 |
| 5,250,447 |
| — |
Sean J. Kerins |
| Severance Payment (2) |
| — |
| — |
| 825,000 |
| 2,100,000 |
| — |
|
| Settlement of MICP Bonus Award |
| — |
| — |
| 525,000 |
| — |
| — |
|
| Settlement of Pro Rata MICP Bonus Award |
| — |
| — |
| 500,000 |
| 500,000 |
| — |
|
| Settlement of Performance Awards |
| 1,920,914 |
| 1,920,914 |
| 1,294,923 |
| 1,920,914 |
| — |
|
| Settlement of Stock Options |
| 511,140 |
| 511,140 |
| 374,879 |
| 511,140 |
| — |
|
| Settlement of Restricted Awards (3) |
| 1,458,316 |
| 1,458,316 |
| 1,212,744 |
| 1,458,316 |
| — |
|
| Accrued Vacation Payout |
| 42,308 |
| 42,308 |
| 42,308 |
| 42,308 |
| — |
|
| Management Insurance Benefit |
| 4,200,000 |
| — |
| — |
| — |
| — |
|
| Welfare Benefits Continuation |
| — |
| 2,575 |
| 7,832 |
| 10,442 |
| — |
|
| SERP |
| — |
| 641,568 |
| — |
| 932,077 |
| — |
|
| Other |
| — |
| — |
| 50,000 |
| — |
| — |
|
| Total |
| 8,132,678 |
| 4,576,821 |
| 4,832,686 |
| 7,475,197 |
| — |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
Potential Payouts Upon Termination | ||||||||||||
| | | | | | | | Termination | | | | |
| | | | | | | | Without Cause | | | | |
| | | | | | | | or | | Change in | | |
| | | | | | | | Resignation for | | Control | | |
| | | | Death | | Disability | | Good Reason | | Termination | | Retirement |
Name |
| Benefit |
| ($) (1) |
| ($) (2) |
| ($) (3) (4) |
| ($) (5) |
| ($) (6) (7) |
Kristin D. Russell | | Severance Payment | | — | | — | | 825,000 | | 1,759,518 | | — |
| | Prorated Annual Cash Incentive | | 550,000 | | 550,000 | | 550,000 | | 550,000 | | — |
| | Annual Cash Incentive (Severance) | | — | | — | | 577,500 | | — | | — |
| | TOTAL Annual Cash Incentives | | 550,000 | | 550,000 | | 1,127,500 | | 550,000 | | — |
| | Performance Stock Unit Awards (8) | | 1,787,295 | | 1,787,295 | | 1,148,294 | | 1,787,295 | | — |
| | Non-Qualified Stock Option Awards (8) | | 78,358 | | 78,358 | | 78,358 | | 78,358 | | — |
| | Restricted Stock Unit Awards (8) | | 1,414,555 | | 1,414,555 | | 951,594 | | 1,414,555 | | — |
| | TOTAL Long-Term Incentive Awards | | 3,280,208 | | 3,280,208 | | 2,178,246 | | 3,280,208 | | — |
| | Management Insurance Benefit | | 4,400,000 | | — | | — | | — | | |
| | Welfare Benefits Continuation | | — | | 10,191 | | 30,998 | | 41,331 | | — |
| | Outplacement Services | | — | | — | | 50,000 | | — | | — |
| | Supplemental Executive Retirement Plan | | — | | 286,177 | | — | | 550,098 | | — |
| | TOTAL | | 8,230,208 | | 4,126,576 | | 4,211,744 | | 6,181,155 | | — |
Carine L. Jean-Claude | | Severance Payment |
| — | | — | | 675,000 | | 1,382,704 | | — |
| | Prorated Annual Cash Incentive |
| 450,000 | | 450,000 | | 450,000 | | 450,000 | | — |
| | Annual Cash Incentive (Severance) | | — | | — | | 472,500 | | — | | — |
| | TOTAL Annual Cash Incentives | | 450,000 | | 450,000 | | 922,500 | | 450,000 | | — |
| | Performance Stock Unit Awards (8) | | 833,134 | | 833,134 | | 415,406 | | 833,134 | | — |
| | Non-Qualified Stock Option Awards (8) | | 19,579 | | 19,579 | | 19,579 | | 19,579 | | — |
| | Restricted Stock Unit Awards (8) | | 723,598 | | 723,598 | | 431,054 | | 723,598 | | — |
| | TOTAL Long-Term Incentive Awards |
| 1,576,311 | | 1,576,311 | | 866,039 | | 1,576,311 | | — |
| | Management Insurance Benefit | | 3,600,000 | | — | | — | | — | | — |
| | Welfare Benefits Continuation | | — | | 6,694 | | 20,362 | | 27,149 | | — |
| | Outplacement Services |
| — | | — | | 50,000 | | — | | — |
| | Supplemental Executive Retirement Plan |
| — | | — | | — | | — | | — |
| | TOTAL | | 5,626,311 | | 2,033,005 | | 2,533,901 | | 3,436,164 | | — |
The benefits listed below are provided in accordance with the Executive Change in Control Retention Agreement, the Severance Policy, applicable equity award agreements, the Management Insurance Program, and the Supplemental Executive Retirement Plan.
| (1) | Death |
(a) A prorated annual cash incentive award for the calendar year of termination, based upon actual performance, amount displayed is at target
(b) Immediate vesting of all unvested equity awards
(c) A lump-sum cash payment equal to four times the executive’s target total cash compensation, net of tax and payable under the Management Insurance Program
| (2) | Disability |
(a) A prorated annual cash incentive award for the calendar year of termination, based upon actual performance; amount displayed is at target
(b) Immediate vesting of all unvested equity awards
(c) Continued medical coverage under Arrow’s health plan for one-hundred eighty days
(d) SERP benefit payments begin at normal retirement date but are reduced by the Early Payment Discount to reflect the date of disability
| (3) | Termination Without Cause |
(a) A prorated annual cash incentive award for the calendar year of termination, based upon actual performance, amount displayed is at target
(b) During the eighteen-month severance period (twenty-four-month severance period for the CEO)
i. Salary continuation
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2024 ANNUAL |
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PROXY STATEMENT |
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Potential Payouts Upon Termination | ||||||||||||
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| Termination Scenario | ||||||||
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| Termination |
|
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| Without "Cause" or |
| Change in |
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| Resignation |
| Control |
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| Death |
| Disability |
| for "Good Reason" |
| Termination |
| Retirement |
Name |
| Benefit |
| ($) |
| ($) |
| ($) (1) |
| ($) |
| ($) |
Andrew D. King |
| Severance Payment (2) |
| — |
| — |
| 787,500 |
| 2,000,000 |
| — |
|
| Settlement of MICP Bonus Award |
| — |
| — |
| 498,750 |
| — |
| — |
|
| Settlement of Pro Rata MICP Bonus Award |
| — |
| — |
| 475,000 |
| 475,000 |
| — |
|
| Settlement of Performance Awards |
| 1,667,221 |
| 1,667,221 |
| 1,068,408 |
| 1,667,221 |
| — |
|
| Settlement of Stock Options |
| 459,751 |
| 459,751 |
| 325,534 |
| 459,751 |
| — |
|
| Settlement of Restricted Awards (3) |
| 1,412,160 |
| 1,412,160 |
| 460,910 |
| 1,412,160 |
| — |
|
| Accrued Vacation Payout |
| 40,385 |
| 40,385 |
| 40,385 |
| 40,385 |
| — |
|
| Management Insurance Benefit |
| 4,000,000 |
| — |
| — |
| — |
| — |
|
| Welfare Benefits Continuation |
| — |
| 4,995 |
| 15,192 |
| 20,256 |
| — |
|
| SERP |
| — |
| 188,990 |
| — |
| 368,886 |
| — |
|
| Other |
| — |
| — |
| 50,000 |
| — |
| — |
|
| Total |
| 7,579,517 |
| 3,773,502 |
| 3,721,679 |
| 6,443,659 |
| — |
Gretchen K. Zech |
| Severance Payment (2) |
| — |
| — |
| 682,500 |
| 1,337,024 |
| — |
|
| Settlement of MICP Bonus Award |
| — |
| — |
| 477,750 |
| — |
| — |
|
| Settlement of Pro Rata MICP Bonus Award |
| — |
| — |
| 455,000 |
| 455,000 |
| — |
|
| Settlement of Performance Awards |
| 1,423,900 |
| 1,423,900 |
| 912,251 |
| 1,423,900 |
| — |
|
| Settlement of Stock Options |
| 382,889 |
| 382,889 |
| 282,888 |
| 382,889 |
| — |
|
| Settlement of Restricted Awards (3) |
| 1,310,844 |
| 1,310,844 |
| 409,126 |
| 1,310,844 |
| — |
|
| Accrued Vacation Payout |
| 35,000 |
| 35,000 |
| 35,000 |
| 35,000 |
| — |
|
| Management Insurance Benefit |
| 3,640,000 |
| — |
| — |
| — |
| — |
|
| Welfare Benefits Continuation |
| — |
| 4,876 |
| 14,830 |
| 19,774 |
| — |
|
| SERP |
| — |
| 502,422 |
| — |
| — |
| — |
|
| Other |
| — |
| — |
| 50,000 |
| — |
| — |
|
| Total |
| 6,792,633 |
| 3,659,931 |
| 3,319,345 |
| 4,964,431 |
| — |
|
|
|
|
|
|
|
|
|
|
|
ii. Annual cash incentive award, based upon actual performance, but adjusted for 0% achievement for MBO performance
NARRATIVE EXPLANATION OF THE CALCULATION OF AMOUNTSiii. Equity award vesting continues
Hadiv. Continued medical coverage under Arrow’s health plan or equivalent cash value
(c) SERP benefit payments begin if the death, disability,termination date is after the earliest retirement or a changedate
(d) Reimbursement for outplacement expenses – up to $50,000 ($75,000 for the CEO)
(e) If eligible for normal retirement, equity award vesting continues in control termination of any of the NEOs occurred, all restricted awards, options, and performance awards would have fully vested. Theaccordance with their respective vesting schedules; stock options would remain exercisable for the remainder of their original term.term
| (4) | As of December 31, 2023, of the NEOs, only Ms. Zech was eligible to receive payments upon a resignation for “good reason.” The numbers reflected for Messrs. Kerins, Agrawal, and Schell and Mses. Russell and Jean-Claude only apply in cases of termination without “cause.” |
| (5) | Change in Control Termination |
(a) A lump-sum cash payment equal to two times the executive’s target total cash compensation (three times for the CEO)
During 2017, had a(b) A prorated annual cash incentive award for the calendar year of termination, bybased on actual performance, amount displayed is at target
(c) Immediate vesting of all unvested equity awards
(d) Continued medical coverage under Arrow’s health plan for the earlier of (i) twenty-four months (thirty-six months for the CEO) after the termination date and (ii) attaining age 65
(e) SERP benefit payments begin at age 60 based upon Years of SERP Participation as of the termination date, but with no Early Payment Discount
| (6) | Retirement |
(a) If eligible for normal retirement, equity award vesting continues in accordance with their respective vesting schedules; stock options would remain exercisable for the remainder of their original term
(b) SERP benefit payments begin if the termination date is after the earliest retirement date
| (7) | Mr. Kerins was eligible for normal retirement as of April 1, 2022 |
| (8) | Long-Term Incentive Awards |
(a) The categories “Performance Stock Unit Awards” and “Restricted Stock Unit Awards” include restricted award grants made to the NEOs that were subject to performance criteria that required the Company without “cause”to achieve non-GAAP net income greater than zero or in the cases of Mr. Longthey would be canceled
(b) PSUs and Ms. Zech, resignation of the executive for “good reason” occurred, performance, restricted, and option awards would have vested immediately.
None of the NEOs would have received severance or MICP payments in the event of death, disability, or retirement. Had a termination of any of the NEOs by the Company without “cause” or, with respect to Mr. Long or Ms. Zech, resignation by the executive for “good reason” occurred, the executive would have received his or her base salary and MICP awards (prorated as applicable) for a period of 24 months (for the Chief Executive Officer) or 18 months (for all other NEOs).
Performance awards and restricted awardsRSUs are valued atas of the closing market price of the Company’s common stock on December 29, 2017.2023
(c) In-the-money stock options are valued based on the difference between the exercise price of the in-the-money options and the closing market price of the Company’s common stock on December 29, 2017.2023
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NON-QUALIFIEDPERFORMANCE STOCK OPTION,UNIT, RESTRICTED STOCK UNIT, AND PERFORMANCENON-QUALIFIED STOCK UNITOPTION AWARD AGREEMENTS
The various share and share-based awards made to the NEOs are evidenced by written agreements, each of which contains provisions addressing alternative termination scenarios. The provisions applicable to NEOs are summarized in the following Tabletable for grants in 2017.2023.
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| Death or Disability | Termination Without | Involuntary Within |
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| Voluntary | ||||||||||||||||||
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| | |
| | | | | | | | | | | | | | ||||||
Performance Stock Units | | | If the performance period has ended, any remaining unvested awards vest immediately | | |
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| | |
|
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| | Unvested awards are forfeited. | | | Unvested awards are forfeited. | | |||||||||||||||||||
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| | | | | | | | | | | | | | | | | | | | ||||||
Restricted Stock Units | | | Unvested awards vest immediately. | | | Awards with vesting dates falling within the | |
| | Unvested awards vest immediately. | | | Vesting continues on schedule, subject to forfeiture in the event of a non-compete violation. | ||||||||||||
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| | Unvested awards are forfeited. | | |
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| | | | | | | | | | | | | | | | | | | | ||||||
Stock Options | | | All options vest immediately and remain exercisable until the original expiration date (ten years from the grant date). | | | Options with vesting dates falling within the | | | All options vest immediately, and the entire award is exercisable until the original expiration date (ten years from the grant date). | | | Unvested |
|
| | | Vested and unvested options are forfeited. | | | Unvested options are forfeited. Vested options remain exercisable for 90 days following termination. | | ||||
| | | | | | | | | | | | | | | | | | | | ||||||
| (1) |
| Of the |
84 |
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CEO PAY RATIO
In compliance with the pay ratio disclosure requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following information about the ratio of the annual total compensation paid to the individual identified as its median paid employee and the annual total compensation of the CEO, Mr. Kerins.
The 2023 annual total compensation of the individual identified as the median-paid employee, other than the Company’s CEO, was $56,886. Mr. Kerins’ 2023 annual total compensation was $8,891,814, as reported in the “2023 Summary Compensation Table.” As a result, we estimate that for 2023, the ratio of these amounts was 1-to-156. We believe this pay ratio is a reasonable estimate calculated in a manner consistent with applicable SEC rules and based on payroll and employment records and the methodology described above. The estimates and assumptions that we use may differ from those used by other companies, including those in our Peer Group described in the CD&A.
The following summarizes the methodology, material assumptions, adjustments, and estimates the Company used for calculating the CEO pay ratio:
| > | Employee Measurement Date: The Company utilized the entire global population of approximately 22,100 eligible employees on December 31, 2023. |
| > | Exclusions: The number of US and non-US employees prior to exemption were approximately 4,900 and 17,200, respectively. Employees from the following non-US jurisdictions that collectively constitute 5% or less of the total global workforce were excluded: Poland (879), Malaysia (155), Thailand (33), Philippines (26), and New Zealand (11). The total number of employees excluded was approximately 1,100. Therefore, the total number of US and non-US employees used in the final analysis was 4,900 and 16,100, respectively. |
| > | Compensation Time Period: The Company measured compensation for the above employees using the 12-month period ending December 31, 2023. |
| > | Determining the Median Paid Employee: While total annual compensation for each of the median employee and the CEO is used to calculate the pay ratio, the SEC allows companies to use a different compensation measure for identifying the median employee. We used target total cash (base + target bonus) as the consistently applied compensation measure to identify the median paid employee. |
Base pay for hourly employees was calculated based on a reasonable estimate of hours worked in 2023 and on salary levels for all remaining employees.
Using this methodology, the Company identified its 2023 median paid employee, a full-time, hourly employee, located in the United States.
| > | Determining Median Paid Employee’s Pay for CEO Ratio: The individual identified as the median paid employee had an annual compensation in the amount of $56,886 for fiscal 2023, calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. |
| > | Determining the CEO’s Pay for CEO Ratio: With respect to the annual total compensation of the CEO, the Company used the amount reported in the “Total” column of our 2023 Summary Compensation Table included in this Proxy Statement. |
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| 85 |
|
|
Alternative Pay Ratio
As an alternative approach in determining Mr. Kerins’ compensation for purposes of calculating the CEO Pay Ratio, we adjusted the compensation reported in the 2023 Summary Compensation Table to exclude the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column required under SEC rules and are not a substitute for total compensation. The change in pension value is subject to many external variables, such as interest rates, assumptions about life expectancy and changes in the discount rate determined at each year end, which are functions of economic factors and actuarial calculations that are not related to the Company’s performance and are outside the control of the Compensation Committee.
This adjustment resulted in total annual compensation of $6,374,308, and an adjusted pay ratio of approximately 1-to-112. We believe excluding the Change in Pension Value from the CEO’s total annual compensation for purposes of calculating the pay ratio results in a more meaningful comparison of ongoing CEO compensation to the median of the annual total compensation of all employees, particularly when viewed over a period of time.
86 |
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PAY VERSUS PERFORMANCE
In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Rules”), the following table sets forth information regarding the relationship between “compensation actually paid” as calculated per the Rules, and certain financial performance of Arrow for the years ended December 31, 2023, 2022, 2021, and 2020 for each individual who served as our Principal Executive Officer (“PEO”) and our other NEOs during each year. Refer to the “Executive Compensation” section in the CD&A for further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with Company performance, and how the Compensation Committee makes its decisions.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Value of Initial Fixed | | | | | ||
| | | | | | | | | | | | | | $100 Investment Based | | | | | ||
| | | | | | | | | | Average | | Average | | On: | | | | | ||
| | Summary | | Summary | | | | | | Summary | | Compensation | | | | Peer | | | | |
| | Compensation | | Compensation | | Compensation | | Compensation | | Compensation | | Actually | | Arrow's | | Group | | | | |
| | Table Total for | | Table Total for | | Actually Paid | | Actually Paid | | Table Total | | Paid to | | Total | | Total | | Net | | |
| | First | | Second | | to First | | to Second | | for Non-PEO | | Non-PEO | | Shareholder | | Shareholder | | Income | | Absolute |
Year1 (a) |
| PEO2 (b) |
| PEO2 (c) |
| PEO3 (d) |
| PEO3 (e) |
| NEOs2 (f) |
| NEOs3 (g) |
| Return4 (h) |
| Return5 (i) |
| (in millions)6 (j) |
| EPS7 (k) |
2023 | | $8,891,814 | | n/a | | $11,494,294 | | n/a | | $3,224,995 | | $3,983,576 | | $144 | | $181 | | $ 904 | | $17.06 |
2022 | | $7,478,225 | | $11,550,022 | | $8,049,694 | | $6,516,685 | | $2,734,955 | | $2,070,990 | | $123 | | $140 | | $1,427 | | $23.13 |
2021 | | n/a | | $12,880,838 | | n/a | | $24,843,768 | | $3,902,722 | | $6,736,978 | | $158 | | $157 | | $1,108 | | $15.60 |
2020 | | n/a | | $11,703,943 | | n/a | | $14,433,945 | | $3,705,149 | | $4,146,853 | | $115 | | $106 | | $584 | | $7.92 |
(1) | NEOs included in these columns reflect the following: |
| | | | |
Year | PEOs | Non-PEO NEOs | ||
2023 | | Sean J. Kerins (PEO 1) | | Rajesh K. Agrawal, Gretchen K. Zech, Kristin D. Russell, Carine L. Jean-Claude, Michael J. Long, Kirk D. Schell |
2022 | | Sean J. Kerins (PEO 1) | | Rajesh K. Agrawal, Kirk D. Schell, Gretchen K. Zech, Vincent P. Melvin, Richard A. Seidlitz, Christopher D. Stansbury |
2021 | | Michael J. Long (PEO 2) | | Sean J. Kerins, Christopher D. Stansbury, Gretchen K. Zech, Vincent P. Melvin |
2020 | | Michael J. Long (PEO 2) | | Sean J. Kerins, Christopher D. Stansbury, Gretchen K. Zech, Andrew D. King |
(2) | Amounts reflect the table labeled “2023 Summary Compensation Table” for our NEOs for each corresponding year. |
(3) | The following table shows the adjustment to the total compensation reported in the “2023 Summary Compensation Table” for our PEOs, as well as the average for our other NEOs, to determine “compensation actually paid,” as computed in accordance with the Rules. Because “compensation actually paid,” as calculated per the Rules, requires the inclusion of equity awards as compensation prior to vesting of the awards, the amounts reported below do not reflect the actual compensation earned by or paid to our NEOs during the applicable year, with a significant portion of the “compensation actually paid” subject to forfeiture if the underlying vesting conditions are not achieved. The “compensation actually paid” for 2020 – 2022 has been updated from the amounts reported in the Company’s 2023 Proxy Statement to reflect application of SEC guidance relating to retirement vesting treatment and valuing performance awards as well as to correct the inadvertent exclusion of the new hire grants received by Mr. Agrawal and Mr. Schell in 2022. |
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| 87 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 | | 2020 | |||||||||||||||||||
| | | | Non-PEO | | | | | | | | Non-PEO | | | | | Non-PEO | | | | | Non-PEO | ||||
| PEO 1 |
| NEO Average |
| PEO 1 |
| PEO 2 |
| NEO Average |
| PEO 2 |
| NEO Average |
| PEO 2 |
| NEO Average | |||||||||
Total Compensation from the Summary Compensation Table | $ | 8,891,814 | | $ | 3,224,995 | | $ | 7,478,225 | | $ | 11,550,022 | | $ | 2,734,955 | | $ | 12,880,838 | | $ | 3,902,722 | | $ | 11,703,943 | | $ | 3,705,149 |
Adjustments for Pension | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustment Summary Compensation Table Pension (a) | $ | (2,517,506) | | $ | (455,737) | | $ | (533,030) | | $ | — | | $ | — | | $ | — | | $ | (594,473) | | $ | (979,530) | | $ | (951,949) |
Amount added for Current Year Service Cost (b) | $ | 762,082 | | $ | 269,720 | | $ | — | | $ | (14,085) | | $ | 273,214 | | $ | (13,682) | | $ | 544,659 | | $ | (12,599) | | $ | 528,740 |
Amount added for Prior Year Service Cost Impacting Current Year (b) | $ | 2,692,795 | | $ | — | | $ | 3,029,395 | | $ | — | | $ | — | | | — | | $ | — | | $ | — | | $ | — |
Total Adjustments for Pension | $ | 937,371 | | $ | (186,017) | | $ | 2,496,365 | | $ | (14,085) | | $ | 273,214 | | $ | (13,682) | | $ | (49,814) | | $ | (992,129) | | $ | (423,209) |
Adjustments for Equity Grants | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustment for grant date values in the Summary Compensation Table(c) | $ | (4,000,040) | | $ | (1,725,039) | | $ | (3,500,063) | | $ | (6,000,112) | | $ | (1,615,082) | | $ | (6,000,028) | | $ | (1,625,076) | | $ | (6,000,044) | | $ | (1,475,005) |
Year-end fair value of unvested awards granted in the current year(d) | $ | 3,932,171 | | $ | 1,511,458 | | $ | 2,930,470 | | $ | 4,913,326 | | $ | 1,492,162 | | | 7,563,832 | | $ | 2,048,625 | | $ | 7,369,405 | | $ | 1,957,883 |
Year-over-year difference of year-end fair values for unvested awards granted in prior years(d) | $ | 1,305,688 | | $ | 824,037 | | $ | (895,968) | | $ | (2,095,192) | | $ | (255,980) | | $ | 10,018,282 | | $ | 2,368,526 | | $ | 4,051,168 | | $ | 776,509 |
Fair values at vest date for awards granted and vested in the current year (d) | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | — | | $ | — | | $ | — | | $ | — |
Difference in fair values between prior year-end fair values and vest date fair values for awards granted in prior years(d) | $ | 427,290 | | $ | 451,940 | | $ | (459,335) | | $ | (1,837,274) | | $ | (225,767) | | $ | 394,526 | | $ | 91,995 | | $ | (1,698,398) | | $ | (394,474) |
Forfeitures during the current year equal to the prior year-end fair value(d) | $ | — | | $ | (117,798) | | $ | — | | $ | — | | $ | (332,512) | | | — | | $ | — | | $ | — | | $ | — |
Dividends or dividend equivalents not otherwise included in total compensation | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Total Adjustments for Equity Awards | $ | 1,665,109 | | $ | 944,598 | | $ | (1,924,896) | | $ | (5,019,252) | | $ | (937,179) | | $ | 11,976,612 | | $ | 2,884,070 | | $ | 3,722,131 | | $ | 864,913 |
Compensation Actually Paid | $ | 11,494,294 | | $ | 3,983,576 | | $ | 8,049,694 | | $ | 6,516,685 | | $ | 2,070,990 | | $ | 24,843,768 | | $ | 6,736,978 | | $ | 14,433,945 | | $ | 4,146,853 |
(a) | The amounts reflect the change in the actuarial present value of the accumulated benefit under all defined benefit and actuarial pension plans reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column in the “2023 Summary Compensation Table” for the applicable year. |
(b) | The amounts represent the sum of the actuarial present value of the benefits under all defined benefit and actuarial pension plans attributable to services rendered during the indicated fiscal year and any plan modifications during the applicable year, calculated using the same methodology as used in the Company’s financial statements under generally accepted accounting principles. |
(c) | The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” and “Option Awards” columns in the “2023 Summary Compensation Table” for the applicable year. |
(d) | In accordance with the Rules, the fair values of unvested and outstanding equity awards to our NEOs were remeasured starting on December 31, 2019, and subsequently as of each vesting date and as of the end of each fiscal year while the award remains unvested, during the years displayed in the table above. Fair values as of each measurement date were determined using valuation assumptions and methodologies (including volatility, dividend yield, risk-free interest rates and probability of achievement of the underlying performance goals) that are generally consistent with those used to estimate fair value on the grant date under US GAAP. |
For options, a Black-Scholes model was used to estimate the fair value as of the various measurement dates. We explain assumptions made in valuing equity awards on the grant date in the “Stock-Based Compensation Plans” section of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the corresponding fiscal year.
(4) | The amounts in this column show changes over our past four fiscal years in the value of $100 (assuming reinvestment of dividends) invested in Arrow’s common shares traded on the NYSE. |
(5) | The amounts in this column show changes over the past four fiscal years in the value of $100 (assuming reinvestment of dividends), invested in Arrow’s peer group, consisting of Avnet, Inc., Celestica Inc., Flex Ltd., Jabil Inc., WESCO International, Inc., CDW Corp., HP Inc., HP Enterprise Co., and TD SYNNEX Corp. In 2020, our peer group consisted of Anixter International Inc., Avnet, Inc., Celestica Inc., Flex Ltd., Jabil Inc., Tech Data Corporation, and WESCO International, Inc. (the “2020 Peer Group”). |
(6) | The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements in its Annual Report on Form 10-K for the applicable year. |
(7) | While we use numerous financial and non-financial performance measures to evaluate performance under our compensation programs, Absolute EPS is the financial performance measure that, in our assessment, represents the most important performance measure used to link “compensation actually paid” to NEOs to Company performance in 2023. Absolute EPS determines the payout with respect to 70% of our 2023 annual cash incentive. See Appendix to this Proxy Statement for a reconciliation of Absolute EPS to the most directly comparable GAAP measure. |
88 |
| |
Required Relationship Disclosure
In accordance with the Rules, Arrow is providing the following representation of the relationships between the information presented in the Pay versus Performance table.
Compensation Actually Paid and Cumulative TSR
Compensation Actually Paid vs. Net Income
|
| 89 |
Compensation Actually Paid vs. Absolute EPS (Company Selected Measure)
Required Tabular Measures
As required by the Rules, the following is a list of the most important performance measures used to link “compensation actually paid” to Company performance. The role of each of these performance measures in our executive compensation programs is more thoroughly discussed in the “Executive Compensation” section in the CD&A along with a description of how executive compensation relates to Company performance and how the Compensation Committee makes its decisions.
|
Tabular List |
Absolute EPS |
Relative EPS Growth |
ROIC |
WACC |
90 |
| |
The Company has a variety of policies and procedures for the identification and review of related person transactions.
Arrow’s Worldwide Code of Business Conduct and Ethics (the “Code”(“Code”) prohibits employees, officers, and directors from entering into transactions that present a conflict of interest absent a specific waiver.interest. A conflict of interest arises when an employee’s private interests either conflict or appear to conflict with Arrow’s interest.interests. The Code also requires that any such transaction, which may become known to any employee, officer, or director, be properly reported to the Company. Any conflict of interest disclosed under the Codeinvolving an executive officer requires a waiver from senior management. If the conflict of interest involves senior management, a waiver from the Board is required.Board. Any such waiver, or any amendment to the Code, would be disclosed on the Company’s website.
A “related person transaction,” as defined under SEC rules, generally includes any transaction, arrangement, or relationship involving more than $120,000 in which the Company or any of its subsidiaries was, is, or will be a participant and in which a “related person” has a material direct or indirect interest. “Related persons” mean directors and executive officers, and their immediate family members, director nominees, and shareholders owning more than five percent of the Company’s outstanding stock.stock, and their immediate family members. “Immediate family member” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, or any person (other than a tenant or employee) sharing a household with any such director, director nominee, executive officer, or five percent shareholder.
As part of the process related to the financial close of each quarter, the Company distributes a disclosure checklist to the management of each operating unit and financial function around the world,globally, which seeks to ensure complete and accurate financial disclosure. One part of the checklist seeks to identify any related person transactions. AnyPursuant to the Company’s written Disclosure Controls and Procedures, any previously undisclosed transaction is initially reviewed by: (i) the Company’s Corporate Controller Department, in consultation with the Company’s disclosure committee, to determine whether the transaction should be disclosed in the Company’s SEC filings;filings and (ii) senior management of the Company, including the ChiefCompany’s Legal Officer and the Chief Financial Officer,Department for consideration of the appropriateness of the transaction. If such transaction involves members of senior management,and to determine if it is elevated to the Board for review.
In addition, the Company’s corporate governance guidelines specify the standards for independence of directors. Any related person transaction involving a director requires the review and approval ofby the Board.
Transactions involving members of senior management orThe Audit Committee conducts a director require thereasonable prior review and approvaloversight of the Board. Further, the Audit Committee reviews and approves all related person transactions required to be disclosed pursuant to SEC Regulation S-K.S-K or NYSE listing standards. In the course of its review of related person transactions, the senior management of the Company or the independent directors of the BoardAudit Committee will consider all of the relevant facts and circumstances that are available to them, including but not limited to: (i) the benefits to the Company; (ii) in a transaction involving a director, the impact on the director’s independence; (iii) the availability of comparable products or services; (iv) the terms of the transaction; and (v) whether the transaction is proposed to be on terms more favorable to the Company than terms that could have been reached with an unrelated third party. The manager or director involved in the transaction will not participate in the review or approval of such transaction.
The Company’s LawCorporate Controller Department, together with the Corporate Controller’sLaw Department, is responsible for monitoring compliance with these policies and procedures. There were no related party transactions requiring disclosure under SEC Regulation S-K since January 1, 2023.
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| 91 | |
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PROXY STATEMENT |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Arrow’s directors, executive officers, and persons who own more than ten percent of a registered class of Arrow’s equity securities to file reports of ownership and changes in ownership with the SEC. To facilitate compliance with Section 16(a) by Arrow’s directors and executive officers, the Company’s employees generally prepare these reports on the basis of information obtained from each director and executive officer. To the Company’s knowledge, based solely on a review of the reports Arrow filed on behalf of its directors and executive officers, written representations from these persons that no other reports were required, and all Section 16(a) reports provided to the Company, the Company believes that during the fiscal year ended December 31, 2017, all Section 16(a) filings were timely filed with the exception of four Form 4 reports (one for Ms. Hamilton filed three days late and one each for Ms. Zech and Messrs. King and Stansbury filed one day late). In addition, the Company filed two amended Form 4 reports (one for Mr. Melvin for incorrectly reporting the number of shares sold due to a number transposition error, and one for Mr. Stansbury for reporting certain RSUs that had previously been disclosed in a Form 3 report).
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AVAILABILITY OF MORE INFORMATION
Arrow’s corporate governance guidelines,Corporate Governance Guidelines, the Corporate Governance Committee charter, the Audit Committee charter, the Compensation Committee charter, the Company’s Worldwide Code of Business Conduct and Ethics, the Director Resignation Policy and the Anti-Hedging and Anti-Pledging Policy, and the Finance Code of Ethics can be found under “Governance Documents” at the “Leadership &and Governance” sublinksub-link of the Investor Relations drop downdrop-down menu on investor.arrow.com. The contents of this website are not incorporated by reference in this Proxy Statement or any other report or document the Company files with the SEC. Hard copies are available in print to any shareholder who requests them. The Company’s transfer agent and registrar is Wells Fargo Bank N.A. (Wells Fargo Shareowner Services),Equiniti Trust Company, 1110 Centre Pointe Curve, Suite 101, Mendota Heights, Minnesota 55120.
Shareholders and other interested parties who wish to communicate with the Board or any of its members of the Board(including non-management directors as a group) may do so by submitting such communication to Arrow’s Corporate Secretary, Gregory Tarpinian,Carine L. Jean-Claude, at Arrow Electronics, Inc., 92019151 East Dry Creek Road,Panorama Circle, Centennial, Colorado 80112. Arrow’s Corporate Secretary will present any such communication to the directors.Board or applicable directors or group of directors, except those of a harassing nature or solicitations.
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2024 ANNUAL |
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MULTIPLE SHAREHOLDERS
WITH THE SAME ADDRESS
The Company will promptly deliver promptly upon request a separate copy of the Notice and/or thethis Proxy Statement and Annual Report to any shareholder at a shared address to which a single copy of these materials werewas delivered. To receive a separate copy of these materials, you may contact the Company’s Investor Relations Department either by mail at 92019151 East Dry Creek Road,Panorama Circle, Centennial, COColorado 80112, by telephone at 303-824-4544,303 - 824 - 4544, or by email at investor@arrow.com.
The Company has adopted a procedure called “householding,” which has been approved by the SEC. Under this procedure, the Company is delivering only one copy of the Notice and/or thethis Proxy Statement and Annual Report to multiple shareholders who share the same address and have the same last name, unless the Company received instructions to the contrary from an affected shareholder. This procedure reduces printing costs, mailing costs, and fees.
If you are a holder of the Company’s common stock as of the Record Date and would like to revoke your householding consent and receive a separate copy of the Notice and/or thethis Proxy Statement and the Annual Report in the future, please contact Broadridge Financial Solutions, Inc. (“Broadridge”), either by calling toll free at (800) 542-1061 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30 days of receipt of the revocation of your consent.
Any shareholders of record sharing the same address and currently receiving multiple copies of the Notice, the Annual Report, and thethis Proxy Statement, who wish to receive only one copy of these materials per household in the future, may contact the Company’s Investor Relations Department at the address, telephone number, or e-mail listed above to participate in the householding program.
A number ofSeveral brokerage firms have instituted householding. If you hold your shares in “street name,” please contact your bank, broker, or other holder of record to request information about householding.
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SUBMISSION OF SHAREHOLDER PROPOSALS
If a shareholder intends to present a proposal at Arrow’s Annual Meetingannual meeting of shareholders to be held in 20192025 and seeks to have the proposal included in Arrow’s Proxy Statementproxy statement relating to that Annual Meeting,annual meeting, pursuant to Rule 14a‑814a-8 of the Securities Exchange Act, of 1934, as amended, the proposal must be received by Arrow no later than the close of business on November 28, 2018.26, 2024 for a regularly scheduled annual meeting.
Arrow’s bylawsBy-laws govern the submission of nominations for director and other business proposals that a shareholder wishes to have considered at Arrow’s Annual Meetingannual meeting of shareholders to be held in 2019 which2025 that are not included in the Company’s Proxy Statementproxy statement for that Annual Meeting.annual meeting. Under the bylaws,By-laws, subject to certain exceptions, nominations for director or other business proposals to be addressed at the Company’s next Annual Meeting2025 annual meeting may be made by a shareholder entitled to vote who has delivered a notice to theArrow’s Corporate Secretary of Arrow no earlier than January 7, 2025 and not later than the close of business on March 12, 2019 and not earlier than February 10, 2019.6, 2025. The notice must contain the information required by the bylaws.By-laws. These advance notice provisions are in addition to, and separate from, the requirements that a shareholder must meet in order to have a proposal included in the Proxy Statementproxy statement under the rules of the SEC.
Arrow’s By-laws provide that a shareholder, or a group of up to 20 shareholders, owning at least 3% of Arrow’s outstanding common stock continuously for at least three years, may include in our proxy statement director nominees constituting up to the greater of two directors or 20% of the number of directors on the Board, provided that the shareholder and the nominees satisfy the eligibility requirements in our By-laws. If you wish to nominate any person for election to our Board at the 2025 annual meeting of shareholders under the proxy access provision of our By-laws, your nomination notice must be submitted to Arrow’s Corporate Secretary between October 27, 2024 and November 26, 2024, unless the date of the mailing of the notice for the 2025 annual meeting is moved by more than 30 days before or after the anniversary of the mailing date of this Proxy Statement, in which case the nomination must be received by the 10th day following the day on which public announcement of the date of mailing of the notice for the 2025 annual meeting is first made.
In addition to satisfying the requirements under our By-laws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act, which notice must be postmarked or transmitted electronically to the Company at its principal executive offices no later than March 8, 2025. If the date of the 2025 annual meeting of shareholders is changed by more than 30 calendar days from the first anniversary of the Annual Meeting, then notice must be provided by the later of 60 calendar days prior to the date of the 2025 annual meeting of shareholders or the 10th calendar day following the day on which public announcement of the date of the 2025 annual meeting of shareholders is first made.
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| By Order of the Board of Directors, |
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Corporate Secretary |
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APPENDIX
NON-GAAP EXECUTIVE COMPENSATION MEASURES
The tables below present calculations of performance measures used for short-term and long-term incentive compensation purposes. For a full discussion of these measures, refer to the information in the “Annual Cash Incentives” and “Long-Term Incentive Awards” sections in the CD&A.
The annual cash incentive is based on the “Absolute EPS” measure below.
The LTIP is based on: (1) the “Three-Year Relative EPS Growth” which is defined as “Three-Year EPS Growth” as calculated below compared to the EPS growth of Arrow’s Peer Group, and (2) the “Three-Year Average ROIC in Excess of Three-Year WACC” measure below.
The tables below include reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures. For a description of the items adjusting the GAAP results in the tables below, refer to the respective fiscal year's Annual Report on Form 10-K filed with the SEC. Any analysis of results presented on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented on a GAAP basis.
Absolute EPS used in the annual cash incentive calculation excludes the impact of intangible asset amortization expense resulting from acquisitions. We believe excluding this expense provides an appropriate measure of short-term performance because acquisitions generally contribute to long-term value creation. For this same reason, we include this amortization expense in the Three-Year EPS Growth used in the LTIP calculation to hold management accountable for investments in acquisitions.
Absolute EPS used in the annual cash incentive calculation is adjusted to exclude the short-term impact of changes in foreign currencies in order to align the achieved result with the exchange rates used in setting the target. Additionally, Absolute EPS is adjusted to exclude pension settlement gains and losses, and gains and losses on investments, net. The Three-Year Relative EPS Growth LTIP calculation does not include these adjustments because the impacts are not readily available for the entire peer group.
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Annual Cash Incentive Measure
Absolute EPS
($ per diluted share)
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| December 31, |
| December 31, |
| December 31, |
| December 31, | ||||
| | 2023 | | 2022 | | 2021 | | 2020 | ||||
Net income per diluted share, as reported | | $ | 15.84 | | $ | 21.80 | | $ | 15.10 | | $ | 7.43 |
Intangible amortization expense | |
| 0.40 | |
| 0.39 | |
| 0.37 | |
| 0.36 |
Restructuring, integration, and other charges(1) | |
| 1.12 | |
| 0.17 | |
| 0.17 | |
| 0.21 |
Impact of wind down | |
| — | |
| — | |
| — | |
| (0.15) |
(Gain) loss on investments | |
| (0.26) | |
| 0.03 | |
| (0.13) | |
| (0.05) |
Other(2) | |
| — | |
| — | |
| — | |
| 0.23 |
Non-recurring tax items(3) | |
| 0.02 | |
| — | |
| — | |
| (0.02) |
FX impact(4) | |
| (0.06) | |
| 0.74 | |
| 0.10 | |
| (0.08) |
Non-GAAP net income per diluted share(5) | | $ | 17.06 | | $ | 23.13 | | $ | 15.60 | | $ | 7.92 |
(1) | Restructuring, integration, and other charges for 2023 includes charges to increase the environmental remediation reserves, early lease termination charges, and operating expense reduction initiatives for the year ended December 31, 2023. |
(2) | Other for 2020, includes the impact of tariffs and write-down of certain assets. |
(3) | Includes income tax expense (benefit) related to legislation changes and other non-recurring tax adjustments. |
(4) | Includes the impact of differences between foreign exchange rates assumed in plan targets and actual foreign exchange rates during the years presented. |
(5) | The sum of the components for non-GAAP net income per diluted share may not agree to totals, as presented, due to rounding. |
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Long-Term Incentive Program (LTIP) Measures
Three-Year EPS Growth
($ per diluted share)
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| December 31, 2023 |
| December 31, 2020 | ||
Net income per diluted share, as reported | | $ | 15.84 | | $ | 7.43 |
Restructuring, integration, and other charges (1) |
| | 1.12 | |
| 0.21 |
Impact of wind down |
| | — | |
| (0.15) |
Other(2) |
| | 0.02 | |
| (0.02) |
Non-GAAP net income per diluted share |
| $ | 16.98 | | $ | 7.47 |
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Three-year EPS % growth |
| | 113.2 | % |
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Non-GAAP three-year EPS % growth |
| | 127.3 | % |
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(1) | Includes charges to increase the environmental remediation reserves, early lease termination charges, and operating expense reduction initiatives for the year ended December 31, 2023 |
(2) | Includes non-recurring tax adjustments for the year ended December 31, 2023 and write-down of notes receivables for the year ended December 31, 2020. |
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Three-Year Average ROIC in Excess of Three-Year WACC
($ in thousands)
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| | | | Year Ended |
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| | 3 Year | | December 31, 2023 | | December 31, 2022 | | December 31, 2021 |
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| | Average | | (unaudited) | | (unaudited) | | (unaudited) |
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Numerator: |
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Consolidated operating income, as reported |
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| | $ | 1,471,164 | | $ | 2,068,494 | | $ | 1,556,822 | |
Equity in earnings of affiliated companies (1) |
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| 6,407 | |
| 7,664 | |
| 3,508 | |
Less: Noncontrolling interests (1) |
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| 5,858 | |
| 8,274 | |
| 2,271 | |
Consolidated operating income, as adjusted |
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| 1,471,713 | |
| 2,067,884 | |
| 1,558,059 | |
Less: Tax effect |
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| 323,586 | |
| 494,690 | |
| 354,044 | |
After-tax consolidated operating income, as adjusted |
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| 1,148,127 | |
| 1,573,194 | |
| 1,204,015 | |
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Consolidated operating income, as reported |
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| | $ | 1,471,164 | | $ | 2,068,494 | | $ | 1,556,822 | |
Restructuring & Integration charges |
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| 83,916 | |
| 13,741 | |
| 15,393 | |
Pension expense(2) |
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| (3,777) | |
| (3,503) | |
| (5,180) | |
Gain (loss) on investments, net(2) |
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| 19,284 | |
| (2,857) | |
| 12,951 | |
Equity in earnings of affiliated companies(2) |
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| 6,407 | |
| 7,664 | |
| 3,508 | |
Less: Noncontrolling interests (2) |
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| 5,858 | |
| 8,274 | |
| 2,271 | |
Non-GAAP consolidated operating income, as adjusted |
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| 1,571,136 | |
| 2,075,265 | |
| 1,581,223 | |
Less: Tax Effect |
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| 346,150 | |
| 492,500 | |
| 359,100 | |
After-tax non-GAAP consolidated operating income, as adjusted |
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| 1,224,986 | |
| 1,582,765 | |
| 1,222,123 | |
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Denominator: |
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Average short-term borrowings, including current portion of long-term debt(3) |
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| 892,986 | |
| 504,094 | |
| 322,696 | |
Average long-term debt(3) |
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| 3,068,681 | |
| 2,852,348 | |
| 2,034,077 | |
Average total equity(3) |
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| 5,659,361 | |
| 5,416,410 | |
| 5,233,267 | |
Average cash and cash equivalents(3) |
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| 234,840 | |
| 240,296 | |
| 256,702 | |
Invested capital |
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| | $ | 9,386,188 | | $ | 8,532,556 | | $ | 7,333,338 | |
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Return on invested capital (“ROIC”) |
| 15.70 | % |
| 12.23 | % |
| 18.44 | % |
| 16.42 | % |
Less: Weighted average cost of capital (“WACC”) |
| 8.16 | % |
| 8.66 | % |
| 8.12 | % |
| 7.70 | % |
ROIC in excess of WACC |
| 7.54 | % |
| 3.57 | % |
| 10.32 | % |
| 8.72 | % |
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Non-GAAP ROIC |
| 16.09 | % |
| 13.05 | % |
| 18.55 | % |
| 16.67 | % |
Less: WACC |
| 8.16 | % |
| 8.66 | % |
| 8.12 | % |
| 7.70 | % |
Non-GAAP ROIC in excess of WACC |
| 7.93 | % |
| 4.39 | % |
| 10.43 | % |
| 8.97 | % |
(1) | Operating income is adjusted for noncontrolling interests and equity in earnings of affiliated companies to include the pro-rata ownership of non-wholly owned subsidiaries. |
(2) | Non-GAAP operating income is adjusted to include pension expense and gain (loss) on investments and is adjusted for noncontrolling interests and equity in earnings of affiliated companies to include the pro-rata ownership of non-wholly owned subsidiaries. |
(3) | The year ended average is based on the addition of the account balance at the end of the five most recently ended quarters and dividing by five. |
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| Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. V29471-P04829 ! ! ! For All Withhold All For All Except For Against Abstain ! ! ! ! ! ! ARROW ELECTRONICS, INC. To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ARROW ELECTRONICS, INC. 9151 EAST PANORAMA CIRCLE CENTENNIAL, COLORADO 80112 1. Election of Directors Nominees: The Board of Directors recommends you vote FOR ALL the following: If acting as attorney, executor, trustee or in other representative capacity, please sign name and title. 2. To ratify the appointment of Ernst & Young LLP as Arrow's independent registered public accounting firm for the fiscal year ending December 31, 2024. 3. To approve, by non-binding vote, named executive officer compensation. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. The Board of Directors recommends you vote FOR the following proposals: 06) Andrew C. Kerin 07) Sean J. Kerins 08) Carol P. Lowe 09) Mary T. McDowell 10) Gerry P. Smith 01) William F. Austen 02) Fabian T. Garcia 03) Steven H. Gunby 04) Gail E. Hamilton 05) Michael D. Hayford VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern |
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