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 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)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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☐ | Fee paid previously with preliminary materials. |
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0-11. |
OUR | Wednesday, May |
April 1, 2020March 30, 2022
Dear Shareholder: | |
You are invited to Arrow Electronics, Inc.’s (“Arrow” or the “Company”) Annual Meeting of Shareholders (“Annual Meeting”) on Wednesday, May 13, 2020.11, 2022. 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 suggests following its recommended vote on each proposal as being in the best interests of Arrow and urges you to read the Proxy Statement carefully before you vote. | ||
> | the election of the Board of Directors (“Board”); | | | |
> | the ratification of the | | | |
> | the holding of an advisory vote on named executive officer compensation. | | | |
These matters are discussed more fully in the Proxy Statement. | | | ||
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Under the rules adopted by the U.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 (“Notice”(the “Notice”) includes instructions on how to access and review the materials, and how to access your proxy card and vote online. If you would like to receive a printed copy of our 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 our proxy materials, by mailing your proxy card in the postage-paid return envelope.
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WHEN: Wednesday, May WHERE:
AGENDA: 1. Elect the directors for the ensuing year. 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 on named executive officer compensation. 4. Transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
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| NOTICE OF ANNUAL MEETING | |||
| | March 30, 2022 You are invited to Arrow’s Annual Meeting on Wednesday, May 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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Internet | Telephone | Mail | In Person | |||
| | Shareholders may revoke a proxy (change or withdraw their votes) at any time prior to the Annual Meeting by following the instructions in the Proxy Statement. You may request a printed copy of the proxy materials and Arrow’s Annual Report by calling 1-800-579-1639, sending an e-mail to investor@arrow.com, or visiting the following website: investor.arrow.com/financials/financial-results The proxy materials and Arrow’s | ||||
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| | By Order of the Board of Directors, |
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| Carine L. Jean-Claude
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Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be Held on May 13, 2020
11, 2022
LETTER FROM THE CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
At Arrow, we bridge the gap between the possible and the practical through a way of thinking called ‘Five Years Out’ and applying technologies to make it happen. It’s that mindset, that operating model, and that view of the world that allows us to consistently inspire, reimagine, and deliver on the call to action.
When you work in the world of Five Years Out, technology, processes, and decisions move faster every day.
Five Years Out also means we are meaningfully invested in the betterment and improvement of people, communities, and the planet. Smart cities, smart homes, and smart transportation all have the potential to improve lives while simultaneously driving demand for the products we sell and expanding our addressable market. We are pleased to see this evidenced in the strong results generated this year, which you’ll find detailed in our performance highlights section.
While we faced many challenges in 2021, we remained committed to the people who sell, market, design, and engineer our products and solutions. We believe our team of nearly 21,000 employees globally is the key to our competitive differentiation. It is our people who power our performance, our brand, and our success over the long term. We will continue investing in our people.
Additionally, as a trusted partner in a complex value chain, we believe Arrow is uniquely positioned to facilitate environmental and social stewardship and collaborate with customers and suppliers to achieve our shared sustainability goals. Applying the power of technology and innovation to address the world’s economic, social, and environmental challenges continues to drive enhancements to our product suite, expansions to our customer and supplier roster, and increased value for our shareholders.
With innovation and impact as our guides, we look to our long-term stock performance as a reflection of our successful Arrow strategy. As part of our commitment to strategic and operational excellence, we have sharpened our focus on our environmental, social, and governance (“ESG”) strategy and execution. In February 2022, we enhanced management oversight of ESG matters by elevating Gretchen Zech to an expanded role as Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer, demonstrating the Company’s commitment to executive-level leadership on ESG matters. Arrow strives to conduct business in a way that is sustainable for the long-term, as depicted in our inaugural ESG report released in 2022.
Guiding today’s innovators to create a better tomorrow is a big responsibility. In the pages that follow, you’ll find more information about how Arrow’s focus on governance and structure supports our sustainable business practices. We welcome your input and appreciate your support.
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| Sincerely, | |
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| Michael J. Long | |
| Chairman, President, and Chief Executive Officer | |
ARROW ELECTRONICS, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 202011, 2022
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In Connection with the 20202022 Annual Meeting Information
THE PURPOSE OF THIS PROXY STATEMENT
The Board of Arrow, a New York corporation, is furnishing this Proxy Statement to shareholders of record to solicit proxies to be voted at the 20202022 Annual Meeting. By returning a completed proxy card, or voting by telephone or internet, you are giving instructions on how your shares are to be voted at the Annual Meeting. The Proxy Statement is available through www.proxyvote.comwww.proxyvote.com..
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Only shareholders of record of Arrow’s common stock at the close of business on March 16, 20202022 (“Record Date”) are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 78,667,82867,026,363 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 shall constitute a quorum.
For those who hold shares as a participant in Arrow’s 401(k) Plan,period of at least ten (10) days prior to the shareholder has the right to direct Vanguard Fiduciary Trust Company (“Vanguard”), who is the holderAnnual Meeting, a 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 by Vanguard inopen to the same proportions asexamination of any shareholder during ordinary business hours. In addition, a complete list of shareholders entitled to vote at the shares for which voting instructions were received from other participants inAnnual Meeting will be open to the 401(k) Plan. Voting (includingexamination of any revocations) by 401(k) Plan participants will close at 11:59 p.m. Eastern time on May 10, 2020. Vanguard will then vote all shares of common stock held inshareholder during 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 12, 2020. 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, Lily Y. Hughes,Carine L. Jean-Claude, at Arrow Electronics, Inc., 9201 East Dry Creek Road, Centennial, Colorado 80112. If the proxy was given by telephone or internet, it may be revoked in the same manner. 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 $25,000, plus expenses. Arrow will supply soliciting materials to the brokers and other nominees holding Arrow common stock in a timely manner so that the brokers and other nominees may send the materials to each beneficial owner. Arrow will reimburse the brokers and other nominees 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.
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PROPOSAL | BOARD’S VOTING RECOMMENDATION | ||
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| Election of Directors of Arrow for the ensuing year | FOR Each Nominee | |
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2 | 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 on named executive officer compensation | FOR | |
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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Internet | Telephone | Mail | In Person |
Arrow’s Board recommends the approval of all proposals as being in the best interests of Arrow and urges you to read the Proxy Statement carefully before you vote. Your vote is important regardless of the number of shares you own. | |||
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HOLDERS OF MORE THAN 5% OF COMMON STOCK
The following table 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 16, 2020.2022.
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Name and Address |
| Number of Shares |
| Percent of |
| Number of Shares |
| Percent of | ||
of Beneficial Owner |
| Beneficially Owned |
| Class | | Beneficially Owned | | Class | ||
BlackRock Inc. (1) |
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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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| 11.0 | % | | 7,556,039 | | 11.3 | % |
The Vanguard Group (2) |
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100 Vanguard Boulevard |
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Malvern, Pennsylvania 19355 |
| 7,861,484 |
| 10.0 | % | | 7,035,801 | | 10.5 | % |
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| (1) |
| Based upon a Schedule 13G filed with the SEC on |
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| Based upon a Schedule 13G filed with the SEC on February |
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SHAREHOLDINGS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of March 16, 2020,2022, the beneficial ownership of the Company’s common stock for each director and director nominee, each of the “Named Executive Officers” (the Chief Executive Officer, the Chief Financial Officer, and each of the other three most highly compensated executive officers of the Company, referred to as “NEOs”), and otherall directors, director nominees, and executive officers who file Section 16(a) reports.as 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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| Common |
| Acquirable |
| % of Outstanding | ||||||||||
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Name |
| Owned (1) |
| Stock Units (2) |
| within 60 Days |
| Common Stock | | Owned (1) | | Stock Units (2) | | within 60 Days | | Common Stock | | |
Michael J. Long |
| 492,138 |
| — |
| — |
| * |
| | 121,930 | | — | | — | | * | |
Barry W. Perry |
| — |
| 64,725 |
| — |
| * |
| | — | | 72,011 | | — | | * | |
Philip K. Asherman |
| — |
| 32,786 |
| — |
| * |
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William F. Austen | | — | | 1,550 | | — | | * | | |||||||||
Fabian T. Garcia | | — | | — | | — | | * | | |||||||||
Steven H. Gunby |
| — |
| 6,166 |
| — |
| * |
| | — | | 13,027 | | — | | * | |
Gail E. Hamilton |
| 36 |
| 23,121 |
| — |
| * |
| | 101 | | 22,200 | | — | | * | |
Richard S. Hill |
| 8,829 |
| 28,979 |
| — |
| * |
| | 2,894 | | 28,256 | | — | | * | |
M. F. (Fran) Keeth |
| — |
| 40,846 |
| — |
| * |
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Andrew C. Kerin |
| 1,984 |
| 22,881 |
| — |
| * |
| | — | | 24,249 | | — | | * | |
Laurel J. Krzeminski |
| — |
| 2,595 |
| — |
| * |
| | 3,894 | | 4,597 | | — | | * | |
Carol P. Lowe | | — | | 264 | | — | | * | | |||||||||
Stephen C. Patrick |
| — |
| 51,992 |
| — |
| * |
| | — | | 56,992 | | — | | * | |
Gerry P. Smith | | — | | 1,008 | | — | | * | | |||||||||
Sean J. Kerins | | 108,172 | | — | | — | | * | | |||||||||
Christopher D. Stansbury |
| 31,823 |
| — |
| — |
| * |
| | 6,926 | | — | | — | | * | |
Sean J. Kerins |
| 97,458 |
| — |
| — |
| * |
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Andrew D. King |
| 80,101 |
| — |
| — |
| * |
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Lily Y. Hughes |
| — |
| — |
| — |
| * |
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Total Directors’ and Executive Officers’ Beneficial Ownership as a Group (19 individuals) |
| 971,727 |
| 274,091 |
| 708 |
| 1.6 | % | |||||||||
Vincent P. Melvin | | 25,888 | | — | | — | | * | | |||||||||
Gretchen K. Zech | | 40,951 | | — | | — | | * | | |||||||||
Total Directors’ and Executive Officers’ Beneficial Ownership as a Group (22 individuals) | | 417,277 | | 224,154 | | 707 | | 1.0 | % | |||||||||
*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. |
| (3) | Mr. Hill will not be a nominee at the 2022 Annual Meeting of shareholders, and his term will expire on the date of that meeting, May 11, 2022. |
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Arrow Electronics, Inc. is a global technology solutions and services provider. The CompanyArrow has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions, and tools that 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 benefit reachesbenefits reach more people, so expands Arrow’s addressable market, promoting a healthy, cyclical economy. Named to Fortune's “World’s Most Admired Companies” list for 2020, Arrow tops the “Wholesalers: Electronics and Office Equipment” category for the seventh consecutive year.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FRAMEWORKOVERVIEW
At Arrow, doing good is good for business and our global community. We monitor and manage our environmental, social, and governance (“ESG”) opportunities and impacts and work closely with shareholders and other stakeholders to help create a better tomorrow and to assure the long-term sustainability of our company.
Arrow reduces environmental impact through responsible operations that include a focus on energy conservation, waste reduction, and minimizing emissions.
Arrow’s Corporate Social Responsibility program guidescommunity investments help today’s innovators make life better through technology. We believe that our collaborative philanthropic endeavors engage customers and employees and contribute to a better tomorrow. Purposeful community engagementthe Company’s long-term value.
Arrow is powered by our people and talent growth is our mindset. We embrace inclusion and diversity as catalysts for innovation and provide equal opportunities for all. We believe our investment in talent and technology contributes to employee healthlong-term value for our shareholders and wellbeing, resulting increates a stronger company.work environment that benefits every employee.
Arrow is committed to responsible corporate governance, which we believe promotes the long-term interests of itsour shareholders and strengthens board and management accountability.
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Arrow continues to focus on expanding and elevating our oversight and management of ESG matters. The Board’s Corporate Governance Committee has direct oversight of, and is committed to, advancing our ESG policies and practices, as outlined in its committee charter. In February 2022, we enhanced management oversight of ESG matters by elevating Gretchen Zech to an expanded role as Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer, demonstrating the Company’s commitment to executive-level leadership on ESG matters.
Arrow intends to continue to evolve and integrate ESG in operations and related disclosures. 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 will be a component of our executive annual cash incentive plan for 2022. We see this integration as a competitive advantage and means to address pressing current and future challenges. We share our ESG performance through reporting and leverage external guidance outlined by the Sustainability Accounting Standards Board (“SASB”) and the Task Force on Climate-related Financial Disclosures (“TCFD”).
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inaugural ENVIRONMENTAL, SOCIAL, AND GOVERNANCE report
Arrow has shared annual updates on its social investments and impacts in its annual Proxy Statement since 2014. In the past year, we embarked on a company-wide effort to better communicate how we identify and address environmental, social, and governance challenges, opportunities, and impacts within our operations. The result of this effort is an integrated perspective of our ESG performance and goals for the coming year. We welcome you to take a look at this inaugural report and share your thoughts at ESG@arrow.com, which can help inform future disclosures.
SOCIAL RESPONSIBILITY HIGHLIGHTs
Arrow’s corporate social responsibility approach establishes initiatives and alliances around the belief that technology2021 ESG Report can improve people’s lives,be accessed at arrow.com/esg.The contents of this report and the benefits of innovation should be forwebsite on which it is available are not incorporated by reference in this Proxy Statement or any other report or document Arrow files with the many, not the few. The Company collaborates with innovators who share its commitment to making the world a better place with technology. Arrow helps them navigate a complex world, developing practical solutions that make people’s lives more fulfilling and productive. In doing so, Arrow does more than extend technology’s influence and strengthen its reputation as an industry leader. Arrow becomes part of the humanitarian solution.SEC.
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COMMITMENT TO COMPANY DIVERSITyArrow has remained resilient in these extraordinary times. That is due, in large part, to our focus on serving our customers and the communities where we work and live.
Innovation isWe continued to provide a collective endeavor. As technologies become more layeredsafe work environment as the COVID-19 pandemic persisted during 2021. We aligned with and complex, innovators know they cannot go it alone. Up front,followed the guidance of the world’s leading health authorities, as well as related state and national government directives, while minimizing the impact of remote work on Arrow by providing tools for remote work and enhanced benefits where appropriate.
Some examples of Arrow’s customersefforts to protect our employees and support our community are attracted to the company’s deep capabilities and broad services. But they soon discover that the greatest value is in the team behind it all — an equally deep and broad group of professionals who understand their problems from numerous perspectives and curate forward-looking, comprehensive solutions.
In the last two years, Arrow’s commitment to high levels of inclusion and diversity has further intensified as evidenced by the significant increase in racial and ethnic diversity in the U.S. and women employed globally.
listed below:
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Protecting Our People | | Supporting Our Community | |
> Throughout our distribution facilities and offices, our teams continue to do business while aligning to guidance of the world’s leading health authorities and state and national governments. In addition to their guidance, Arrow took the following measures: > To protect the safety of our employees, customers, and suppliers, we implemented a COVID-19 vaccine mandate for our U.S. employees, with the exception of our light industrial population in our distribution facilities and employees with approved exemption requests > All employees in the distribution facilities are required to wear masks on-site at Arrow facilities > We offered a one-time incentive to all U.S. employees in our distribution facilities who became fully vaccinated against COVID-19 by a specified date > Where permitted by law, all U.S. new hires, including light industrial, are required to be fully vaccinated > Maintained procedures globally that limit visitors to our offices, distribution, programming, and integration centers until further notice and require visitors, contingent workers, and service providers visiting Arrow offices to be vaccinated against COVID-19 > Provided online collaboration capabilities to help ensure effective communication within Arrow and with customers and suppliers when employees are working from home > Enhanced benefit programs where needed to best support employees across the globe |
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> Joined with Hong Kong Science & Technology Park’s new Sensor Lab 2.0, a cleanroom for rapidly developing smart sensors for the expanding healthcare wearables and the IoT market > Supported the National Collegiate Inventors Competition, including prototyping an electronic home rapid test to detect COVID 19 developed by the University of Illinois that is 98% effective > Contributed to community food banks and shelter providers as food insecurity increased by 20% in the U.S. > Supported STEM and business education programs in Arrow communities as schools and after-school programs operated both remotely and in-person > Collaborated on a social distancing detection system using AI-powered cameras and models that extract insights related to density and distancing, which are available for review in real-time > Engineered hand-held multi-sensor devices that enable remote patient monitoring and diagnosis based on accurate medical examination and real-time diagnostics, detecting key vital signs and disease progression from a patient’s lips and fingertips |
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PROXY STATEMENT |
LIFE AT ARROW: THE EMPLOYEE EXPERIENCe
Arrow’s Chief Human Resources Officer regularly provides updates to the Board on the talent strategy which guides the Company’s efforts to attract, develop, and retain an innovative workforce. Arrow’s five-year talent strategy emphasizes employees as career customers who grow their career capital through knowledge, skills, and abilities acquired in the course of their work. As employee career equity grows at Arrow so, too, does Arrow’s return on talent investments. At Arrow, the focus is moving the employee experience forward.
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CORPORATE GOVERNANCE HIGHLIGHTs
The CompanyArrow believes that good corporate governance is keycritical to achieving long-term shareholder value. The following table highlights some of Arrow’s corporate governance practices and policies:
policies as of the date of this Proxy Statement:
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The Arrow Board prioritizes diversity in its recruitment of directors and has retained a recruitment firm to assist the Board in actively recruiting and evaluating potential diverse Board candidates. Arrow is committed to building a Board that consists of the optimal mix of skills, experience, expertise, and diversity capable of effectively overseeing the business strategy and risk management. Arrow’s Board consists of highly engaged, independent, and diverse directors that are actively involved in strategic, risk, and management oversight. Consistent with that effort, in 2021, Arrow welcomed Mr. Garcia, who brings ethnic diversity to the Board, and Ms. Lowe, who enhances the Board’s gender diversity.
Board Refreshment
The Board believes the fresh perspectives brought by newer directors are critical to a forward-looking and strategic Board when appropriately balanced with the deep understanding of Arrow’s business provided by longer-serving directors. Accordingly, Arrow has maintained a deliberate mix of new and tenured directors on the Board, and the Corporate Governance Committee is focused on ensuring the mix of tenures, backgrounds, skills, and perspectives is optimal for Arrow. Since 2019, Arrow has added four new directors with different backgrounds and experiences to enhance further the oversight of Arrow’s strategic goals and initiatives and contribute to the development and expansion of the Board’s knowledge and capabilities.
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Snapshot of Director Nominees
Below is a snapshot of the expected composition of Arrow’s Board of Directors immediately following the 20202022 Annual Meeting scheduled for May 11, 2022, assuming the election of the 11 nominees named in this Proxy Statement. One of our current directors, Mr. Hill, is not a nominee for re-election at the proxy statement.Annual Meeting. The slate of eleven director nominees set forth in this Proxy Statement includes three female nominees and one ethnically diverse nominee.
Skill/Experience | Nominees |
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| CEO Experience | 7 | |
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| Corporate Governance Experience |
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| Information Security Experience | 4 | |
| Human Capital Experience | 7 | |
| ESG Experience | 9 | |
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PROXY STATEMENT |
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Environmental Management
Arrow’s decision in North America to recycle and purchase recycled products benefited the environment in the following ways in 2019:
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11,921/582 | 3,484 | 2,912 | 4,167,352 | 8,107,206 | 110,356 |
trees preserved/ | cubic yards | metric tons | kilowatt-hours | gallons of | gallons |
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CORPORATE SOCIAL RESPONSIBILITY STORIES
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PROPOSAL 1: ELECTION OF DIRECTORS
THE BOARD RECOMMENDS A VOTE “FOR” ALL OF THE NOMINEES NAMED BELOW.
Each nominee for election as a member of the Board is to be elected to hold office until the next Annual Meeting.
Except for Mr. Willian F. Austen, allAll nominees identified below are current members of the Board. They have been recommended for re-election to the Board by the Corporate Governance Committee and approved and nominated for re-election by the Board. In accordance with the Company’s amended corporate bylaws (“bylaws”Bylaws”), the teneleven 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 rules. As a result, if a shareholder holds shares in “street name” through a broker or other nominee, the broker or nominee is not permitted to exercise voting discretion with respect to this proposal. For this reason, if a shareholder doesyou do not give his or heryour broker or nominee specific instructions, the shareholder’syour shares will not be voted on this proposal. If you vote to “abstain,” your shares will be counted as present at the meeting, and your abstention will have the effect of a vote against the proposal.
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 enterprise;
> the ability to represent the interests of the Company’s shareholders while being attuned to the needs of the Company’s employees, community in which it operates, and other stakeholders;
> independence and strength of conviction coupled with the ability to leave personal prejudice behind so as to be open to other points of view;
> the willingness and ability to objectively and constructively appraise the performance of executive management and, when necessary, recommend appropriate changes; and
> all other criteria established by the Board from time to time, including functional skills, corporate leadership, diversity, international experience, or other attributes which will contribute to the development and expansion of the Board’s knowledge and capabilities.
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| > | the ability to represent the interests of the Company’s shareholders, while being attuned to the needs of the Company’s employees, the community in which it operates, and other stakeholders, as such needs can also impact long-term shareholder value; |
| > | 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; and |
| > | all other criteria established by the Board from time to time, including functional skills, corporate leadership, diversity, international experience, or other attributes which will contribute to the development and expansion of the Board’s knowledge and capabilities. |
BOARD EVALUATION, NOMINATIONS AND SUCCESSION
During the Company’s annual Board evaluation and nomination process, the Corporate Governance Committee evaluates the Company’s directors in light of current needs of the Board and the Company. In addition, during the course of the year, the Corporate Governance Committee discusses Board succession and reviewsevaluates potential candidates. The Corporate Governance Committee has retained a third party to assist in identifying potential nominees.
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The Company’s annual process involves assessments at the Board, Board committee, and individual director levels under the direction of the Corporate Governance Committee Chair.levels. This process assists the Board in determining who it should nominate to stand for election based on Company and Board needs.election. In addition, the Corporate Governance Committee’s Board candidate nomination process includes the continual evaluation ofCommittee continually evaluates potential new candidates for Board membership which is taken into account when it takes into consideration when recommending to the Board a slate ofrecommends nominees for election at each annual meeting of shareholders.election.
The Corporate Governance Committee considers a number of different factors in evaluating Boardpotential candidates including:
>diversity-enhancing qualities –age, gender, and diverse backgrounds;
>core attributes – independence, high integrity and ethical standards, public company service, understanding or experience with complex public companies or like organizations, and ability to work collegially and collaboratively with other directors and management; and
>skills – financial literacy, industry experience, operational management experience, senior executive experience, and other expertise that may be important for the Company’s strategies.board membership, including:
The Corporate Governance Committee considers all these relevant attributes of each Board candidate, with the goal of putting forth a diverse slate of candidates with a combination of skills, experience, and personal qualities that will serve the Board and its committees, the Company, and its shareholders well.
| > | diversity-enhancing qualities –age, gender, geographical, and ethnic/racial backgrounds; |
| > | core attributes – independence, high integrity and ethical standards, public company service, understanding or experience with complex public companies or like organizations, and ability to work collegially and collaboratively with other directors and management; and |
| > | skills – financial literacy, industry experience, operational management experience, senior executive experience, and additional expertise that may be important for the Company’s strategies. |
The Corporate Governance Committee has a thoughtful policy regarding diversity. process for identifying and evaluating potential nominees recommended by shareholders, whereby such candidates are evaluated in the same manner as other candidates.
In 2021, the Company welcomed two new directors to the Board, Ms. Lowe and Mr. Garcia. These directors were identified by an outside recruitment firm and recommended for nomination in accordance with the Company’s Corporate Governance Guidelines.
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, gender and consistentrace/ethnicity. Consistent with that philosophy, the Board has taken measures to diversify its makeup:
>> All but one of the Company’s director nominees (i.e., Mr. Long) are independent, and they have a broad range of experience in varying fields, including software development and sales, business strategy consulting, hospitality services, consumer products, electronics and computer hardware manufacturing and distribution, business services, and construction. > Immediately following the 2022 Annual Meeting scheduled for May 11, 2022, assuming the election of the 11 nominees named in the Proxy Statement: > 27% of the Board will be women, and > 9% of the Board will come from a diverse racial/ethnic background. > A majority of the Company’s directors hold or have held directorships at other U.S. public companies. > Six of the director nominees, in addition to the Company’s Chairman and 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.
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> Three of the Company’s directors are women, or 30% of the entire Board.
> A majority of the Company’s directors hold or have held directorships at other U.S. public companies.
2022 ANNUAL PROXY STATEMENT > Six of the director nominees, in addition to the Company’s Chairman and CEO, have served as chief executive officers, and all have demonstrated superb leadership and intellectual and analytical skills gained from deep experience in management, finance, and corporate governance.
Based on each nominee’s experience, attributes, and skills, which exemplify the sought-after characteristics described above, the Corporate Governance Committee has concluded that each nominee possesses the appropriate qualifications to serve as a director of the Company.
Independent Director Committees: Compensation | Barry W. Perry | Age: 75 | Director Since: 1999 | ||
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Englehard Corporation ● Chief Executive Officer and Chairman of the Board of Engelhard Corporation, a surface and materials science company, Albemarle Corporation and Ashland Global Holdings Inc. ● A director of Albemarle Corporation (a public company) from 2010 to 2018, and Ashland Global Holdings Inc. (a public company) from 2007 to 2019. | | |||
REASONS FOR NOMINATION While he was Chief Executive Officer of Engelhard Corporation, Mr. Perry established the company’s vision and strategy, selected key management personnel, and evaluated the risks of participating in various markets. Further, his experience as a director of a number of public multinational companies provides him with the skills to objectively and accurately evaluate the financial performance and corporate strategies of a large company. | CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW)  | |||
Independent Director Committees: Audit | William F. Austen | Age: 63 Director Since: 2020 | |
| CAREER HIGHLIGHTS | ||
● President and CEO ● A director until Bemis was acquired by Amcor Limited in 2019. ● Executive Vice President and Chief Operating Officer from 2013 to ● Group President from 2012 through ● Vice President of Operations from 2004 to 2012. | Morgan Adhesives Company ● President and Chief Executive Officer General Electric Company ● Various positions from 1980 until 2000. Tennant Company ● A director Arconic Corporation ● A director since 2020 (a public company). | ||
REASONS FOR NOMINATION As President and CEO of Bemis, 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 CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●Tennant Company ●Arconic Corporation | |||
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Independent Director Committees: Corporate Governance | Fabian T. Garcia | Age: 62 Director Since: 2021 | |
CAREER HIGHLIGHTS | |||
Unilever ● President, Personal Care and member of the Unilever Leadership Executive since 2022. ● President, Unilever North America and member of the Unilever Leadership Executive since 2020. Revlon, Inc. ● President and Chief Executive Officer 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 ● SVP, International Relations, 2002-2003. Chanel ● President, APAC, Member of the Executive Committee, 1996-2001. Proctor & Gamble ● Various positions in the U.S., Japan, Taiwan, Venezuela, and Colombia, 1980-1994. Kimberly-Clark ● Director, 2011-2019. | ||
REASONS FOR NOMINATION Mr. Garcia is a global business leader with a strong track record and deep experience, including 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 diverse background and global experience are 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 | |||
Independent Director Committees: Audit & Compensation | Steven H. Gunby | Age: 64 Director Since: 2017 | |
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FTI Consulting, Inc. (“FTI”) ● President, Chief Executive Officer, and a director The Boston Consulting Group (“BCG”) ● 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, such as serving as a member of BCG’s Executive Committee. | | ||
REASONS FOR NOMINATION At FTI, Mr. Gunby’s focus has been turning FTI into a vibrant, profitable growth engine, through operational changes, changes in strategy, and significant changes in culture and leadership. At BCG, Mr. Gunby also focused on transformative growth, helping move the Americas operation from a period of flat headcount growth and diminished profitability to CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●FTI Consulting, Inc. | |||
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Independent Director Committees: Audit & Corporate Governance | Gail E. Hamilton | Age: 72 Director Since: 2008 | ||
CAREER HIGHLIGHTS | ||||
Symantec Corporation (“Symantec”) ● Executive Vice President from Compaq Computer Corporation ● Vice President and General Manager of the Communications Division Hewlett-Packard Company ● General Manager of the Telecom Platform Division | OpenText Corporation ● A director Ixia (acquired by Keysight Technologies in 2017) ● A director Westmoreland Coal ● A director (a public company) from 2011 to 2019. | |||
REASONS FOR NOMINATION Ms. Hamilton was responsible for designing, manufacturing, and selling electronic systems for more than 20 years. While at Symantec, Ms. Hamilton oversaw the profit and loss and operations of the enterprise and consumer business. In that role, she was also responsible for business planning and helped steer the company through an aggressive acquisition strategy. The Board believes Ms. Hamilton’s experience at Symantec, a leading software company, makes her particularly valuable in providing guidance to Arrow’s Enterprise Computing Solutions business with regard to its direction and strategy. | CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW)  | |||
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Independent Director Committees: Corporate Governance |
| Age: 58 Director Since: 2010 | |
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CAREER HIGHLIGHTS | |||
| Towne Park | ||
● Chief Executive Officer The Brickman Group, Ltd.
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| Aramark Corporation ● Executive Vice President ● Executive Vice President ● Elected as an executive officer ● President, Aramark Healthcare and ● A number of 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
CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●None | |||
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Independent Director Committees: Audit | Laurel J. Krzeminski | Age: 67 Director Since: 2018 | ||
| CAREER HIGHLIGHTS | |||
● Executive Vice President and Chief Financial Officer ● Senior Vice President and Chief Financial Officer from 2013 to ● Vice President and Chief Financial Officer from 2010 to 2013. ● Vice President and Corporate Controller from 2008 to | Gillette Company ● Several corporate and operational finance positions that included Terracon ● A director (a private company) Limbach Holdings, Inc. ● A director (a public company) since 2018. | |||
REASONS FOR NOMINATION Ms. Krzeminski’s experience as the chief financial officer of a listed company, as well as her in-depth knowledge and understanding of generally accepted accounting principles, experience in preparing, auditing, and analyzing financial statements, understanding of internal controls over financial reporting, and her understanding of audit committee functions, are highly valued qualities as a director. Ms. Krzeminski 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)  | |||
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Chairman, President, and Chief Executive Officer |
| Age: 63 Director Since: 2008 | |
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| CAREER HIGHLIGHTS | ||
● Chairman of the Board ● Chief Executive Officer and President ● President and Chief Operating Officer of Arrow from 2008 to 2009. ● Senior Vice President from 2006 to 2008, and, prior thereto, Vice President for more than five years. | Arrow Global Components ● President since 2006. Arrow Enterprise Computing Solutions ● President, North America and Asia/Pacific Components in 2006. ● President, North America in 2005. ● President and Chief Operating Officer from 1999 to 2005. AmerisourceBergen Corporation ● A director UCHealth ● A director (a nonprofit company) since 2019. | ||
REASONS FOR NOMINATION As a result of his numerous years in leadership roles at the Company and in the distribution industry, Mr. Long understands the competitive nature of the business and has an in-depth knowledge of the Company, a strong management background, and broad executive experience. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●AmerisourceBergen Corporation | |||
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Independent Director Committees: Audit | Carol P. Lowe | Age: 56 Director Since: 2021 | |
CAREER HIGHLIGHTS | |||
FLIR Systems, Inc. ● Executive Vice President and Chief Financial Officer, 2017-2021. Sealed Air Corporation ● Senior Vice President and Chief Financial Officer, 2011-2017. Carlisle Companies Incorporated ● Various positions from 2002 to 2011, including President, Trail King Industries; President, Carlisle Food Service Company, and VP & CFO. | TCW Special Purpose Acquisition Corporate ● Director (a public company) since 2021. EMCOR Group, Inc. ● Director (a public company) since 2017. Other ● Current director of Novolex (a private company) ● Member of the Board of Visitors and Finance Committee, Fuqua School of Business. | ||
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) ●TCW Special Purpose Acquisition Corporation ●EMCOR Group, Inc. | |||
Independent Director Committees: Audit & Corporate Governance | Stephen C. Patrick | Age: 72 Director Since: 2003 | |
| CAREER HIGHLIGHTS | ||
● Vice Chairman ● Chief Financial Officer ● In his more than 25 years at Colgate-Palmolive, he held positions as Vice President, Corporate Controller, and Vice President of Finance for Colgate Latin America. | Alternative Packing Solutions ● Director (a private company) since 2016. ABC Company ● Director (a private company) since 2015. | ||
REASONS FOR NOMINATION Mr. Patrick’s experience and education make him an expert in financial matters. As the Chief Financial Officer of a successful public company, Mr. Patrick was responsible for assuring that all day-to-day financial transactions were accurately recorded, processed, and reported in all public filings. All of this requires a thorough understanding of finance, treasury, and risk management functions. In addition to his extensive financial expertise, Mr. Patrick brings to the Board executive leadership experience as a chief financial officer of a large multinational company. Mr. Patrick is considered an “audit committee financial expert” as the term is defined in Item 407(d) of Regulation CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●None | |||
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Independent Director Committees: Corporate Governance | Gerry P. Smith | Age: 58 Director Since: 2020 | |
CAREER HIGHLIGHTS | |||
ODP Corp ● Chief Executive Officer and director since 2017. Lenovo Group Limited ● Executive Vice President and Chief Operating Officer from 2016 to 2017. ● Executive Vice President and President of Data Center Group in 2016. ● Chief Operating Officer of the Personal Computing Group and Enterprise Business Group from 2015 to 2016. ● 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. Smith has industry-specific strategic, operational, and managerial expertise gained through a more than 25-year career with Lenovo and Dell. Additionally, Mr. Smith’s expertise in positioning companies for future growth and success, extensive leadership experience, and strong track record in increasing operating profit and managing complex integrations for corporations are valuable qualifications on the Board. CURRENT PUBLIC COMPANY DIRECTORSHIPS (OTHER THAN ARROW) ●ODP Corp. | |||
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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. The Corporate Governance Committee must then consider whether to accept or reject the director’s resignation and make a recommendation to the Board. The Board will then consider the resignation within 90 days following the date of the shareholders’ meeting at which the election occurred and then shall publicly disclose its decision. A director whose resignation is under consideration may not participate in any deliberation regarding his or her resignation. The Director Resignation Policy can be found under “Governance Documents” at the “Leadership & Governance” sub-link of the Investors drop-down menu on investor.arrow.com.
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The Board meets in general sessions with the Chairman of the Board presiding, in meetings limited to non-managementnon- management directors (which are presided over by the Lead Director), and in various committees. Committee meetings are open to all members of the Board.
Committee memberships and chair assignments are reviewed no less than annually by the Corporate Governance Committee, which makes appointment and chair recommendations to the Board.
The table below reflects current committee memberships for calendar year 2019.as of the date of this Proxy Statement.
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| Compensation |
| Corporate | ||
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Barry W. Perry | | X | | | | M | | | ||
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| | X | | M | | C | | | ||
Gail E. Hamilton | | X | | M | | | | M | ||
| | X | |
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Andrew C. Kerin | | X | | | | | | C | ||
Laurel J. Krzeminski | | X | | M | | | | | ||
Michael J. Long | | | | | | | | | ||
| | X | | M | | | | | ||
Stephen C. Patrick | | X | | C | | | | M | ||
Gerry P. Smith | | X | | | | | | M | ||
C= Chair M= Member
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| (2) | Mr. Hill is not nominated for |
| (3) | Ms. Lowe joined the Board and was |
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In accordance with the Company’s corporate governance guidelines, the Board appointed Mr. Perry to serve as the Lead Director. The Lead Director chairs Board meetings when the Chairman 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. Additionally, as a matter of practice, the Board holds executive sessions chaired by the Lead Director at every in-person Board meeting.
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CHIEF EXECUTIVE OFFICER AND CHAIRMAN POSITIONS
The Company’s CEO currently serves as Chairman of the Board. In his position as CEO, Mr. Long has primary responsibility for the Company’s day-to-day operations of the Company and provides consistent leadership on the Company’s key strategic objectives. In his role as Chairman,the Board Chair, he sets the strategic priorities for the Board, presides over its meetings, and communicates itsthe Board’s 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 in a more effective and efficient implementation of corporate strategy; (ii) it unifies the Company’s strategy behind a single vision; (iii) the CEO 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 CEO; and (vi) the role of the Lead Director, which fosters better communication among non‑managementnon-management directors, fortifies the Company’s corporate governance practices, making the separation of the positions of Chairman of the Board and CEO unnecessary at this time.
In accordance with the Company’s Corporate Governance Guidelines, the Board has appointed Mr. Perry to serve as the Lead Director. The Lead Director chairs Board meetings when the Chairman 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. Additionally, as a matter of practice, the Board holds executive sessions chaired by the Lead Director at each in-person Board meeting.
Each of the committees of the Board operates under a charter, copies of which are available under “Governance Documents” at the “Leadership & Governance” sub-link of the Investors drop-down menu on investor.arrow.com. (As a matter of practice, the Board determined that a director who acts as the chair for a committee will not serve as a member of any other committee.)
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Members | Responsibilities | |
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Steven H. Gunby Gail E. Hamilton Laurel J. Krzeminski
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The Board has determined that Mrs. Keeth, Ms. Krzeminski, Ms. Lowe, and Mr. Patrick are qualified as “audit committee financial experts,” as the term is defined in Item 407(d) of Regulation S-K. Ms. M.F. (Fran) Keeth served on the Audit Committee for a portion of 2021, until departing from the Board on June 1, 2021.
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Steven H. Gunby, Chair Richard S. Hill Barry W. Perry | |
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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 applicable rules and regulations. In 2019,2021, the Compensation Committee directly engaged Pearl Meyer & Partners (“Pearl Meyer”) as a consultant to examine and report to the Compensation Committee on best practices in the alignment of compensation programs for the CEO 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 provides guidance to the Corporate Governance Committee regarding non-management director compensation. Pearl Meyer does not provide any other services to the Company. These services have not raised any conflicts of interest.
Corporate Governance Committee
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Members | | Responsibilities |
Andrew C. Kerin, Chair Fabian T. Garcia Gail E. Hamilton Richard S. Hill Stephen C. Patrick Gerry P. Smith | |
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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, officers, employees, and others. Such recommendations may be submitted to Arrow’s Corporate Secretary, Lily Y. Hughes,Carine L. Jean-Claude, 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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The Corporate Governance Committee has retained the services of a third-party executive recruitment firm to assist its members in the identification 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 committeeand then determines whether to interview the nominee. If warranted, the Corporate Governance Committee, the Chairman of the Board and CEO, the Lead Director, and others, as appropriate, interview the potential nominees.
The Corporate Governance Committee’s expectations as to the specific qualities and skills required for directors, including those nominated by shareholders, are set forth in Section 4 of Arrow’s corporate governance guidelinesCorporate Governance Guidelines (available under “Governance Documents” at the “Leadership & Governance” sub-link of the Investors drop-down menu on investor.arrow.com).
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The Board takes a proactive approach toward succession planning and talent management. The independent directors meet multiple times a year in executive sessionsessions 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-personin- person opportunities for the Board to interact with key members of management beyond the Company’s executive officers on no less than a quarterly basis. The Board has a confidential plan to address any unexpected short-term absence of the CEO and other members of the senior management team.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, 2020,2022, forty percent of the Company’s executive leadership wasExecutive Officers were diverse based on gender and race/ethnicity.
The role of the Board and its committees is to promote the best interests of the Company and its shareholders by overseeing the management of Arrow’s business, assets, and affairs, which includes oversight forof ESG matters.matters, including human capital management, data privacy, and cybersecurity risks, as well as risks posed by events such as the COVID-19 pandemic. Management is responsible for the day-to-day analysis and review of the risks facing the Company, including timely identification of riskrisks (including by a company-wide enterprise risk management survey) and risk controls related to significant business activities, and developingdevelopment of programs and recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential reward, and the appropriate manner in which to control risk. 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 seeks 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’s oversight of issues related to internal controls over financial reporting and regulatory compliance; the Corporate Governance Committee’s oversight of the Board’s succession planning and governance; and the Compensation Committee’s oversight of risks related to compensation programs. Arrow’s CEO has the ultimate management authority for enterprise risk management, including responsibility for capability development, risk identification and assessment, and policies and governance, as well as strategies and actions to address enterprise risk. Management provides the Board and appropriate committees of the Board regular briefing and information sessions on the significant risks that the Company faces and how the Company seeks to control those risks when appropriate. Risk oversight in certain areas is the responsibility of a Board committee, such as the Audit Committee’s oversight of issues related to internal controls over financial reporting and regulatory compliance as well as the Company’s data privacy and cybersecurity; the Corporate Governance Committee’s oversight of the Board’s succession planning and governance; and the Compensation Committee’s oversight of risks related to compensation programs and strategies relating to human capital management.
The Company believes that its executive compensation program reflects an appropriate mix of compensation elements and balances current 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;
| > | 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 170% of target for annual cash incentives for the NEOs and 0% to 185% for long-term incentives); |
| > | total direct compensation (“TDC”) 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 the 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 |
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| > | the Compensation Committee retains negative 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. |
> 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 (“TDC”) 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 the 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 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 best interests.
Further, at the Compensation Committee’s request, in 2019, Pearl Meyer assessedannually assesses the risks associated with the Company’s short-term and long-term incentive programs, the results of which wereare discussed by the Compensation Committee in its May 2019 meeting. TheCommittee. In 2021, the Compensation Committee concluded that the overall design of the Company’s compensation programs maintained an appropriate level of risk. Pearl Meyer did not recommend any plan design changes to further mitigate risk exposure.
It is the Company’s opinion that its compensation policies and practices for all employees do not 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 goals that include maximums designed to prevent “windfall” payouts.
INDEPENDENCEENVIRONMENTAL, SOCIAL, AND GOVERNANCE OVERSIGHT
The Corporate Governance Committee is tasked with responsibility for overseeing the Company’s policies and practices relating to ESG matters to the extent not specifically delegated to other committees. The Compensation Committee is tasked with responsibility for overseeing the development, implementation, and effectiveness of the Company’s practices, policies, and strategies relating to human capital management as they relate to the Company’s workforce generally, including but not limited to policies and strategies regarding recruiting, selection, talent development and progression, corporate culture, and diversity and inclusion. The Compensation Committee is also tasked with responsibility for reviewing the Company’s disclosures with respect to human capital management.
In February 2022, we enhanced management oversight of ESG matters by elevating Gretchen Zech to an expanded role as Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer, demonstrating the Company’s commitment to executive-level leadership on ESG matters.
Our ESG Governance Structure
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INFORMATION SECURITY, PRIVACY, AND COMPLIANCE OVERSIGHT
The Audit Committee is tasked with responsibility for overseeing the Company’s data privacy and cybersecurity programs as well as the Company’s ethics and compliance programs, reviewing the effectiveness of these programs, and discussing with management any identified improvements in the programs.
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 Chief Executive Officer or any other 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.
The Company’s corporate governance guidelines provideCorporate Governance Guidelines state that the Board should consist primarily of independent, 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 relationships with the Company. Further, the Board determines whether any director is involved in any activity or interest that conflicts with or might appear to conflict with his or her fiduciary duties. A director must also meet the independence standards in the New York Stock Exchange listing rules, which the Board has adopted as its standard, as set forth in Section 5 of Arrow’s corporate governance guidelinesCorporate Governance Guidelines (available under “Governance Documents” at the “Leadership & Governance” sub-link of the Investors drop-down menu on investor.arrow.com).
The Board evaluated the independence of each current director, each person who served as a director at any time during 2021, and each director nominee, and has determined that all of its directors and nominees,such persons, other than Mr. Long, satisfy both the New York Stock Exchange’s independence requirements and the Company’s guidelines. However, Mr. Hill served as interim CEOLong was determined not to be independent by virtue of Symantec, a supplier of products tohis employment with the Company, during part of 2019. As a result, Mr. Hill did not meet the requirements for independence and ceased to serve on the Compensation Committee and the Corporate Governance Committee during that time. The Board has also determined that Mr. Hill now meets the independence requirements because he is no longer the interim CEO of Symantec, and reappointed Mr. Hill to serve on the Compensation Committee and the Corporate Governance Committee in February 2020.Company.
As required by the Company’s corporate governance guidelinesCorporate Governance Guidelines and the New York Stock Exchange’s listing rules, all members of the Audit, Compensation, and Corporate Governance Committees are independent.
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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.
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Consistent with the Company’s corporate governance guidelines,Corporate Governance Guidelines, it is the general practice of the Board for all its non-managementnon- management directors to meet separately (without Company management present) either prior to or after each regularly scheduled Board meeting,meetings, with the Lead Director presiding. In 2019,2021, these non-management director meetings totaled fourfive in number.
During 2019,2021, there were fivesix meetings of the Board, eight meetings of the Audit Committee, four meetings of the Compensation Committee, and five meetings of the Corporate Governance Committee. All the directors attended 75% (with the exception of Carol Lowe, who attended 60%) or more of all of the meetings of the Board and the committees on which they served. Ms. Lowe joined the Board and Audit Committee on September 15, 2021, and attended the Board and Audit Committee meetings held on that date and an Audit Committee meeting on November 1, 2021, but was unable to attend the Board and Audit Committee meetings held on December 15, 2021, due to a pre-existing commitment that had been scheduled prior to her joining the Board. The companyCompany encourages its directors to be present at the Annual Meeting. For 2019, nineIn 2021, due to the pandemic, all directors who were members of the ten directorsBoard at the time attended the meeting.May 12, 2021 Annual Meeting telephonically.
TheFor 2021, the non-management members of the Board (that is, all members except Mr. Long) receivereceived the following fees in cash:
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Annual fee |
| $ | 100,000 |
| $ | 100,000 |
Annual fee for service as Corporate Governance Committee Chair |
| $ | 10,000 | | $ | 10,000 |
Annual fee for service as Compensation Committee Chair |
| $ | 20,000 | | $ | 20,000 |
Annual fee for service as Audit Committee Chair |
| $ | 25,000 | | $ | 25,000 |
In addition to the cash fees, for 2021, each non-management director receivesreceived an annual grant of restricted stock units (“RSUs”) valued at $175,000, based on the fair market value of Arrow common stock on the date of grant. Further, the Lead Director receivesreceived another annual award of RSUs valued at $30,000 in recognition of the additional responsibilities associated with such position.
The Restricted Stock Units are vested upon grant and are subject to a restriction period which is the time between the grant date and the earlier of (i) the first anniversary of the grant date or (ii) following the grantee’s separation from service; provided that the restriction period shall end no later than the last day of the calendar year in which the grantee separates from service on the Board. Each non-management director makes an annual election the year preceding the annual grant as to the distribution between the two options as outlined in the restriction period above.
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The following table shows the total dollar value of compensation receivedgranted or earned by all non-management directors in or in respect of 2019.to 2021.
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Non-Management Director Compensation | Non-Management Director Compensation | Non-Management Director Compensation | ||||||||||||
Name |
| Fees Earned |
| Stock Awards |
| All Other |
| Total |
| Fees Earned |
| Stock Awards |
| Total |
Barry W. Perry |
| 100,000 |
| 205,000 |
| — |
| 305,000 | | 100,000 | | 205,000 | | 305,000 |
Philip K. Asherman |
| 120,000 |
| 175,000 |
| — |
| 295,000 | ||||||
William F. Austen | | 100,000 | | 175,000 | | 275,000 | ||||||||
Fabian T. Garcia (1) | | 58,630 | | — | | 58,630 | ||||||||
Steven H. Gunby |
| 100,000 |
| 175,000 |
| — |
| 275,000 | | 120,000 | | 175,000 | | 295,000 |
Gail E. Hamilton |
| 100,000 |
| 175,000 |
| — |
| 275,000 | | 100,000 | | 175,000 | | 275,000 |
Richard S. Hill |
| 100,000 |
| 175,000 |
| — |
| 275,000 | | 100,000 | | 175,000 | | 275,000 |
M. F. (Fran) Keeth |
| 122,500 |
| 175,000 |
| — |
| 297,500 | | 51,712 | | 175,000 | | 226,712 |
Andrew C. Kerin |
| 110,000 |
| 175,000 |
| — |
| 285,000 | | 110,000 | | 175,000 | | 285,000 |
Laurel J. Krzeminski |
| 93,207 |
| 70,875 |
| — |
| 164,082 | | 100,000 | | 175,000 | | 275,000 |
Stephen C. Patrick |
| 100,000 |
| 175,000 |
| — |
| 275,000 | ||||||
Carol P. Lowe (3) | | 29,589 | | — | | 29,589 | ||||||||
Stephen C. Patrick (4) | | 114,658 | | 175,000 | | 289,658 | ||||||||
Gerry P. Smith | | 100,000 | | 113,750 | | 213,750 | ||||||||
| (1) |
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| (2) | M. F. (Fran) Keeth retired from the Board on June 1, 2021, fees earned are prorated. |
| (3) | Carol P. Lowe joined the Board on September 15, 2021, fees earned are prorated. |
| (4) | Stephen C. Patrick was appointed as Chair of the Audit Committee on June 1, 2021, fees earned are prorated. |
| (5) | Messrs. Perry, Gunby, and Kerin |
| (6) |
| Amounts shown under the heading “Stock Awards” reflect the grant date fair values of the restricted stock units granted to each director during |
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 to units of Arrow common stock. The units held by each director are included under the heading “Common Stock Units” in the Shares of Common Stock Beneficially Owned Table. The amounts deferred by each director for 2019,2021, to the extent there are any, are included under the heading “Fees Earned” on the Non-ManagementNon- Management Director Compensation Table. All deferrals under the plan will be paid upon separation of service from the Board.
For stock awards outlined in the Non-Management Director Compensation Table, each director is given the option to have his or her RSUs converted to shares one year after grant.grant or at the time of separation from service on the Board. Messrs. Austen, Hill, Kerin, and Patrick and Mses. Hamilton and Krzeminski and Messrs. Hill and Kerin have selected that option forto have their 2019 grants.2021 RSU award converted to shares one year after the grant.
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DIRECTOR STOCK OWNERSHIP BY DIRECTORSGUIDELINES
The Board believes that stock ownership by its directors strengthens their commitment to the Company’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 beneficial shares of the Company’s common stock having a value of at least three times their annual retainer fee (including shares owned outright, vested shares of restricted stock or RSUs, and common stock units in a deferred compensation account). All directors either own the required number of shares or, in the case of recently appointed directors, are accumulating shares 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.
On the date of the adoption of this Report, the Audit Committee consisted of fivesix directors, all considered independent in accordance with New York Stock Exchange listing standards and other applicable regulations. The Board has determined that committee members Mrs. Keeth, Ms. Krzeminski, Ms. Lowe, and Mr. Patrick are “audit committee financial experts” 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 controls 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 controls 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 20192021 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 Auditing Standards 1301, “Communication with Audit Committee” issued byapplicable requirements of the Public Company Accounting Oversight Board.
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, 20192021, for filing with the SEC.
M. F. (Fran) Keeth,
Stephen C. Patrick, Chair
| Gail E. Hamilton
PRINCIPAL ACCOUNTING FIRM FEES The aggregate fees billed by Arrow’s principal accounting firm, Ernst & Young LLP, for auditing the annual financial statements and the Company’s internal controls 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 Also set forth for the last two fiscal years are “Audit-Related Fees.” Such fees are for services rendered in connection with
The amounts in the table above do not include fees charged by Ernst & Young LLP to Marubun/Arrow, a joint venture between the Company and the Marubun Corporation. Audit fees for Marubun/Arrow totaled Consistent with the Audit Committee charter, audit, audit-related, tax, and other services 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’s independence.
PROPOSAL 2: RATIFICATION OF 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 as Arrow’s independent registered public accounting firm for the fiscal year ending December 31, Receipt of a majority of votes cast is required to approve this proposal. For purposes of determining the 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.
PROPOSAL 3: ADVISORY VOTE ON THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
“RESOLVED that the shareholders of the Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related tables, notes, and narrative in the Proxy Statement for the Company’s The Company holds a say-on-pay vote every year. Although the vote is not binding, the Compensation Committee 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. Receipt of a majority of the votes cast is required to approve this proposal. For purposes of determining the number of votes cast with respect to 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. The Company asks that you review in detail the disclosure 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. It is expected that the next say-on-pay vote following the 2022 Annual Meeting will occur at the 2023 Annual Meeting.
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
Richard S. Hill
A LETTER FROM THE COMPENSATION COMMITTEE Dear Fellow Shareholders, Arrow maintains open communications with the shareholder community. Seeking feedback from our shareholders on a regular basis is a critical part of our approach to managing our executive compensation program. Based on that feedback, we made several changes to our executive compensation program in 2020, including expanding our peer group, strengthening clawback and anti-hedging and pledging provisions, and enhancing disclosure of incentive plan metrics and calculations. We were pleased that, following those changes, you expressed solid support for our executive compensation program with a 92% say-on-pay at our 2021 Annual Meeting. Through engagement with our shareholders during this past year, we learned that you continue to broadly support the philosophy, objectives, and design of our executive compensation program, as well as the changes made to that program over the past year. You also provided us with important perspectives on the critical impact of sustainability, diversity, and inclusion. Again, following those discussions, we made refinements to our executive compensation program and disclosures, as described in further detail on the following pages of the Compensation Discussion & Analysis section. We are proud of Arrow’s continued commitment to our guiding principles while faced with ever-evolving business dynamics. We are appreciative of the critical insights and ongoing support we receive from our investor community. We thank you for continuing to include Arrow in your investment portfolio and look forward to what’s ahead. Steven H. Gunby, Chair Richard S. Hill Barry W. Perry
COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis (“CD&A”) explains the executive compensation program for the Company’s
Financial Performance Achievements
Strategic Performance Achievements
Shareholder Feedback and 2021 Say-On-Pay We regularly engage with our shareholders to listen to their views on business performance, corporate governance, and sustainability. We also consider the input of our shareholders, along with emerging best practices, to ensure alignment with our executive compensation programs. Following the 2020 Annual Meeting, in response to shareholder feedback, we made a number of changes to our CD&A disclosure as well as the 2021 executive compensation program. Shareholders supported those changes, which was reflected by our say-on-pay vote receiving 92% support at the 2021 Annual Meeting. Following the 2021 Annual Meeting, we reached out to 29 of our top shareholders representing collectively more than
2021 Executive Compensation Program At-A-Glance
Incentive Plans: A Closer Look at the Performance Metrics The Compensation Committee discusses metric selection on a regular basis. The focus of our annual and long-term incentive plans is achieving profitable growth and driving long-term shareholder value creation by supporting the following key objectives:
As such, we use a carefully balanced mix of quantifiable absolute and relative financial metrics, and strategic and operational metrics, across our incentive plans ─ with a heavier emphasis on EPS because of its strong
alignment to shareholders. However, the way EPS is measured and balanced with other performance metrics in order to support our goals works differently under each of the incentive plans, as outlined below: Target Total Direct Compensation Pay Mix The charts below show the target TDC of the Company’s Chief Executive Officer (“CEO”) and other NEOs for fiscal 2021. Annual and long-term incentives play a significant role in the executives’ overall compensation at Arrow. They are essential to linking pay to performance, aligning compensation with organizational strategies and financial goals, and rewarding executives for the creation of shareholder value. For fiscal 2021, in the aggregate, 83% of the NEOs’ target TDC was at risk and tied to corporate performance, measured by EPS, ROIC, WACC, and strategic gross profit growth goals (87% for the Company’s CEO and an average of 79% for the other NEOs). The following charts reflect the distribution of the elements of the CEO’s and remaining NEOs’ target TDC based on grant date values. Target Total Direct Compensation
Best Compensation Practices and Policies
THE 2021 EXECUTIVE COMPENSATION PROGRAM IN DETAIL This section 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 focus is evident in the substantially greater weight given to incentive-based compensation compared to fixed compensation.
In making base salary decisions for the NEOs other than the CEO, the Compensation Committee considers its
and 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 the CEO’s individual performance, the Company’s performance, and relevant benchmarking data. In consultation with its independent compensation consultant, the Compensation Committee met in December 2020 to conduct its annual review of base salaries and determine the appropriate 2021 base salary for each then-current NEO. As a result, the Compensation Committee approved a 15% increase to Sean Kerins’ base salary effective January 1, 2021, in conjunction with his promotion from President, Enterprise Computing Solutions to Chief Operating Officer, effective December 28, 2020. Mr. Kerins is the only NEO who received a base salary increase in 2021. Name 2020 2021 % Change Michael J. Long $ 1,320,000 $ 1,320,000 0% Sean J. Kerins (1) $ 650,000 $ 750,000 15% Christopher D. Stansbury $ 700,000 $ 700,000 0% Vincent P. Melvin $ 500,000 $ 500,000 0% Gretchen K. Zech $ 500,000 $ 500,000 0% Name 2018 2019 Michael J. Long $ 1,200,000 $ 1,320,000 Christopher D. Stansbury $ 600,000 $ 700,000 Sean J. Kerins $ 550,000 $ 650,000 Andrew D. King $ 525,000 $ 650,000 Lily Y. Hughes $ — $ 475,000 Performance Achievement Weighted Performance Metric Range Percentage Weighting Achievement % Arrow EPS $ 6.52 - 10.86 (1) 67.86 % 70 % 47.50 % Strategic Goals 0 - 100 % 100.00 % 30 % 30.00 % Total — — 100 % 77.50 % Pay Element Form Performance Metric Annual Cash Incentives Cash The Company’s annual cash incentives, awarded under the Management Incentive Compensation Plan (“MICP”), are designed to reward individuals for performance against pre-established metrics set by the Compensation Committee at the beginning of the year. Each NEO is assigned an annual cash incentive target established based upon the NEO’s level of responsibility, ability to impact overall results, and relevant benchmarking data. Actual annual cash incentive awards may be higher or lower than market since awards are based on results against established performance metrics and can range from 0% to 170% of annual cash incentive target. 42 The table below provides a summary of the Annual Cash Incentive targets for each NEO:
2021 Annual Cash Incentive Performance Goals and Results For fiscal 2021, 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 2021 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 for this metric based on actual performance against annual financial targets. For 2021, the financial performance metric was Absolute EPS. 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. The Compensation Committee set target Absolute EPS for 2021 at $9.11, a 15% increase over 2020 actual results of $7.92 and a 17.4% increase over 2019 actual results representing the last full pre-pandemic fiscal year. The 2021 targets were set at a time when ongoing business disruption from the COVID-19 pandemic was still a strong possibility as vaccinations were not yet widely available and virus-related lockdowns continued globally. As a result, the 15% growth target was rigorous in the context of the broader macroeconomic environment and when compared to historical EPS growth for Arrow. At the end of the performance period, the Compensation Committee evaluated the resulting pay outcomes and concluded that the financial goals had appropriately aligned incentives with the actual performance of the company and the leadership team in a challenging market environment.
Note: Payouts are linearly interpolated for performance between threshold and maximum. For performance below threshold, there is no payout earned. Strategic Gross Profit Growth Goals. Each NEO can earn between 0% and 100% of the target award for this metric based on actual performance against annual, strategic gross profit growth goals. Strategic goals are intended to be dynamic and expected to change on an annual basis depending on the relevant business priorities for the performance year. The Compensation Committee then determines specific, measurable targets that are aligned with expected market growth. For 2021, performance on strategic goals was measured against 7% gross profit growth targets for specific business segments that are critical to the Company’s growth and sustainability objectives. The Compensation Committee identified the most important near-term priority for the long-term success of the Company in 2021 was to grow profitably in key strategic business segments that deliver significantly higher than corporate average returns on working capital investments. Profit growth of 7% exceeded market projections for gross domestic profit growth, electronic component sales growth, or IT spending growth, thus it was a stretch target to measure performance.
Note: Payouts are linearly interpolated for performance between threshold and target. For performance below threshold, there is no payout earned. No additional award is earned for achieving sales growth greater than 7% ─ maximum payout is capped at 100%. Performance on the individual strategic gross profit growth metrics varied yielding a 50% overall payout as a percentage of target. The table below sets forth the 2021 Annual Cash Incentive awards paid to each NEO based on the achievement of Absolute EPS and Strategic Gross Profit Growth. The performance achievements were superior, substantially exceeding the maximum performance targets, resulting in maximum payout awards of 170%, which, under its negative discretion review and determination authority, the Compensation Committee approved.
Long-term incentive awards 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 are normally granted annually. For 2021, the LTIP included a mix of PSUs and RSUs.
(1) Vesting is contingent upon the Company achieving a Non-GAAP net income of greater than zero in the fiscal year of the initial grant.
LTIP Structure
2021 Target LTIP Award Opportunities The Compensation Committee evaluates the CEO’s performance considering prior grant history, the Compensation Committee’s assessment of his contribution, potential contribution, performance during the prior year, peer compensation benchmarking analysis, and the long-term incentive award practices of the Peer Group to determine his annual long-term incentive award.
The Compensation Committee also makes LTIP award decisions for other executives based on the factors discussed above and input from the CEO. These awards are set forth below. For more detail, including the expense to the Company associated with each grant, see the Grants of Plan-Based Awards Table. The Company’s annual long-term incentives, awarded under the LTIP, are designed to reward individuals for performance against pre-established metrics set by the Compensation Committee. Each NEO is assigned an annual long-term incentive target established based upon the NEO’s level of responsibility, ability to impact overall results, and relevant benchmarking data. The table below provides a summary of the LTIP targets for each NEO:
The Compensation Committee generally makes annual equity grants at the first regularly scheduled Board meeting of the calendar year. The Company’s three-year average burn rate of 0.85% of weighted average basic common shares outstanding reflects its prudent management of equity shares used under its LTIP. The 2021 LTIP awards were granted as follows:
A Closer Look at PSUs: 2021 Grants The 2021 PSU awards are tied to Arrow’s three-year (2021-2023) EPS growth as compared to the EPS growth of Arrow’s Peer Group (see the section of this Proxy Statement below captioned “The Role of Peer Companies”) and Arrow’s three-year average ROIC in excess of its three-year WACC. The Compensation Committee chose these performance metrics and the 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. See below:
The three-year Relative EPS Growth metric is weighted at 60%, and the three-year average ROIC minus three- year WACC metric at 40%. At the end of the performance period, the Compensation Committee reviews the outcome of ROIC compared to WACC within the context of the Company’s overall performance during the period, including an evaluation of any adjustments to the underlying metrics, and may implement a downward adjustment to the payout if the Committee concludes that an adjustment would be appropriate to align pay outcomes with performance. Provided the Company achieves a non-GAAP net income of greater than zero during the grant year, participants may earn up to 185% of their targeted PSUs, subject to the individual’s continued employment through the applicable vesting date and any rights provided under the Severance Policy (as defined below) and Participation Agreements (as defined below). Performance Payout for 2019 PSU Grants The tables below apply to the 2019 PSU grants. 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 are paid out based on the schedule below:
Note: Payouts are linearly interpolated for performance between threshold and maximum. For performance below threshold, there is no payout earned.
Three-year average ROIC in excess of three-year WACC (40%).Results are measured at the end of the three-year performance cycle 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 upon an enduring value creation standard.
Note: Payouts are linearly interpolated for performance between threshold and maximum. For performance below threshold, there is no payout earned. For the PSUs granted in 2019, the performance period was completed at the end of the calendar year 2021, with the payout level approved by the Compensation Committee in February 2022. During 2020, two of the companies in the 2019 PSU award Peer Group ─ Anixter International, Inc. and Tech Data Corporation ─ were acquired. As a result of the acquisitions, sufficient financial data was no longer available, and these companies were subsequently removed from the Peer Group at the end of the performance period. Based on this Peer Group, the Company determined that its EPS growth ranked fourth among the reporting companies (weighted result of 51%). The Company’s average ROIC exceeded its WACC by 4.30% during the same period (weighted result of 80%). As a result, in February 2022, the 2019-2021 PSUs vested at 131% of target. Restricted Stock Units Grants of RSUs represent
THE COMPANY’S DECISION-MAKING PROCESS
The Compensation Committee is comprised of independent, non-employee directors of the Board. The Compensation Committee works very closely with its independent consultant and 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 of the Board, reviews and approves the compensation and benefits for the CEO and the Company’s other NEOs. In making its decisions, the Compensation Committee reviews the performance of each of the The Compensation Committee considers performance reviews prepared by the CEO for his direct reports and conducts its own performance review of the 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 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 Pearl Meyer reports to Compensation Committee, the Corporate Governance Committee, the Board, the Company, or Company management.
The Compensation Committee believes targeting TDC around the market median is appropriate, but 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 the purpose of 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, and time in position. To the extent the Compensation Committee deems that the compensation level associated with a 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. With input from its independent compensation consultant, the Compensation Committee annually reviews and approves the compensation Peer Group to ensure it continues to meet the Company’s objectives. During 2020, based on shareholder feedback, the Compensation Committee, with the support of Pearl Meyer, conducted an in-depth peer group analysis to determine a new, expanded group of peer companies, which was approved in December 2020. The expanded Peer Group better reflects our labor market for executive talent and uses a balanced combination of direct and broader industry peers, creating more substantial alignment. Peer Group Selection Process
(1)Trailing Twelve Months; Source company reports and FACTSET market data 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. OTHER PRACTICES, POLICIES, AND GUIDELINES The Compensation Committee recognizes the importance of equity ownership by delivering a significant portion 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
If the ownership requirement has not been met by the fifth anniversary of the date the NEO became subject to the ownership requirement multiple, then 100% of net shares acquired annually are to be retained until requirements are met. Shares that count towards the guidelines include shares owned as well as vested and unvested RSUs. PSUs and vested, but unexercised, Non-qualified Stock Options are not counted towards the ownership requirement. All NEOs currently meet the stock ownership requirements.
The following chart illustrates the investment levels in Company equity held by our CEO and all other NEOs as a group, valued at $114.96 per share (trailing 12-month average as of December 31, 2021). Executive Officer Equity
The Board believes that it is in the Company's best interests and its shareholders to create and maintain a culture that emphasizes integrity and accountability and reinforces the Company’s pay-for-performance compensation philosophy. The Board has adopted a formal clawback policy that provides for the recoupment of certain executive compensation, including both annual cash incentives and long-term incentive awards, in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under federal securities laws. In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under securities laws, the Board may require reimbursement or forfeiture of any excess incentive compensation received by an executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement. In the event an executive has been involved in any misconduct (or knew or should have known about the misconduct and failed to report it to the Company), the Board may require reimbursement or forfeiture of any and all incentive compensation if the underlying conduct occurred during any of the three fiscal years preceding the grant, payment, vesting, or settlement of the incentive compensation. Anti-Hedging and Anti-Pledging Policy The Company’s anti-hedging and anti-pledging policy provides that directors, executive officers, and certain other employees 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
under “Governance Documents” at the “Leadership & Governance” sub-link of the Investor Relations drop-down menu on investor.arrow.com. Severance Policy and Change The Company has a policy for severance (“Severance Policy”) and a change in control agreement (“Change in Control Retention Agreement”) for its executives. The Severance Policy and Change in Control Retention Agreements are described in detail in the section entitled “Agreements and Potential Payments 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 total compensation and The NEOs participate in the 401(k) Plan, which is available to all of Arrow’s U.S. employees. Company contributions to the 401(k) Plan on behalf of the NEOs are included under the heading “All Other Compensation” in the Summary Compensation Table and specified under the heading “401(k) Plan Company Contribution” on the All Other Compensation — Detail Table. Supplemental Executive Retirement Plan (“SERP”) The Company maintains the SERP, a non-qualified, unfunded retirement plan in which, as of December 31,
Executive Retirement Plan” section. The Company has placed approximately
Tax and Accounting Considerations A variety of tax and accounting considerations influence the Compensation Committee’s development and implementation of the Company’s compensation and benefit plans.
equity awards granted each year.
COMPENSATION OF THE The following table provides certain summary information concerning the compensation of the NEOs.
ALL OTHER COMPENSATION — DETAIL
The following table provides information regarding the annual cash incentives, PSUs, and RSUs
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The Outstanding Equity Awards as Fiscal year End Table shows: (i) the number of outstanding stock option awards that are vested and unvested as of December 31, The values ascribed to the awards in the table 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 awards depend.
The following table sets forth the maximum potential number of PSUs which may be awarded to each of the NEOs for PSU awards granted in 2021, 2020, and 2019. Please see section captioned “Long-Term Incentive Awards” in the Compensation Discussion and Analysis for more information.
STOCK VESTED AND OPTIONS EXERCISED IN The following table provides information concerning the value realized by each NEO upon the vesting of restricted and performance units and the exercise of stock options during 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. 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 Executive Deferred Compensation Plan (“EDCP”) was frozen as of December 31, 2019. None of the current NEOs participated in the EDCP. 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. 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 18 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 (age 60). The gross benefit is reduced by the value of hypothetical defined contribution plan contributions and 50% of Social Security. The benefit described above is payable at 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% per year that retirement precedes age 60. Except as provided below, no benefits are payable for termination prior to retirement eligibility. The normal form of benefits provided is a single life annuity with 60 monthly payments guaranteed. Other annuity payment forms are also available. The years of credited service for each of the NEOs and the present value of their respective accumulated benefits as of December 31,
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
Should a participant become disabled before retiring, his or her 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 The present values of the SERP benefits 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 on the Potential Payouts Upon Termination Table.
AGREEMENTS AND POTENTIAL PAYOUTS The Company does not enter into employment agreements with senior management. The Company does, however, have a common Severance Policy and an Under the current Severance Policy, upon an involuntary termination of employment of any of the NEOs without “cause,” the Company will pay such NEO a 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. In the case of termination of the NEO’s employment without “cause,” his or her outstanding equity-based awards would continue to vest through the duration of the Severance Period. Equity-based awards that do not vest Unvested equity-based awards held by NEOs would vest in the event of death or disability. Vested stock options would remain exercisable until the expiration date of such stock option, 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 her death or disability.
Each NEO who consented to the early termination of his or her employment and change CHANGE IN CONTROL RETENTION AGREEMENTS Each of the 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 Under the Change in Control Retention Agreements, the NEOs are eligible for compensation and benefits if, within two years following a “change 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 (for the CEO) or two times (for all other 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 The estimated payments that the NEOs would receive under their respective Change in Control Retention Agreements are set forth in the Potential Payouts Upon Termination Table. 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,” 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
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.
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 compliance 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 adding an interest component to the amount due for the period of deferral (at the then-current POTENTIAL PAYOUTS UPON TERMINATION The following table sets forth the estimated payments and value of benefits that each of the NEOs would be entitled to receive under his or her Change in Control Retention Agreement and the Severance Policy, including the Participation Agreements, as applicable, in the event of the termination of employment under various scenarios, assuming that the termination occurred on December 31, The NEOs are not entitled to receive any payment at, following, or in connection with the termination of his or her employment for cause. In both the table below and the Share-Based Award Agreement Terms Related to Post-Employment Scenarios Table which follows it:
The benefits listed below are provided in accordance with the Executive Change in Control Retention Agreement, the Executive Severance Policy, applicable equity award agreements, the Management Insurance Program, and the Supplemental Executive Retirement Plan.
(a) A prorated annual cash incentive award for the calendar year of termination, based upon actual performance (b) Immediate vesting of all unvested equity awards (c) A lump-sum cash payment equal to four times the executive’s Total Target Cash Compensation, net of tax
(a) A prorated annual cash incentive award for the calendar year of termination, based upon actual performance (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 reduced by the Early Payment Discount to reflect the date of disability
(a) A prorated annual cash incentive award for the calendar year of termination, based upon actual performance (b) During the eighteen-month severance period (twenty-four-month severance period for the CEO) i. Salary continuation ii. Annual cash incentive award, based upon actual performance, but adjusted for 0% achievement for MBO performance iii. Equity award vesting continues iv. Continued medical coverage under Arrow’s health plan or equivalent cash value (c) SERP benefit payments begin if termination date is after the earliest retirement date (d) Reimbursement for outplacement expenses – up to $50,000 ($75,000 for the CEO)
(a) A lump-sum cash payment equal to two times the executive’s total target cash compensation (three times for the CEO)
termination, based upon actual performance
(e) SERP benefit payments begin at age 60 based upon Years of SERP Participation as of the
(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
(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 (b) PSUs and
(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 31,
PERFORMANCE STOCK UNIT, RESTRICTED STOCK UNIT, AND NON-QUALIFIED STOCK OPTION 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 table for grants in
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 The following summarizes the methodology, material assumptions, adjustments, and estimates the Company used for calculating the CEO pay ratio:
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 (“Code”) prohibits employees, officers, and directors from entering into transactions that present a conflict of interest absent a specific waiver. A conflict of interest arises when an employee’s private interests either conflict or appear to conflict with Arrow’s 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 Code requires a waiver from senior management. If the conflict of interest involves senior management, a waiver from the Board is required. 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. “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, 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 management of each operating unit and financial function Transactions involving members of senior management, or a director require the review and approval of the Board. Further, the Audit Committee reviews and approves all related person transactions required to be disclosed pursuant to SEC Regulation The Company’s Law Department, together with the Corporate Controller’s Department, is responsible for monitoring compliance with these policies and procedures. There were no related party transactions in 2021.
DELINQUENT SECTION 16(a) REPORTS Section 16(a) of the Securities Exchange Act of 1934, as amended, 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, 2021, all Section 16(a) filings were timely filed with the exception of reports by Richard A. Seidlitz, the Company’s Vice President, Corporate Controller and Principal Accounting Officer. The Company discovered in 2021 that Section 16(a) filings should have been made on Mr. Seidlitz’s behalf upon his appointment as Principal Accounting Officer in 2018, at which point he became a Section 16 officer. A remedial filing was made on Mr. Seidlitz’s behalf in August 2021 representing twenty transactions (including awards, sales, and withholdings for tax purposes) and corresponding reports that were not filed on a timely basis. AVAILABILITY OF MORE INFORMATION Arrow’s Shareholders and other interested parties who wish to communicate with the members of the Board may do so by submitting such communication to Arrow’s Corporate Secretary,
MULTIPLE SHAREHOLDERS The Company will deliver promptly upon request a separate copy of the Notice and/or the Proxy Statement and Annual Report to any shareholder at a shared address to which a single copy of these materials was delivered. To receive a separate copy of these materials, you may contact the Company’s Investor Relations Department either by mail at 9201 East Dry Creek Road, Centennial, Colorado 80112, by telephone at 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 the 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 the 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 the 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. Several 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.
SUBMISSION OF SHAREHOLDER PROPOSALS If a shareholder intends to present a proposal at Arrow’s Annual Meeting to be held in Arrow’s bylaws govern the submission of nominations for director and other business proposals that a shareholder wishes to have considered at Arrow’s Annual Meeting to be held in Arrow’s bylaws 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 bylaws. If you wish to nominate any person for election to our Board at the 2023 Annual Meeting under the proxy access provision of our bylaws, your nomination notice must be submitted to Arrow’s Corporate Secretary between November 2, 2022 and December 2, 2022, unless the date of the mailing of the notice for the 2023 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 no earlier than the 150th day and no later than the later of the 120th day prior to the mailing of the notice for such meeting or the tenth day following the date we announce publicly the mailing of the notice. In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than Arrow’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 12, 2023.
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 sections titled “Annual Cash Incentives” and “Long-Term Incentive Awards” above. Throughout this document the annual cash incentive is also referred to as “MICP” or “Management Incentive Compensation Plan” and is based on the “Absolute EPS” measure below. The Long-Term Incentive Award is also referred to as “LTIP” and is based on the “three-year EPS growth” and “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 measure. 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 Securities and Exchange Commission. 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 LTIP calculation does not include these adjustments because the impacts are not readily available for the entire peer group.
Annual Cash Incentive Measure Absolute EPS ($ per diluted share)
*Other includes pension settlement gain, and gain on investments, net. ** The sum of the components for non-GAAP net income per diluted share may not agree to totals, as presented, due to rounding. Long-Term Incentive Program (LTIP) Measures Three-year EPS Growth ($ per diluted share)
* Other includes loss on investments, net, and pension settlement expense. ** The sum of the components for non-GAAP net income per diluted share may not agree to totals, as presented, due to rounding.
Three-year average ROIC in excess of three-year WACC ($ in thousands)
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2021 PEER GROUP
