UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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☑ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material under §240.14a-12 |
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| Woodward, Inc. 1081 Woodward Way Fort Collins, Colorado 80524 Tel: 970-482-5811 Fax: 970-498-3050 |
WOODWARD, INC.
NOTICE OF 20202022 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
December 15, 20209, 2022
Dear Stockholder:
You are cordially invited to join our Board of Directors and senior leadership for Woodward, Inc.’s Annual Meeting of Stockholders on Wednesday, January 27, 202125, 2023 at 8:00 a.m., Mountain Standard Time. Due to the ongoing public health impact of the coronavirus (COVID-19) pandemic and inIn order to help protectenable more stockholders to attend the health and well-being of our stockholders and employees,meeting, this year’s Annual Meeting will be a virtual-only meeting. There will be no physical location for in-person attendance at the Annual Meeting.
In order to attend the Annual Meeting, you must register in advance at www.proxydocs.com/WWD.WWD. Registration ends on January 25, 202124, 2023 at 3:5:00 pmp.m. Mountain Standard Time. Upon completing your registration, you will receive via email further instructions and a unique link that will allow you access to the meeting. Please be sure to follow the instructions found on your Proxy Cardproxy card and/or Voting Authorization Form,voting authorization form, as well as subsequent instructions that will be delivered to you via email.
The global economic effects associated with the COVID-19 pandemic have been unprecedented in their scope and depth. We have been following, and will continue to follow, all recommendations of the CDC and other agencies to maximize the safety and well-being of our members. Throughout this crisis, our unwavering focus has been on striking a balance between doing everything we can to keep our workplace as safe as possible and stabilizing our business during this time of economic disruption. Woodward has faced many challenges over our 150-year history and, as with previous downturns, we believe we have the ability to emerge from this crisis an even stronger company.
Your vote is very important to us and to the continued success of our Company. Please complete and return your proxy card by mail, or vote via telephone or the internet, as soon as possible regardless of whether you plan to attend the virtual meeting. Thank you in advance for your continuing commitment to Woodward.
Sincerely yours,
WOODWARD, INC.
Thomas A. GendronCharles P. Blankenship, Jr.
Chairman, Board of Directors
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
In light oforder to enable more stockholders to attend the public health concerns and restrictions resulting from the COVID-19 pandemic,meeting, this year’s Annual Meeting of Stockholders of Woodward, Inc. will be held virtually at the date and time below. There will be no in-person meeting location. At the Annual Meeting, stockholders will be asked to consider and vote upon the matters set forth in this notice.
Date and Time:
Wednesday, January 27, 2021
25, 2023
8:00 a.m., Mountain Standard Time
To attend and participate in the Annual Meeting:
Register at www.proxydocs.com/WWD.WWD. Registration ends on January 25, 202124, 2023 at 3:5:00 pmp.m. Mountain Standard Time.
Enter the control number listed on your Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form.
The Annual Meeting will begin promptly at 8:00 a.m., Mountain Standard Time, on January 27, 2021.25, 2023. You will receive an email containing a link to the Annual meeting one hour prior to the start of the meeting. We encourage you to access the virtual platform prior to the start time to familiarize yourself with the application and ensure that you can hear the streaming audio. You may begin to log into the virtual platform beginning at 7:45 a.m. Mountain Standard Time, on January 27, 2021.25, 2023.
The purpose of our Annual Meeting is to:
| 1. | Elect as |
| 2. | Vote on an advisory resolution regarding the compensation of the Company’s named executive officers; |
3. | Vote on an advisory proposal regarding the frequency of stockholder advisory votes on executive compensation; |
4. | Ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, |
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| Approve an amendment to the Amended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan to increase the number of shares reserved for issuance by |
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| 6. | Transact other business that properly comes before the meeting, or any postponement or adjournment thereof. |
Stockholders who owned Woodward, Inc. common stock at the close of business on the record date, November 30, 2020,28, 2022, are entitled to vote at the meeting, or any postponement or adjournment thereof.
This proxy statement and our Annual Report on Form 10-K for the fiscal year ended September 30, 2020,2022, including consolidated financial statements, are available to you at www.proxydocs.com/WWD.WWD.
Important Notice of Internet Availability of Proxy Materials
The Securities and Exchange Commission’s “Notice and Access” rule enables us to deliver a Notice of Internet Availability of Proxy Materials to stockholders in lieu of a paper copy of the proxy statement, related materials, and our Annual Report. It contains instructions on how to access our proxy statement and 20202022 Annual Report and how to vote online.
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TableWe appreciate your continued support of Contents
Shares cannot be voted by marking, writing on, and/or returning the Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be counted as votes.Woodward.
By Order of the Board of Directors,
WOODWARD, INC.
A. Christopher Fawzy
Corporate Secretary
December 15, 2020
9, 2022
YOUR VOTE IS IMPORTANT
Even if you plan to attend the annual meeting (virtually), please date, sign, and return your proxy card in the enclosed envelope, or vote via telephone or the internet as instructed on the proxy card or Notice of Internet Availability, prior to the meeting and as soon as possible. Your prompt response is helpful and your cooperation will be appreciated.
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Exhibit A – Woodward 2017 Omnibus Incentive Plan, as |
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About the Annual Meeting and Voting
Woodward, Inc. (“Woodward” or the “Company”), on behalf of its Board of Directors (the “Board”), is soliciting your proxy to vote at our Annual Meeting of Stockholders to be held virtually on January 27, 202125, 2023 (or at any postponement or adjournment of the meeting) (the “Annual Meeting”). This proxy statement summarizes the information you need to know to vote at the meeting.
A Notice of Internet Availability (the "Notice") will be first mailed on or about December 18, 202016, 2022 to stockholders of record as of November 30, 202028, 2022 (the “Record Date”). These proxy solicitation materials, combined with our Annual Report on Form 10-K for the fiscal year ended September 30, 20202022 including our most recent audited financial statements, were first made available on the internet on or about December 15, 2020.9, 2022. Our principal executive offices are located at 1081 Woodward Way, Fort Collins, Colorado 80524, and our telephone number at that location is 970-482-5811. We maintain a website at www.woodward.com.www.woodward.com. The information on our website is not incorporated by reference into this proxy statement.
Who Can Vote at the Meeting?
Stockholders who owned Woodward common stock at the close of business on the Record Date, November 30, 2020,28, 2022, are entitled to vote at the meeting. As of the Record Date, there were 62,908,03859,739,073 shares of Woodward common stock outstanding.
Registered Stockholders. If your shares are registered directly in your name with Woodward’s transfer agent, you are considered the stockholder of record with respect to those shares, and the Notice was provided to you directly by Woodward. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote in person (virtually) at the Annual Meeting.
Street Name Stockholders. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and the Notice was forwarded to you by your broker or nominee, who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares. If you request a printed copy of the proxy materials by mail, your broker or nominee will provide a voting instruction card for you to use. Beneficial owners are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person (virtually) at the Annual Meeting unless you follow your broker's procedures for obtaining a legal proxy.
How many votes do I get per share?
Each share of Woodward common stock that you own entitles you to one vote on each matter to be presented at the Annual Meeting, except for the election of directors, for which you may cumulate your votes. Since three directors are standing for election, you will be entitled to three director votes for each share of stock you own. Of this total, you may choose how many votes you wish to cast for each director. The Board is not soliciting discretionary authority to cumulate votes with respect to the election of directors.
Why did I receive a one-page notice in the mail about the internet availability of proxy materials instead of a full set of printed proxy materials?
Under Securities and Exchange Commission (the "SEC") rules, we are making our proxy materials available via the internet. Instead of mailing printed copies of the proxy materials to all of our stockholders, the SEC rules allow us to send you, our stockholders as of the Record Date, a Notice containing instructions on how to access the proxy materials via the internet and how to request a printed copy by mail if you prefer. Sending you the Notice and using the internet instead of mailing printed proxy materials also saves costs and natural resources.
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About the Annual Meeting and Voting (continued)PROXY SUMMARY
How can I get electronic access to the proxy materials?
The Notice provides you with instructions about how to:
View our proxy materials for the Annual Meeting via the internet; and
Request that we send our future proxy materials to you by mail or by email.
If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. If you choose to receive future proxy materials by mail, you will receive a paper copy of those materials, including a form of proxy. Your election to receive proxy materials by mail or email will remain in effect until you notify us that you are terminating your request.
What matters am I voting on?
The election of one director to hold office until the 2025 annual meeting of stockholders or until their successors are duly elected and qualified;
An advisory resolution regarding the compensation of our named executive officers;
An advisory proposal regarding the frequency of stockholder advisory votes on executive compensation;
A proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2023;
An amendment to the Amended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan to increase the number of shares reserved for issuance by 500,000; and
Any other business that may properly come before the meeting.
How does the Board recommend I vote on these proposals?
The Board recommends a vote as follows:
“FOR” the election of the Board’s nominee to the Board;
“FOR” the advisory resolution regarding the compensation of the Company’s named executive officers;
“EVERY YEAR” for the advisory proposal on the frequency of the advisory vote on executive compensation;
“FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm;
“FOR” the approval of an amendment to the Amended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan to increase the number of shares reserved for issuance by 500,000; and
If any other matter is properly presented at the meeting, your shares will be voted in accordance with the proxyholder’s best judgment. At the time this proxy statement was printed, we were not aware of any additional matters to be acted on at the meeting.
How do I vote?
Registered Stockholders. Registered stockholders may vote by any of the following methods:
By Mail. If you requested printed copies of the proxy materials to be mailed to you, you can complete, sign and date the proxy card and return it in the prepaid envelope provided;
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PROXY SUMMARY
By Telephone. If you requested printed copies of the proxy materials to be mailed to you, you can call the toll-free telephone number inon the proxy card and follow the recorded instructions;
By Internet. Access Woodward’s secure website registration page via the internet, as identified in the Notice or proxy card, and follow the instructions; or
By Attending the Annual Meeting (Virtually). You may attend the Annual Meeting by registering at www.proxydocs.com/WWD, where you may vote and submit questions during the meeting. Registration ends on January 25, 202124, 2023 at 3:5:00 p.m. Mountain Standard Time. Please have your Notice, proxy card or the instructions that accompanied your proxy materials in hand when you visit the website.
Street Name Stockholders. If your shares are held by a broker, bank or other nominee, you should have received instructions on how to vote or instruct the broker to vote your shares from your broker, bank or other nominee. Please follow their instructions carefully. Street name stockholders may generally vote by one of the following methods:
By Mail. If you requested printed copies of the proxy materials to be mailed to you, you may vote by signing, dating and returning your voting instruction card to your broker in pre-addressed envelope provided;
By Methods Listed on Your Voting Instruction Card.Telephone or Internet. Please refer to your voting instruction card or other information provided by your bank, broker, nominee or other holder of record to determine whether you may vote by telephone or electronically on the internet, and follow the instructions on the voting instruction card or other information provided by your bank, broker, nominee or other holder of record;nominee; or
By attending the Annual Meeting in person (virtually) with a Proxy from the Record Holder. A street name stockholder who wishes to vote in person (virtually) at the Annual Meeting will need to obtain a legal proxy from his or her bank, brokerage firm or other nominee. Please consult the voting instruction card provided to you by your bank, broker or other nominee to determine how to obtain a legal proxy in order to vote in person (virtually) at the Annual Meeting and any other instructions that may be applicable.
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About the Annual Meeting and Voting (continued)
If you properly fill in your proxy card and send it to us in time to vote, or if you vote by internet or telephone before the polls close, your shares will be voted as you have directed. If you sign the proxy card or vote by internet or telephone but do not make specific choices, your shares will be voted in accordance with the Board’s recommendation as follows:
“FOR” the election of each of the Board’s nominees to the Board;
“FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm;
“FOR” the advisory resolution regarding the compensation of the Company’s named executive officers;
“FOR” the approval of an amendment to the Amended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan to increase the number of shares reserved for issuance by 1,500,000; and
“AGAINST” the stockholder proposal entitled “Proposal to Increase Diversity of Director Nominees.”
If any other matter is presented at the meeting, your shares will be voted in accordance with the proxyholder’s best judgment. At the time this proxy statement was printed, we were not aware of any additional matters to be acted on at the meeting.
If you hold your shares through a broker, bank or other nominee, please follow the instructions regarding how to vote on the Voting Instruction Form you receive from your broker.recommendation.
How do I change my vote or revoke my proxy?
You may revoke your proxy by:
Entering a new vote by telephone, over the internet, or by signing and returning another signed proxy card at a later date,date;
Notifying our Corporate Secretary in writing before the meeting that you have revoked your proxy,proxy; or
Voting in person (virtually) at the meeting.
If you hold your shares through a broker, bank or other nominee, please follow the instructions regarding changing or revoking your proxy on the Voting Instruction Form you receive from your broker.
If you want to give your written proxy to someone other than the individuals named on the proxy card:
Cross out the individuals named and insert the name of the individual you are authorizing to vote,vote; or
Provide a written authorization to the individual you are authorizing to vote along with your proxy card.
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PROXY SUMMARY OF PROPOSALS SUBMITTED FOR VOTE
Summary of Proposals Submitted for Vote
The following are only summaries of the proposals to be presented at the Annual Meeting. You should review the full discussion of each proposal in this proxy statement before casting your vote. |
Proposal 1: Election of DirectorsDirector
Director Nominees:Nominee: At the Annual Meeting, you will be asked to elect to the Board the three nomineesnominee for director identified in this proxy statement. EachThe director willwould be elected to serve a three-year term and will hold office until the 20232025 Annual Meeting held in or about January 20242026 and until a successor is elected and qualified.
Vote Required: Because this is an uncontested election, directors are elected by a majority vote. A nominee for director in an uncontested election will be elected if the votes cast “for” that nominee’s election exceed the votes cast “against” that nominee’s election. AbstentionsFor purposes of this proposal, abstentions and broker non-votes will not be considered in the calculation. We have adopted a director resignation policy. Accordingly, eachthe director has submitted an irrevocable resignation contingent upon not receiving a majority of votes in an uncontested election and acceptance of the resignation by the Board.
Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting Firm
Independent Registered Public Accounting Firm: At the Annual Meeting, you will be asked to ratify the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2021.
Vote Required: The affirmative vote of the holders of a majority of shares of Woodward common stock present in person or by proxy and entitled to vote on the matter at the Annual Meeting will be required to ratify the Audit Committee’s appointment of the independent registered public accounting firm. Abstentions will count as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
Proposal 3: Approval of Advisory Resolution Regarding the Compensation of the Named Executive Officers
Compensation of the Company’s Named Executive Officers: At the Annual Meeting, you will be asked to approve an advisory resolution regarding the compensation of the Company’s named executive officers. This proposal is commonly referred to as a “say-on-pay” vote.
Vote Required: The affirmative vote of the holders of a majority of shares of Woodward common stock present in person (virtually) or by proxy and entitled to vote on the matter at the Annual Meeting will be required for the approval of the advisory resolution regarding the compensation of the Company’s named executive officers. Abstentions will count as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
This proposal 3, commonly referred to as a “say-on-pay” proposal,As an advisory vote, the vote on Proposal 2 is not binding on the Board or the Compensation Committee. However, the Board and the Compensation Committee value the opinions of our stockholders, and will review and consider the voting results when evaluating our executive compensation program.
Proposal 3: Advisory Proposal Regarding the Frequency of the Stockholder Advisory Vote on Executive Compensation
Frequency of the Advisory Vote on the Compensation of Named Executive Officers: At the Annual Meeting, you will be asked to vote “Every Year”, “Every Two Years” or “Every Three Years” with respect to how often we hold a say-on-pay vote. This proposal is commonly referred to as a “say-when-on-pay” vote.
Vote Required: The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders. Abstentions and broker non-votes will have no effect on the outcome of the vote.
As an advisory vote, the vote on Proposal 3 is not binding on the Board or the Compensation Committee. However, the Board and the Compensation Committee value the opinions of our stockholders, and will review and consider the voting results in determining whether to change the frequency of the advisory say-on-pay vote.
Proposal 4: Ratification of the Appointment of Independent Registered Public Accounting Firm
Independent Registered Public Accounting Firm: At the Annual Meeting, you will be asked to ratify the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2023.
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PROXY SUMMARY
Vote Required: The affirmative vote of the holders of a majority of shares of Woodward common stock present in person (virtually) or by proxy and entitled to vote on the matter at the Annual Meeting will be required to ratify the Audit Committee’s appointment of the independent registered public accounting firm. Abstentions will count as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
Proposal 5: Approval of an Amendment to the Woodward Omnibus Incentive Plan
Amendment to the Woodward Omnibus Incentive Plan:At the 2016 Annual Meeting, stockholders of the Company approved the Woodward, Inc. 2017 Omnibus Incentive Plan, as further amended and restated at the 2017 Annual Meeting and further amended at the 2018 Annual Meeting and the 2019 Annual Meeting (as amended, the “Woodward Omnibus Incentive Plan” or the “Omnibus Incentive Plan”). At the 2020 Annual Meeting, you will be asked to approve an amendment to the Woodward, Inc. 2017 Omnibus Incentive Plan, (as amended, the “Woodward Omnibus Incentive Plan” or the “Omnibus Incentive Plan”), to increase in the number of shares reserved for issuance thereunder by 1,500,000.500,000.
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SUMMARY OF PROPOSALS SUBMITTED FOR VOTE (continued)
Vote Required: The affirmative vote of the holders of a majority of the votes castoutstanding shares of Woodward common stock present in person (virtually) or by proxy and entitled to vote on Proposal 45 at the Annual Meeting will be required for the approval of the amendments to the Omnibus Incentive Plan. With respect to Proposal 4,5, abstentions will have the effect of a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
This vote will also satisfy the requirements for approval of Proposal 5: Stockholder Proposal Entitled “Increase Diversity of Director Nominees”:
Stockholder Proposal Entitled “Increase Diversity of Director Nominees”: We have received a proposal from two stockholders5 under the listing rules of the Company requesting that the Board adopt a policy that would require that the initial list of candidates from which new director nominees are chosen by the Nominating and Governance Committee include (but need not be limited to) non-management employees.Nasdaq Stock Market (“Nasdaq”).
Vote Required: This stockholder proposal requires the affirmative vote of a majority of the voting power of the shares of our common stock present virtually or by proxy at the Annual Meeting and entitled to vote thereon. With respect to Proposal 5, abstentions will have the effect of a vote against this proposal, and broker non-votes will have no effect.
The Board unanimously recommends that the stockholders vote “FOR” the election of |
Quorum
A quorum of stockholders is necessary to hold a valid meeting. The presence, in person (virtually) or by proxy, at the Annual Meeting of holders of shares representing a majority of the votes of the common stock entitled to vote constitutes a quorum. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a stockholder does not provide voting instructions to his or her broker or nominee and the broker or nominee does not have discretionary authority to vote on the matter, as further described below under “Voting of Shares Held in Street Name by Your Broker.”
Abstentions
Abstentions are counted as present for establishing a quorum. For all proposals in this proxy statement, except for the election of directors, abstentions have the same effect as votes against the matter.
Voting of Shares Held in Street Name by Your Broker
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker how to vote your shares. You are also invited to attend the Annual Meeting and vote your shares in person (virtually). In order to vote your shares in person (virtually), you must provide us with a legal proxy from your broker and follow theany other instructions provided on the voting instruction card.
Brokerage firms have authority to vote customers’ shares for which they have not received voting instructions on certain “routine” matters, such as ratification of the auditors. If you do not provide voting instructions, your brokerage firm may either vote your shares on routine matters or leave your shares unvoted. On the other hand, absent instructions from customers, a brokerage firm cannot vote customers’ shares on non-routine matters, such as the election of directors, the advisory resolution regarding the compensation of our named executive officers, the advisory proposal regarding the frequency of the stockholder advisory vote on executive compensation, and the approval of the amendment to the Omnibus Incentive Plan to increase the number of shares reserved for issuance thereunder. The shares for which instructions are not given and therefore, remain unvoted, are referred to as
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PROXY SUMMARY OF PROPOSALS SUBMITTED FOR VOTE (continued)
to as “broker“broker non-votes.” For the purposes of this Annual Meeting, the only routine matter is the Ratification of the Appointment of our Independent Registered Public Accounting Firm. Consequently, if you do not give your brokerage firm specific instructions, your shares will not be voted on the other, non-routine, matters and will not be counted in determining the number of shares necessary for approval, although they will count for purposes of determining whether a quorum exists. We encourage you to provide instructions to your brokerage firm. This ensures your shares will be voted at the meeting.
In order for your shares to be voted on all matters presented at the Annual Meeting, including the election of directors, we urge all stockholders whose shares are held in street name by a brokerage firm to provide voting instructions to the brokerage firm. |
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Board of DirectorsPROPOSAL 1: ELECTION OF DIRECTOR
Woodward’s certificate of incorporation provides for the Board to be divided into three classes, designated Class I, Class II and Class III, with directors in each class serving a three-year term. Woodward’s certificate of incorporation further provides that the Board must consist of no less than six directors. The exact number of directors serving on the Board, and the exact number of directors in each class, is determined from time to time by resolution of the Board. If the number of directors changes, any increase or decrease must be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. The Company’s Bylaws and Director Guidelines provide that directors are elected by a majority of the votes cast and we have a corresponding resignation policy for uncontested director elections. Contested elections are determined by a plurality vote.
James R. RulsehOn May 9, 2022, Thomas A. Gendron retired from his role as Chairman of the Board, Chief Executive Officer (“CEO”) and President. In connection with Mr. Gendron’s retirement, Mr. Charles ("Chip") Blankenship, Jr. was appointed as Chairman of the Board, CEO and President of the Company, effective May 9, 2022. At that time, the Board increased the number of directors from ten to eleven and appointed Mr. Blankenship to the class of directors who have been elected to hold office until Woodward’s 2023 annual meeting of stockholders (to be held in or about January 2024). At the Board’s request, Mr. Gendron remained a director, officer and employee of the Company until July 11, 2022 in order to facilitate an effective transition, while allowing the executive management team to maintain its focus on executing the Company’s strategic priorities. Following Mr. Gendron’s retirement as a director, the Board decreased the number of directors from eleven to ten.
Mary Petrovich and Paul Donovan, each of whom has served on the Board for more than 20 years, will be retiring from the Board at the upcoming expiration of their respective terms and will not stand for re-election. The Board greatly appreciates Ms. Petrovich’s and Mr. Donovan’s longstanding support, dedication and leadership as of November 19, 2020, after the Board’s last meeting of calendar year 2020, due to health reasons. Mr. Rulseh’s contributions to the Company, including his advice and counsel to management, have been invaluable. We would like to take this opportunity to thank Mr. Rulseh for his dedication, leadership and vision throughout his 19 years of service as a memberdirectors of the BoardCompany. In light of Directors,Ms. Petrovich’s and we wish him and his family the very best.
Following Mr. Rulseh’s retirement,Donovan’s upcoming retirements, the Board consistswill reduce the number of directors from ten to eight effective upon the expiration of their term, on the date of the Annual Meeting, and until such time as the Board appoints one or more additional director(s). As part of the ongoing board refreshment practice, the Board has engaged a third party to conduct a focused director recruiting effort in line with the Company’s board nomination process and criteria as described below in the sections titled “Director Nomination Process” and “Board Composition and Diversity”.
The Board’s three classes are currently comprised of ten directors, with three Class I directors, threefour Class II directors, and twothree Class III directors. EachUpon the upcoming expiration of Ms. Petrovich’s and Mr. Donovan’s respective term, Class III will be comprised of one director. The director nominee identified in this proxy statement as standing for election at the 20202022 Annual Meeting of Stockholders, David P. Hess, has been nominated by the Board at the recommendation of the Nominating and Governance Committee to hold office for a three-year term expiring in January 2024,2026, or when a successor is elected and qualified. Thomas A. Gendron, Daniel G. Korte and Ronald M. Sega are incumbents.Mr. Hess, who was appointed to serve as a member of the Board on January 27, 2021, is standing for election by stockholders for the first time. Directors identified in this proxy statement who are not standing for election at this meeting will continue in office for the remainder of their respective terms, subject to the Company’s policies. If a nominee becomes unavailable for election and the Nominating & Governance Committee elects to propose another nominee, proxy holders will vote the proxies for such nominee to fill the vacancy.
We identify below certain biographical information of each of our directors, andincluding Mr. Hess as the director nomineesnominee for election, including his or her principal occupation, public company directorships currently held or held during the past five years and other business affiliations. We also describe the specific experience, qualifications, attributes and skills of each director and director nominee that led the Board to conclude he or she should serve as a member of the Board.election:
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PROPOSAL 1: ELECTION OF DIRECTOR
Director Standing for Election at This Meeting for Terms Expiring in 2026:
David P. Hess | ||||||
Age: 67 Director Since: 2021 | Board Committee(s): Compensation; Nominating and Governance | |||||
Served as CEO of Arconic Corporation from April 2017 until January 2018. Previously served in numerous executive leadership roles during his 38-year career at United Technologies Corporation (“UTC”) until his retirement in 2017. Other Public Company Directorships: •Southwest Airlines Co. (since 2021). •Allegheny Technologies (since 2019). •Arconic Corporation (2017-2019). | ||||||
Relevant Experience and Skills: •Joined UTC in 1979 and served in various roles, including President – Hamilton Sundstrand from 2004-2009, President – Pratt & Whitney from 2009-2014 and UTC Executive Vice President and Chief Customer Officer – Aerospace from 2015-2017. •Extensive boardroom experience at public and private aerospace, defense and industrial companies. •Brings a strong background in senior executive leadership roles in the aerospace and defense sectors, as well as deep industry experience, a proven track record, collaborative style and strong technical background, to the Board. | ||||||
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Board of Directors (continued)PROPOSAL 1: ELECTION OF DIRECTOR
PROPOSAL 1 — ELECTION OF DIRECTORS
Incumbent Directors
Directors Standing for Election at This Meeting for Terms ExpiringRemaining in 2024:Office Until 2024
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Charles P. Blankenship, Jr. | ||||||
Age: 56 Director Since: 2022 | Board Committee(s): Executive (Chair) | |||||
Chairman of the Board, Other Public Company Directorships: •Arconic Corporation (2018-2019). | ||||||
Relevant Experience and Skills: •Montgomery Distinguished Professor of Practice at the University of Virginia’s School of Engineering and Applied Sciences, from •Chief Executive Officer of Arconic from 2018-2019. •Held significant leadership roles in Aviation, Energy, and •Sr. Vice President of •Accomplished business leader with | ||||||
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Age: 62 Director Since: 2017 | Board Committee(s): Compensation (Chair); Nominating and Governance; Executive | |||||||
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Other Public Company Directorships: •LMI Aerospace, | ||||||||
Relevant Experience and Skills: •Served as Chief Executive Officer of LMI Aerospace, Inc. (“LMI”), now part of the Sonaca Group, from •Joined PPG in May 2018 as Global Vice President-elect of its Aerospace products business. •President of the Rolls-Royce Defense Group in Washington, DC and London, UK from •Held various senior level roles at The Boeing Company in supply chain, program management and general management.
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PROPOSAL 1: ELECTION OF DIRECTOR
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Board of Directors (continued)
Age: 70 Director Since: 2008 | Board Committee(s): Audit | ||||||
Emeritus Professor of Other Public Company Directorships: •Rentech, Inc. (2007-2018). | |||||||
Relevant Experience and •Department of Defense (“DOD”) Highly Qualified Expert serving as the •Professor and Director of the Systems Engineering Graduate Programs at CSU •Vice President and Enterprise Executive for Energy and the Environment at CSU and The Ohio State University •Director of Defense Research and •Under Secretary for the U.S. Air Force from •Former NASA astronaut and veteran of two shuttle missions. •Retired from the U.S. Air Force in the rank of Major General.
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Your Board unanimously recommends a vote “FOR” each of the nominees presented in Proposal 1.
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Board of Directors (continued)PROPOSAL 1: ELECTION OF DIRECTOR
Directors Remaining in Office Until 2022:2025:
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| Age: 59 Director Since: 2021 | Board Committee(s): Audit | ||||
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Operating Partner of Cerberus Operating and Advisory Company since February 2019. Other Public Company Directorships: •None held during the past five years. | ||||||
Relevant Experience and Skills: •Executive Vice President, Chief Financial Officer of CIRCOR International from December 2013 – December 2018. •Vice President of Finance and Chief Financial Officer of Sikorsky Aircraft Company from May 2012 – December 2013. •Vice President of Finance and Chief Financial Officer of Pratt & Whitney from April 2005 – May 2012. •Corporate Controller at Lockheed Martin from August 2001 – April 2005. •Partner with PricewaterhouseCoopers from March 1997 – August 2001. •Contributes significant strategy, finance, mergers and acquisitions, capital deployment and investor relations expertise. | ||||||
John D. Cohn, Lead Director | ||||||
Age: 68 Director Since: 2002 | Board Committee(s): Audit; Executive | |||||
President of CrossBorder Strategic Solutions, LLC, a strategic advisory firm that assists companies to expand globally with specific focus on execution since August 2019. Other Public Company Directorships: •None held during the past five years. | ||||||
Relevant Experience and Skills: •Senior Vice President, Asia Business Planning and Execution at Rockwell Automation, Inc., a global leader in automation and digital transformation, from 2011-2019. •Senior Vice President, European Business Planning and Execution at Rockwell Automation from 2009-2011. •Senior Vice President, Strategic Development and Communications at Rockwell Automation from 1999-2009. •Contributes expertise in global market and business development, leading organizations through change management, mergers and acquisitions, and extensive knowledge and direct experience in industrial and aerospace markets. | ||||||
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PROPOSAL 1: ELECTION OF DIRECTOR
Eileen P. Drake | ||||||
Age: 56 Director Since: 2017 | Board Committee(s): Nominating and Governance (Chair); Compensation; Executive | |||||
Chief Executive Officer and President of Aerojet Rocketdyne Holdings, Inc., a manufacturer of aerospace and defense products, since Other Public Company Directorships: •Aerojet Rocketdyne Holdings, Inc. (since 2015). | ||||||
Relevant Experience and Skills: •Briefly served as Chief Operating Officer, Aerojet Rocketdyne in •Held various senior level roles at United Technologies Corporation (“UTC”) from •Managed production operations at •Spent seven years as
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Board of Directors (continued)
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| Age: 64 Director | Board Committee(s): Audit (Chair); Executive | ||||
President and Chief Executive Officer of Franklin Electric Co., Inc., a manufacturer and distributor of water and fuel pumping systems, since 2014, and Chairman of the Franklin Electric Board since 2015. Other Public Company Directorships: •Franklin Electric Co., Inc. (since 2014). | ||||||
Relevant Experience and Skills: •Joined Franklin Electric in 1988 and served in various roles of increasing responsibility, including as Chief Financial Officer from 1999-2005, President of the International Water Systems and Fueling Group from 2005-2011, and President and Chief Operating Officer of Franklin Electric from 2011-2014. •Worked on numerous acquisitions in the U.S. and overseas. •Holds an Airline Transport Pilot license since 1981. •Provides the Board extensive experience in P&L, finance, international and general management, and top leadership experience. | ||||||
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Board of Directors (continued)PROPOSAL 1: ELECTION OF DIRECTOR
Directors Remaining in Office Until 2023:
Whose Term Will Not Continue After the Annual Meeting:
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Paul Donovan | ||||||
Age: 75 Director Since: 2000 | Board Committee(s): Audit | |||||
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Retired in 2004 as special advisor to the Chairman of Wisconsin Energy Corporation. Other Public Company Directorships: •CLARCOR, Inc. (2003-2017). | ||||||
Relevant Experience and Skills: •Executive Vice President and Chief Financial Officer of Sundstrand Corporation, a manufacturer of aerospace and industrial products, from •Held a variety of financial positions, including at Allied Signal and Ford Motor Company.
•Brings expertise regarding the intricacies of tax, banking, finance, |
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| Mary L. Petrovich | |||||
Age: 59 Director Since: 2002 | Board Committee(s): Compensation; Nominating and Governance | |||||
Senior advisor to private equity with the Carlyle Group and American Security Partners since Other Public Company Directorships: •Nikola Corporation (since 2020). •WABCO (2011-2019). | ||||||
Relevant Experience and Skills: •Executive Chair of AxleTech International, a supplier of off-highway and specialty vehicle drive train systems and components, from •Chairman and Chief Executive Officer of AxleTech International from •Former President of the Drivers Controls Division of Dura Automotive, possessing management responsibility for 7,600 employees.
•Significant operational experience with Six Sigma lean manufacturing techniques and supply chain |
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Board of Directors (continued)PROPOSAL 1: ELECTION OF DIRECTOR
Recently Retired Director:
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Retired as Chairman of the Board, President and Chief Executive Officer of the Company in May 2022. Retired as a director and employee of the Company in July 2022. Other Public Company Directorships: •Hexcel Corporation (since 2010). | ||||||
Relevant Experience and Skills: •Served Woodward for over 30 years in both the aerospace and industrial businesses, providing leadership in sales, marketing, business development, and product support management. •Extensive experience with and knowledge of the Company’s businesses and the industries in which they operate. •Comprehensive understanding of Woodward and its operations, including the Company’s strategic vision, products, suppliers, customers and markets. | ||||||
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GOVERNANCEPROPOSAL 1: ELECTION OF DIRECTOR
Governance DocumentsBoard Skills and Diversity Highlights
Woodward’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of the NASDAQ Stock Market (“NASDAQ”), SEC rules and regulations, and the applicable corporate governance requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). We maintain a corporate governance page on our website at http://www.woodward.com/about/corporate-governance. Included on this site are the following documents adopted by our Board:
The Woodward Constitution;
Director Guidelines;
Executive/Director Stock Ownership Guidelines;
The Woodward Code of Business Conduct and Ethics for directors, officers, and employees (who we refer to as members);
Woodward Code of Ethics for Senior Financial Officers andRAJEEV BHALLA Age: 59 WWD Board Tenure: 2* Other Finance Members;
Policy relating to “Insider” Trades of Woodward Stock;
Clawback Policy; and
Related Person Transaction Policies and Procedures.
Charters for our Audit Committee, Compensation Committee, Executive Committee, and Nominating and Governance Committee can also be found on our corporate governance page, as well as a link to EthicsPoint, our third-party help-line reporting system provider.Public Company Boards w/in 5 Years: 0 CHARLES P. BLANKENSHIP, JR. Age: 56 WWD Board Tenure: 1* Other Public Company Boards w/in 5 Years: 1 JOHN D. COHN Age: 68 WWD Board Tenure: 21* Other Public Company Boards w/in 5 Years: 0 PAUL DONOVAN Age: 75 WWD Board Tenure: 23* Other Public Company Boards w/in 5 Years: 1 EILEEN P. DRAKE Age: 56 WWD Board Tenure: 6* Other Public Company Boards w/in 5 Years: 1 DAVID P. HESS Age: 67 WWD Board Tenure: 2* Other Public Company Boards w/in 5 Years: 3 DANIEL G. KORTE Age: 6* Other Public Company Boards w/in 5 Years: 1 MARY L. PETROVICH Age: 59 WWD Board Tenure: 21* Other Public Company Boards w/in 5 Years: 2 RONALD M. SEGA Age: 70 WWD Board Tenure: 15* Other Public Company Boards w/in 5 Years: 1 AVERAGE TENURE 10.9 YEARS GREGG C. SENGSTACK Age: 64 WWD BOARD Tenure: 12* Other Public Company Boards w/in 5 Years: 1 AVERAGE AGE 63.6 YEARS BOARD DIVERSITY GENDER DIVERSITY (2 OF 10) ETHNIC/RACIAL DIVERSITY (1 OF 10) DIRECTOR INDEPENDENCE INDEPENDENCE (9 OF 10) BOARDS SKILLS AND EXPERIENCE SENIOR EXECUTIVE OF PUBLIC COMPANY (9 OF 10) FINANCIAL EXPERTISE (8 OF 10) TECHNICAL EXPERTISE (5 OF 10) MANUFACTURING / OPERATIONS (6 OF 10) M&A & BUSINESS INTEGRATION (10 OF 10) GLOBAL EXPERIENCE (9 OF 10) AEROSPACE EXPERIENCE (8 OF 10) INDUSTRIAL EXPERIENCE (9 OF 10) *Including year appointed.
Sustainability
Woodward’s mission is to set the global standard in energy control solutions for the aerospace and industrial markets and promote sustainable solutions by optimizing energy use through improved efficiency and lower emissions. Woodward’s continuous commitment to sustainability and corporate social responsibility extends to several aspects of our business, including:
Products and Facilities – Woodward’s clean energy technologies and innovative product designs contribute to the global reduction of harmful emissions as well as the more efficient use of energy and other natural resources, while our innovative facilities and production processes optimize our industrial footprint;
People – Woodward promotes an inclusive work environment that fosters growth, encourages self-development and provides meaningful work. The Company pays competitive wages, offers a comprehensive benefit package, and provides employees with opportunities to develop critical skills and enhance business and professional acumen to support their future success;
Governance – Woodward’s governance structure and core principles enable sustainable growth while advancing shareholder value through strong relationships with members, customers, and other stakeholders;
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GOVERNANCE (continued)
Social Responsibility – Woodward is committed to fair and equal treatment of all individuals, human rights, and compliance with all laws such as those addressing child labor, human trafficking, corruption, and conflict minerals.
Woodward’s sustainability report outlines our present and future commitment to sustainability. Our sustainability report is available on our website and can be accessed at http://www.woodward.com/en/about/social-responsibility.
Independent DirectorsPROPOSAL 1: ELECTION OF DIRECTOR
Board Composition and Diversity
The Board during its annualis guided by the Company’s Bylaws, Director Guidelines, and Constitution, which requires the Board to adhere to the philosophy and concepts, including respect for the dignity, value and equality of all of our employees. The Nominating and Governance Committee is committed to exercising best practices of corporate governance and recognizes the importance that the Board contains (i) diversity of knowledge and experience at policy-making levels in business, public service, education, technology, and other relevant knowledge that contributes to the Company’s global activities, and (ii) diversity in cultural background, ethnicity, gender and age. Taken together, the Board believes that a board comprised of diverse directors supports the Board’s ability to effectively oversee the Company’s business, and as such the Board believes that diversity is an important aspect of board composition. The Nominating & Governance Committee periodically meets with the full Board to review the Board’s composition to ensure the Board has an appropriate mix of diversity attributes. In evaluating the independence of its members,Board’s composition, the Nominating & Governance Committee considers, for each incumbent director and any potential nominee, various factors, including the skills and attributes described in the above chart. For more information on our director nomination process, please refer to the “Director Nomination Process” section below.
The table below provides aggregate statistics regarding our Board-level diversity:
Board Diversity Matrix (As of December 9, 2022) | ||||
Total Number of Directors | 10 | |||
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| Male | |
Part I: Gender Identity | ||||
Directors | 2 |
| 8 | |
Part II: Demographic Background | ||||
Asian |
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White | 2 |
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Director Independence
The Board has determined that each member of the Board, other than Mr. Gendron,Blankenship, is independent under the criteria established by current NASDAQthe Nasdaq listing requirements for independent directors.rules. In addition, the Board has determined that each member of the Audit Committee and each member of the Compensation Committee meets the additional independence criteria required for audit committee and compensation committee members, as applicable, established by SEC rules and regulations and NASDAQNasdaq listing requirements.rules.
To better manage our environmental, social and governance ("ESG") programs and initiatives, we created a cross-functional executive-led team to establish and promote the strategies, standards and practices that advance Woodward’s ESG performance (the "ESG Steering Committee"). The ESG Steering Committee is responsible for evaluating our ESG practices; developing and recommending ESG strategies, practices and commitments that should be a principal focus company-wide; coordinating across the business to ensure ESG efforts are leveraged and synchronized across the enterprise; supporting the businesses to help achieve effective implementation of strategic ESG goals; and ensuring that our global ESG strategies, initiatives and accomplishments are effectively communicated to our stakeholders, including customers, investors, employees and our local communities.
Environmental
For more than 150 years, Woodward has specialized in selling products and solutions that improve efficiency and energy control in our customers’ engines and other systems and products. We pride ourselves on being responsive to our customers’ needs and creating innovative solutions that make manufacturing more energy-efficient, are more cost effective, and decrease emissions and waste. Our innovative fluid energy, combustion control, electrical
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PROPOSAL 1: ELECTION OF DIRECTOR
energy, and motion control systems help customers offer cleaner, more reliable, and more efficient equipment. By focusing on improving energy efficiency emissions for our products and in our customers’ products, Woodward is well positioned to support global efforts to increase energy efficiency and reduce greenhouse gases.
Notably, we recently announced that we will work together with one of our customers, Airbus, to provide the Fuel Cell Balance of Plant ("BoP") solution for the ZEROe demonstrator, which aims to put a zero-emission aircraft into service by 2035. Woodward will contribute advanced design capabilities and world-leading fuel technologies for the ZEROe project for more sustainable air travel based on hydrogen propulsion. Our BoP will contribute an essential part of the project, with a comprehensive package of monitoring and control means for hydrogen fuel and air for the hydrogen fuel cell system. Airbus aims to put a zero-emission aircraft into service by 2035. The ZEROe project will provide important solutions in the portfolio for emission-free flying.
With respect to the emissions that we generate in our own operations, over the past year we made significant progress in developing our processes in connection with assessing and measuring our Scope 1 and Scope 2 emissions. We have tracked a significant portion of our Scope 1 and Scope 2 emissions since 2017, and over the past year we devoted meaningful resources to assessing our emissions collection and reporting processes, including data governance, collection, consolidation and controls. Our short-term focus is to close certain gaps we identified in these processes and to establish internal controls to ensure the accuracy and reliability of our emissions data. We are also working diligently to propose an emissions reduction target, including identifying emissions reduction opportunities and reasonable timelines to achieve those reductions.
Social
Woodward employees are the Company’s most valuable resource and at the heart of our success. Hiring, developing, and retaining talent are critical components to our long-term sustainable success and remain a top priority.
Woodward continues to make significant investment in training and professional development. We have established and grown our in-house training programs, which provide resources and courses to employees in all business units and departments. We provide online training that promotes career and personal development, in addition to commercial, technical and compliance topics. For example, our new machinists and technicians undergo a rigorous, multi-month training and skills development process that enables them to perform to Woodward’s high standards. We are focused on improving training and development, including by compressing the training cycle time to develop our employees quickly and efficiently without compromising safety or quality. Woodward also has a Tuition Assistance Program, which supports employees who are interested in post-secondary education opportunities.
The health and safety of our employees is also a top priority. We have implemented appropriate procedures and precautions to ensure the continued safety and well-being of employees. We are always looking for ways to exceed compliance standards by utilizing continuous improvement discipline to proactively eliminate risks in the workplace. A key organizational focus over the next year will be the successful expansion of our find-it fix-it proactive workplace safety initiative to all employees.
In addition to our comprehensive investment in our employees’ success and safety, we strive to maintain an inclusive environment that values and leverages the uniqueness of each member to the benefit of all our stakeholders. We view the combination of diverse perspectives and backgrounds as a powerful force for innovation. To promote diversity and our core principles, we emphasize dignity, value, and equality of all employees, regardless of race, color, religion, age, gender or sexual orientation, through our actions and the workplace training programs we provide. We continually strive to harness the diversity of our global workforce by cultivating a climate that permits all our employees to bring their authentic selves to work every day.
Woodward’s policies and practices reflect corporate governance initiatives that are compliant with the Nasdaq listing rules, SEC rules and regulations, and the applicable corporate governance requirements of the Sarbanes-
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PROPOSAL 1: ELECTION OF DIRECTOR
Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). We maintain a corporate governance page on our website at http://www.woodward.com/about/corporate-governance. Highlights of our corporate governance include:
•100% Independent Committee Members •Lead Independent Director with Lead Independent Director Charter •Majority Voting for Directors with Mandatory Resignation Policy •Annual Board and Committee Evaluations •Director Overboarding Policy •Director Change in Circumstances with Resignation Policy •Director Retirement Policy •Periodic Review of Committee Charters and Governance Policies •Published Corporate Responsibility Report | •Regular Meetings of Independent Directors Without Management Present •Formal CEO Evaluation Process •Clawback Policy for Cash and Equity Compensation •Annual Say-on-Pay Vote •Stockholder Engagement Program •Stock Ownership Guidelines for Directors and Officers •Anti-Hedging and Anti-Pledging Policy •Codes of Conduct for Directors, Officers and Employees •Succession Planning Process |
Code of Ethics
Our Board has adopted a Code of Business Conduct and Ethics for directors, officers and employees. We have also adopted a Code of Ethics for Senior Financial Officers and Other Finance Members. Both codes are available on our website at http://www.woodward.com/about/corporate-governance. We will post on this section of our website any amendment to either code, as well as any waivers of either code, that are required to be disclosed by SEC or Nasdaq rules.
Board Structure and Risk Oversight
As noted above, on May 9, 2022, Mr. Gendron servesBlankenship was appointed as our Chairman of the Board and Chief Executive Officer (“CEO”). CEO, following Mr. Gendron’s retirement.
Because one individual serves as both Chairman and CEO, the Board appoints an independent director to serve as “Lead Director.” Our Lead Director is Mr. Cohn, who was appointed to that position by the Board in 2017. The Board believes the combined Chairman/CEO position, together with an independent Lead Director, has certain advantages over other board leadership structures and best meets the Company’s current needs. Mr. Gendron’sBlankenship’s leadership as Chairman and CEO provides our Board with detailed and in-depth knowledge of the Company’s strategy, markets, operations and financial condition, and enhances our ability to communicate a clear and consistent strategy to our stockholders, employees and business partners. This leadership structure differentiatesprovides clear separation of the oversight role of the Lead Director and other independent directors from the oversight role of the Chairman/CEO and other management, enabling the Board and the Chairman/CEO to have greater clarity and focus on their respective leadership roles.
Our Board has adopted a Lead Director charter that provides a clear and formal delineation of the duties and responsibilities of the Lead Director. The charter provides that the Lead Director will serve a maximum term of five years in such capacity. The Lead Director chairs, among other duties, separate sessions of the independent directors following regularly scheduled Board meetings. Topics discussed at the sessions of the independent directors are at discretion of such directors, and generally include among other things, a review of our CEO’s performance. The Lead Director thereafter meets with the CEO to review items discussed at the sessions of the independent directors and to provide feedback from the Board with regard to his overall performance as CEO. The Lead Director then reports to the independent directors regarding each such feedback meeting with the CEO. Additionally, the Lead Director (together with the Chairperson of the Compensation Committee) presents to the CEO his annual performance review as conducted by the Compensation Committee with input from the independent directors. The Lead Director also leads a review and discussion regarding the results of the Board’s annual self-evaluation, discussed below. The Lead Director also communicates with the CEO on a regular basis to discuss any other Board matters or concerns, and acts as a liaison in that regard between the independent members of the Board and the CEO, without inhibiting direct communication between them.
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BOARD Leadership Structure (continued)
The Board is responsible for, among other things, overseeing the management of the business and affairs of the Company; selecting and recommending to stockholders appropriate candidates for election to the Board; reviewing and, where appropriate, approving the business plans, major strategies and financial objectives of the Company; evaluating Board processes and performance and the overall effectiveness of the Board; evaluating the performance of the Company and of senior management; requiring, approving and overseeing the implementation of the Company’s succession plans; reviewing compliance with applicable laws and regulations and adopting and overseeing policies of corporate conduct to assure compliance with applicable laws and regulations, a corporate culture that reflects the Company’s values, and maintenance of necessary accounting, financial and other controls.
The Board understands there is no single “one-size fits all” approach to providing Board leadership in the competitive and changing environment in which we operate. The optimal Board leadership structure may vary as circumstances warrant. At present, the Board believes its current structure effectively maintains independent oversight and management. Consistent with our Director Guidelines, the Board reviews and considers whether the positions of Chairman and CEO should be combined or separated as part of a regular review of the effectiveness of the Company’s governance structure.
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PROPOSAL 1: ELECTION OF DIRECTOR
Lead Independent Director
Our Board has adopted a Lead Director Charter that provides a clear and formal delineation of the duties and responsibilities of the Lead Director. The charter provides that the Lead Director will serve a maximum term of five years in such capacity, unless the Board determines in its sole discretion that circumstances exist that would support extending the term of service beyond such period. During fiscal year 2022, and in connection with the appointment of Mr. Blankenship, the Board extended Mr. Cohn’s term as Lead Director by an additional year to provide continuity of independent Board leadership during Mr. Blankenship’s initial tenure as CEO. Responsibilities of the Lead Director include, among other duties:
presiding at all meetings of the Board at which the Chairman and CEO is not present, including separate sessions of the independent directors, and briefing the Chairman and CEO on the items discussed in such meetings;
in consultation with the Chair of the Compensation Committee, presenting to the Chairman and CEO his annual performance review, and from time to time providing updates to the Chairman and CEO in regard to overall performance;
together with the Chair of the Nominating and Governance Committee, reviewing and reporting on the results of the Board self-evaluation;
facilitating discussion and open dialogue among all independent directors during and outside of Board meetings;
serving as a liaison between the Chairman and CEO and the independent directors, without inhibiting direct communication between them; and
communicating with the Chairman and CEO on a regular basis to discuss any other Board matters or concerns.
Long-Term Strategic Planning
Our Board recognizes the importance of assuring that our overall business strategy is designed to create long-term, sustainable value for our stockholders. As a result, our Board maintains an active oversight role in helping our management team formulate, plan and implement the Company’s strategy. The Board and our management team routinely discuss the execution of our long-term strategic plans, the status of key initiatives, and the key opportunities and risks facing the Company. At least annually, the Board participates in an in-depth review with our management team of the Company’s strategic plan, including the industry and competitive landscapes, and short- and long-term plans and priorities. In addition to our business strategy, the Board reviews the Company’s financial plan for the upcoming year, which is aligned to the Company’s long-term strategic plans and priorities.
Risk Oversight
The Board’s Risk Oversight Responsibilities
The Board is responsible for overseeing risk management, including but not limited to oversight of identification and mitigation of risks associated with our strategic plan, capital structure, operational performance and supply chain management, development activities, talent attraction, retention and succession planning, compliance with government regulations, cybersecurity, market or technology shifts, and other significant inherent risks. The Board has the ultimate oversight responsibility for the Company’s risk management activities, with various committees of the Board composed entirely of independent directors overseeing certain aspects of risk management. While the Board and its various committees have oversight responsibilities for risk management processes, management has responsibility for the day-to-day aspects of risk management. The Board and its committees receive regular reports on risk management from Company management and our independent auditors. The Board and its committees have direct and independent access to management. By fostering increased communication, we believe the
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PROPOSAL 1: ELECTION OF DIRECTOR
current Board leadership structure and our Board risk oversight practices lead to the identification and implementation of effective risk management strategies.
Key Board Committee Oversight Responsibilities
The Audit Committee is responsible for risks relating to the Company's financial statements, financial reporting processes, the evaluation of the effectiveness of internal control over financial reporting, oversight of the Company’s cybersecurity risk and compliance activities, and the Company’s compliance with its financial and ethics policies.
The Compensation Committee is responsible for monitoring risks associated with the design and administration of the Company's compensation programs and equity compensation plans, performs the annual performance review of the CEO, and ensures the independence of the compensation consultant.
The Nominating and Governance Committee oversees risks relating to the Company's corporate governance processes, compliance with the SEC and Nasdaq rules and regulations, and other state and federal laws and regulations relating to corporate governance, and reviews and reassesses the adequacy of the Company’s Code of Business Conduct and Ethics.
Oversight of Other Core Business Functions
In addition, employees representing certain core business functions also regularly engage with the Board and its committees. For example:
Our Vice President, Information Technology provides periodic updates to the Audit Committee on cybersecurity, cybersecurity compliance, and other risks relevant to our information technology environment, as well as updates regarding the results of periodic cybersecurity exercises and cyber response readiness assessments. We also engage third-party advisors who provide to management and the Audit Committee an independent assessment of our cyber risk management program and our internal response preparedness.
Our internal audit function reports directly to the Audit Committee and provides objective audit, investigative and advisory services designed to gauge whether the Company is anticipating, identifying, assessing and appropriately prioritizing and mitigating risks.
Members of our Global Legal & Compliance function update our Board regularly on material legal, ethics, compliance and governance matters. Our General Counsel oversees risks related to ethics and compliance, labor and employment, and disputes and litigation, and provides regular reports to the Audit Committee on these topics.
Our Business Development team, together with other key leaders, assists the Board in its oversight of strategic acquisitions, investments and assessments of the competitive landscape.
Effectiveness of Our Risk Oversight Approach
We believe the division of risk management responsibilities among the Board, its committees and management is the most effective approach for addressing the risks that Woodward faces. The existing Board leadership structure supports effective risk oversight by promoting communication between the independent directors and management, including discussions between the Lead Director and the Chairman and CEO. In addition, independent directors chair the various committees involved in assisting with risk oversight, and all directors are involved in the risk oversight function.
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PROPOSAL 1: ELECTION OF DIRECTOR
Board and Committees Self-Evaluation Process
Board and committee evaluations play a critical role in ensuring the effective functioning of our Board and its committees. Our Board and its committees annually evaluate their own performance. Generally, as part of the self-evaluation process, directors are provided with detailed questionnaires and then participate in a guided, one-on-one interview-based or a group discussion-based evaluation designed to offer a thoughtful and substantive reflection on the Board’s or committee’s performance, as applicable. The questionnaires and interviews consider various topics related to Board and committee composition, structure, effectiveness and responsibilities, as well as the overall mix of director skills, experience and backgrounds. As set forth in its charter, the Nominating and Governance Committee oversees the Board evaluation process. The Nominating and Governance Committee periodically reviews the form of questionnaire and the self-evaluation process, considers whether changes are recommended, and reports the results to the Board.
Director Overboarding Policy
Directors are expected to commit substantial time and energy to the Board and should ensure that other existing and future time commitments do not materially interfere with their service as a director. Unless otherwise approved in advance by the Nominating and Governance Committee, directors who are not Woodward employees may serve on the boards of a maximum of four other public companies, and directors who are also Woodward employees may serve on the board of a maximum of one other public company. Additionally, no member of the Audit Committee may serve on more than two other public company audit committees without first obtaining the prior approval of the Board.
Director Retirement Policy
Under the Director Guidelines, no individual will be nominated by the Board for re-election if such individual will achieve the age of 70 as of the annual stockholder meeting date of such re-election, unless the Board determines in its sole discretion that circumstances exist that would support any such nomination.
Policy with Respect to Change in Professional Responsibilities
Directors whose professional responsibilities change significantly from those they had when they were elected to the Board or who are involved in other circumstances that may negatively impact the Board or the Company should volunteer to resign from the Board. Such persons should not necessarily leave the Board. There should, however, be an opportunity for the Board through the Nominating and Governance Committee to review the continued appropriateness of Board membership under the circumstances.
The Board met eleventen times in fiscal year 2020, including multiple special meetings of the Board in connection with the previously contemplated merger with Hexcel Corporation (which was terminated in April 2020).2022. All directors attended at least 7590 percent of the aggregate of the total meetings of the Board and all committees on which they served, with the exception of Mr. Rulseh who was unable to attend certain meetings due to health reasons.served. Directors are encouraged, but are not required, to attend annual meetings of stockholders. TheAll then-incumbent directors attended the Company’s last annual meeting of stockholders was attended by all but one of our directors.stockholders.
The Board has the following standing committees:an Audit Committee;Committee, Compensation Committee;Committee, Nominating and Governance Committee;Committee, and Executive Committee.Committee, each of which has the composition and responsibilities described below. All actions by committees are reported to the Board at the next regularly scheduled meeting. As part of its ongoing corporate governance review, the Board reviews its assignment of committee memberships annually. Mr. Rulseh servedBlankenship replaced Mr. Gendron as the Chair of our Nominating and Governance Committee for all of fiscal year 2020, and he continued to serve in that capacity until his retirement from the Board on November 19, 2020. At its November 2020 meeting, the Board made the following committee rotations, effective as of December 1, 2020: (i) Messrs. Cohn and Donovan were appointed as memberschair of the AuditExecutive Committee and removedupon his May 9, 2022 appointment as membersChairman of the Nominating and Governance Committee and the Compensation Committee, (ii) Mr. Korte was appointed as Chairperson of the Compensation Committee, replacing Ms. Petrovich as Chairperson, appointed as a member of the Nominating and Governance Committee, and removed as a member of the Audit Committee, and (iii) Ms. Drake was appointed as Chairperson of the Nominating and Governance Committee, replacing Mr. Rulseh as Chairperson, appointed as a member of the Compensation Committee, and removed as a member of the Audit Committee. No other changes were made to the committee assignments as reported in last year’s proxy statement.Board.
2024
Board Meetings and Committees (continued)PROPOSAL 1: ELECTION OF DIRECTOR
The following table reflects the committee memberships as of the filing date of this proxy statement:
NAME |
| AUDIT |
| COMPENSATION |
| NOMINATING & GOVERNANCE |
| EXECUTIVE | ||||
Rajeev Bhalla | ■ | |||||||||||
Charles P. Blankenship, Jr. | ■ | |||||||||||
John D. Cohn |
| ■ |
|
|
|
|
| ■ | ||||
Paul Donovan |
| ■ |
|
|
|
|
|
| ||||
Eileen P. Drake |
|
|
| ■ |
| ■ |
| ■ | ||||
| David P. Hess |
|
|
| ■ | ■ | ||||||
Daniel G. Korte |
|
|
| ■ |
| ■ |
| ■ | ||||
Mary L. Petrovich |
|
|
| ■ |
| ■ |
|
| ||||
Ronald M. Sega |
| ■ |
|
|
|
|
|
| ||||
Gregg C. Sengstack |
| ■ |
|
|
|
|
| ■ | ||||
■ = Committee Member; ■ = Chair |
|
|
|
|
|
|
TheMembership
Our Board has determined that each member of our Audit Committee oversees and monitorssatisfies the Company’s accountingrequirements for independence for Audit Committee members and financial reporting processes, includingliteracy under the quality of internal controls over those processes and audits of the Company’s financial statements and internal controls over financial reporting. The Audit Committee also retains, oversees, and evaluates the Company’s independent registered public accounting firm, and is involved in the selection of the lead audit partner. The Audit Committee also reviews and approves the selection and tenure of the Company’s internal audit lead, and periodically assesses the quality of internal audit activity. The Audit Committee also assists the Board with monitoring compliance with laws, regulations and the Company’s Code of Business Conduct and Ethics. The Audit Committee is also responsible for reviewing the Company’s financial reporting risk exposure and the Company’s risk assessment and risk management processes. In addition, the Audit Committee oversees compliance of the Company’s financial statements with applicable rules and regulations and recommends to the Board, based on reviews and discussion with managementof Nasdaq and the Company’s independent registered public accounting firm, that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K. The Audit Committee operates under a charter that more fully describes the responsibilities of the Audit Committee. The Audit Committee reviews its charter at least annually and recommends to the Board such revisions as it deems necessary or appropriate.
The Audit Committee charter can be found on our website at http://www.woodward.com/about/corporate-governance.
Consistent with SEC rules and regulations and NASDAQ’s listing standards, and in accordance with the Audit Committee charter, all members of the Audit Committee are independent directors and meet all enhanced independence requirements for Audit Committee members.SEC. The Board of Directorshas also determined that Messrs. Sengstack, Bhalla and Donovan are audit committee financial experts within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended, and have experience resulting in “financial sophistication” as defined under NASDAQNasdaq listing requirements.rules.
Committee Charter
Our Audit Committee operates under a written charter that was adopted by our Board and satisfies the applicable standards of Nasdaq and the SEC. The Audit Committee reviews its charter at least annually and recommends to the Board any revisions it deems necessary or appropriate. A copy of the Audit Committee Charter is available on our website at http://www.woodward.com/about/corporate-governance.
Responsibilities
Our Audit Committee oversees (i) our accounting and financial reporting processes, including the quality of internal controls over those processes, and the audits of the Company’s financial statements and internal control reports, and (ii) our processes for risk management, monitoring compliance with laws and regulations, and adherence to the Company’s Code of Business Conduct and Ethics. The Audit Committee’s responsibilities also include, but are not limited to:
• | appointing, compensating, overseeing, and evaluating the Company’s independent registered public accounting firm, and participating in the selection of the lead audit partner; |
assessing the quality of internal audit activity;
reviewing and approving the selection and tenure of the Company’s internal audit lead;
assisting the Board with monitoring the Company’s compliance with laws and regulations;
establishing procedures for the receipt, retention and treatment of complaints received regarding accounting, internal controls, or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
25
PROPOSAL 1: ELECTION OF DIRECTOR
reviewing the Company’s financial reporting risk exposure and the Company’s risk assessment and risk management processes;
overseeing compliance of the Company’s financial statements with applicable rules and regulations; and
recommending, based on reviews and discussion with management and our independent registered public accounting firm, that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K.
Meetings
The Audit Committee held sixfive meetings in fiscal year 2020.2022.
Membership
Our Board has determined that each member of our Compensation Committee satisfies the requirements for independence for Compensation Committee members under all applicable rules and regulations of Nasdaq and the SEC.
Our Compensation Committee operates under a written charter that was adopted by our Board and satisfies the applicable standards of Nasdaq and the SEC. The Compensation Committee dischargesreviews its charter at least annually and recommends to the responsibilitiesBoard any revisions it deems necessary or appropriate. A copy of the Board relating toCompensation Committee Charter is available on our website at http://www.woodward.com/about/corporate-governance.
Responsibilities
Our Compensation Committee administers our incentive and other compensation of the Company’s Chief Executive Officerplans, reviews our compensation practices and policies, determines compensation for our CEO and other executive officers, and conductsgenerally supports our Board in carrying out its overall responsibilities relating to executive compensation. The Compensation Committee’s responsibilities also include, but are not limited to:
conducting an annual performance review of the Chief Executive OfficerCEO with input from the independent members of the Board. The Compensation Committee reviewsBoard;
overseeing and approves the compensation of all ofadministering our executive officers. The Compensation Committee has oversight responsibility
o | annual incentive compensation under Woodward’s short-term variable incentive plan, |
o | long-term incentive program, which includes both a cash and equity component, and |
o | Omnibus Incentive Plan; |
designing and approving performance metrics, and reviewing performance against such metrics, for the Company’s (i) annual short-term incentive compensation under the Woodward Variable Incentive Plan (the “WVIP”), (ii)and long-term incentive program, which includes a both a cash componentprograms;
21
Board Meetings and Committees (continued)
(Woodward’s Cash Long-Term Incentive Plan (the “Cash LTI”)) and an equity component, and (iii) Omnibus Incentive Plan. Exceptexcept as described under the “Delegation of Authority” section, the Compensation Committee determines, determining and takestaking all action, including granting of all incentives and/or equity compensation to eligible recipients, in accordance with the terms of the Omnibus Incentive Plan,Plan; and serves as administrator
approving and oversees compliance withoverseeing the termsapplication of the plan.The Compensation Committee reviews performance against targets for both the annual incentive compensation plan and the long-term incentive compensation plan. In addition, the Compensation Committee produces the annual report required by SEC rules, and recommends to the Board the inclusion of the Compensation Discussion and Analysis (“CD&A”) in the Company’s Annual Report on Form 10-K and its proxy statement.our Clawback Policy.
The Compensation Committee charter can be found on our website at http://www.woodward.com/about/corporate-governance.
Consistent with NASDAQ’s listing requirements, and in accordance with the Compensation Committee charter, all members of the Compensation Committee are independent directors and meet the heightened standards for independence of Compensation Committee members under the NASDAQ listing rules. The Compensation Committee charter provides that the Compensation Committee may, after reviewing certain specified independence criteria, retain or obtain the advice of compensation advisers. The Compensation Committee charter also provides that the Compensation Committee is responsible for the appointment, compensation and oversight of the work of any such compensation advisers, and that the Company will provide for appropriate funding for payment of reasonable compensation to any compensation advisers retained by the Compensation Committee.Meetings
The Compensation Committee held ninesix meetings in fiscal year 2020, including certain special meetings in connection with the previously contemplated merger with Hexcel Corporation.2022.
In making its decisions and completing its annual review of our executive compensation program, the Compensation Committee routinely examines a variety of factors which typically include the following (among others):
Financial reports on performance versus budget and compared to prior year performance for purposes of establishing any payouts under the WVIP;
Calculations and reports on levels of achievement of corporate performance objectives in the WVIP;
Reports on the Company’s strategic initiatives and budget for future performance periods;
Information on the Company’s officers’ and directors’ stock ownership and option holdings;
Information regarding dilutive effects of the equity compensation plans;
Data regarding the total compensation of our Chief Executive Officer, Chief Financial Officer, and our three other most highly compensated executive officers (our Named Executive Officers, or “NEOs”), including base salary, cash incentives, equity awards, and any perquisites;
Information regarding compensation programs and compensation levels at our peer comparator group identified by our independent compensation consultant and described under the caption “Compensation Discussion and Analysis — Compensation Philosophy and Strategy — Competitive Comparisons”;
The extent to which executive compensation and Company performance are aligned;
Trends, leading practices and governance or regulatory changes that impact executive compensation; and
The design and administration of the Company's compensation programs and equity compensation plans, and associated risks, if any.
2226
Board Meetings and Committees (continued)PROPOSAL 1: ELECTION OF DIRECTOR
Compensation Committee Interlocks and Insider Participation
Mr. Korte, Ms. Drake, Mr. Hess and Ms. Petrovich served as members of the Compensation Committee in fiscal year 2022. The Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules, and no Compensation Committee member had any relationship required to be disclosed pursuant to Item 404 of Regulation S-K.
Delegation of Authority
The Compensation Committee charter provides authority to the Compensation Committee to delegate any of its role and responsibilities to subcommittees entirely made up of Compensation Committee members.members, as it deems appropriate. The Compensation Committee has delegated, to a subcommittee comprised of the Compensation Committee Chairperson and one other Compensation Committee member, the authority to review and approve the grant of options, restricted stock units and/or restricted stock to officers and other employees of the Company, members of the Board, or consultants of the Company in the interval between regularly scheduled meetings of the Compensation Committee, subject to the pool for awards as identified and approved by the Compensation Committee in advance on an annual basis (such grants, “interim grants”). Additionally, the Board has (i) delegated to the Chief Executive OfficerCEO limited authority to make certain interim grants, and (ii) delegated to the Compensation Committee all of the Board’s rights to impose restrictions on such authority of the Chief Executive Officer.CEO. The Chief Executive OfficerCEO is not permitted to make grants to any member of the Board, any Section 16 officer, or any other elected officer of the Company. The Chief Executive OfficerCEO is authorized to make grants of not more than 15,000 nonqualified stock options or 5,000 shares of Restricted Stock Units or Restricted Stock Awards to any individual during any fiscal year. The Compensation Committee delegated to the Chairman of the Compensation Committee the authority to approve any and all option exercises when the optioneegrantee seeks to pay for the cost of the option and/or the taxes associated with the transaction with stock previously owned and held by the optionee for at least six months. The Chairman of the Compensation Committee is authorized to further delegate these responsibilities to any other member of the Compensation Committee.
Risk Assessment
The Compensation Committee regularly and independently reviews the Company’sour compensation policies and practices, including reviewing our incentive compensation programs, to confirm that incentive pay does not encourage unnecessary risk taking. The Compensation Committee believes that our compensation policies and believes theypractices are robust and effective. The Company also conducted a review of its compensation plans and related risk to the Company. The Company and the Compensation Committee, with the input of Aon, the Board’sour independent compensation consultant (Aon), have concluded that any risks arising from the Company’s employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Nominating and Governance Committee
Membership
Our Board has determined that all members of the Nominating and Governance Committee are independent within the meaning of the Nasdaq listing rules.
Our Nominating and Governance Committee operates under a written charter that was adopted by our Board and satisfies the applicable standards of Nasdaq and the SEC. The Nominating and Governance Committee reviews its charter at least annually and recommends to the Board any revisions it deems necessary or appropriate. A copy of the Nominating and Governance Committee Charter can be found at http://www.woodward.com/about/corporate-governance.
27
PROPOSAL 1: ELECTION OF DIRECTOR
Responsibilities
Our Nominating and Governance Committee identifies and recommends to our Board qualified individuals to fill any vacancies onbecome Board members, and develops and oversees the implementation of corporate governance guidelines and principles. The Nominating and Governance Committee’s responsibilities also include, but are not limited to:
developing and recommending the guidelines and criteria for selecting new members of the Board, develops and administers the Director Guidelinesincluding diversity, and the Company’s guidelinesqualifications for corporate governance, reviewscommittee membership;
conducting searches for potential members of our Board;
recommending director nominees to stand for election as members of the Board at each annual meeting of stockholders;
making recommendations regarding the size of our Board and reassesses the Company’s programsits committees;
making recommendations regarding committee and policies related to its codes of conduct, overseeschair assignments;
overseeing an annual Board self-evaluation, establishesself-evaluation;
reviewing and making recommendations with respect to our Director Guidelines;
establishing and reviewing other governance related policies and guidelines, such as stock ownership guidelines for officers and directors,directors;
reviewing and addresses other governancereassessing our programs and policies related matters. In addition,to the NominatingCompany’s Code of Business Conduct and Governance Committee Ethics; and
periodically evaluatesevaluating the compensation and benefits of the Company’s non-employee members of the Board, and recommends any changes to the Board for approval.
The Nominating and Governance Committee charterheld five meetings in fiscal year 2022.
Membership
The Executive Committee is chaired by the Chairman and CEO. Based on the recommendations of the Nominating and Governance Committee, the Executive Committee is also comprised of the Lead Director and each of the Chairpersons of the Board’s other standing committees.
Charter
A copy of the Executive Committee Charter can be found on our website at http://www.woodward.com/about/corporate-governance.corporate-governance.
In accordance with NASDAQ listing requirements and the Nominating and Governance Committee’s charter, all members of the Nominating and Governance Committee are independent directors. Responsibilities
The Nominating and Governance Committee held six meetings in fiscal year 2020.
The Executive Committee exercises all the powers and authority of the Board in the management of the business when the Board is not in session, and when, in the opinion of the Chairman of the Board, a particular matter should not be postponed until the next regularly scheduled Board meeting. The Executive Committee has been delegated non-exclusive authority to declare cash dividends. The Executive Committee may not authorize certain
23
Board Meetings and Committees (continued)
major corporate actions such as amending the certificate of incorporation, amending the bylaws, adopting an agreement of merger or consolidation, or recommending the sale, lease, or exchange of substantially all of the assets of the Company.
The Executive Committee charter can be found on our website at http://www.woodward.com/about/corporate-governance.28
PROPOSAL 1: ELECTION OF DIRECTOR
Meetings
The Executive Committee held no meetings in fiscal year 2020. 2022.
The Nominating and Governance Committee considers candidates for Board membership as recommended by directors, management, or stockholders. The Nominatingstockholders, and Governance Committee uses the same criteria to evaluate all candidates for Board membership, whether recommended by directors, management, or stockholders.such candidate recommendations. As it deems necessary, the Nominating and Governance Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees. The Nominating and Governance Committee engaged a third-party consultant in fiscal year 20202022 to assist in identifying andand/or evaluating director candidates.
The Nominating and Governance Committee recommends qualified director candidates for nomination by the Board based on the skills and characteristics that the Board seeks in its members as well as consideration of the diversity of the Board as a whole. This review includes an assessment of, among other things, a candidate’s knowledge, education, experience, cultural background, including ethnicity, gender and age, and skills in areas critical to understanding the Company and its business, with a commitment to enhancing shareholder value. The Nominating and Governance Committee seeks candidates with the highest professional and personal ethics and values, that are aligned with the philosophy and concepts as expressed in the Company’s Constitution, and who will operate in accordance with the Company’s Code of Business Conduct and Ethics. The Nominating and Governance Committee also assesses a candidate’s ability to make independent analytical inquiries, and willingness to devote adequate time to Board duties.
Director nominees should possess the following experience, qualifications, attributes and skills:
An understanding of the principal operational and financial objectives, plans and strategies of the Company;
An understanding of the results of operations and financial condition of the Company;
An understanding of the relative standing of the Company in relation to its competitors; and
Leadership experience at the policy-making level in business, government, education or public interest.
Prospective directors should be committed to representing the long-term interests of the stockholders. A potential director must exhibit an inquisitive and objective perspective, an ability to think strategically, an ability to identify practical problems, and an ability to assess alternative courses of action that contribute to the long-term success of the business. Director candidates must have industry expertise and/or commit to understanding the Company’s industry as a basis to address strategic and operational issues of importance to the Company. Directors are also expected to commit substantial time and energy to the Board and should ensure that other existing and future time commitments do not materially interfere with their service as a director. Unless otherwise approved in advance by the Nominating and Governance Committee, non-employee directors shall limit their board service to a maximum of four other public companies, and employee directors shall limit their board service to a maximum of one other public company.
The Nominating and Governance Committee considers other relevant factors, as it deems appropriate, including the current composition of the Board and the need for expertise on various Board committees. Every effort is made to complement and supplement skills within the Board and strengthen identified areas of need. The Nominating and Governance Committee considers the ability of candidates to meet independence and other requirements of the SEC, NASDAQ,Nasdaq, or other regulatory bodies exercising authority over the Company.
24
Board Meetings and Committees (continued)
The Nominating and Governance Committee’s process for evaluating potential director candidates normallytypically requires one or more members of the Nominating and Governance Committee, and others as appropriate (including members of management), to interview prospective nominees in person or by telephone. Upon identification of a qualified candidate, the Nominating and Governance Committee will recommend a candidate for consideration by the full Board.
Director Retirement Policy29
Under the Director Guidelines, no individual will be nominated by the Board for re-election if such individual will achieve the age of 70 as of the annual stockholder meeting date of such re-election, unless the Board determines in its sole discretion that circumstances exist that would support any such nomination.
Policy with Respect to Change in Professional ResponsibilitiesPROPOSAL 1: ELECTION OF DIRECTOR
Directors whose professional responsibilities change significantly from those they had when they were elected to the Board or who are involved in other circumstances that may negatively impact the Board or the Company should volunteer to resign from the Board. Such persons should not necessarily leave the Board. There should, however, be an opportunity for the Board through the Nominating and Governance Committee to review the continued appropriateness of Board membership under the circumstances.
Stockholder Recommendations for Directors
Stockholders wishing to suggest a candidate for Board membership should write our Corporate Secretary at 1081 Woodward Way, Fort Collins, Colorado 80524, and provide certain information to the Company as follows:
The stockholder’s name and contact information;
A statement that the writer is a stockholder of record and is proposing a candidate for consideration by the Nominating and Governance Committee;
The name of, and contact information for, the candidate and a statement that the candidate is willing to be considered and serve as a director, if nominated and elected;
A statement of the candidate’s business and educational experience;
Information regarding the factors described above sufficient to enable the Nominating and Governance Committee to evaluate the candidate;
A statement of the value that the candidate would add to the Board;
A statement detailing any relationship between the candidate and any of our customers, suppliers, or competitors; and
Detailed information about any relationship or understanding between the proposing stockholder and the candidate.
In connection with its evaluation, the Nominating and Governance Committee may request additional information from the candidate or the recommending stockholder. The Nominating and Governance Committee has discretion to decide which individuals to recommend for nomination as directors. In order to give the Nominating and Governance Committee sufficient time to evaluate a recommended candidate, the recommendation must be received by our Corporate Secretary not later than the 120th calendar day before the one year anniversary of the date our proxy statement was mailed to stockholders in connection with the previous year’s Annual Meeting of stockholders. No candidates for director nominations were submitted for consideration or recommended to the Nominating and Governance Committee by any stockholder in connection with the election of directors at this Annual Meeting.
Board Composition and Diversity
The Board meets periodically with the Nominating and Governance Committee to review Board composition for diversity of knowledge, experience, cultural background, ethnicity, gender, and age which, when taken together, enables the Board to ensure that board members possess the skills, perspectives and expertise necessary to
25
Board Meetings and Committees (continued)
effectively oversee the Company’s business. In this regard, the Nominating and Governance Committee considers, for each incumbent director and potential nominee, the various factors described in the below table. The Nominating and Governance Committee reviews the assessment and its recommendations with the Board.
The Nominating and Governance Committee is committed to exercising best practices of corporate governance and recognizes the importance of a Board that contains diverse experience at policy-making levels in business, public service, education, and technology, as well as other relevant knowledge that contributes to the Company’s global activities. The Board believes that diversity is an important component of Board membership, and is guided by the Company’s Bylaws, Director Guidelines, and Constitution, which requires the Board to adhere to the philosophy and concepts, including respect for the dignity, value and equality of all of our employees (who we refer to as members).
Board diversity, leadership and experience qualifications for our independent directors are summarized in the table below:
Board Member | Corporate Governance
| LEADERSHIP EXPERIENCE / COMPLIANCE
| Individual Diversity Attributes
| Strategy
| Industry Knowledge
| ||||||||||||||
John D. Cohn | 19 | – | ∎ | ∎ |
|
|
| ∎ | ∎ | ∎ |
| 66 |
| ∎ | ∎ | ∎ | ∎ | ∎ | ∎ |
Paul Donovan | 21 | 1 | ∎ | ∎ | ∎ |
| ∎ | ∎ |
|
|
| 73 |
| ∎ |
| ∎ | ∎ | ∎ | ∎ |
Eileen P. Drake | 4 | 1 | ∎ | ∎ | ∎ | ∎ |
|
| ∎ | ∎ | ∎ | 54 | ∎ |
| ∎ |
| ∎ | ∎ | ∎ |
Thomas A. Gendron | 16 | 1 |
| ∎ | ∎ | ∎ | ∎ |
| ∎ |
|
| 59 |
| ∎ | ∎ | ∎ | ∎ | ∎ | ∎ |
Daniel G. Korte | 4 | 1 | ∎ | ∎ |
| ∎ | ∎ | ∎ | ∎ | ∎ |
| 60 |
| ∎ | ∎ |
| ∎ |
| ∎ |
Mary L. Petrovich | 19 | 1 | ∎ | ∎ | ∎ |
|
|
| ∎ | ∎ |
| 57 | ∎ | ∎ |
| ∎ |
| ∎ | ∎ |
James R. Rulseh | 19 | 1 | ∎ | ∎ | ∎ | ∎ |
|
| ∎ | ∎ |
| 65 |
| ∎ |
| ∎ |
| ∎ | ∎ |
Ronald M. Sega | 13 | 1 | ∎ |
|
| ∎ | ∎ | ∎ |
| ∎ | ∎ | 68 |
| ∎ |
|
| ∎ | ∎ |
|
Gregg C. Sengstack | 10 | 1 | ∎ | ∎ | ∎ |
| ∎ |
|
|
|
| 62 |
| ∎ | ∎ | ∎ |
| ∎ | ∎ |
*Including year appointed
Board and Board Committees Self-Evaluation Process
Board and committee evaluations play a critical role in ensuring the effective functioning of our Board and Board committees. Our Board annually evaluates the performance of the Board and its committees. Generally, as part of the Board’s self-assessment process, directors are provided with detailed questionnaires and then participate in a guided, one-on-one interview-based or a group discussion-based evaluation designed to offer a thoughtful and substantive reflection on the Board’s performance. The questionnaires and interviews consider various topics related to Board composition, structure, effectiveness and responsibilities, as well as the overall mix of director skills, experience and backgrounds. As set forth in its charter, the Nominating and Governance Committee oversees the Board and committee evaluation process. The Nominating and Governance Committee periodically reviews the form of questionnaire and the self-evaluation process, considers whether changes are recommended, and reports the results to the Board. For fiscal year 2020, the Board modified its typical process based on the previously contemplated merger with Hexcel Corporation. Specifically, the Nominating and Governance
26
Board Meetings and Committees (continued)
Committee delegated authority to specified members thereof to interview each director individually as part of the Board self-evaluation process. The interviews focused on certain criteria deemed critical for the then contemplated combined entity.
Stockholder Communications With the Board of Directors
Stockholders may send communications to the Board by submitting a letter addressed to: Woodward, Inc., Attn: Corporate Secretary, 1081 Woodward Way, Fort Collins, Colorado 80524. The Board has instructed the Corporate Secretary to forward such communications to the Lead Director. The Board has also instructed the Corporate Secretary to review such correspondence and, at the Corporate Secretary’s discretion, not to forward correspondence which is deemed of a commercial or frivolous nature or inappropriate for Board consideration. The Corporate Secretary may also forward the stockholder communication within the Company to the Chief Executive Officer and President or to another executive officer to facilitate an appropriate response.
The Corporate Secretary maintains a log of all communications from stockholders and the disposition of such communications, which the directors review at least annually.
The Board is responsible for overseeing management’s identification and mitigation of Company risks, including but not limited to risks associated with our strategic plan, capital structure, development activities, compliance with government regulations, and other significant inherent risks such as cybersecurity. The Board has the ultimate oversight responsibility for risk management processes, with various committees of the Board composed entirely of independent directors overseeing certain aspects of such risk management. While the Board and its various committees have oversight responsibilities for risk management processes, management has responsibility for the day-to-day aspects of risk management. The Board and its committees receive regular reports on risk management from Company management and independent auditors.
The Audit Committee is responsible for risks relating to the Company's financial statements, financial reporting processes, the evaluation of the effectiveness of internal control over financial reporting, and the Company’s compliance with its financial and ethics policies.
The Compensation Committee is responsible for monitoring risks associated with the design and administration of the Company's compensation programs and equity compensation plans, and performs the annual performance review of the CEO and ensures the independence of the compensation consultant.
The Nominating and Governance Committee oversees risks relating to the Company's corporate governance processes, compliance with the SEC and NASDAQ rules and regulations, and other state and federal laws and regulations relating to corporate governance, and reviews and reassesses the adequacy of the Company’s Code of Business Conduct and Ethics.
The Board and its committees have direct and independent access to management. We believe this division of risk management responsibilities is the most effective approach for addressing the risks that Woodward faces. The existing Board leadership structure encourages communication between the independent directors and management, including those as a result of discussions between the Lead Director and the Chairman of the Board and Chief Executive Officer. By fostering increased communication, we believe that the current Board leadership structure leads to the identification and implementation of effective risk management strategies.
Contemplated Merger with Hexcel Corporation
As part of Woodward’s ongoing consideration and evaluation of our long-term prospects and strategies, the Board and management regularly consider various strategic options potentially available to us, all with the goal of enhancing value for our stockholders. On January 12, 2020, we announced that we had entered into an agreement and plan of merger (the “Merger Agreement”) with Hexcel Corporation (“Hexcel”) and Genesis Merger Sub, Inc., a wholly owned subsidiary of Woodward (“Merger Sub”), which provided that, upon the terms and subject to the
27
Board Meetings and Committees (continued)
conditions set forth therein, Merger Sub would merge with and into Hexcel, with Hexcel surviving the merger as a wholly owned subsidiary of Woodward (the “Merger”). Subsequently, on April 5, 2020, in response to the increasing impact on both the aerospace and industrial sectors, and global markets broadly, resulting from the health crisis caused by the COVID-19 pandemic, the Boards of Directors of both companies mutually agreed to terminate the Merger Agreement with no liability to either company. The Board is confident that this was the right decision for our customers, our shareholders, and our members as it has allowed us, and will continue to allow us, to dedicate our focus and resources toward ensuring Woodward remains strong and closely connected with our customers and supply chain during this unprecedented time.
Related Person Transaction Policies and Procedures
The Board adopted the Company’s Related Person Transaction Policies and Procedures (our “RPT Policy”), which provides that the Audit Committee will review and approve Interested Transactions (as described below). Our RPT Policy delegates the authority to act with respect to Interested Transactions that are valued below a stated threshold to the Chair of the Audit Committee.
Our RPT Policy defines an “Interested Transaction” with reference to transactions described in Item 404 of Regulation S-K promulgated by the SEC, which generally means a transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships or any material amendments or modifications thereto in which the Company (including any of its subsidiaries) was, is, or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has, or will have a direct or indirect interest.
“Related Person” also is defined in our RPT Policy with respect to the definitions contained in Item 404 of Regulation S-K. Generally, “Related Persons” consist of any director or executive officer of the Company, any nominee for director, any holder of five percent or more of the Company’s common stock, or any immediate family member of any such persons. “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, or sister-in-law of any such person, and any person (other than a tenant or employee) sharing the household of such person. It may also include entities with which any of such persons have a relationship.
The approval procedures in our RPT Policy state that the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances. In addition, our RPT Policy states that, in connection with the approval or ratification of an Interested Transaction involving an outside director or nominee for director, the Audit Committee should consider whether such transaction would compromise such director’s status as: (1) an independent director under NASDAQ’s independence standards, (2) an “outside director” under Section 162(m) of the Internal Revenue Code (the “Code”) to the extent appropriate or a “non-employee director” under Rule 16b-3 under the Exchange Act, if such non-employee director serves on the Compensation Committee of the Board, or (3) an independent director under Rule 10A-3 of the Exchange Act, if such non-employee director serves on the Audit Committee of the Board. Our RPT Policy also identifies certain transactions that are deemed to be pre-approved, including transactions involving competitive bids, regulated transactions, and employee transactions. No director participates in any discussion for approval of a related party transaction for which he or she is an interested party other than is necessary to provide relevant information to the Audit Committee.
Woodward is not currently engaged in any Interested Transactions, and there are no known proposed Interested Transactions, that would require disclosure under the RPT Policy.
28
Board Meetings and Committees (continued)
Compensation Committee Interlocks and Insider Participation
Ms. Petrovich and Messrs. Rulseh, Cohn, and Donovan served as members of the Compensation Committee during fiscal year 2020. The Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules and no Committee member had any relationship required to be disclosed pursuant to Item 404 of Regulation S-K.
Non-Employee Director Compensation
During fiscal year 2019, theThe Board has adopted an Outside Director Compensation Policy, the current version of which is filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020.2022. This policy sets forth the types and amounts of compensation that we pay to our non-employee directors. Directors who are also Woodward employees do not receive additional compensation for their services as directors.
Fiscal year 2020 compensation for our non-employee directors was established concurrently with the adoption of, and in conformance with, the Outside Director Compensation Policy. However, on April 3, 2020, the Board approved a temporary reduction of the directors’ annual base retainers by 25% as part of a broader cash conservation effort to mitigate the impact of the COVID-19 pandemic on the Company. In September 2020, the Board reinstated the directors’ full base retainers for fiscal year 2021.
Periodic Evaluation of Outside Director Compensation Policy
Pursuant to the Outside Director Compensation Policy, and in accordance with previous practice, the Nominating and Governance Committee evaluates the market competitiveness of the Company’s director compensation program (including with input from its independent compensation consultant) on a periodic basis, typically every two years. The last such evaluation occurred in September 2019,Board amended the Outside Director Compensation Policy and, effective as of fiscal year 2022, increased for each non-employee director (i) the next evaluation is expectedannual retainer from $82,500 to occur in September 2021.$85,000 and (ii) the target delivered value for equity awards from $135,000 to $140,000. Outside director compensation for fiscal year 2023 remains unchanged from fiscal year 2022.
Cash Compensation
Non-employee directors are paid an annual cash retainer, in addition to certain annual cash retainers for any memberships and/or chair positions on various Board committees or as Lead Director. Annual, Lead Director and committee membership retainers are paid in four equal quarterly installments. Directors do not receive additional compensation for individual Board or Committee meetings attended.
The Outside Director Compensation Policy established cash compensation for non-employee directors at the following levels in fiscal year 2020:2022:
30
PROPOSAL 1: ELECTION OF DIRECTOR
Annual |
| $ |
Lead Director |
| $25,000 |
Audit Committee – Chairman |
| $23,000 |
Audit Committee – Non-Chair members |
| $13,000 |
Compensation Committee – Chairman |
| $12,500 |
Compensation Committee – Non-Chair members |
| $6,500 |
Nominating & Governance Committee – Chairman |
| $12,500 |
Nominating & Governance Committee – Non-Chair members |
| $6,500 |
|
|
29
Board Meetings and Committees (continued)
Equity compensation (in the form of stock options) is awarded to non-employee directors annually, based on a “targeted delivered value.” Non-employee directors appointed to the Board during a fiscal year may also be eligible for an initial equity grant upon their appointment to the Board. For fiscal year 2020,2022, in conformance with the Outside Director Compensation Policy and as approved by the Board, the targeted delivered value was $135,000.$140,000. The number of stock options awarded to each director is determined based on the targeted delivered value, divided by the Black-Scholes value of each stock option as calculated by the Company’s independent compensation consultant for such awards as close to the grant date as practicable. The exercise price of the stock option awards is determined on the effective grant date and is equal to the closing price of the Company’s stock as quoted on NASDAQNasdaq on that day.
Based on the targeted delivered value of $135,000$140,000 and the Black-Scholes value of each option as determined by the independent compensation consultant, the Compensation Committee approved the grant of 4,2003,000 stock options to non-employee directors at an exercise price of $104.77,$117.64, which was the closing price of Woodward common stock as quoted on NASDAQNasdaq on the date of grant (October 1, 2019,2021, the first day of the Company’s fiscal year 2020)2022). Non-employee director stock option grants vest over four years at the rate of 25% per year.
Our Omnibus Incentive Plan and the Outside Director Compensation Policy provide that non-employee directors may not receive equity awards exceeding a targeted delivered value, as determined on the grant date, of $300,000 in any fiscal year (or $450,000 in any fiscal year in which the director is initially appointed).
Executive Benefit Plan
Our directors are eligible to participate in a non-qualified deferred compensation plan, the Woodward Executive Benefit Plan (“EBP”). Under the EBP, our directors are able to defer up to 100% of their earned cash compensation, including retainer fees, and any fees for participation as a committee member, committee chairman, or Lead Director.
31
PROPOSAL 1: ELECTION OF DIRECTOR
Total Non-Employee Director Compensation for Fiscal Year 20202022
The following table shows the compensation earned by non-employee members of the Board during the fiscal year ended September 30, 2020:2022:
DIRECTOR |
| FEES EARNED OR PAID IN CASH($) |
| OPTION AWARDS($)(1) |
| TOTAL($) |
| FEES EARNED OR PAID IN CASH($) |
| OPTION AWARDS($)(1) |
| TOTAL($) |
| 98,000 |
| 135,810 |
| 233,810 | |||||||
John D. Cohn |
| 115,344 |
| 154,518 |
| 269,862 |
| 123,000 |
| 135,810 |
| 258,810 |
Paul Donovan |
| 90,344 |
| 154,518 |
| 244,862 |
| 98,000 |
| 135,810 |
| 233,810 |
Eileen P. Drake |
| 90,344 |
| 154,518 |
| 244,862 | ||||||
Daniel G. Korte |
| 90,344 |
| 154,518 |
| 244,862 | ||||||
Eileen P. Drake(2) |
| 104,000 |
| 135,810 |
| 239,810 | ||||||
David P. Hess |
| 98,000 |
| 135,810 |
| 233,810 | ||||||
Daniel G. Korte(3) |
| 104,000 |
| 135,810 |
| 239,810 | ||||||
Mary L. Petrovich |
| 96,344 |
| 154,518 |
| 250,862 |
| 98,000 |
| 135,810 |
| 233,810 |
James R. Rulseh |
| 96,344 |
| 154,518 |
| 250,862 | ||||||
Dr. Ronald M. Sega |
| 90,344 |
| 154,518 |
| 244,862 |
| 98,000 |
| 135,810 |
| 233,810 |
Gregg C. Sengstack |
| 100,344 |
| 154,518 |
| 254,862 |
| 108,000 |
| 135,810 |
| 243,810 |
| (1) |
|
(2) | Ms. Drake deferred 75% of her total aggregate cash retainer fees in fiscal year 2022 into the EBP. |
(3) | Mr. Korte deferred 75% of his total aggregate cash retainer fees in fiscal year 2022 into the EBP. |
Option awards outstanding as of September 30, 2022 were as follows:
| OUTSTANDING OPTIONS NOT VESTED |
| OUTSTANDING OPTIONS VESTED |
| TOTAL OUTSTANDING OPTIONS | |
Rajeev Bhalla |
| 3,000 |
| — |
| 3,000 |
John D. Cohn |
| 10,000 |
| 35,800 |
| 45,800 |
Paul Donovan |
| 10,000 |
| 36,812 |
| 46,812 |
Eileen P. Drake |
| 10,000 |
| 16,700 |
| 26,700 |
David P. Hess |
| 4,425 |
| 475 |
| 4,900 |
Daniel G. Korte |
| 10,000 |
| 16,700 |
| 26,700 |
Mary L. Petrovich |
| 10,000 |
| 41,195 |
| 51,195 |
Dr. Ronald M. Sega |
| 10,000 |
| 41,195 |
| 51,195 |
Gregg C. Sengstack |
| 10,000 |
| 41,195 |
| 51,195 |
32
Board Meetings and Committees (continued)
Option awards outstandingInformation About Our Executive Officers
Set forth below is certain information concerning each of our current executive officers as of September 30, 2020 are as follows:
the date of this proxy statement. For additional information regarding Mr. Blankenship, see “Proposal 1 – Election of Director” above.
DIRECTOR |
| OUTSTANDING OPTIONS NOT VESTED |
| OUTSTANDING OPTIONS VESTED |
| TOTAL OUTSTANDING OPTIONS |
John D. Cohn |
| 12,850 |
| 35,645 |
| 48,495 |
Paul Donovan(1) |
| 12,850 |
| 35,645 |
| 48,495 |
Eileen P. Drake |
| 11,975 |
| 6,925 |
| 18,900 |
Daniel G. Korte |
| 11,975 |
| 6,925 |
| 18,900 |
Mary L. Petrovich |
| 12,850 |
| 42,345 |
| 55,195 |
James R. Rulseh |
| 12,850 |
| 37,320 |
| 50,170 |
Dr. Ronald M. Sega |
| 12,850 |
| 35,645 |
| 48,495 |
Gregg C. Sengstack |
| 12,850 |
| 42,345 |
| 55,195 |
AGE | POSITION(S) WITH WOODWARD | |
Charles "Chip" P. Blankenship, Jr. | 56 | Chairman of the Board, Chief Executive Officer and President |
Mark D. Hartman | 49 | Chief Financial Officer |
Thomas G. Cromwell | 53 | Vice Chairman, Chief Operating Officer |
A. Christopher Fawzy | 53 | Corporate Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer |
Randall "Randy" L. Hobbs | 54 | President, Industrial |
Terence "Terry" J. Voskuil | 57 | President, Aerospace |
| (1) |
|
31Charles “Chip” P. Blankenship, Jr: Chairman of the Board, Chief Executive Officer and President since May 9, 2022. Prior to joining Woodward, Mr. Blankenship served as the Montgomery Distinguished Professor of Practice at the University of Virginia’s School of Engineering and Applied Sciences from August 2019 through January 2022. Mr. Blankenship served as Chief Executive Officer of Arconic from January 2018 through February 2019. During Mr. Blankenship’s 24-year career with General Electric Company (“GE”), he held significant leadership roles including Chief Executive Officer of GE Appliances, a Haier Company, from June 2016 through July 2017, and President and Chief Executive Officer of GE Appliances from December 2011 through June 2016. Mr. Blankenship also served as Sr. Vice President of Haier Group from June 2016 until December 2017.
Mark D. Hartman: Chief Financial Officer since October 2021; Senior Vice President and Corporate Controller from October 2019 through September 2021; Senior Vice President, Finance Global Operations from May 2019 through October 2019; and Vice President and Corporate Controller from January 2007 through May 2019. Prior to joining Woodward, Mr. Hartman held roles of increasing responsibility at Advanced Energy Industries from 2002 to 2007, notably serving as interim CFO for the company.
Thomas G. Cromwell: Vice Chairman, Chief Operating Officer since February 2019. Prior to joining Woodward, Mr. Cromwell was employed at Kohler Co., Inc. for 10 years, where he served as Group President, Power from 2014 through 2019, President, Global Engines from 2012 through 2014, and President, Gasoline Engines from 2009 through 2012.
A. Christopher Fawzy: Corporate Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer since October 2009; Vice President, General Counsel, and Corporate Secretary from June 2007 through September 2009. Mr. Fawzy became the Company’s Chief Compliance Officer in August 2009. Prior to joining Woodward, Mr. Fawzy was employed by Mentor Corporation from 2001 through 2007, where he served as Vice President, General Counsel and Secretary.
Randall “Randy” L. Hobbs: President, Industrial since December 2022. Prior to joining Woodward, Mr. Hobbs was employed by General Electric Company for 33 years, most recently serving as Senior Executive Director, Rotating Parts & Compressor Airfoils from 2013 through 2022, and General Manager, Supply Chain Strategy Leader from 2011 through 2013. Prior to 2011, Mr. Hobbs held roles of increasing responsibility with GE Aviation and GE Transportation since joining GE in 1989.
Terence “Terry” J. Voskuil: President, Aerospace since October 2022; President, Aircraft Turbine Systems from February 2021 through October 2022; Sr Vice President Fuel Systems & Controls from November 2019 through January 2021; Vice President and General Manager of Fuel Systems Center of Excellence from July 2015 through November 2019; Vice President, R&D and Systems from March 2011 through June 2015. Prior to this role, Mr.
33
EXECUTIVE OFFICERS
Voskuil held varying engineering roles with increasing responsibility in the Aircraft Turbine Systems group since joining Woodward in 1989.
Information About Our Other Officers
AGE | POSITION(S) WITH WOODWARD | |
Paul P. Benson | 58 | Corporate Vice President, Human Resources |
W. John Godsman | 53 | Corporate Vice President, Strategy and Business Development |
Matteo R. Pisciotta | 50 | Corporate Vice President, Global Sourcing |
(1) | There are no family relationships between any of the corporate officers listed below or between any of the corporate officers listed below and the aforementioned executive officers. |
Paul P. Benson: Corporate Vice President, Human Resources since September 2019. Prior to September 2019, Mr. Benson was employed at Esterline Technologies Corporation from 2014 through September 2019, where he served as Executive Vice President and Chief Human Resources Officer. Prior to 2014, Mr. Benson was employed at Hewlett Packard Enterprise Company from 2006 through 2014, most recently serving as Senior Human Resources Director, Transformation.
W. John Godsman: Corporate Vice President, Strategy and Business Development since May 2022. Prior to joining Woodward, Mr. Godsman was employed at General Electric Company from 2010-2022, were he served as Vice President, Global Head of Business Development from 2019-2022, Vice President, Business Development, GE Aviation from 2018-2019, and the Business Development Leader for GE Aviation from 2010-2018 and GE Transportation from 2016-2018.
Matteo R. Pisciotta: Corporate Vice President, Global Sourcing since August 2019. Prior to joining Woodward, Mr. Pisciotta was employed at Polaris Industries, Inc., serving as Vice President, Global Procurement and Supply Chain from 2016 through August 2019. Prior to 2016, Mr. Pisciotta was employed at Oshkosh Corporation for nine years, where he served as Vice President, Global Procurement and Supply Chain from 2009 through 2016.
34
PROPOSAL 2 – ADVISORY RESOLUTION REGARDING THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
As required by Section 14A of the Securities Exchange Act of 1934, we are offering our stockholders an opportunity to cast an advisory vote on the compensation of our named executive officers, as disclosed in this proxy statement. In response to the advisory vote of our stockholders at our 2016 Annual Meeting regarding the recommended frequency of such an advisory resolution, we have presented this proposal to stockholders on an annual basis. Every six years we are required to hold a vote regarding the frequency of such an advisory resolution. Our last such vote was in January 2017; accordingly, a proposal regarding the frequency of such resolution is included as Proposal 3 in this proxy statement. Although the vote is non-binding, we value continuing and constructive feedback from our stockholders on compensation and other important matters. The Board and the Compensation Committee will consider the voting results when making future compensation decisions.
As described in the “Compensation Discussion and Analysis” section of this proxy statement, we believe that our executive compensation program (1) provides a competitive total compensation program that enables us to attract, retain and motivate a high-performance executive management team, and (2) aligns the interests of the NEOs with the interests of our stockholders, by focusing on both short-term and long-term performance goals, by promoting ownership of the Company, and by linking individual performance to our fundamental financial performance. For example:
We encourage long-term stock ownership by our executive officers with award features, such as graduated vesting on stock option award tranches at 25% per year beginning on the first anniversary of the grant date.
Our annual incentive compensation plans in fiscal year 2022 were aligned between Company executives and all other employees of the Company to promote unified achievement of Company goals and objectives.
We establish total compensation (base salary, short-term cash incentives, and long-term incentives) for each NEO that is competitive with total compensation for executives in comparable positions at companies in our compensation peer group.
We place a strong emphasis on variable, performance-based compensation that is designed so that the payout opportunity is directly linked to the achievement of pre-determined financial performance metrics, with upside opportunity for exceeding the pre-determined goals.
Our allocation of cash compared to non-cash compensation is weighted significantly toward non-cash-based compensation in order to (1) minimize the extent to which the interests of existing stockholders are diluted by equity used as compensation and (2) balance operating performance with delivering returns to our stockholders.
In light of our fiscal year 2022 financial results, we believe that the compensation paid to our NEOs in fiscal year 2022 was aligned with our financial performance for the reasons discussed under the caption “Compensation Discussion and Analysis — Elements of Compensation — 2022 NEO Target Pay Mix.”
We have stock ownership guidelines that require our CEO to own shares of our common stock equal to 5 times annual base salary; our CFO, COO and Business Group Presidents to own shares of our common stock equal to 3 times annual base salary; and our Corporate Vice Presidents to own shares of our common stock equal to 2 times annual base salary, other than in special circumstances as may be determined by the Compensation Committee.
We believe that proper administration of our executive compensation program should result in the development of a management team that improves our fundamental financial performance and provides value to the long-term
35
PROPOSAL 2 – ADVISORY RESOLUTION REGARDING THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
interests of the Company and its stockholders. Additional information relevant to your vote can be found in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement.
For these reasons, we recommend that stockholders vote in favor of the following advisory resolution:
“RESOLVED, that the compensation paid to Woodward's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion presented in Woodward’s proxy statement for its 2022 Annual Meeting of Stockholders, is hereby APPROVED.”
Your Board unanimously recommends that you vote “FOR” this advisory resolution. |
36
PROPOSAL 3 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Act and Section 14A of the Exchange Act enable our stockholders to indicate their preference at least once every six years regarding how frequently we should solicit a non-binding advisory vote on the compensation of our named executive officers as disclosed in our proxy statement. Our last such vote was in January 2017. Accordingly, this year we are asking our stockholders to indicate whether they would prefer an advisory vote every one, two or three years. Alternatively, stockholders may abstain from casting a vote.
After considering the benefits and consequences of each alternative, our Board recommends that the advisory vote on the compensation of our named executive officers be submitted to the stockholders every year as has been done since 2011. In formulating its recommendation, our Board considered that compensation decisions are made annually and that an annual advisory vote on executive compensation will allow stockholders to provide more frequent and direct input on our compensation philosophy, policies and practices.
The alternative among one year, two years or three years that receives the highest number of votes from the holders of shares of our common stock present in person or by proxy and entitled to vote at the Annual Meeting will be deemed to be the frequency preferred by our stockholders. Abstentions and broker non-votes will have no effect on this proposal.
While our Board believes that its recommendation is appropriate at this time, the stockholders are not voting to approve or disapprove that recommendation, but are instead asked to indicate their preference, on an advisory basis, as to whether the non-binding advisory vote on the approval of our named executive officer compensation should be held every year, two years or three years.
Our Board and our Compensation Committee value the opinions of our stockholders in this matter and, to the extent there is any significant vote in favor of one time period over another, will take into account the outcome of this vote when making future decisions regarding the frequency of holding future advisory votes on the compensation of our named executive officers. However, because this is an advisory vote and therefore not binding on our Board or the Compensation Committee, our Board or Compensation Committee may decide that it is in the best interests of our stockholders that we hold an advisory vote on the compensation of our named executive officers more or less frequently than the option preferred by our stockholders. The results of the vote will not be construed to create or imply any change or addition to the fiduciary duties of our board of directors.
Your Board unanimously recommends a vote to hold future advisory votes on
named executive officer compensation every “ONE YEAR”
37
DirectorsCompensation Discussion and Named Executive Officers
The following table shows how much Woodward common stock was beneficially owned, as of November 27, 2020, by each director, each named executive officer of the Company, and all directors and executive officers as a group:
DIRECTORS |
| NUMBER OF SHARES(1)(2) |
| PERCENT (%)(1) |
John D. Cohn |
| 61,245 |
| * |
Paul Donovan(3) |
| 44,296 |
| * |
Eileen P. Drake |
| 10,775 |
| * |
Daniel G. Korte |
| 10,775 |
| * |
Mary L. Petrovich |
| 61,678 |
| * |
Ronald M. Sega |
| 57,345 |
| * |
Gregg Sengstack |
| 71,945 |
| * |
NAMED EXECUTIVE OFFICERS | ||||
Thomas A. Gendron(4) |
| 1,344,164 |
| 2.07 |
Robert F. Weber, Jr. |
| 230,772 |
| * |
Thomas G. Cromwell |
| 24,565 |
| * |
Sagar A. Patel |
| 152,717 |
| * |
Chad R. Preiss |
| 213,509 |
| * |
Jonathan W. Thayer |
| 32,025 |
| * |
All directors and executive officers as a group (14 persons) |
| 2,465,117 |
| 3.81 |
*Less than one percent |
|
|
|
|
|
|
|
|
32
STOCK OWNERSHIP OF MANAGEMENT (continued)Analysis
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Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of our records, all reports required to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) were filed on a timely basis, with the exception of a Form 4 filed by the Company on behalf of Ms. Petrovich related to a transaction for the purchase of Company stock.
33
Persons Owning More Than Five Percent of Woodward Stock
The following table shows how many shares of Woodward common stock were owned by each person known to us to own more than five percent of our common stock as of November 27, 2020:
OWNERSHIP OF COMMON STOCK | ||||
|
|
|
|
|
PRINCIPAL HOLDERS |
| NUMBER OF SHARES |
| PERCENT(%) |
Capital Research Global Investors 333 South Hope Street Los Angeles, California 90071 |
| 6,730,932(1) |
| 10.70 |
The Vanguard Group 100 Vanguard Boulevard Malvern, Pennsylvania 19355 |
| 5,270,563(2) |
| 8.38 |
BlackRock, Inc. 55 East 52nd Street New York, New York 10055 |
| 5,266,472(3) |
| 8.37 |
Woodward Retirement Savings Plan 5001 North Second Street Rockford, IL 61111 |
| 3,727,733(4) |
| 5.93 |
|
|
|
|
|
|
|
|
34
Compensation Discussion and Analysis
Named Executive Officers
The following Compensation Discussion and Analysis (“CD&A”) provides an overview of our compensation philosophy, strategy, objectives and structure for fiscal year 2020.2022. This section is intended to be read in conjunction with the tables that immediately follow, which provide further historical compensation information for the NEOs.
For fiscal year 2020,2022, our NEOs were:
NAME | PRINCIPAL POSITION DURING FISCAL YEAR | |
| Chairman, Chief Executive Officer and President | |
|
| |
Mark D. Hartman(3) | Chief Financial Officer | |
Thomas G. Cromwell | Vice Chairman, Chief Operating Officer | |
A. Christopher Fawzy | Corporate Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer | |
Sagar A. |
| |
| Former President, Engine Systems | |
|
|
| (1) |
|
| (2) |
|
(3) | Mr. Hartman was appointed as Chief Financial Officer |
(4) | Mr. |
Fiscal 2022 Business Highlights
Our strategic focus is providing energy control and optimization solutions for the aerospace and industrial markets.
The precise and efficient control of energy, including motion, fluid, combustion and electrical energy, is a growing
requirement in the markets we serve, and we have developed and are executing on strategies to eliminate greenhouse gases, commercialize space, and accelerate the digital age. To facilitate a cleaner, decarbonized world, we are partnering with our customers to enable their equipment to be more efficient, capable of utilizing clean burning fuels, advancing fuel cells, and the integration of renewable power in both commercial and defense operations.
On November 18, 2022, we reported our financial results for fiscal year 2022, which included the following:
Net sales for fiscal year 2022 were $2.38 billion, compared to $2.25 billion in fiscal year 2021.
Net earnings for fiscal year 2022 were $172 million, or $2.71 per diluted share, compared to $209 million, or $3.18 per diluted share, in fiscal year 2021.
In fiscal 2022, the Company experienced strong demand for our products and services, although profitability was impacted by the challenging industry-wide operating environment, including labor and material inflation as well as global supply chain and labor disruptions.
No Short-Term Cash Incentive Compensation Awarded to Named Executive Officers in Fiscal 2022
At the beginning of fiscal year 2022, the Compensation Committee established specific performance metrics and rigorous performance targets under our fiscal year 2022 short-term cash incentive compensation plan (the
38
Compensation Discussion and Analysis
“Woodward Variable Incentive Plan” or “WVIP”) that were designed to appropriately motivate performance in key areas of the business, drive achievement of our short-term goals, and align pay and performance.However, the Company did not achieve threshold performance under the WVIP for fiscal year 2022, in part due to ongoing material and labor inflation, as well as greater than expected global supply chain and labor disruptions. As such, no short-term cash incentive payouts were made to the NEOs or to any other Board-appointed officer under the WVIP or otherwise for fiscal year 2022. See “Short-Term Incentive Compensation” below for more information.
Overview of Compensation Objectives
Our executive compensation program is intended to (1) provide a competitive total compensation program that enables usdesigned to attract, retain and motivate a high-performance executive management team and (2)to link thetheir total compensation program payouts to Company performance and stockholder interests. We believe that proper administration of this program should result in a compensation program that is aligned with, and motivates improvement in,structure our fundamental financial performance and supports the long-term interests of the Company and its stockholders.
Our executive compensation program is intended to aligninclude performance metrics and rigorous performance goals that are aligned with our business strategy and long-term stockholder value creation.
The key elements of our executive compensation to the overall financial performance of the Company and is structuredprogram are as a total compensation package comprised of the following elements:follows:
Base salary;
Annual short-term incentive compensation under the Woodward Variable Incentive Plan (“WVIP”); and
Long-term incentive compensation under the Company’s long-term incentive program (“LTI Plan”), which includes a cash component (under the Cash LTI, as discussed below) and equity components (typically in the form of non-qualified stock options).
Key Elements of our Executive Compensation Program | |
Base Salary •Fixed compensation for our NEOs •Attraction and retention tool that allows us to maintain a consistent, stable leadership team •Adjusted based on performance, peer benchmarking, and other relevant factors | Long-Term Cash Incentive Compensation •Performance-based, cash payout at the end of a three-year period •Target opportunities for our NEOs range from 25% to 50% of base salary at target level performance •Payouts based on our performance under two key financial related metrics (Return on Capital and Net EPS Growth), measured on a relative basis as compared to the S&P MidCap 400 Index |
Short-Term Incentive Compensation (the WVIP) •Payouts are typically based on the achievement of specific, rigorous financial and operational/strategic performance metrics •WVIP target opportunities for our NEOs typically range from 65% to 100% of base salary at target level performance •Designed to drive achievement of our short-term goals | Long-Term Equity Incentive Compensation •Annual awards historically in the form of non-qualified stock options (“stock options”) •Exercise price of stock options equal to the closing price of Company stock on the effective date of grant •Time-based vesting for stock options; typically 25% each year over four years •Critical attraction and retention tool •Designed to motivate and reward NEOs to achieve multi-year strategic goals and to deliver sustained long-term value to stockholders |
In addition, the executive compensation program for NEOs includes health and welfare benefits, a non-qualified deferred compensation program, defined contribution retirement plans, severance and change in control agreements, and other ancillary benefits.
Fiscal 2020 Business Highlights
On November 19, 2020, we reported our financial results for fiscal year 2020, which included the following:
Net sales for fiscal year 2020 were $2.5 billion, compared to $2.9 billion in fiscal year 2019.
Net earnings for fiscal year 2020 were $240 million, or $3.74 per diluted share, compared to $260 million, or $4.02 per diluted share, in fiscal year 2019.
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Compensation Discussion and Analysis (continued)
Our Executive Compensation Practices
Our executive compensation policies and practices are designed to reinforce our pay-for-performance philosophy and align with sound governance principles. The following chart highlights our fiscal year 2022 executive compensation policies and practices:
✓ | Significant portion of executive compensation is at-risk based on corporate performance | |
✓ | Annual review and approval of our executive compensation strategy | |
✓ | Robust peer compensation group adopted on an annual basis, and then used to evaluate the market-competitiveness of our compensation | |
✓ | Independent compensation consultant engaged by the Compensation Committee | |
✓ | All members of the Compensation Committee are independent directors under applicable rules | |
✓ | Cash and equity incentives are performance-based | |
✓ | Multi-year vesting periods for equity awards | |
✓ | Both our short- and long-term cash incentive plans are subject to zero payouts and maximum payouts | |
✓ | Limited and modest perquisites | |
✓ | Annual risk assessment of our executive compensation program | |
✓ | Clawback policy on cash and equity incentive compensation | |
✓ | Stock ownership guidelines for executive officers and directors | |
✓ | Annual risk assessment of our executive compensation program | |
What We Don’t Do | ||
✘ | No “single trigger” change in control payments or benefits | |
✘ | No tax gross-ups for change in control related payments | |
✘ | No hedging, pledging or short selling of Woodward stock by our directors or by any Woodward employee, including NEOs | |
✘ | No strict benchmarking of compensation to a specific percentile of our peer group | |
✘ | No repricing of any stock options without stockholder approval | |
✘ | No employment contracts with any NEO |
Fiscal year 2020 marked oneCompensation Process
Compensation Philosophy and Strategy
To promote the creation of long-term stockholder value and the most volatile periodsachievement of Company objectives, our executive compensation philosophy is designed to:
attract, retain and motivate superior talent who exemplify the philosophies and values expressed in the global macro-economic landscape. We acted swiftly to focus on diligent cash management and liquidity and to align our cost structure to the current COVID-19 environment, which significantly impacted both our Aerospace and Industrial business segments. Our Aerospace segment was impacted by the decline in global passenger traffic, partially offset by a strong defense market. Our Industrial segment was impacted by a sharp decline in oil prices as well as the pandemic. The COVID-19 headwinds are enduring, and we have driven and will continue to focus on operational excellence, prudently managing cash and liquidity, and executing on our strategy, to emerge as a leaner and stronger company. Company’s Constitution;
COVID-19 Responsive Actions
In response to the economic challenges resulting from the COVID-19 pandemic, the Company engaged in several initiatives designed to mitigate the impact of the COVID-19 pandemic on the Company and to position the Company for longer-term growth while preserving our financial strength through this period of global uncertainty. On April 3, 2020, as part of the broader effort to address the near-term economic challenges brought on by the pandemic, the Compensation Committee approved an immediate reduction of Company officers’ salaries and its non-employee directors’ annual base retainers. Specifically, the CEO’s salary and non-employee directors’ annual base retainers were reduced by 25%, and all other officers’ salaries were reduced by 10%. In September 2020, the Compensation Committee reinstated the officers’ and non-employee directors’ full pay for fiscal year 2021.
Additionally, on April 3, 2020, the Compensation Committee proactively eliminated any payments under the WVIP in fiscal year 2020 for all employees. Similarly, in September 2020, in the continued interest of maintaining cash and liquidity throughout the COVID-19 pandemic, the Compensation Committee determined that a WVIP payout in 2021 was unlikely and thus the Compensation Committee did not establish specific metrics and criteria under the WVIP for fiscal year 2021. The Compensation Committee did, however, renew the overarching annual performance incentive plan, which continues to specify performance goals related to net earnings similar to such goals as described below in Annual Short-Term Incentive Compensation.
In further response to the challenges resulting from the COVID-19 pandemic, the Company implemented workforce management actions through a combination of a hiring freeze, layoffs and furloughs, reduced work week hours, reduced all non-essential costs, implemented a Company-wide wage freeze, increased focus on reducing working capital, and limited capital expenditures to business-critical items.
Leadership Transitions
On January 6, 2020, the Company announced that Mr. Weber, who had previously announced his intention to retire on January 3, 2020, would postpone his retirement and continue to serve in his capacity as Vice Chairman and an officer of the Company. Mr. Weber served in that role until April 2020, primarily assisting the Company with the proposed merger with and integration of Hexcel Corporation.
Then, on April 13, 2020, shortly after the mutual termination of the merger agreement with Hexcel, the Company announced that as part of its actions in response to the ongoing global economic challenges and uncertainties attributable to the COVID-19 pandemic and the resulting impact on the broader macroeconomic environment and its business, Mr. Weber would return to the role of Vice Chairman, Chief Financial Officer, effective as of April 13, 2020, succeeding Mr. Thayer who departed the Company upon Mr. Weber’s return to his prior role.
On December 4, 2019, Mr. Patel, previously the Business Unit President of Fuel Systems and Controls, was appointed as President, Aerospace Aftermarket and Hydraulic Systems. No changes were made to his compensation in fiscal year 2020 as a direct result of his appointment into his new position. The Compensation Committee established the 2020 WVIP metrics prior to Mr. Patel’s appointment in his new position. As such, Mr. Patel’s fiscal year 2020 WVIP target was calculated using the performance metrics established for the Fuel Systems and Controls business unit. Separately, prior to his appointment in his new position, Mr. Patel’s target Cash LTI award opportunity was reduced from 35% of his base salary to 25% of his base salary, effective as of the beginning of the fiscal year 2020-2022 Cash LTI cycle.
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Compensation Discussion and Analysis (continued)
align the Business Unit Presidentinterests of Engine & Turbine Controls, was appointed as President, Engine Systems, in connectionour executive officers and employees with a reorganizationthose of the Company’s Industrialour stockholders by using equity-based and other incentive compensation to motivate executive officers to achieve multi-year strategic goals and deliver sustained long-term stockholder value;
align compensation programs with our vision, key business segment. No changes were made to Mr. Preiss’ compensation in fiscal year 2020 as a direct result of the reorganization. As payments under the WVIP for fiscal year 2020 had been proactively eliminated at the time of the reorganization, the Compensation Committee determined to make no changes to the WVIP plan design or metrics in connection with the reorganization. At the time it was established, Mr. Preiss’ fiscal year 2020 WVIP target had been calculated using thestrategies and financial performance metrics for the Engine & Turbine Controls business unit. Separately, prior to his appointment in his new position, Mr. Preiss’ target Cash LTI award opportunity was reduced from 35% of his base salary to 25% of his base salary, effective as of the beginning of the fiscal year 2020-2022 Cash LTI cycle.drivers, while maintaining an appropriate balance between short- and long-term rewards; and
Executive Compensation Mix
For our NEOs, we believe it is importantfocus on pay-for-performance by ensuring that a significant portion of total compensation be tied to incentives that can fluctuate, up or down, based on our financial and operational performance to align with stockholder interests. With respect toopportunity is variable compensation, the Compensation Committee places a balanced emphasis on both short-term (i.e., the WVIP) and long-term Company performance (i.e., Cash LTI and equity compensation); however, the majority of target variable compensation for our NEOs relates to long-term objectives.
In analyzing the pay mix and various elements of compensation for each NEO, the Compensation Committee annually considers competitive market data, internal equity (the relative compensation among the Company’s NEOs), and the other individual factors described below in Compensation Philosophy and Strategy. These include the nature and scope of the individual’s role at Woodward, the individual’s performance, knowledge, skills, abilities, potential, and overall contribution to the Company and impact to shareholder value.
The charts below reflect the target mix pay between fixed and variable compensation components based on target compensation for our NEOs during fiscal year 2020, which reflects our pay-for-performance philosophy:
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Compensation Discussion and Analysis (continued)
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Compensation Philosophy and Strategy
Our compensation philosophy and strategy is to align executive compensation with Company performance and stockholder interests to establish total compensation (base salary, annual short-term cash incentives, and long-term incentives) for each NEO that is competitive with total compensation for executives in comparable positions at companies in our peer comparator group. Our compensation approach reflects multiple factors such as (i) the individual’s performance, knowledge, skills, abilities and potential, (ii) significant contributions to the Company and impact to shareholder value, and (iii) our ability to achieve our goals to attract and retain industry leading talent.
Our philosophy places a strong focus on pay-for-performance, with an emphasis on variable compensation, and in particular, long-term incentive compensation that directly ties to Company performance. Our variable compensation plans (annual short-term incentives and long-term incentives), which for fiscal year 2020 represented between 68% and 84% of our NEOs’ target total compensation opportunities, are designed so that the payout opportunity is directly linked to the achievement of challenging yet attainable pre-determined financial performance metrics with upside opportunity for exceeding the predetermined goals. Our variable compensation plans also include equity-based compensation to align NEO and stockholder interests. With the variable incentive components of our executive compensation program, we strive to align the interests of the NEOs with the interests of our stockholders in different ways by focusing on both short-term and long-termother objectives. Company performance goals, by promoting ownership of the Company, and by linking reward outcomes to our financial performance. As a result of Woodward’s total compensation approach, which includes base pay and variable pay (annual incentive compensation and long-term incentive compensation), the actual performance of the Company significantly influences the total compensation received by our NEOs.executives.
Consideration of Stockholder Say on PaySay-on-Pay Vote
In January 2020,2022, our stockholders voted on an advisory resolution regarding the compensation of our named executive officers, which was approved by 93.7%95.5% of the votes cast on the proposal (the “say on pay“say-on-pay proposal”). The Compensation Committee determined that the favorable vote demonstrated strong stockholder support for Woodward’s overall executive compensation approach, and the related actions described in its 2019 proxy statement, and further determined that current practices and processes did not require any significant modifications to achieve the desired results or to address any stockholder concerns. The Compensation Committee will continue to consider the outcome of these advisory votes and feedback from our stockholders when evaluating future executive compensation arrangements. In addition, we are required to hold an advisory vote on the frequency of our say-on-pay votes every six years (such proposal or vote regarding the frequency of the say-on-pay vote, the “say-when-on-pay” proposal or vote). We last held a say-when-on-pay vote at our 2016 Annual Meeting. Accordingly, a say-when-on-pay proposal is included as Proposal 3 in this proxy statement.
Role of the Compensation Committee
The Compensation Committee annually:
determines our CEO’s compensation by evaluating his performance against a set of objectives through a defined process led by the Compensation Committee Chairperson, involving all independent Board members;
determines the compensation arrangements for our other executive officers;
reviews and reassesses our executive compensation program, including the performance of an annual risk assessment;
reviews and approves the plan design and performance metrics for our variable incentive plans;
reviews, approves and administers our equity compensation plans; and
approves individual equity grants.
For additional information about the Compensation Committee, see “Board Meetings and Committees—Compensation Committee” in this proxy statement.
In making executive compensation decisions for fiscal year 2022, the Compensation Committee sought the assistance of its independent compensation consultant, Aon, as well as Mr. Gendron (our then-current CEO) and our management team (except with respect to their own compensation). The Compensation Committee reviewed the cash and equity compensation and other compensation components for our executive officers to ensure they would be properly incentivized and rewarded for their and the Company’s performance. No employees were present during the discussion of their own compensation.
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Compensation Discussion and Analysis
RoleBase Salary
•Fixed compensation for our NEOs
•Attraction and retention tool that allows us to maintain a consistent, stable leadership team
•Adjusted based on performance, peer benchmarking, and other relevant factors
Long-Term Cash Incentive Compensation
•Performance-based, cash payout at the end of Managementa three-year period
In order•Target opportunities for our NEOs range from 25% to design compensation programs that50% of base salary at target level performance
•Payouts based on our performance under two key financial related metrics (Return on Capital and Net EPS Growth), measured on a relative basis as compared to the S&P MidCap 400 Index
Short-Term Incentive Compensation
(the WVIP)
•Payouts are aligned with appropriatetypically based on the achievement of specific, rigorous financial and operational/strategic performance metrics
•WVIP target opportunities for our NEOs typically range from 65% to 100% of base salary at target level performance
•Designed to drive achievement of our short-term goals
Long-Term Equity Incentive Compensation
•Annual awards historically in the form of non-qualified stock options (“stock options”)
•Exercise price of stock options equal to the closing price of Company performancestock on the effective date of grant
•Time-based vesting for stock options; typically 25% each year over four years
•Critical attraction and retention tool
•Designed to motivate and reward NEOs to achieve multi-year strategic goals and strategic direction,to deliver sustained long-term value to stockholders
In addition, the executive compensation program for NEOs includes health and welfare benefits, a non-qualified deferred compensation program, defined contribution retirement plans, severance and change in control agreements, and other ancillary benefits.
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Compensation Discussion and Analysis
Our Executive Compensation Practices
Our executive compensation policies and practices are designed to reinforce our pay-for-performance philosophy and align with sound governance principles. The following chart highlights our fiscal year 2022 executive compensation policies and practices:
Compensation Philosophy and Strategy
To promote the creation of long-term stockholder value and the achievement of Company objectives, our executive compensation philosophy is designed to:
attract, retain and motivate superior talent who exemplify the philosophies and values expressed in the Company’s Constitution;
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Compensation Discussion and Analysis (continued)
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All decisions regarding executive compensation are ultimately made by the Compensation Committee.
The Company’s Corporate Vice President, Human Resources, works with the Compensation Committee Chair to establish the agenda for Compensation Committee meetings. At the Compensation Committee’s request, the Chief Executive Officer regularly attends the meetings and provides background information regarding the Company’s strategic objectives, evaluation of the performance of the executive officers, and compensation recommendations as to executive officers other than himself. The Compensation Committee may also seek input from the Corporate Vice President, General Counsel & Corporate Secretary, as necessary and appropriate, to carry out its duties. The Corporate Vice President, Human Resources, provides input on executive compensation structure, performance assessment process and data, potential promotions, talent management and succession planning, and compensation associated with promotions. No employee is present during the discussion of his or her compensation.
Role of the Compensation Consultant
In making its determinations with respect to executive compensation, the Compensation Committee generally engages the services of an independent compensation consultant. In fiscal year 2020, the Compensation Committee retained the services of Aon’s Rewards Solutions practice to assist with its review of the total compensation packages of the NEOs.
The Compensation Committee retains Aon primarily to provide guidance for the executive compensation decision-making process. Annually, Aon provides the Compensation Committee with an analysis comparing the compensation for the NEOs to our compensation philosophy and to the data of our peer comparator group for base salary, target short-term incentives, target total cash, target long-term incentives (cash and equity), and target total compensation. In carrying out its assignment, the consultant may interact with members of management, including but not limited to the Chief Executive Officer, the Corporate Vice President, Human Resources, the Corporate Vice President, General Counsel & Corporate Secretary, Vice President & Corporate Controller, and the Director, Global Total Rewards.
In addition to their services with respect to compensation for the NEOs, Aon acts as a global compensation and benefits consultant for the Company and provides total compensation data for the Company’s key leadership group. Management also utilizes Aon’s benefits index and compensation and benefits survey data to benchmark compensation and benefits for the Company’s non-NEOs.
The decision to use Aon for advice and services not related to executive compensation was made by management. While neither the Compensation Committee nor the Board pre-approves these non-executive compensation services, the Compensation Committee annually reviews Aon's internal guidelines and practices designed to guard against conflicts and ensure the objectivity of advice in connection with the Compensation Committee’s review of the six compensation consultant conflicts of interest factors described below.
For fiscal year 2020, the Company paid Aon $599,406 for advice and services provided to the Compensation Committee and the Company. Of this amount, $393,644 was paid as a result of the work Aon performed for the Compensation Committee related to executive compensation advice and services, $116,804 was paid as a result of the work Aon performed for the Company that was not related to executive compensation, including international benchmarking data and services, and other health, welfare and retirement plan consulting services, and $88,958 was paid as a result of the work Aon performed for the Company in connection with the previously contemplated merger with Hexcel, including executive compensation advice and services and broad compensation benchmarking data applicable to non-executive employees.
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maintain a market-based strategy that provides a competitive total compensation opportunity, without strictly benchmarking compensation to a specific percentile of our peer group;
align the interests of our executive officers and employees with those of our stockholders by using equity-based and other incentive compensation to motivate executive officers to achieve multi-year strategic goals and deliver sustained long-term stockholder value;
align compensation programs with our vision, key business strategies and financial performance drivers, while maintaining an appropriate balance between short- and long-term rewards; and
focus on pay-for-performance by ensuring that a significant portion of total compensation opportunity is variable compensation that directly ties to Company performance. Our variable compensation plans are designed so that the payout opportunity is directly linked to the achievement of challenging yet attainable pre-determined financial metrics and other objectives. Company performance significantly influences the total compensation received by our executives.
Consideration of Stockholder Say-on-Pay Vote
In January 2022, our stockholders voted on an advisory resolution regarding the compensation of our named executive officers, which was approved by 95.5% of the votes cast on the proposal (the “say-on-pay proposal”). The Compensation Committee determined that the favorable vote demonstrated strong stockholder support for Woodward’s overall executive compensation approach, and further determined that current practices and processes did not require any significant modifications to achieve the desired results or to address any stockholder concerns. The Compensation Committee will continue to consider the outcome of these advisory votes and feedback from our stockholders when evaluating future executive compensation arrangements. In addition, we are required to hold an advisory vote on the frequency of our say-on-pay votes every six years (such proposal or vote regarding the frequency of the say-on-pay vote, the “say-when-on-pay” proposal or vote). We last held a say-when-on-pay vote at our 2016 Annual Meeting. Accordingly, a say-when-on-pay proposal is included as Proposal 3 in this proxy statement.
Role of the Compensation Committee
The Compensation Committee annually:
determines our CEO’s compensation by evaluating his performance against a set of objectives through a defined process led by the Compensation Committee Chairperson, involving all independent Board members;
determines the compensation arrangements for our other executive officers;
reviews and reassesses our executive compensation program, including the performance of an annual risk assessment;
reviews and approves the plan design and performance metrics for our variable incentive plans;
reviews, approves and administers our equity compensation plans; and
approves individual equity grants.
For additional information about the Compensation Committee, see “Board Meetings and Committees—Compensation Committee” in this proxy statement.
In making executive compensation decisions for fiscal year 2022, the Compensation Committee sought the assistance of its independent compensation consultant, Aon, as well as Mr. Gendron (our then-current CEO) and our management team (except with respect to their own compensation). The Compensation Committee reviewed the cash and equity compensation and other compensation components for our executive officers to ensure they would be properly incentivized and rewarded for their and the Company’s performance. No employees were present during the discussion of their own compensation.
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Compensation Discussion and Analysis (continued)
During fiscal year 2020, in accordance with SEC rules and regulations and NASDAQ listing requirements, the Compensation Committee considered various factors relating to compensation consultant independence, including the following six factors established by the SEC:
The provision of other services to the Company by Aon;
The amount of fees received from the Company by Aon as a percentage of total revenue;
Aon’s policies and procedures designed to prevent conflicts of interest;
Any business or personal relationship of the individual consultants with a member of the Compensation Committee;
Any stock of the Company owned by the individual consultants; and
Any business or personal relationship of the individual consultants or Aon with an executive officer of the Company.
As a result of the interactions with the Compensation Committee and management, the Company believes Aon has a well-developed understanding of our business, and is well positioned to provide objective guidance on compensation and benefit plans that are aligned with and reinforce our strategies and goals, and has determined that Aon is independent and free from any conflict of interest.
Competitive Comparisons
Our executive compensation program is benchmarked to be competitive with our peer comparator group. On an annual basis, companies in our peer comparator group are reviewed, changed if appropriate, and approved by the Compensation Committee. The companies included in our peer comparator group are selected based on a combination of multiple comparative factors, including competitors for business and/or talent, markets and industries served, revenues, profits, market capitalization, global and publicly-traded holding structure, level of operational complexity, and manufacturing profile.
Based on its annual review, the Compensation Committee determined it was appropriate to make changes to the companies comprising the peer comparator group for fiscal year 2020 pay and performance comparisons. Specifically, Rockwell Collins, Esterline Technologies, Actuant Corporation and Triumph Group were removed from the peer comparator group. Rockwell Collins and Esterline Technologies were removed because both were acquired and are no longer publicly-traded. Actuant Corporation and Triumph Group were removed because they each no longer fit within the revenue and market capitalization range used by the Compensation Committee to select peer group companies. Sensata Technologies Holding plc, IDEX Corporation and Aerojet Rocketdyne Holdings were added to the peer comparator group for fiscal year 2020 because they (i) are in similar industries as the Company, (ii) fit within the revenue and market capitalization ranges used to identify other peers, (iii) emphasize engineering and technology, and (iv) serve the aerospace and defense and/or other industrial markets.
Compensation data from our peer comparator group identified in the table below was reviewed as part of the Compensation Committee’s process of determining target total compensation opportunities for each NEO for fiscal year 2020. We also reference this data across each component of compensation for our NEOs, including base salary, annual short-term incentive compensation, and long-term incentive compensation. At the time the peer group below was approved by the Compensation Committee, the peer group was comprised of companies that had revenues ranging from 0.5x to 1.8x the Company’s projected fiscal year 2019 revenues, with median revenues equal to 1.0x the Company’s projected fiscal year 2019 revenues. Based on Aon’s recommendation, the Compensation Committee determined this to be an appropriate range. Industry and revenues serve as the primary evaluation criteria because we believe they are the best indicators of the scope, operations, and complexity of an organization, as well as the duties and responsibilities of the NEO positions being compared. Operating income and market capitalization are also evaluated as secondary metrics to validate the appropriateness of peers and ensure the peer companies have similar valuation, profitability, and/or growth profiles as Woodward.
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Compensation Discussion and Analysis (continued)
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In fiscal year 2020, the Compensation Committee continued to use the same approach to competitive data to assess the NEOs’ compensation levels as that which was used in prior years. Accordingly, the Compensation Committee used raw competitive data (as compared to size adjusted data) to establish the competitive market for pay levels due to the increased transparency of raw data for the Compensation Committee and executives, and because it lessens potential volatility in pay levels that can be attributable to small changes in executives’ revenue responsibilities.
Compensation Decisions Compared to Market Data
When determining total compensation opportunities for our executives, we consider many factors, including:
our compensation philosophy, which provides guiding principles and broad direction;
external market data to provide a frame of reference for how comparable companies set compensation opportunities as well as compensation trends;
the nature and scope of the individual’s role at Woodward compared to the benchmark job;
the individual’s performance, knowledge, skills, abilities, potential, and significant contributions to the Company and impact to shareholder value; and
the cumulative impact of our retention efforts over the course of the individual’s career.
In making compensation decisions and determinations, the Compensation Committee, in consultation with Aon and management, matches the NEOs with similarly positioned executives at companies in the peer comparator group, which we refer to as the benchmark position. These matches facilitate pay comparisons based on functional matches, job duties, responsibilities, level of impact, and organizational level.
When analyzing market data from our peer group, Aon presents data to the Compensation Committee at the 25th, 50th and 75th percentiles for reference points. However, we do not target any percentile or percentile range as a specific objective for the compensation we pay. Rather, our compensation decisions are based on the full consideration of all of the above mentioned elements that provide input into our deliberations and inform our decisions. As a result of evaluating compensation based on the criteria described above, total target compensation for our NEOs may in certain circumstances be above or below the reference points of the peer comparator group provided by Aon.
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Compensation Discussion and Analysis (continued)
Elements of Compensation
Base Salary
Base salary is an important•Fixed compensation component we must payfor our NEOs
•Attraction and retention tool that allows us to remain competitive inmaintain a consistent, stable leadership team
•Adjusted based on performance, peer benchmarking, and other relevant factors
Long-Term Cash Incentive Compensation
•Performance-based, cash payout at the end of a three-year period
•Target opportunities for our industry and the marketplace in general. The Compensation Committee generally setsNEOs range from 25% to 50% of base salary at target level performance
•Payouts based on our performance under two key financial related metrics (Return on Capital and Net EPS Growth), measured on a relative basis as compared to the S&P MidCap 400 Index
Short-Term Incentive Compensation
(the WVIP)
•Payouts are typically based on the achievement of specific, rigorous financial and operational/strategic performance metrics
•WVIP target opportunities for our NEOs typically range from 65% to 100% of base salary at target level performance
•Designed to drive achievement of our short-term goals
Long-Term Equity Incentive Compensation
•Annual awards historically in the form of non-qualified stock options (“stock options”)
•Exercise price of stock options equal to the closing price of Company stock on the effective date of grant
•Time-based vesting for stock options; typically 25% each year over four years
•Critical attraction and retention tool
•Designed to motivate and reward NEOs to achieve multi-year strategic goals and to deliver sustained long-term value to stockholders
In addition, the executive compensation program for NEOs includes health and welfare benefits, a non-qualified deferred compensation program, defined contribution retirement plans, severance and change in control agreements, and other ancillary benefits.
39
Compensation Discussion and Analysis
Our Executive Compensation Practices
Our executive compensation policies and practices are designed to reinforce our pay-for-performance philosophy and align with sound governance principles. The following chart highlights our fiscal year 2022 executive compensation policies and practices:
✓ | Significant portion of executive compensation is at-risk based on corporate performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Annual review and approval of our executive compensation strategy | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Robust peer compensation group adopted on an annual | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Independent compensation consultant engaged by the Compensation Committee | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Cash and equity incentives are performance-based | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Multi-year vesting periods for equity awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Both our short- and long-term cash incentive plans are subject to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Limited and modest perquisites | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Annual risk assessment of our executive compensation program | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Clawback policy on
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Stock ownership guidelines for executive officers and directors | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✓ | Annual risk assessment of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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What We Don’t Do | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✘ | No “single trigger” change in control payments or benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✘ | No tax gross-ups for change in control related payments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✘ | No hedging, pledging or short selling of Woodward | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
✘ | No strict benchmarking of
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✘ | No repricing of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Compensation Philosophy and Strategy To promote the creation of long-term stockholder value and the achievement of Company objectives, our executive compensation philosophy is designed to: attract, retain and motivate superior talent who exemplify the philosophies and values expressed in the Company’s Constitution; 40 Compensation Discussion and Analysis maintain a market-based strategy that provides a competitive total compensation opportunity, without strictly benchmarking compensation to a specific percentile of our peer group; align the interests of our executive officers and employees with those of our stockholders by using equity-based and other incentive compensation to motivate executive officers to achieve multi-year strategic goals and deliver sustained long-term stockholder value; align compensation programs with our vision, key business strategies and financial performance drivers, while maintaining an appropriate balance between short- and long-term rewards; and focus on pay-for-performance by ensuring that a significant portion of total compensation opportunity is variable compensation that directly ties to Company performance. Our variable compensation plans are designed so that the payout opportunity is directly linked to the achievement of challenging yet attainable pre-determined financial metrics and other objectives. Company performance significantly influences the total compensation received by our executives. Consideration of Stockholder Say-on-Pay Vote In January 2022, our stockholders voted on an advisory resolution regarding the compensation of our named executive officers, which was approved by 95.5% of the votes cast on the proposal (the “say-on-pay proposal”). The Compensation Committee determined that the favorable vote demonstrated strong stockholder support for Woodward’s overall executive compensation approach, and further determined that current practices and processes did not require any significant modifications to achieve the desired results or to address any stockholder concerns. The Compensation Committee will continue to consider the outcome of these advisory votes and feedback from our stockholders when evaluating future executive compensation arrangements. In addition, we are required to hold an advisory vote on the frequency of our say-on-pay votes every six years (such proposal or vote regarding the frequency of the say-on-pay vote, the “say-when-on-pay” proposal or vote). We last held a say-when-on-pay vote at our 2016 Annual Meeting. Accordingly, a say-when-on-pay proposal is included as Proposal 3 in this proxy statement. Role of the Compensation Committee The Compensation Committee annually: determines our CEO’s compensation by evaluating his performance against a set of objectives through a defined process led by the Compensation Committee Chairperson, involving all independent Board members; determines the compensation arrangements for our other executive officers; reviews and reassesses our executive compensation program, including the performance of an annual risk assessment; reviews and approves the plan design and performance metrics for our variable incentive plans; reviews, approves and administers our equity compensation plans; and approves individual equity grants. For additional information about the Compensation Committee, see “Board Meetings and Committees—Compensation Committee” in this proxy statement. In making executive compensation decisions for fiscal year 2022, the Compensation Committee sought the assistance of its independent compensation consultant, Aon, as well as Mr. Gendron (our then-current CEO) and our management team (except with respect to their own compensation). The Compensation Committee reviewed the cash and equity compensation and other compensation components for our executive officers to ensure they would be properly incentivized and rewarded for their and the Company’s performance. No employees were present during the discussion of their own compensation. 41 Compensation Discussion and Analysis Role of Management In order to implement compensation programs for fiscal year 2022 that align with appropriate Company performance goals and strategic direction, the Compensation Committee worked closely with management, including Mr. Gendron (our then-current CEO), the Corporate Vice President, Human Resources (the “CHRO”), and the Corporate Vice President, General Counsel & Corporate Secretary (the “General Counsel”). Specifically, management facilitated the alignment process by: reviewing comparative benchmarking compensation data provided by Aon for our NEOs; evaluating NEO performance (with the exception of our CEO); making recommendations to the Compensation Committee regarding variable incentive plan design and performance metrics that consider the Company’s objectives and strategy; and making recommendations to the Compensation Committee regarding all elements of compensation of the NEOs (with the exception of Mr. Gendron). All decisions regarding executive compensation are ultimately made by the Compensation Committee. Management provided further input on executive compensation structure, background information regarding our strategic objectives, performance assessment process and data, potential promotions, talent management and succession planning, and compensation associated with promotions. At the request of the Compensation Committee, the CEO, CHRO and General Counsel regularly attend Compensation Committee meetings. The Compensation Committee also meets as needed without any members of management present. Role of the Compensation Consultant Services Provided by Aon to the Compensation Committee The Compensation Committee recognizes the value in procuring independent, objective expertise and counsel in connection with fulfilling its duties, and pursuant to its charter, the Compensation Committee has the authority to select and retain independent advisors and counsel to assist it with carrying out its duties and responsibilities. For fiscal year 2022, the Compensation Committee engaged Aon to review our executive compensation policies and practices. Aon reviewed and advised on all principal aspects of our executive compensation program for fiscal year 2022. In connection with the hire of Mr. Blankenship, Aon supported the Compensation Committee by assessing the competitive market for CEO compensation and aiding in the development of a compensation arrangement that was aligned with shareholder interests while being sufficiently motivating to attract a highly sought-after industry talent. The Committee believes that Aon has a well-developed understanding of our business, and is well positioned to provide objective guidance on compensation and incentive plans that are aligned with and reinforce our strategies and goals. Services Provided by Aon to Management In addition to the services Aon provides to the Compensation Committee on executive compensation matters, management utilizes Aon as one of our global compensation and benefits consultants. Aon provides total compensation data for the Company’s key leadership group, and consults on our various health, welfare and retirement plans. Management also utilizes Aon’s benefits index and compensation and benefits survey data to benchmark compensation and benefits for the Company’s non-executives. The decision to engage Aon for advice and services not related to executive compensation was made by management. For fiscal year 2022, the Company paid Aon $983,077 for advice and services provided to the Compensation Committee and the Company. Of this amount, $415,130 was paid as a result of the work Aon performed for the Compensation Committee related to executive compensation advice and services, and $122,466 was paid as a 42 Compensation Discussion and Analysis result of the work Aon performed for management that was not related to executive compensation, and $445,481 was paid for certain health and welfare benefit programs that are not related to compensation. Aon’s Independence The Compensation Committee annually reviews the objectivity and independence of the advice provided by Aon on executive compensation matters. The Compensation Committee has evaluated Aon’s engagement, and based on the six factors for assessing independence and identifying potential conflicts of interest that are set forth in Rule 10C-1(b)(4) of the Exchange Act of 1934 (the “Exchange Act”) and Rule 5605(d)(3)(D) of the Nasdaq Stock Market rules, and such other factors as were deemed relevant under the circumstances, has determined that its relationship with Aon and the work of Aon on behalf of the Compensation Committee did not raise any conflict of interest, and that Aon is independent. Competitive Market-Based Compensation Approach Our executive compensation program is benchmarked to be competitive with our compensation peer group. On an annual basis, companies in our compensation peer group are reviewed, changed if appropriate, and approved by the Compensation Committee. The companies included in our compensation peer group are selected based on a combination of multiple comparative factors, as summarized below.
Based on its annual review, the Compensation Committee determined no changes were needed to the fiscal year 2022 compensation peer group used for pay and performance comparisons. The companies comprising the fiscal year 2022 compensation peer group are summarized below. Woodward’s revenues at the time of approval of this peer group were positioned around the competitive 50th percentile of the peer group.
Use of Comparative Market Data Our executive compensation program is designed to provide total compensation opportunities that are competitive with the compensation offerings in our compensation peer group. The use of comparative market information as a reference point is an important element of our compensation determination process, including specifically using external market data to identify market compensation trends, provide a frame of reference for 43 Compensation Discussion and Analysis how comparable companies set compensation opportunities, and compare the nature and scope of the individual’s role at Woodward to similarly positioned executives at companies in the compensation peer group. The Compensation Committee considers quantitative comparative data from our compensation peer group in determining each element of compensation for each NEO. All comparative market data that the Compensation Committee considers is provided by Aon based on commercial data sources. While Aon presents the Compensation Committee with specific percentile pay data as a reference point, we do not target any percentile or percentile range as a specific objective for the compensation we pay. Rather, our compensation decisions are based on the full consideration of all of the above-mentioned elements. In addition to comparative data, the Compensation Committee also considers other qualitative factors in its compensation determination process. Such factors are considered holistically and include: our compensation philosophy, which provides guiding principles and broad direction; the executive’s performance, knowledge, skills, abilities, potential, and significant contributions to the Company and impact to shareholder value; internal equity; and the cumulative impact of our retention efforts over the course of the individual’s career. Fiscal 2022 NEO Target Pay Mix Our executive compensation program focuses on pay-for-performance, and a significant portion of our executive compensation is variable and at-risk. The Compensation Committee uses its discretion in determining the appropriate mix of fixed and variable compensation for each NEO. The balance between each element of compensation may change from year-to-year based on corporate strategy and objectives, business conditions, and other considerations. For fiscal year 2022, our NEOs had the following target pay mix, which reflects our pay-for-performance philosophy. We did not include Mr. Blankenship in the below charts because his pay mix in fiscal year 2022 does not accurately reflect his target pay mix during a typical fiscal year because of the sign on incentives he received and the fact that he joined the Company approximately 60% of the way through fiscal year 2022. 44 Compensation Discussion and Analysis Base Salary Base salary is the only fixed component of our NEOs’ total compensation and provides stable, competitive pay to attract, motivate and retain our NEOs. Base salaries typically reflect each NEO’s experience, skills, knowledge and responsibilities, although comparative market data also plays a role in setting base salary levels. We do not apply specific formulas to determine salary changes. Instead, the salaries of our NEOs are reviewed on an annual basis by the Compensation Committee based on our compensation philosophy and strategy. Salary changes for our NEOs are typically approved by the Compensation Committee in September and generally take effect in January each year. Short-Term Incentive Compensation A key objective of our compensation philosophy is to tie a significant portion of each NEO’s compensation to our performance. To support this objective, we typically provide (through the WVIP, our short-term cash incentive compensation plan) annual performance-based cash incentive opportunities to our NEOs and all other Woodward employees. This compensation is typically earned based on our performance against specified performance metrics and rigorous targets that are established by the Compensation Committee at the beginning of the fiscal year. The performance metrics are designed to appropriately motivate performance in key areas of the business that are critical to the Company’s long-term strategy and stockholder value creation (including operational excellence), to align pay and performance, and to enhance visibility for participants. For fiscal year 2022, the Compensation Committee renewed the overarching annual performance incentive plan, which continues to specify performance goals related to net earnings. Specifically, for fiscal year 2022, actual Company achievement of the overarching performance goal of net earnings determined each NEO’s maximum possible WVIP incentive payout up to a maximum WVIP payout of 1.0% of net earnings for Messrs. Blankenship and Gendron, 0.5% of net earnings for Messrs. Hartman and Cromwell, and 0.33% of net earnings for Messrs. Fawzy and Patel. Setting maximum WVIP incentive payouts in this manner motivates achievement of net earnings, which strongly ties to stockholder value creation. Fiscal Year 2022 WVIP Performance Metrics, Targets and Actual Performance The specific WVIP performance metrics and targets approved by the Compensation Committee for fiscal year 2022 are outlined below, including their (i) relative weighting, (ii) threshold, target and maximum performance levels, and (iii) actual performance. The WVIP performance metrics and targets reflect rigorous targets that would have taken significant efforts to achieve in light of the challenging industry-wide operating environment. The WVIP performance metrics and performance targets reflect such conditions, which have resulted in a decline in the Company’s financial performance. These metrics and targets were applicable to all employees, including the NEOs.
45 Compensation Discussion and Analysis How Performance is Measured For purposes of the WVIP performance metrics for fiscal year 2022, “Adjusted EPS”
The above payout formula applies to each of the two performance measures, which are weighted equally and measured independently from the other. If performance is below the 50th percentile, no award will be earned or paid as it relates to that performance measure. Award amounts are interpolated for performance results between the above percentiles. Performance at the 60th percentile is necessary to earn a payout of 100% of target as it relates to that measure. We believe having a target payout at the 60th percentile sets a higher standard of performance. The maximum award that can be earned for performance at or above the 75th percentile is 200% of target as it relates to that measure. Our Performance During the Fiscal 2020-2022 Cycle Payouts for the fiscal year 2020-2022 cycle were based on the following performance levels:
Fiscal 2020-2022 Cash LTI Payout for our NEOs For the fiscal year 2020-2022 Cash LTI cycle, targets and actual payouts are detailed in the following table:
Mr. Blankenship’s Compensation Compensation Determination Process In determining Mr. Blankenship’s total target full fiscal year 2022 compensation (including all elements of his compensation and the sign-on incentives provided to him upon his hire), the Compensation Committee evaluated 49 Compensation Discussion and Analysis market data for positions of similar responsibility at similarly-sized manufacturing organizations, and his status as a highly sought-after executive. Long-Term Incentive Compensation Pursuant to the terms of Mr. Blankenship’s offer letter, his total annual target compensation under the LTI Plan for fiscal year 2023 is $4,800,000, of which the cash component represents $462,000 (50% of his base salary on a risk adjusted basis) and the remainder is comprised of an equity component with a grant date fair value of approximately $4,338,000. Mr. Blankenship was not entitled to any amounts under the fiscal year 2020-2022 Cash LTI cycle because his employment with the Company began after the first day of the last fiscal year of the performance period (participants must be employed on the first day of the fiscal year to be eligible). He will begin participating in the Cash LTI plan in the 2023-2025 cycle, with his first eligible payout on a prorated basis beginning for fiscal year 2023. Mr. Blankenship’s first annual equity grant under the LTI Plan was made on October 3, 2022 (the first business day of the Company’s fiscal year 2023), as part of the Company’s regular annual equity grant process for eligible participants. Sign-On Incentives Mr. Blankenship received, as sign-on incentives, a one-time $1,000,000 cash payment (which he would be obligated to reimburse if he voluntarily resigns from the Company within two years of his employment start date), as well as a one-time equity sign-on incentive. In determining the value and form of the sign-on incentive awards, the Compensation Committee considered Mr. Blankenship’s historical compensation arrangements, market practice, retention objectives, and pay-for-performance alignment. The equity sign-on incentive award consisted of a one-time equity grant representing a grant date fair value of $5,600,000, comprised of $3,400,000 in time-vested RSUs and $2,200,000 of grant date fair value in stock options. Specifically, Mr. Blankenship received on May 9, 2022 (his employment start date) 34,600 RSUs, all of which will cliff vest three years from the grant date, and 50,500 stock options with an exercise price equal to $98.34, the closing price of the Company’s stock as quoted on Nasdaq on such date. All the stock options will vest over four years at the rate of 25% per year. Relocation Benefits for Mr. Blankenship In connection with Mr. Blankenship’s hire, and consistent with Woodward’s relocation policy for homeowners, the Company offered to guarantee to Mr. Blankenship an offer on his primary residence in Virginia equal to the average appraised value of the home. In order to accommodate a transition period for Mr. Blankenship and his family, the Company, at its expense and for a period of 12 months, offered to provide for Mr. Blankenship’s commute between his residence in Virginia and the Company’s headquarters in Fort Collins, Colorado. Additionally, the Company offered to provide Mr. Blankenship with temporary housing in the Fort Collins, Colorado area for a period of up to 12 months. All other relocation benefits provided to Mr. Blankenship were consistent with the benefits we provide to all new hires who relocate in order to join the Company, regardless of their role. The NEOs are eligible to participate in health, welfare, and retirement benefits on the same basis as all of our U.S. employee membership. These benefits include a group health insurance program; life insurance, inclusive of employee life, additional buy-up employee life, optional spouse life, and optional child life; Accidental Death & Dismemberment insurance; Short-Term Disability; Long-Term Disability; a 401(k) retirement savings plan (the “Woodward Retirement Savings Plan”), inclusive of employee contributions and Company contributions (100% match on the first 3% of employee contributions, 50% on the next 3% of employee contributions, maxing at 4.5%); Woodward Stock Plan (annual Woodward 50 Compensation Discussion and Analysis Our NEOs are also eligible to participate in a non-qualified deferred compensation plan (the “Executive Benefit Plan” or the “EBP”).
All of our tax-qualified plans are subject to applicable limitations set by the Internal Revenue Service (“IRS”). Supplemental contributions to the EBP (as more fully described below) are made for the Woodward Retirement Savings Plan, the Woodward Stock Plan, and the grandfathered Retirement Income Plan and are solely to restore for IRS limitations. The benefits described in this section are paid to remain competitive in the marketplace. Amounts relating to certain of these benefits may be found in the “All Other Compensation” column of the Summary Compensation Table. Post-Employment Compensation and Employment Contracts The Company’s NEOs are not employed under general employment contracts and are employees
The severance benefits are intended to ease the consequences of
The benefits applicable during a change in control For a further description of the severance and change in control agreements, see the information under the caption “Executive Compensation — Potential Payments Upon Termination or Change in Impact of Accounting and Tax Issues on Executive Compensation In
Compensation Discussion and Analysis
The Board has established stock ownership guidelines for the Company’s non-employee directors and its officers to align their interests and objectives with those of our stockholders. The below table reflects minimum ownership value for the Company’s non-employee directors and its officers as a multiple of their respective annual base retainers or salaries, as applicable. Accumulation of the amount of stock required under the ownership guidelines is expected within 60 months of the date of such person’s appointment or election.
Shares held as owner of record or in a brokerage account, shares held in the Woodward Retirement Savings Plan, and unfunded deferred amounts denominated in Woodward Stock in the EBP, all qualify towards the ownership guidelines. Unexercised and vested “in-the-money” stock options will also qualify towards up to a maximum of 50% of the ownership requirements. The Compensation Committee may in its discretion relieve any person of such obligations on a case-by-case basis, taking into consideration special circumstances such as retirement or health of the individual. As of the date of this proxy statement filing, all directors and officers were in compliance with the ownership guidelines taking into account applicable accumulation periods following their Hedging and Pledging Policy Under our written policies, no directors or employees (including officers) of the Company are permitted to purchase our stock on margin, or to short sell, buy or sell puts or calls, or to engage in any other transaction related to Woodward securities that hedge or offset, or are designed to hedge or offset any decrease in the market value of Woodward securities, whether such securities are granted to such employee or director by the Company as part of compensation, or held by the employee or director. In addition, directors and employees of the Company are not permitted to pledge Woodward stock under any circumstances. Clawback Policy
Compensation
Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, or the Exchange Act, that might incorporate this proxy statement, in whole or in part, the following Woodward, Inc. Compensation Committee Report on Compensation Discussion and Analysis shall not be deemed to be “soliciting material” or “filed” with the SEC or incorporated by reference into any such previous or future filings. The Compensation Committee is charged with certain responsibilities relating to compensation of the Company’s executive officers. The Compensation Committee evaluates and approves all compensation of executive officers, including base salaries, short-term and long-term incentive compensation, and any perquisite programs of the Company. Compensation Committee determinations are presented to the Board. The Compensation Committee also fulfills its duties with respect to the Compensation Discussion and Analysis and Compensation Committee Report portions of the proxy statement, as described in the Compensation Committee’s charter. The Compensation Discussion and Analysis was prepared by management of the Company. The Company is responsible for the Compensation Discussion and Analysis and for the disclosure controls relating to executive compensation. The Compensation Discussion and Analysis is not a report or disclosure of the Compensation Committee. The Compensation Committee met with management of the Company and the Compensation Committee’s outside consultant to review and discuss the Compensation Discussion and Analysis. The Compensation Committee of the Board of Directors of the Company has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement and the
Executive
The following tables set forth compensation information for the NEOs for services rendered in all capacities to the Company and its subsidiaries in fiscal year
Note: The
Woodward’s contributions to the Woodward Retirement Savings Plan, which consists of a 401(k) component, a Woodward common stock component, and a Retirement Income Plan component (which was closed to new entrants hired after 2003). 54 Executive Compensation Credit to the EBP for contributions to which the executive would have been entitled if the benefit had been calculated without regard to the limit under the Internal Revenue Code on total contributions, benefit eligible compensation, and/or salary deferrals.
In accordance with our standard relocation policy that is applicable to all employees, payments made in fiscal year 2022 to federal and state tax authorities in connection with a relocation to Colorado by Mr. Patel that occurred in late fiscal year 2021. Our relocation policy provides for these payments to offset the economic loss suffered by the relocated employee on account of taxes owed on certain relocation benefits paid by the Company. These tax assistance benefits were determined and provided to Mr. Patel in the same way as for any other employees who receive relocation benefits. Various other perquisite costs attributable to our NEOs, as described more fully in the footnotes to the below table. Table to footnote (4) above:
Executive Compensation
Grants of Plan-Based Awards for Fiscal Year The following table provides additional information with respect to stock-based awards granted in fiscal year
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table Stock option awards consist of non-qualified options issued for a 10-year term. Each option tranche granted to NEOs in fiscal year 56 Executive Compensation within three months following the date of termination or the term of the option whichever is earlier. For stock option awards granted on or after October 1, 2013, upon a termination of employment due to retirement, options will not accelerate and will continue to vest and be exercisable in accordance with the schedule established at the grant date. For the foregoing purposes, our directors are eligible for retirement upon attaining age 55, and the NEOs are eligible for retirement upon (i) attaining age 55 with at least ten years of service with us, (ii) attaining age 65 with no minimum years of service, or (iii) attaining two years of service if such NEO was first hired at or after the age of 55 (such person who was first hired at or after the age of 55, a “Late Career Hire”). The RSUs granted to Mr. Blankenship upon his employment start date were granted pursuant to the Company’s Form Attraction and Retention RSU Agreement. If employment is terminated (other than for reasons as described below), unvested RSUs granted pursuant to such form agreement immediately terminate. Such form agreement does not The WVIP and the Cash LTI are presented in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table because each is a cash-based performance award. The actual amounts of the awards under the Cash LTI listed in the Non-Equity Incentive Plan Compensation column were paid in November
Executive Compensation
Outstanding Equity Awards at Fiscal Year End (September 30, The following table provides information regarding the outstanding equity awards held by each of the NEOs as of September 30,
58
Executive Compensation
Option Exercises and Stock Vested Table The following table provides the amounts received (net of the exercise price) upon the exercise of options or similar instruments or the vesting of stock or similar instruments during fiscal year
Nonqualified Deferred Compensation Table at Fiscal Year End The following table discloses contributions, earnings and balances under the EBP, the Company’s nonqualified deferred compensation plan, for each NEO, during fiscal year
Narrative Disclosure of Nonqualified Deferred Compensation Table The EBP is a non-qualified, deferred compensation plan that is designed to allow for supplemental retirement savings above the limits imposed by the IRS. If deferrals are above the Code limits on eligible compensation, then the account is credited by the Company with a percentage “match” contribution equivalent to that available under 59 Executive Compensation returns based on the same investment alternatives available to participants under the Woodward Retirement Savings Plan. Deemed investments into Woodward common stock is generally permitted, except that supplemental contributions by the Company to the EBP are not permitted to initially be deemed invested in Woodward stock. Eligible employee participants may defer up to 50% of base salary for a plan year and up to 100% of cash incentive compensation. All distribution elections must be made in advance of the plan year. At the time of the deferral election, the participant must designate the time and form of distribution.
Potential Payments Upon Termination or Change in Control This section explains the payments and benefits to which the NEOs would be entitled in various termination of employment The intent of this section is to isolate those payments and benefits for which the amount, vesting, or time of payment is altered by the termination of employment in the described circumstances. This section does not cover all amounts the NEOs would receive following termination. Specifically, they are entitled to COBRA, life insurance conversion, and payouts from Retirement
A pro rata payout (based on service prior to retirement) at the conclusion of each open Cash LTI cycle based on actual company performance; and Continued vesting and exercisability (in accordance with the original vesting schedule) of unvested non-qualified stock options following retirement. 60 Executive Compensation The following table shows the amount each NEO would receive on account of a retirement on the last business day of our fiscal
Death If Incentive payouts from the Cash LTI Acceleration of vesting of non-qualified stock option awards (the value in this column represents the shares that vested due to this provision, with a market price as of the last day of fiscal year Acceleration of vesting of RSUs (the value in this column represents the shares that vested due to this provision, with a market price as of the last day of fiscal year 2022). 61 Executive Compensation NEOs who are retirement eligible receive, upon retirement, continued vesting (in accordance with the original vesting schedule) of any then-unvested options. Accordingly, death of an NEO would not result in vesting of any stock options that otherwise would have been forfeited for such retirement-eligible NEOs, although it would result in immediate vesting of such options. See “Outstanding Equity Awards at Fiscal Year End” table above for information regarding unvested (“Unexercisable”) options. The following table shows the amount each NEO other than Mr. Gendron would receive on account of death occurring on the last business day of our fiscal year:
Disability If A monthly payment under the Woodward, Inc. Long-Term Disability plan available to all employees; Incentive payouts from the Cash LTI Acceleration of vesting of non-qualified stock option awards (the value in this column represents the shares that vested due to this provision, with a market price as of the last day of fiscal year Acceleration of vesting of RSUs (the value in this column represents the shares that vested due to this provision, with a market price as of the last day of fiscal year 2022).
NEOs who are retirement eligible receive, upon retirement, continued vesting (in accordance with the original vesting schedule) of any then-unvested options. Accordingly, termination of an NEO by reason of disability would not result in vesting of any stock options that otherwise would have been forfeited for such retirement-eligible NEOs, although it would result in immediate vesting of such options. See “Outstanding Equity Awards at Fiscal Year End” table above for information regarding unvested (“Unexercisable”) options. The following table shows the amount each NEO other than Mr. Gendron would receive on account of disability-related termination occurring on the last business day of our fiscal year: 62 Executive Compensation
Executive Severance and Change in Control We have entered into transitional compensation agreements with certain of our officers, including all of our NEOs, which become operative only in the event of a qualifying termination, A qualifying termination of employment under the agreements generally means a termination of the NEO’s employment by the Company without “cause” or by the NEO for “good reason” (as both terms are defined in the agreements). A qualifying termination of employment is considered in connection with a change in control if the termination is within the period beginning three months before the change in control and ending two years after the change in control. Payments of certain cash amounts owed under the agreements will be made only after the release of claims in favor of the Company becoming effective and irrevocable. In consideration for the NEO agreeing to restrictive covenants and releasing claims in favor of the Company, the executive would receive an incremental amount (payable in a lump sum) equal to 100% of the sum of the executive’s annual base salary and target annual incentive (the “Restrictive Covenants Payment”). Restrictive covenants in the agreements include noncompetition, confidentiality, nonsolicitation, cooperation, and nondisparagement requirements. Moreover, if the payments described below would constitute an "excess parachute payment" within the meaning of Section 280G of the Code, the Company would not provide reimbursement to the executive for any excise taxes imposed. In some instances, the executive may be subject to a 20% excise tax on a portion of the severance and other benefits payable upon a change in control. In such cases, the company does not provide a tax gross-up. However, the amount payable to the executive may be reduced to eliminate the excise tax, but only if the net-of-tax result to the executive is better than paying the excise tax. Severance Benefits An NEO who experiences a qualifying termination of employment not in connection with a change in control will, subject to signing a release of claims in favor of the Company, receive (i) any unpaid base salary, accrued vacation pay, unreimbursed business expenses, and any other amounts earned by and owed to the eligible employee; (ii) a payment equal to the Company's cost (less the eligible employee’s premium co-pay obligations) to provide the NEO with one year of continued health and welfare benefit coverage under Company-provided plans; (iii) the then-current year's annual incentive award that the NEO would have actually earned, if any, prorated based on the 63 Executive Compensation portion of the year before the qualifying termination of employment; (iv) the actual amount that the NEO would have earned, if any, for the applicable performance period for all outstanding Cash LTI cycles, prorated based on the portion of the performance cycle before the qualifying termination of employment); (v) the NEO’s equity compensation awards that are scheduled to vest within 12 months based on continued employment (specifically excluding any awards that remain subject to performance goals that have not been achieved) will continue to vest, and any vested unexercised stock options or stock appreciation rights will be exercisable for the remaining life of the option (subject to earlier termination as provided in the applicable plan or award agreement); and (vi) the Restrictive Covenants Payment. The following table describes the payments and benefits that are triggered by the occurrence of a qualifying termination outside of a change in control. For purposes of this table, we have assumed the exercise of stock options on September 30, 2022, the last business day of fiscal year 2022, at the closing price on that day of $80.26 per share. NEOs who are retirement eligible receive, upon retirement, continued vesting (in accordance with the original vesting schedule) of any then-unvested options and RSUs, without regard to the occurrence of a qualifying termination. Accordingly, a qualifying termination would not result in any incremental vesting of any stock options or RSUs as a result of such termination of a retirement-eligible NEO. See “Outstanding Equity Awards at Fiscal Year End” table above for information regarding unvested (“Unexercisable”) options. Mr. Gendron retired from the Company in July 2022, and as such is not included in the table below. Mr. Patel experienced a qualifying termination from the Company after the end of the Company’s fiscal year 2022 but prior to the filing of this proxy statement. As such, amounts shown for Mr. Patel reflect actual amounts received where such amounts are known and projected amounts (based on the Company achieving target performance) under the fiscal year 2023 annual incentive plan and the three open cycles under our Cash LTI plan.
64 Executive Compensation
Change in Control and Restrictive Covenant Agreements Post-Employment Provisions For purposes of these agreements, a change in control occurs if: Any person, entity, or group (with certain exceptions) becomes the beneficial owner of 30% or more of the combined voting power of the then-outstanding shares of Woodward common stock; There is a change in a majority of the Board during any consecutive 12-month period, other than by election or nomination by a vote of two-thirds of the Board members as of the beginning of the period (such individuals or any such new directors, the “Incumbent Board”); Woodward’s stockholders approve a merger, consolidation, sale of assets, or share exchange, and in any such case, which is consummated and results in Woodward’s stockholders owning less than 51% of the combined voting power of the surviving corporation following the transaction; or During any consecutive If, within three months prior to or not more than 24 months following a change in control, The executive would receive an amount (payable in a lump sum) equal to:
The following table describes the payments and benefits that are triggered by the occurrence of a change in control and the termination of employment following a change in control. For purposes of this table, we have assumed the exercise of stock options on September 30, 65 Executive Compensation in the absence of a change in control. Accordingly, a change in control would not result in any incremental vesting of any stock options
Pay Ratio Pursuant to Section 953(b) of the Dodd-Frank Act and SEC rules, we are For the year ended September 30, 2022, the total compensation for Mr. Blankenship was 66 Executive Compensation We annualized Mr. Blankenship's total compensation as follows:
For fiscal year 2022, the annual total compensation for our median employee was Using Mr. Blankenship’s annualized total target compensation (including the grant date fair value of anticipated future annual equity awards, target Cash LTI and target bonus, but without regard to Mr. Blankenship’s sign-on incentives and temporary commuting benefits), total CEO pay In accordance with SEC rules, we identified the median employee as of July 1, 67 Executive Compensation converted to USD using exchange rates as of August For purposes of identifying the median employee, individuals (with corresponding number of employees) who were employed in The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
Equity Compensation Plan Information The below table describes the total number of stock options that were awarded under the expired 2006 Omnibus Incentive Plan (the “2006 Plan”) and the Omnibus Incentive Plan, and remain outstanding, as well as the number of shares of Woodward securities remaining available for future grants as of
PROPOSAL 4 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has selected the accounting firm of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2023. The decision of the Audit Committee to appoint Deloitte & Touche LLP was based on careful consideration of the firm’s qualifications as an independent registered public accounting firm. Deloitte & Touche LLP was originally selected by the Audit Committee as the Company’s independent registered public accounting firm effective December 6, 2007. Although the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, the Audit Committee and the Board are requesting, as a matter of policy, that stockholders ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2023. The Audit Committee is not required to take any action as a result of the outcome of the vote on this proposal. However, if the stockholders do not ratify the appointment, the Audit Committee would investigate the reasons for the stockholders’ rejection and would consider whether to retain Deloitte & Touche LLP or to appoint another independent registered public accounting firm. Furthermore, even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. A proposal to ratify the appointment of Deloitte & Touche LLP for the current year will be presented at the Annual Meeting. A representative from Deloitte & Touche LLP is expected to attend the Annual Meeting and will have the opportunity to make a statement, if he or she desires to do so, and be available to answer appropriate questions.
Audit Committee Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Exchange Act that might incorporate this proxy statement in whole or in part, the information set forth above under “Board Meetings and Committees — Audit Committee,” relating to the charter of the Audit Committee and the independence of the Audit Committee members, and the following report shall not be deemed to be “soliciting material” or “filed” with the SEC or incorporated by reference into any such previous or future filings. Audit Committee Report The Audit Committee oversees the Company’s financial reporting process and compliance with the Sarbanes-Oxley Act on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including maintaining an effective system of internal control over the Company’s financial reporting. Based on the review and discussions referred to in this report, we recommended to the Board that the audited financial statements for the year ended September 30, In addition, our recommendation was based on our discussion with Deloitte & Touche LLP of the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) 69 PROPOSAL 4 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM and the SEC. We also discussed with Deloitte & Touche LLP their independence, and received from them the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence. We based our recommendation on the foregoing discussions, disclosures and considerations.
Audit Committee’s Policy on Pre-Approval of Services Provided by Independent Registered Public Accounting Firm The Audit Committee is responsible for appointing, setting compensation for, and overseeing the work of the independent registered public accounting firm. As a result, the Audit Committee has established a policy regarding pre-approval of all services provided by the independent registered public accounting firm. Under the established policy, all audit and tax services and related fees require the specific approval of the Audit Committee. For audit-related services and all other services, the Audit Committee has determined specific services and dollar thresholds under which such services would be considered pre-approved. To the extent that management requests services other than these pre-approved services, or beyond the dollar thresholds, the Audit Committee must specifically approve the services. In situations where approval of such services is required prior to the next regularly scheduled meeting of the Audit Committee, the Audit Committee has delegated authority to approve such services to the Chairman of the Audit Committee. Furthermore, under the established policy, the independent registered public accounting firm is prohibited from performing the non-audit services identified by the SEC and the Public Company Accounting Oversight Board as prohibited. The policy also requires management to periodically prepare reports for the Audit Committee on the Company’s use of the independent registered public accounting firm.
Fees Paid to Independent Registered Public Accounting Firm The following table represents fees billed or expected to be billed for professional audit services rendered by Deloitte & Touche LLP for the audit of the Company’s consolidated financial statements
In November
70
PROPOSAL
At the 2016 Annual Meeting, stockholders of the Company approved the Woodward, Inc. 2017 Omnibus Incentive Plan, as further amended and restated at the 2017, 2018, 2019, 2020 and The Omnibus Incentive Plan is intended to attract and retain the best available individuals for positions of substantial responsibility, and to provide to such individuals additional incentives that are aligned with and promote the success of the Company. The Omnibus Incentive Plan also is intended to encourage stock ownership by employees, consultants, or non-employee directors who are granted awards under the Omnibus Incentive Plan (“Participants”), thereby further aligning their interests with those of the Company’s stockholders. The only amendment to the Omnibus Incentive Plan that is being submitted for stockholder approval is an increase by Other than as described above, no material changes to the Omnibus Incentive Plan have been made since the plan was last approved by stockholders. Why Stockholders Should Approve the Amendment to the Omnibus Incentive Plan In determining whether and how many additional shares to propose to make available under our Omnibus Incentive Plan, the Board considered the following factors: Remaining Competitive. The Omnibus Incentive Plan plays an important role in our Human Capital management strategy and our effort to align the interests of Participants and stockholders. Moreover, to be competitive in our industry, equity compensation awards are an important tool in recruiting, retaining and motivating highly qualified technical and other key employees, upon whose efforts our success is dependent. It is critical that we have the ability to issue shares to these individuals to align their interests to those of stockholders and the creation of long-term stockholder value. Equity awards are an important component of the Company’s compensation program. The Omnibus Incentive Plan, including the amendment described herein, will help the Company to continue to attract and retain the services of qualified employees, officers and non-employee directors (such directors, “Outside Directors”). Equity incentives align the interests of our employees, officers and Outside Directors with those of other stockholders. Equity incentives appropriately align recipients with stockholders by giving them a common interest in incentivizing award recipients to focus on growth in stockholder value. The Size of Our Request is Reasonable. The potential dilution from the additional Past Usage of Shares. Over the past three fiscal years, Future Use of Shares. In determining projected share usage, the Compensation Committee considered a forecast that included the following factors: (1) the 2,898,023 shares that remained available under the Omnibus Incentive Plan as of November 15, 2022; (2) the additional 500,000 shares that would be 71 PROPOSAL 5 – APPROVAL OF AN amendment to the Woodward Omnibus Incentive Plan
Increased Market Volatility Driving Need for More Shares. The Compensation Committee conducted this evaluation at a time of significant volatility in the stock Shares Remaining Available under the Omnibus Incentive Plan may be Insufficient. In developing the number of shares to add to the Omnibus Incentive Plan, the Board projected future share usage needs for the Company to be able to make competitive grants to Participants. The Shares that remain available under the Omnibus Incentive Plan may be insufficient for our future needs in attracting, retaining and motivating our employees, officers and Outside Directors. Effect of Stockholder Approval of Amendment to the Omnibus Incentive Plan If stockholders approve the amendment described herein to the Omnibus Incentive Plan, such new version will supersede the version of the Omnibus Incentive Plan that was approved by stockholders at our last Annual Meeting. If stockholders do not approve the amendment to the Omnibus Incentive Plan described herein, we will continue to use the version of the Omnibus Incentive Plan that was approved by stockholders at our last Annual Meeting. However, absent the share increase proposed herein, the shares that remain available for issuance under 72
PROPOSAL
the Omnibus Incentive Plan may not, in the future, be sufficient for us to be able to achieve our goals of attracting, motivating and retaining our employees through grants of equity awards. Woodward Omnibus Incentive Plan Summary The following is a summary of the principal features of the Omnibus Incentive Plan as proposed to be amended. The summary is qualified in its entirety by reference to the Omnibus Incentive Plan, inclusive of the proposed additional amendment, which is attached to this proxy statement as Exhibit A. Any terms not capitalized but not defined herein shall take the meaning ascribed to them in the Omnibus Incentive Plan. The Omnibus Incentive Plan permits the Company to grant various types of incentive awards, including: (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) performance units, (5) performance shares, (6) restricted stock units, (7) other stock-based awards, (8) annual incentive awards, and (9) cash-based awards (individually, an “Award,” and collectively, “Awards”). The Omnibus Incentive Plan limits the awards that an individual Participant may receive in any fiscal year of the Company (“Fiscal Year”). Specifically, a Participant may receive during any fiscal year: (i) no more than 600,000 Shares subject to stock options and stock appreciation rights (subject to an additional award of up to 900,000 Shares in the fiscal year of hire); (ii) no more than 150,000 Shares subject to Full Value Awards (subject to an additional award of an additional 50,000 Shares in the fiscal year of hire); and (iii) the maximum amount that may be paid for all performance periods ending during a Fiscal Year) with respect to cash-based Awards is $10,000,000. No Outside Director may be granted Awards which, in the aggregate, exceed $300,000 in grant date fair value (calculated under generally accepted accounting principles), provided that such amount is increased to $450,000 in the Fiscal Year of his or her initial service as an Outside Director. Any Awards or other compensation provided to an Outside Director for his or her services as a consultant or employee are excluded from these Outside Director Award limitations. Shares Reserved The Omnibus Incentive Plan authorizes the grant of Awards with respect to an aggregate of The Omnibus Incentive Plan does not permit what is known as liberal share recycling. Upon exercise of a stock appreciation right settled in shares, the gross number of shares covered by the portion of the Award so exercised will cease to be available under the Omnibus Incentive Plan. Shares that have been actually issued under the Omnibus Incentive Plan pursuant to any Award will not be returned to the Omnibus Incentive Plan and will not become available for future grant or sale under the Omnibus Incentive Plan, except that if unvested shares of Full Value Awards are repurchased by the Company or are forfeited to the Company, those shares will become available for future grant or sale under the Omnibus Incentive Plan (unless the Omnibus Incentive Plan is terminated). Shares used to pay the exercise price or purchase price of an Award, and/or used to satisfy withholding taxes related to the Award will not be available for future grant or sale under the Omnibus Incentive Plan. For purposes of clarification, no shares purchased by the Company with proceeds received from the exercise of an option will become available for issuance under the Omnibus Incentive Plan. If an option or stock appreciation right expires or becomes unexercisable without having been exercised in full, then the unexercised shares subject thereto will become available for future grant or sale under the Omnibus Incentive Plan. If a Full Value Award is forfeited or repurchased by the Company, then the forfeited or repurchased shares subject thereto will become available for future grant or sale under the Omnibus Incentive Plan. To the extent an Award is paid out in cash rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the Omnibus Incentive Plan. 73
PROPOSAL
Furthermore, any Full Value Award that is granted on or after January 30, 2019 will reduce the number of shares remaining under the share authorization by two shares for each share actually subject to the Full Value Award. If any part of such a Full Value Award is forfeited, repurchased by the Company due to a failure to vest, paid out in cash, or returned to the Omnibus Incentive Plan for any other reason set forth in the Omnibus Incentive Plan, an equal amount (that is, twice the number of Full Value Awards being forfeited or cancelled) will be returned to the Omnibus Incentive Plan and will increase accordingly the number of shares remaining under the share authorization. Administration The Omnibus Incentive Plan is administered by the Compensation Committee or another committee as may be delegated in accordance with the Omnibus Incentive Plan or as described in the “Delegation of Authority” section above (the “Committee”). To the extent deemed desirable by the Board or the Committee, the Committee consists of at least two directors, both of whom qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934 and as “outside directors” under Code Section 162(m). Except to the extent prohibited by applicable laws, the Committee may delegate to one or more individuals the day-to-day administration of the Omnibus Incentive Plan and/or any of the functions assigned to the Committee in the Omnibus Incentive Plan. Any such delegation may be revoked by the Committee at any time. Subject to the other provisions of the Omnibus Incentive Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Board or Committee (as applicable) will have the authority, in its discretion:
74
PROPOSAL
The Board has delegated to our Chief Executive Officer limited authority to make certain equity grants of non-qualified stock options, Restricted Stock Units and Restricted Stock Awards under the Omnibus Incentive Plan during the interval between regularly scheduled meetings of the Compensation Committee, which authority would continue under the amendment described herein. The Chief Executive Officer is authorized to make equity grants Service Providers (including the persons named in the Summary Compensation Table below) will be eligible to be selected to receive Awards under the Omnibus Incentive Plan, although only employees are eligible to receive incentive stock options. The actual number of individuals who will receive Awards cannot be determined in advance because the Committee has the discretion to select the Participants. As of November Duration The amendment to the Omnibus Incentive Plan would be effective January Adjustments The Omnibus Incentive Plan provides for equitable adjustment by the Committee, in the event that any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, reincorporation, reclassification, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of the Company, or other change in the corporate structure of the Company affecting the shares occurs. In the event of any such occurrence, the Committee, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be 75
PROPOSAL
made available under the Omnibus Incentive Plan, will adjust the number and class of shares of stock that may be issued under the Omnibus Incentive Plan, the number, class and price of shares of stock covered by each outstanding Award, and/or the numerical share limits under the Omnibus Incentive Plan. No Repricings The Omnibus Incentive Plan expressly prohibits option repricing and certain other actions known as an “Exchange Program.” The Committee may not implement an Exchange Program (as defined) unless stockholders approve an amendment to the Omnibus Incentive Plan that permits the implementation of an Exchange Program. We are not requesting stockholders to approve any such amendment at this time. No Dividends or Distributions on Unvested Awards Any dividends or distributions on unvested shares subject to Full Value Awards granted under the Omnibus Incentive Plan will not be paid immediately to the Participant and instead will be subject to the same vesting schedule as the underlying shares on which the dividend or distribution is paid. In addition, no dividends or distributions will be paid on any unexercised shares covered by stock options or stock appreciation rights. Notwithstanding the preceding, adjustments may be made in unvested Awards as provided in “Adjustments” above. Minimum Vesting Requirements No Award (other than cash-based Awards) will be scheduled to vest earlier than the one-year anniversary of the grant date of such Award unless the Participant dies or becomes disabled. Notwithstanding the foregoing, (a) Full Value Awards that result in the issuance of an aggregate of up to five percent (5%) of the total shares available under the Omnibus Incentive Plan may be granted with vesting schedules that do not follow the minimum one year vesting rule, and (b) after a stock-based Award has been granted, the Committee has discretion to partially or fully accelerate the vesting of an Award. In addition, as explained below under “Change in Control,” Awards will accelerate vesting if they are not assumed by a successor entity, notwithstanding the minimum one year vesting schedule. The minimum one year vesting schedule does not apply to the cash-based annual incentive, other cash-based Awards, stock options, or stock appreciation rights granted under the Omnibus Incentive Plan prior to January 24, 2018. Options The exercise price of each option will be determined by the Committee and set forth in the Award Agreement; provided, however, that such exercise price may generally not be less than one hundred percent (100%) of the fair market value of a share on the effective grant date of the Award. The maximum term of each option will be ten (10) years from its effective grant date or such shorter term as may be provided by the Committee and set forth in the Award Agreement. The Committee will determine whether the options are intended to be incentive stock options (which may receive more favorable tax treatment to the Participant under the Code) or nonqualified stock options (which do not qualify as incentive stock options). The Committee may provide for the acceptable form of consideration for exercising an option, including the method of payment. Such consideration may consist of:
76
PROPOSAL
Restricted Stock Awards and Restricted Stock Units Restricted Stock Awards consist of shares transferred to Participants, without payment, as additional compensation for their services to the Company, or any Parent or Subsidiary of the Company. Restricted stock units consist of a contractual right of the Participant to receive shares, or cash equal in value to those shares, in the future, without payment, as additional compensation for their services to the Company, or any Parent or Subsidiary of the Company. Restricted Stock Awards and restricted stock units awarded under the Omnibus Incentive Plan will be subject to such terms and conditions as the Committee determines are appropriate, including without limitation, restrictions on the sale or other disposition of such shares. The Committee may impose such restrictions on restricted shares as it may deem advisable or appropriate, and may set vesting criteria for restricted stock units based upon the achievement of Company-wide, divisional, business unit, or individual goals (including, but not limited to, continued status as a service provider), applicable federal or state securities laws or any other basis determined by the Administrator in its sole discretion. Stock Appreciation Rights Each stock appreciation right provides the award recipient the right to receive an amount equal to the number of shares corresponding to the stock appreciation right exercised, multiplied by the amount by which the Company’s common stock price exceeds the exercise price on the date of exercise. The Company’s obligation arising upon the exercise of a stock appreciation right may be paid in shares or in cash, or any combination thereof, as the Committee may determine. The exercise price of each stock appreciation right will be determined in advance by the Committee and set forth in the applicable Award Agreement; provided, however, that such exercise price generally may not be less than the fair market value of a share on the effective grant date of the Award. The maximum term of each stock appreciation right will be ten years from its effective grant date or such shorter term as may be provided in advance by the Committee and set forth in the applicable Award Agreement. Performance Units and Performance Shares The Committee may grant performance units and/or performance shares. Each performance unit will have an initial value that is established by the Committee on or before the grant date. Each performance share will have an initial value equal to the fair market value of a share on the grant date. The Committee will set performance objectives or other vesting provisions in its discretion which, depending on the extent to which they are met, will determine the number or value of performance units/shares that will be paid out to the Participant. The Committee may set performance objectives based upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued status as a service provider), applicable federal or state securities laws, or any other basis determined by the Committee in its discretion. 77
PROPOSAL
The Plan permits (but does not require) awards to be granted subject to performance-based vesting criteria that the Committee deems appropriate. The Committee, in its discretion may (but is not required to) provide that one or more of performance goals must be satisfied before an Award vests. For example, the Committee may choose performance goals relating to cash flow, earnings, product and operational metrics, revenue or total shareholder return. Performance goals are measured over one or more specified periods referred to as performance periods. Performance periods may not be shorter than one fiscal quarter. The maximum duration of performance periods under the Omnibus Incentive Plan is twenty fiscal quarters. Any performance goals may be measured: (1) in absolute terms, (2) in combination with more than one performance goal (for example, as a price/earnings ratio goal by combining total shareholder return (share price) and earnings performance goals), (3) in relative terms (including, but not limited to, as compared to results for other periods of time, and/or against another company or companies or index or indices), (4) with respect to equity, assets or human resources (for example, on a per-share or per-capita basis), (5) against the performance of the Company as a whole or a business unit or units or products of the Company, (6) on a pre-tax or after-tax basis, and/or (7) on a GAAP (generally accepted accounting principles) or non-GAAP basis. The Committee may determine whether any element(s) or item(s) will be included in or excluded from the calculation of any performance goal with respect to any Participants. The Committee, in its discretion, also may choose additional or other performance objectives not listed above, which objectives generally may be measured over a specified period as the Committee determines. Inclusion in the Omnibus Incentive Plan of a specific list of permissible (but not required) goals originally was intended to permit the Committee, in its discretion, to choose to grant Awards that qualified as “performance-based” compensation under Code Section 162(m). The performance-based exception under Code Section 162(m) now generally has been eliminated, yet we have chosen to retain in the Plan the specific list of permissible goals described in this paragraph. However, as also indicated above, the Plan permits the Committee to choose to grant Awards subject to performance goals that are not included in the specified list. Further, the Committee may choose to grant Awards that vest based on criteria other than performance goals, with different length performance or vesting periods, and the Committee generally may choose to waive the achievement of any performance goals. Annual Incentive Awards Under the Omnibus Incentive Plan, the Committee may designate certain employees as eligible to receive a payment with respect to a fiscal year based on a percentage of an incentive pool equal to the greatest of: (a) three percent (3%) of the Company’s consolidated operating earnings for the fiscal year, (b) two percent (2%) of the Company’s operating cash flow for the fiscal year, or (c) five percent (5%) of the Company’s net income for the fiscal year. The Committee will allocate an incentive pool percentage to each eligible employee for each fiscal year. In no event may (i) the incentive pool percentage for any one employee exceed fifty percent (50%) of the total pool, or (ii) the sum of the incentive pool percentages for all eligible employees exceed one hundred percent (100%) of the total pool. Cash-Based Awards The Committee may grant other cash-based Awards in such amounts and upon such terms and conditions as the Committee, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Omnibus Incentive Plan. Each cash-based Award will specify a payment amount or payment range (which may be expressed as a percentage of the Participant’s base salary, a dollar amount or a result of a formula or other matrix), as determined by the Committee. The Committee may, but is not required to, establish performance or vesting criteria that will determine the number and/or value of cash-based Awards paid out to a Participant. The maximum amount that may be paid to any Participant for all performance periods ending during a Fiscal Year with respect to cash based awards (excluding the annual incentive awards described in the preceding paragraph) is $10 million. 78
PROPOSAL
The Committee may grant other stock-based Awards not otherwise described by the terms of the Omnibus Incentive Plan, including the grant or offer for sale of unrestricted shares, in such amounts and upon such terms and conditions as the Committee, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Omnibus Incentive Plan. Such Awards may involve the transfer of actual shares to Participants, or the payment in cash or otherwise of amounts based on the value of shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States. Such Awards may be expressed in terms of shares or units based on shares, as determined by the Committee. The Committee may, but is not required to, establish performance or vesting criteria that will determine the number and/or value of such Awards paid out to a Participant. Awards to Outside Directors Outside Directors are eligible to be granted Awards under the Omnibus Incentive Plan. However, in any Fiscal Year, no Outside Director may receive Awards that, in the aggregate, exceed $300,000, provided that such amount is increased to $450,000 in the fiscal year of an Outside Director’s initial service as such. For this purpose, the value of the Awards will be determined using the Black-Scholes value as calculated by the independent compensation consultant or using another appropriate method as may be approved by our Compensation Committee. Any Awards or other compensation provided to an Outside Director for his or her services as a consultant or employee are excluded from these limitations. Change in Control; Dissolution or Liquidation If a successor corporation or other entity does not assume or substitute for an Award upon such change in control to the successor, then (i) each Participant will fully vest in and have the right to exercise any such of his or her outstanding options and stock appreciation rights, and (ii) all time-based vesting restrictions on any such restricted stock and restricted stock units will lapse. With respect to Awards with performance-based vesting that are not assumed or substituted for, unless the Committee or the applicable Award Agreement or other written agreement between the Participant and the Company (or the Company’s parent or subsidiary for which the Participant provides services) provide otherwise, all performance goals or other vesting criteria will be (a) deemed achieved at target levels (with the payout prorated based on the portion of the performance period that has elapsed as of immediately prior to the closing of the transaction), or (b) based on actual achievement versus the performance goals or vesting criteria, and all other terms and conditions will be deemed met, and in each case as determined by the Committee. In addition, if an option or stock appreciation right is not assumed or substituted for, the administrator will notify the Participant in writing or electronically that the option or stock appreciation right will be exercisable for a period of time determined by the administrator, in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period. For Awards granted to our Outside Directors that are assumed or substituted for in a change in control, upon the termination of an Outside Director's service as a director of our or the successor corporation (other than a voluntary resignation that is not made at the successor's request), then (i) the Outside Director will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, (ii) all restrictions on the Outside Director's restricted stock and restricted stock units will lapse, and (iii) with respect to the Outside Director’s Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions will be deemed met, unless the Committee or the applicable Award Agreement or other written agreement between the Outside Director and the Company (or the Company’s parent or subsidiary for which the Participant provides services) provide otherwise. Except as provided above, upon a change in control, each Award generally will be subject to the terms of the applicable Award Agreement that was provided by the Committee for that Award. 79
PROPOSAL
In the event of a proposed dissolution or liquidation of the Company, the administrator will notify each Participant holding an outstanding Award as soon as practicable prior to the completion of such proposed procedure and, to the extent the Award had not been previously exercised, it will terminate immediately prior to the consummation of the proposed procedure. Transferability Awards generally may not be transferred, pledged, assigned, or otherwise alienated or hypothecated, except in accordance with the laws of descent and distribution or as determined by the Committee. Amendment and Termination The Company, by action of the Board or its authorized Committee, may at any time and for any reason amend, alter, suspend or terminate the Omnibus Incentive Plan, or any part thereof. However, the Company will obtain stockholder approval of any amendment to the Omnibus Incentive Plan Federal Income Tax Consequences The following discussion is a brief summary of the principal United States federal income tax consequences of the Omnibus Incentive Plan for a Participant who is a U.S. tax resident under the provisions of the Code currently in effect. The Code and its regulations are subject to change. This summary is not intended to be exhaustive and does not describe, among other things, state, local or foreign income and other tax consequences. The specific tax consequences to a Participant will depend upon that Participant’s individual circumstances. Options and Stock Appreciation Rights Under existing law and regulations, the grant of options and stock appreciation rights will not result in income taxable to the Participant. At the time of the exercise of a nonqualified stock option, the Participant will be taxed at ordinary income tax rates on the excess of the fair market value, at the time of exercise, of the shares purchased over the option’s exercise price. At the time of the exercise of a stock appreciation right, the Participant will be taxed at ordinary income tax rates on the amount of the cash, or the fair market value of the shares, received by the employee upon exercise. No taxable income is reportable by a Participant when an incentive stock option is exercised (although the exercise may subject the Participant to alternative minimum tax and/or may affect the determination of the Participant’s alternative minimum tax). If the Participant exercises an incentive stock option and later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the Participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option. 80
PROPOSAL
A Participant in the Omnibus Incentive Plan who is granted a restricted stock Award will not be taxed upon the acquisition of such shares so long as the interest in such shares is subject to a “substantial risk of forfeiture” within the meaning of Code Section 83. Upon lapse or release of the restrictions, the recipient will be taxed at ordinary income tax rates on an amount equal to the then current fair market value of the shares. Any such Awards that are not subject to a substantial risk of forfeiture will be taxed at the time of grant. The basis of Restricted Stock held after lapse or termination of restrictions will be equal to their fair market value on the date of lapse or termination of restrictions, and upon subsequent disposition any further gain or loss will be a long-term or short-term capital gain or loss, depending upon the length of time the shares are held. A recipient of a restricted stock Award may elect to be taxed at ordinary income tax rates on the full fair market value of the Restricted Stock at the time of grant. If this election is made, the basis of the shares acquired will be equal to the fair market value at the time of grant, no tax will be payable upon the subsequent lapse or release of the restrictions, and any gain or loss upon disposition will be a capital gain or loss. Restricted Stock Units A Participant who is granted a restricted stock unit will not be taxed upon the grant of the Award. Upon receipt of payment of cash or shares pursuant to a restricted stock unit, the Participant will realize ordinary income in an amount equal to any cash received and the fair market value of any shares received. Performance Awards, Cash-Based Awards, and Other Stock-Based Awards A recipient of a performance Award, cash-based Award or other stock-based Award generally will realize ordinary income at the time shares are transferred or cash is paid to the grantee with respect to such Award. Tax Effect for the Company The Company generally will be entitled to a tax deduction in connection with an Award under the Omnibus Incentive Plan in an amount equal to the ordinary income recognized by a Participant and at the time that the Participant recognizes such income (for example, the exercise of a nonqualified stock option), except as follows. Under Code Section 162(m), the deductibility of compensation paid to certain individuals is limited to $1,000,000 per person per year. These individuals include our Chief Executive Officer, Chief Financial Officer and certain other executive officers (including, but not necessarily limited to, our next three other most highly compensated named executive officers other than the Chief Executive Officer and Chief Financial Officer and certain individuals who were subject to Section 162(m) at Woodward in our 2018 Fiscal Year or a later Fiscal Year). Under a special Code Section 162(m) transition rule, compensation received from the exercise of non-qualified stock options that we granted prior to November 2, 2017 is expected to be fully deductible although this tax treatment is not guaranteed. Section 409A Section 409A of the Code imposes certain requirements on nonqualified deferred compensation arrangements, including requirements on an individual’s election to defer compensation and requirements on the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions of deferred compensation (as determined thereunder) must be made on or following the occurrence of certain events (such as the individual’s separation from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form of distribution after the compensation has been deferred. For certain individuals who are officers, Section 409A requires that certain distributions commence no earlier than six months after such officer’s separation from service. Certain Awards under the Omnibus Incentive Plan may be designed to be subject to the requirements of Section 409A in form and in operation. For example, restricted stock units that provide for a settlement date that is substantially later than the vesting date may be subject to Section 409A. If an Award under 81
PROPOSAL
the Omnibus Incentive Plan is subject to and fails to satisfy the requirements of Section 409A, the recipient of that Award will recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20 percent federal penalty tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Awards will be designed and operated in such a manner that they are intended to be either exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or deferral thereof, as applicable, will not be subject to the additional tax or interest applicable under Section 409A, except as otherwise determined in the sole discretion of the Committee. The Omnibus Incentive Plan and each Award Agreement is intended to meet the requirements of Section 409A, to the extent applicable, and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Committee. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Section 409A, we intend that the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A. In no event will the Company or other employer have any obligation under the Omnibus Incentive Plan to reimburse a Participant for any taxes or other costs that may be imposed on the Participant as a result of Section 409A.
Participation in the Woodward Omnibus Incentive Plan The number and type of Awards (if any) that a service provider may receive under the Omnibus Incentive Plan is in the discretion of the Committee and, therefore, cannot be determined in advance. Our executive officers and Outside Directors will be eligible to receive future Awards under the Omnibus Incentive Plan, and therefore, our executive officers and Outside Directors have an interest in the approval of the Omnibus Incentive Plan by stockholders. For purposes of illustration only, the following table sets forth information with respect to the Awards that were granted under the Omnibus Incentive Plan during our 82 PROPOSAL 5 – APPROVAL OF AN amendment to the Woodward Omnibus Incentive Plan
83 PROPOSAL 5 – APPROVAL OF AN amendment to the Woodward Omnibus Incentive Plan
Your Board unanimously recommends that you vote “FOR” the approval of the amendments to the Woodward Omnibus Incentive Plan.
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The
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Persons Owning More than 5% of Woodward Common Stock The following table shows how many shares of Woodward common stock were owned by each person known to us to own more than five percent of our common stock as of November 15, 2022:
Section 16(a) Beneficial Ownership Reporting Compliance Based upon a review of our records, all reports required to be filed pursuant to Section 16(a) of Exchange Act were filed on a timely basis, with the exception of (i) a Form 4 filed by the Company on behalf of Mr. Korte related to a purchase of Company stock, and (ii) a Form 4 filed by the Company on behalf of Mr. Bhalla related to the sale of Company stock, in each case were filed late due to an administrative oversight by their respective third-party advisors. Related Person Transaction Policies and Procedures The Board adopted the Company’s Related Person Transaction Policies and Procedures (our “RPT Policy”), which provides that the Audit Committee will review and approve Interested Transactions (as described below). Our RPT Policy delegates the authority to act with respect to Interested Transactions that are valued below a stated threshold to the Chair of the Audit Committee. Our RPT Policy defines an “Interested Transaction” with reference to transactions described in Item 404 of Regulation S-K promulgated by the SEC, which generally means a transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships or any material amendments or modifications thereto in which the Company (including any of its subsidiaries) was, is, or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has, or will have a direct or indirect interest. “Related Person” also is defined in our RPT Policy with respect to the definitions contained in Item 404 of Regulation S-K. Generally, “Related Persons” consist of any director or executive officer of the Company, any 87 ADDITIONAL INFORMATION nominee for director, any holder of five percent or more of the Company’s common stock, or any immediate family member of any such persons. “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, or sister-in-law of any such person, and any person (other than a tenant or employee) sharing the household of such person. It may also include entities with which any of such persons have a relationship. The approval procedures in our RPT Policy state that the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances. In addition, our RPT Policy states that, in connection with the approval or ratification of an Interested Transaction involving an outside director or nominee for director, the Audit Committee should consider whether such transaction would compromise such director’s status as: (1) an independent director under NASDAQ’s independence standards, (2) an “outside director” under Section 162(m) of the Internal Revenue Code (the “Code”) to the extent appropriate or a “non-employee director” under Rule 16b-3 under the Exchange Act, if such non-employee director serves on the Compensation Committee of the Board, or (3) an independent director under Rule 10A-3 of the Exchange Act, if such non-employee director serves on the Audit Committee of the Board. Our RPT Policy also identifies certain transactions that are deemed to be pre-approved, including transactions involving competitive bids, regulated transactions, and employee transactions. No director participates in any discussion for approval of a related party transaction for which he or she is an interested party other than is necessary to provide relevant information to the Audit Committee. Woodward is not currently engaged in any Interested Transactions, and there are no known proposed Interested Transactions, that would require disclosure under the RPT Policy. Stockholder Communications With the Board of Directors Stockholders may send communications to the Board by submitting a letter addressed to: Woodward, Inc., Attn: Corporate Secretary, 1081 Woodward Way, Fort Collins, Colorado 80524. The Board has instructed the Corporate Secretary to forward such communications to the Lead Director. The Board has also instructed the Corporate Secretary to review such correspondence and, at the Corporate Secretary’s discretion, not to forward correspondence which is deemed of a commercial or frivolous nature or inappropriate for Board consideration. The Corporate Secretary may also forward the stockholder communication within the Company to the Chief Executive Officer and President or to another executive officer to facilitate an appropriate response. The Corporate Secretary maintains a log of all communications from stockholders and the disposition of such communications, which the directors review at least annually. Stockholder Nominations and Stockholders who, in accordance with SEC Rule 14a-8, wish to present proposals for inclusion in our proxy statement and form of proxy to be distributed in connection with next year’s Annual Meeting must submit their proposals so that they are received by us at our principal executive offices no later than the close of business on August Under our Bylaws, certain procedures are provided that a stockholder must follow to nominate persons for election as directors or to introduce an item of business at an annual meeting of stockholders (other than a proposal brought pursuant to SEC Rule 14a-8). These procedures provide that nominations for director and/or an item of business to be introduced at an annual meeting of stockholders must be submitted in writing to the Corporate Secretary of the Company at our principal executive offices by a stockholder of record on both the date of giving notice and the record date for the annual meeting. In general, our Bylaws require that such a notice for nominating a director or introducing an item of business at the 88 ADDITIONAL INFORMATION than September In addition, a stockholder who desires to nominate director candidates for election at an annual meeting for the 2023 Annual Meeting, which is expected to be held in or about January 2024, must comply with the requirements of newly enacted Rule 14a-19 by notifying our Corporate Secretary with regard to the intent to solicit proxies as required by Rule 14a-19 no later than November 26, 2023. Please note that the notice requirement under Rule 14a-19 is in addition to the applicable notice requirements under the advance notice provisions of our bylaws as described above. Notices of intention to nominate a director or present proposals at the Householding of Proxy Materials In an effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our Notice or, if you have elected to receive hard copies, our proxy materials, unless one or more of these stockholders notifies us that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards. If you share an address with another stockholder and received only one Notice or one set of proxy materials and would like to request a separate copy of these materials or any other proxy materials in the future, please: (1) mail your request to Woodward, Inc., 1081 Woodward Way, Fort Collins, Colorado 80524, Attn: Corporate Secretary; (2) send an e-mail to investor.relations@woodward.com; or (3) call our Investor Relations department at You may obtain a free copy of our Annual Report on Form 10-K for the year ended September 30, 2022, filed with the Securities and Exchange Commission (“SEC”) and available at its website at www.sec.gov. Please contact the Corporate Secretary, Woodward, Inc., 1081 Woodward Way, Fort Collins, Colorado 80524 or email investor.relations@woodward.com. This report is also available at www.proxydocs.com/WWD. 89 ADDITIONAL INFORMATION
Woodward is soliciting this proxy on behalf of its Board and will bear the entire cost of proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the Notice and proxy materials. This solicitation is being made by mail, but also may be made personally or by facsimile, telephone, messenger, or via the internet. The Company has employed Morrow Sodali LLC, We are not aware of any additional matters to be acted upon at the meeting other than those discussed in this statement. If any other matter is presented, proxy holders will vote on the matter in their discretion. By Order of the Board of Directors WOODWARD, INC. A. Christopher Fawzy Corporate Secretary December
Exhibit A – Woodward, INc. 2017 Omnibus Incentive Plan, as WOODWARD, INC. 2017 OMNIBUS INCENTIVE PLAN (As Amended on January
Exhibit A – Woodward, INc. 2017 Omnibus Incentive Plan, as
TABLE OF CONTENTS
A-i Exhibit A – Woodward, Inc. 2017 Omnibus Incentive Plan, as amended
A-ii
Exhibit A – Woodward, Inc. 2017 Omnibus Incentive Plan, as amended
A-iii
Exhibit A – Woodward Omnibus Incentive Plan, as amended
1.1General. The Plan permits the grant of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Covered Employee Annual Incentive Awards, Cash-Based Awards and/or Other Stock-Based Awards. 1.2Effective Date. The 2017 Omnibus Incentive Plan originally was effective as of September 14, 2016 and was last amended effective January 1.3Purposes. The purposes of the Plan are to (a) attract and retain the best available individuals for positions of substantial responsibility, (b) provide additional incentive to such individuals, and (c) promote the success of the Company’s business. The Plan also is designed to encourage stock ownership by Participants, thereby aligning their interests with those of the Company’s shareholders. The following words and phrases will have the following meanings unless a different meaning is plainly required by the context:
A-1
Exhibit A – Woodward Omnibus Incentive Plan, as amended
2.8“Change in Control” means the occurrence of any of the following events: (a)A change in the ownership of the Company that occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection, the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change in Control. Further, if the stockholders of the Company immediately before such change in ownership continue to retain, immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company, such event will not be considered a Change in Control under this subsection; (b)A change in the effective control of the Company that occurs on the date that a majority of Directors is replaced during any twelve (12) month period by Directors whose (c)A change in the ownership of a substantial portion of the Company’s assets that occurs on the date that any Person acquires (or has acquired during the twelve (12) For purposes of this Section 2.8, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if its primary purpose is to: (A) change the jurisdiction of the Company’s incorporation, or (B) create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. 2.9“Code” means the U.S. Internal Revenue Code of 1986, as amended. Any reference to a specific section of the Code will include such section and any valid regulation or other applicable guidance that has been promulgated under such section and is in effect.
A-2
Exhibit A – Woodward Omnibus Incentive Plan, as amended
2.12“ 2.13“Consolidated Operating Earnings” mean the consolidated earnings before income taxes of the Company, computed in accordance with generally accepted accounting principles, but shall exclude the effects of Extraordinary Items.
2.18 “Director” means a member of the Board.
A-3 Exhibit A – Woodward Omnibus Incentive Plan, as amended (a) actions permitted under Section 14 do not constitute an Exchange Program, and (b) as set forth in Section 5.5, the Administrator may not implement any Exchange Program.
2.28“Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (d)If the Common Stock is listed on any established stock exchange or a national market system, including without limitation, the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market of The NASDAQ Stock Market, its Fair Market Value will be the closing sales price for the Common Stock as quoted on such exchange or system on the day of determination (or, if no closing sales price was reported on that date, as applicable, on the last trading date such closing sales price was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (e)If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (f)In the absence of an Notwithstanding the foregoing under this Section, for federal, state and local income tax reporting purposes, Fair Market Value will be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time. 2.29“Fiscal Quarter” means a fiscal quarter within a Fiscal Year. 2.30“Fiscal Year” means the fiscal year of the Company. 2.31“Full Value Awards” mean Awards other than in the form of an Option or Stock Appreciation Right, and which is settled by the issuance of Shares. 2.32“Grant Date” means, with respect to an Award, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. The Grant Date of an Award will in no event be earlier than the date the Award is approved by the Administrator. 2.33“Incentive Stock Option” means an Option that by its terms qualifies and otherwise is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
Exhibit A – Woodward Omnibus Incentive Plan, as amended 2.34“Net Income” means consolidated net income before taxes for a determination period, as reported in the Company’s annual report to shareholders or as otherwise reported to the Company’s shareholders. 2.35“Nonqualified Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
2.37“Operating Cash Flow” means cash flow from operating activities as defined in FASB Accounting Standards Codification Topic 230, Statement of Cash Flows, or its successor. 2.38“Option” means a stock option to purchase Shares granted pursuant to Section 6. An Option’s Award Agreement will specify whether the Option is an Incentive Stock Option or a Nonqualified Stock Option. 2.39“Other Stock-Based Award” means an Award granted pursuant to Section 13, which is payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares, including, but not limited to, Shares granted purely as a bonus and not subject to any restrictions or conditions, but excluding any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit, Performance Share or Performance Unit. 2.40“Outside Director” means a Director who is not an Employee. 2.41“Parent” means a “parent corporation,” as defined in Section 424(e) of the Code. 2.42“Participant” means a Service Provider to whom an Award has been granted. 2.43“Performance Goals” will have the meaning set forth in Section 11. 2.44“Performance Period” means any Fiscal Year or such other period longer or shorter than a Fiscal Year but, in any case, not shorter than one (1) Fiscal Quarter or longer than twenty (20) Fiscal Quarters, as determined by the Administrator in its sole discretion. 2.45“Performance Share” means an Award denominated in Shares, which may be earned in whole or in part upon attainment of Performance Goals or other vesting or performance criteria as the Administrator may determine, as provided in Section 10. 2.46“Performance Unit” means an Award denominated in units, which may be earned in whole or in part upon attainment of Performance Goals or other vesting or performance criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing, as provided in Section 10. 2.47“Period of Restriction” means the period during which Restricted Shares are subject to a substantial risk of forfeiture (based on the passage of time, continued status as a Service Provider, the achievement of target levels of performance, the achievement of Performance Goals, or the occurrence of other events as determined by the Administrator), as provided in Section 7. 2.48“Plan” means this 2017 Omnibus Incentive Plan, as hereafter amended from time to time. A-5 Exhibit A – Woodward Omnibus Incentive Plan, as amended 2.49“Product and Operational Metrics” mean objective and measurable goals for the quality, design, creation, introduction, manufacture or delivery of products, including, but not by way of limitation, with respect to design specifications or requirements, market penetration and/or that do not exceed specified defect levels. 2.50“Restricted Shares” means Shares issued pursuant to a Restricted Stock Award or pursuant to the early exercise of an Option.
2.52“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company. 2.53“Revenue” means net revenue. 2.54“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. 2.55“Section 16(b)” means Section 16(b) of the Exchange Act. 2.56“Section 162(m)” means Section 162(m) of the Code. 2.57“Section 409A” means Section 409A of the Code. 2.58“Securities Act” means the U. S. Securities Act of 1933, as amended. Any reference to a specific section of the Securities Act includes such section and any valid regulation, rule or other guidance that has been promulgated under such section and is in effect. 2.59“Service Provider” means an Employee, Director or Consultant. 2.60“Share” mean a share of Common Stock. 2.61“Stock Appreciation Right” means an Award, granted alone or in connection with an Option, pursuant to Section 9. 2.62“Subsidiary” means a “subsidiary corporation,” as defined in Section 424(f) of the Code. 2.63“Tax Obligations” means the tax, social insurance and/or social security liability obligations and requirements in connection with an Award, including, without limitation, (i) all federal, state, and local income, employment and any other taxes (including the Participant’s Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by the Employer, (ii) the Participant’s and, to the extent required by the Employer, the Employer’s fringe benefit tax liability, if any, associated with the grant, vesting, or exercise of the Award or sale of Shares issued under the Award, and (iii) any other taxes, social insurance and/or social security liabilities or premium the responsibility for which the Participant has, or has agreed to bear, with respect to such Award (or exercise thereof or issuance of Shares or other consideration thereunder). 2.64“Total Shareholder Return” means the total return (change in price, including treatment of dividends, if any, as determined by the Administrator) of a Share. A-6 Exhibit A – Woodward Omnibus Incentive Plan, as amended SECTION 3. 3.1General. Subject to adjustment as provided in Section 14, the total number of Shares that may be issued under the Plan is
3.2Lapsed Awards. If an Option or Stock Appreciation Right expires or becomes unexercisable without having been exercised in full, then the unexercised Shares subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). If a Full Value Award is forfeited or repurchased by the Company due to a failure to vest, then the forfeited or repurchased Shares subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so exercised will cease to be available under the Plan. Shares that have been issued under the Plan pursuant to any Award will not be returned to the Plan and will not become available for future grant or sale under the Plan; provided, however, that if unvested Shares of Full Value Awards are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant or sale under the Plan (unless the Plan is terminated). Shares used to pay the Exercise Price or purchase price of an Award and/or used to satisfy the Tax Obligations related to the Award will cease to be available for future grant or sale under the Plan. To the extent an Award is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. For purposes of clarification, no Shares purchased by the Company with proceeds received from the exercise of an Option will become available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 14, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3.1, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan pursuant to this Section 3.2. 3.3Full Value Awards. For purposes of determining the number of Shares available for issuance under Section 3.1 above, each Share granted on or after January 30, 2019 pursuant to any Full Value Award shall reduce the number of Shares remaining under the Share Authorization by two Shares. If any Shares granted pursuant to such a Full Value Award are forfeited, repurchased by the Company due to a failure to vest, paid out in cash, or returned to the Plan for any other reason provided in Section 3.2, the number of Shares returned to the Share Authorization shall be the same number that was deducted from the Share Authorization on account of the grant of the Full Value Award (or portion thereof). 3.4Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan. SECTION 4. 4.1.1Multiple Administrative Bodies Permitted. Different Committees with respect to different groups of Service Providers may administer the Plan. A-7 Exhibit A – Woodward Omnibus Incentive Plan, as amended 4.1.2Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Awards as “performance-based compensation” within the meaning of Section 162(m), the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m). 4.1.3Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. 4.1.4Other Administration. Other than as provided above, the Plan will be administered by (a) the Board or (b) a Committee, which committee will be constituted to satisfy Applicable Laws.
4.1.5Delegation of Authority for Day-to-Day Administration. Except to the extent prohibited by Applicable Laws, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to the Administrator in the Plan. Any such delegation may be revoked by the Administrator at any time. 4.2Powers of the Administrator. Subject to the other provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion: (a)to determine Fair Market Value; (b)to select the Service Providers to whom Awards may be granted; (c)to determine the number of Shares or dollar amount to be covered by each Award; (d)to approve forms of Award Agreements for use under the Plan; (e)to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award. Such terms and conditions include, but are not limited to, the Exercise Price, the time or (f)to construe and interpret the terms of the Plan and Awards; (g)to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws; (h)to modify or amend each outstanding Award, including, but not limited to, the discretionary authority to accelerate the vesting of Awards, to extend the post-termination exercisability period of Awards, and to extend the term of an Option or SAR (subject to the maximum term permitted under the Plan); (i)to allow Participants to satisfy Tax Obligations in such manner as A-8 Exhibit A – Woodward Omnibus Incentive Plan, as amended (j)to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; (k)to allow a Participant, in compliance with Applicable Laws (l)to impose such restrictions, conditions or limitations as it determines
(m)to (n)to make all other determinations deemed necessary or advisable for administering the Plan. 4.3Binding Effect of Administrator’s Decisions. The Administrator’s decisions, determinations and interpretations with respect to the Plan or Awards will be final and binding on all Participants and any other holders of Awards, and will be given the maximum possible deference permitted by law. 5.1General Share Limits Notwithstanding any contrary Plan provision, for so long as the Company is a “publicly held corporation” within the meaning of Section 162(m) and the deduction limitations of Section 162(m) are applicable to the Company’s Covered Employees, then, subject to adjustment as provided in Section 14, the limits specified in this Section 5.1 will apply to any grants of the following types of Awards: 5.1.1Fiscal Year Limit on Options and/or SARs. No Participant may be granted, during any Fiscal Year, Options and/or SARs covering more than a total of 600,000 Shares; provided, however, that during the Fiscal Year in which a Participant first becomes an Employee (the “Fiscal Year of Hire”), the Participant may be granted Options and/or SARs covering up to a total of an additional 900,000 Shares. 5.1.2Fiscal Year Limit on Full Value Awards. No Participant may be granted, during any Fiscal Year, Full Value Awards covering more than a total of 150,000 Shares; provided, however, that during the Fiscal Year of Hire, the Participant may be granted Full Value Awards covering up to a total of an additional 50,000 Shares. 5.1.3Fiscal Year Limit on Cash-Based Awards. The maximum amount that may be paid for all Performance Periods ending during a Fiscal Year with respect to Cash-Based Awards is $10,000,000. As an example A-9 Exhibit A – Woodward Omnibus Incentive Plan, as amended for illustration purposes only, if a Participant has two Performance Periods that end during a single Fiscal Year (for example, an annual Performance Period and a multi-year Performance Period), the total combined amount that the Participant may be paid for those two Performance Periods is $10 million. For this purpose, an amount that is paid to a Participant in a Fiscal Year that is after the Fiscal Year in which the applicable Performance Period ended (for example, but not by way of limitation, early in the next Fiscal Year following certification of actual results versus the applicable Performance Goals or because it is deferred under a deferred compensation arrangement) will be considered paid for the Fiscal Year in which the applicable Performance Period ended. To the extent permitted under Section 162(m), subsequent increases in the value of the deferred amount pursuant to the deferred compensation arrangement will not count against the limit in this Section 5.1.3. 5.1.4Fiscal Year Limit on Covered Employee Annual Incentive Awards. The total amount that may be awarded or credited in any Fiscal Year with respect to a Covered Employee Annual Incentive Award will be determined in Section 12.
5.2Fiscal Year Limit on Outside Director Awards and Other Compensation. No Outside Director may be granted, in any Fiscal Year, Awards with a value which, in the aggregate, exceeds $300,000, provided that such amount is increased to $450,000 in the Fiscal Year of his or her initial service as an Outside Director. For this purpose, value is determined under a methodology as approved by the Administrator, which is currently determined in accordance with the calculations of the Compensation Committee’s independent compensation consultant. Any Awards or other compensation provided to an individual for his or her services as an Employee, or for his or her services as a Consultant other than as an Outside Director, will be excluded for purposes of the limitations in this Section 5.2. 5.3Minimum Vesting Requirement for Full Value Awards. No Full Value Award, Option or Stock Appreciation Right will be scheduled to vest (based on the vesting schedule contained in the applicable Award Agreement) earlier than the one (1) year anniversary of the Grant Date of such Award, except to the limited extent provided in Section 14.3 (relating to Change in Control) or in the case of the death or Disability of the Participant. Notwithstanding the preceding sentence, (a) Full Value Awards that result in the issuance of an aggregate of up to five percent (5%) of the Share Authorization (as defined in Section 3.1) may be granted to Service Providers without regard to the minimum vesting requirements of the prior sentence, and (b) the Committee shall retain its full discretionary authority under Section 4.2(h) (relating to amendments and modifications to outstanding Awards). 5.4Incentive Stock Option Limits. 5.4.1$100,000 Limitation. Notwithstanding any designation of an Option as an Incentive Stock Option in an Award Agreement, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of any Employer) exceeds one hundred thousand dollars ($100,000), the portion of the Options falling within such limit will be Incentive Stock Options and the excess Options will be treated as Nonqualified Stock Options. For these purposes, Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. 5.4.2Maximum Term. In the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of any Employer, the term of the Incentive Stock Option will be A-10 Exhibit A – Woodward Omnibus Incentive Plan, as amended five (5) years from its Grant Date or such shorter term as may be provided by the Administrator and set forth in the Award Agreement. 5.4.3Exercise Price. In the case of an Incentive Stock Option granted to an Employee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the any Employer, the Exercise Price of the Option will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the Grant Date. In the case of an Incentive Stock Option granted to any Employee other than an Employee described in immediately preceding sentence, the Exercise Price of the Option will be no less than one hundred percent (100%) of the Fair Market Value per Share on the Grant Date. 5.4.4Employee Only Eligibility. Incentive Stock Options may be granted only to Employees. 5.5No Exchange Program Permitted. The Administrator may not implement any Exchange Program.
6.1Grant of Options. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Options to Service Providers in such amounts as the Administrator, in its sole discretion, determines. 6.2Award Agreement. Each Option will be evidenced by an Award Agreement that will specify the Exercise Price of the Option, the maximum term of the Option, the number of Shares covered by the Option, any conditions to exercise the Option, and such other terms and conditions of the Option as the Administrator, in its discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan. The Award Agreement also will specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option. 6.3Maximum Term of Option. The maximum term of each Option will be ten (10) years from its Grant Date or such shorter term as may be provided by the Administrator and set forth in the Award Agreement, subject to Section 5.4.2. 6.4Exercise Price and Consideration. 6.4.1Exercise Price. The Exercise Price of each Option will be determined by the Administrator and set forth in the Award Agreement; provided, however, that such Exercise Price may not be less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date, subject to Section 5.4.3. Notwithstanding the foregoing, Options may be granted with an Exercise Price of less than one hundred percent (100%) of the Fair Market Value per Share on the Grant Date pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. 6.4.2Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (a) cash; (b) check; (c) promissory note, to the extent permitted by Applicable Laws; (d) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price for the Shares with respect to which such Option will be exercised and provided that accepting such Shares will not result in any adverse accounting consequences to the Company, as the A-11 Exhibit A – Woodward Omnibus Incentive Plan, as amended Administrator determines in its sole discretion; (e) consideration received by the Company under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (f) by net exercise; (g) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (h) any combination of the foregoing methods of payment. 6.5.1Procedure for Exercise; Rights as a Stockholder. Each Option will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) a notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and (b) full payment of the Exercise Price for the Shares with respect to which the Option is exercised (including satisfaction of all Tax Obligations with respect thereto). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise
of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her legal spouse. Until such Shares are issued and delivered (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue and deliver (or cause to be issued and delivered) such Shares promptly after the Option is exercised. No adjustment will be made for any dividend or other right for which the record date is prior to the date the Shares are issued and delivered, except as provided in Section 14. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 6.5.2Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination of Participant’s status as a Service Provider (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the termination of Participant’s status as a Service Provider, but in no event later than the expiration of the term of such Option as set forth in the Award Agreement. 6.5.3Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of Disability (but in no event may the Option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following termination of Participant’s status as a Service Provider due to Disability, but in no event later than the expiration of the term of such Option as set forth in the Award Agreement. 6.5.4Death of Participant. If a Participant dies while he or she is a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of the Participant’s death (but in no event later than the A-12 Exhibit A – Woodward Omnibus Incentive Plan, as amended expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary under the Plan, provided such beneficiary has been properly designated prior to Participant’s death in a form acceptable to the Administrator and to the extent permitted by Applicable Laws. In the absence of such beneficiary designation (or to the extent not permitted by Applicable Laws), then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following termination of Participant’s status as a Service Provider due to death, but in no event later than the expiration of the term of such Option as set forth in the Award Agreement. 6.6No Dividend Equivalents Permitted. No dividends or other distributions will be paid with respect to Shares that are subject to unexercised Options, provided that nothing in this Section 6.6 shall preclude the Administrator from exercising its powers and authority under Section 14. SECTION 7. 7.1Grant of Restricted Stock Awards. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Restricted Stock Awards to Service Providers in such amounts as the Administrator, in its sole discretion, determines.
7.2Award Agreement. Each Restricted Stock Award will be evidenced by an Award Agreement that will specify the Period of Restriction (if any), the number of Restricted Shares subject to the Award, and such other terms and conditions of the Award as the Administrator, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan. Unless the Administrator determines otherwise, the Company as escrow agent will hold the Restricted Shares until the restrictions on such Shares have lapsed. 7.3Transferability. Except as provided in this Section 7 or the Award Agreement, Restricted Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction. 7.4Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Restricted Shares as it may deem advisable or appropriate. 7.5Legend on Certificates. The Administrator, in its sole discretion, may require that a legend be placed on any certificates representing Restricted Shares to give appropriate notice of the applicable restrictions on such Shares. 7.6Removal of Restrictions. Except as otherwise provided in this Section 7, Restricted Shares will be released from escrow as soon as practicable after the last day of the applicable Period of Restriction or at such other time as the Administrator may determine (including after satisfaction of all Tax Obligations with respect thereto). Subject to vesting limitations in Section 5.3, the Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed. 7.7Voting Rights. During the Period of Restriction, Service Providers holding Restricted Shares may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise. A-13 Exhibit A – Woodward Omnibus Incentive Plan, as amended 7.8Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Restricted Shares will be entitled to receive any dividends and/or other distributions paid with respect to such Shares, unless the Administrator provides otherwise. If any such dividends or distributions are paid in Shares, such Shares will be subject to the same restrictions on transferability and forfeitability as the Restricted Shares with respect to which they were paid. 7.9Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock Awards as “performance-based compensation” under Section 162(m), the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goal(s). The Performance Goal(s) will be set by the Administrator on or before the Determination Date. In granting Restricted Stock Awards that are intended to qualify under Section 162(m), the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) (e.g., in determining the Performance Goal(s)). SECTION 8. 8.1Grant of Restricted Stock Units. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time, may grant Restricted Stock Units to Service Providers in such amounts as the Administrator, in its sole discretion, determines. 8.2Award Agreement. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the number of Restricted Stock Units, the vesting criteria of the Award, the form of payout of the Award, which, subject to Section 8.5, may be left to the discretion of the Administrator, and such other terms and conditions of the Award as the Administrator, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan.
8.3Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit, or individual goals (including, but not limited to, continued status as a Service Provider), applicable federal or state securities laws or any other basis determined by the Administrator in its sole discretion. 8.4Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, subject to the vesting limitations in Section 5.3, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout. 8.5Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) determined by the Administrator and set forth in the Award Agreement (including after satisfaction of all Tax Obligations with respect thereto). The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination of both. 8.6Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company. 8.7Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m), the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goal(s). The Performance Goal(s) will be set by the A-14 Exhibit A – Woodward Omnibus Incentive Plan, as amended Administrator on or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m), the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) (e.g., in determining the Performance Goal(s)). SECTION 9. 9.1Grant of Stock Appreciation Rights. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Stock Appreciation Rights to Service Providers in such amounts as the Administrator, in its sole discretion, determines. 9.2Award Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the Exercise Price of the Stock Appreciation Right, the term of the Stock Appreciation Right, any conditions to exercise the Stock Appreciation Right, and such other terms and conditions of the Award as the Administrator, in its discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan. 9.3Exercise Price and Other Terms. The Exercise Price of each Stock Appreciation Right will be determined by the Administrator and set forth in the Award Agreement; provided, however, that such Exercise Price may not be less than one hundred percent (100%) of the Fair Market Value per Share on the Grant Date. Notwithstanding the foregoing, Stock Appreciation Rights may be granted with an Exercise Price of less than one hundred percent (100%) of the Fair Market Value per Share on the Grant Date pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
9.4Expiration of Stock Appreciation Rights. A Stock Appreciation Right will expire on the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6.3 relating to the maximum term and Section 6.5 relating to exercise also will apply to Stock Appreciation Rights. 9.5Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right (including satisfaction of all Tax Obligations with respect thereto), a Participant will be entitled to receive payment from the Company in an amount determined by multiplying: (a)The difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b)The number of Shares At the discretion of the Administrator, the payment upon any Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof. No adjustment will be made for any dividend or other right for which the record date is prior to the date the Shares, if applicable, are issued and delivered, except as provided in Section 14. 9.6No Dividend Equivalents Permitted. No dividends or other distributions will be paid with respect to Shares that are subject to unexercised Stock Appreciation Rights, provided that nothing in this Section 6.6 shall preclude the Administrator from exercising its powers and authority under Section 14. A-15 Exhibit A – Woodward Omnibus Incentive Plan, as amended SECTION 10. 10.1Grant of Performance Units/Shares. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Performance Units and/or Performance Shares to Service Providers in such amounts as the Administrator, in its sole discretion, determines. 10.2Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the Grant Date. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the Grant Date. 10.3Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the Participant. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period and such other terms and conditions as the Administrator, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued status as a Service Provider), applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion. 10.4Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, subject to the vesting limitations under Section 5.3, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.
10.5Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period (including after satisfaction of all Tax Obligations with respect thereto). The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof. 10.6Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company. 10.7Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Units/Shares as “performance-based compensation” under Section 162(m), the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goal(s). The Performance Goal(s) will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m), the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) (e.g., in determining the Performance Goal(s)). A-16 Exhibit A – Woodward Omnibus Incentive Plan, as amended SECTION 11. 11.1General. If the Administrator, in its discretion, decides to grant an Award intended to qualify as “performance-based compensation” under Section 162(m), the provisions of this Section 11 will control over any contrary provision in the Plan; provided, however, that the Administrator in its discretion may grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) to such Participants that are based on Performance Goal(s) or other specific criteria or goals but that do not satisfy the requirements of this Section. 11.2Performance Goals. The granting and/or vesting of Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) and may provide for a targeted level or levels of achievement (“Performance Goals”) including (a) Cash Flow; (b) Earnings; (c) Product and Operational Metrics; (d) Revenue; and (e) Total Shareholder Return. Any Performance Goal used may be measured (i) in absolute terms, (ii) in combination with another Performance Goal or Goals (for example, but not by way of limitation, as a ratio or matrix), (iii) in relative terms (including, but not limited to, as compared to results for other periods of time, against other objective metrics, and/or against another company, companies or an index or indices), (iv) with respect to equity, assets or human resources of the Company, (including, for example, on a per-share or per-capita basis), (v) against the performance of the Company as a whole or a specific business unit(s) (including acquired business units), business segment(s) or product(s) of the Company, (vi) on a pre-tax or after-tax basis, and/or (vii) on a GAAP (generally accepted accounting principles) or non-GAAP basis. For example, but not by way of limitation, the Administrator could determine that Restricted Stock Units will be earned for a Performance Period for the achievement of goals for Earnings calculated before interest, taxes, depreciation and amortization. As another example, the Administrator could determine that Restricted Stock Units will be earned for a Performance Period for the achievement of goals for Earnings divided by the number of Shares that are outstanding (in other words, Earnings per Share). Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator, in its discretion, will determine whether any significant element(s) or item(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participants. As determined in the discretion of the Administrator prior to the Determination Date, achievement of Performance Goals for a particular Award may be calculated in accordance with the Company’s financial statements, prepared in accordance with GAAP, or as adjusted for certain costs, expenses, gains and losses to provide non-GAAP measures of operating results
Exhibit A – Woodward Omnibus Incentive Plan, as amended
11.3Procedures. To the extent necessary to comply with the performance-based compensation provisions of Section 162(m), with respect to any Award granted subject to Performance Goal(s), within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Section 162(m)), the Administrator will, in writing, (a) designate one or more Participants to whom an Award will be made, (b) select the Performance Goal(s) applicable to the Performance Period, (c) establish the Performance Goal(s), and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Goal(s) and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goal(s) have been achieved for such Performance Period. In determining the amounts earned by a Participant, the Administrator will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period. A Participant will be eligible to receive payment pursuant to an Award for a Performance Period only if the Performance Goal(s) for such period are achieved (and all Tax Obligations with respect thereto are satisfied). 11.4Additional Limitations. Notwithstanding any other provision of the Plan, any Award that is granted to a Participant and is intended to constitute qualified performance based compensation under Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m), and the Plan will be deemed amended to the extent necessary to conform to such requirements. SECTION 12. 12.1Establishment of Incentive Pool. The Committee may designate Covered Employees who are eligible to receive a monetary payment with respect to a Fiscal Year based on a percentage of an incentive pool equal to the greater of: (a) three percent (3%) of the Company’s Consolidated Operating Earnings for the Fiscal Year, (b) two percent (2%) of the Company’s Operating Cash Flow for the Fiscal Year, or (c) five percent (5%) of the Company’s Net Income for the Fiscal Year. The Administrator will allocate an incentive pool percentage to each designated Covered Employee for each Fiscal Year. In no event may (i) the incentive pool percentage for any one Covered Employee exceed fifty percent (50%) of the total pool, and (ii) the sum of the incentive pool percentages for all Covered Employees cannot exceed one hundred percent (100%) of the total pool. 12.2Determination of Covered Employees’ Portions. As soon as possible after the determination of the incentive pool for a Fiscal Year, the Administrator will calculate each Covered Employee’s allocated portion of the incentive pool based upon the percentage established at the beginning of the Fiscal Year. Each Covered Employee’s incentive award then will be determined by the Administrator based on the Covered Employee’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Administrator. In no event may the portion of the incentive pool allocated to a Covered Employee be increased in any way, including as a result of the reduction of any other Covered Employee’s allocated portion. The Administrator will retain the discretion to adjust such Awards downward. SECTION 13. 13.1Grant of Cash-Based Awards. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Cash-Based Awards in such A-18 Exhibit A – Woodward Omnibus Incentive Plan, as amended amounts and upon such terms and conditions as the Administrator, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan.
13.2Grant of Other Stock-Based Awards. Subject to the limits of Section 5 and the other terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Other Stock-Based Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and upon such terms and conditions as the Administrator, in its sole discretion, determines, provided that such terms and conditions are otherwise consistent with the terms and conditions of the Plan. Such Awards may involve the transfer of actual Shares to Participants, or the payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States. 13.3Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award will specify a payment amount or payment range (which may be expressed as a percentage of the Participant’s base salary, a dollar amount or a result of a formula or other matrix), as determined by the Administrator. Each Other Stock-Based Award will be expressed in terms of Shares or units based on Shares, as determined by the Administrator. The Administrator may establish performance or vesting criteria in its discretion. If the Administrator exercises its discretion to establish such criteria, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the criteria are met. 13.4Payment of Cash-Based and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or Other Stock-Based Award, will be made in accordance with the terms of the Award, in cash or Shares as the Administrator determines. 13.5Termination. The Administrator will determine the extent to which the Participant will have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Participant’s status as a Service Provider. Such provisions will be determined in the sole discretion of the Administrator, may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination. SECTION 14. 14.1Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, reincorporation, reclassification, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of shares of stock that may be issued under the Plan and/or the number, class, and price of shares of stock covered by each outstanding Award, and the numerical Share limits in Sections 3 and 5. 14.2Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant holding an outstanding Award as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
Exhibit A – Woodward Omnibus Incentive Plan, as amended
14.3Change in Control. In the event of a Change in Control: (a)Each then-outstanding Award will be treated as the Administrator determines (subject to the provisions of the following paragraph) without a Participant’s consent, including, without limitation, that (i) Awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participant’s Awards will terminate upon or immediately prior to the Change in Control; (iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part upon the Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the Change in Control; (iv) (A) an Award will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the Change in Control (and, for the avoidance of doubt, if as of the date of the Change in Control the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company, without payment), or (B) an Award will be replaced with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this Section 14.3, the Administrator will not be obligated to treat all Awards, all Awards held by a Participant or other holder, or all Awards of the same type, similarly. (b)If the successor corporation does not assume or substitute for an outstanding Award or portion thereof, as described in subsection (a)(i), and, for the avoidance of doubt, notwithstanding the minimum vesting requirement set forth in Section 5.3, (i) the Participant will fully vest in and have the right to exercise any such outstanding Option or Stock Appreciation Right, including Shares as to which such Award would not otherwise be vested or exercisable, (ii) all time-based vesting restrictions on any such Award will lapse, and (iii) the payout level attainable under any such Award with performance-based vesting restrictions will be deemed to have been earned as of the date of the Change in Control based on either (A) the actual level of achievement of all relevant performance criteria against the applicable “target” level(s) measured as of the date of the Change in Control, or (B) the deemed achievement of all relevant performance criteria against the applicable “target” level(s) measured as of the date of the Change in Control, with a pro rata payout based on the number of days within the applicable Performance Period that has elapsed before the Change in Control, as determined by the Administrator, and, in each such case, all other applicable vesting criteria and other terms and conditions of the Award will be deemed to have been satisfied, unless specifically provided otherwise in the applicable Award Agreement or other written agreement between the Participant and the Company or other Employer. The treatment of any other Awards will be determined by the Administrator in connection with the grant thereof, as reflected in the applicable Award Agreement. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that such Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period. For the purposes of this Section 14.3, an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit, Performance Share or Other Stock-Based Award, for each Share subject to such Award, to be solely common stock of the successor corporation A-20 Exhibit A – Woodward Omnibus Incentive Plan, as amended or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.
Notwithstanding anything in this Section 14.3 to the contrary, and unless otherwise provided in an Award Agreement, an Award that vests, is earned or paid out upon the satisfaction of one or more Performance Goals or other performance criteria will not be considered assumed if the Company or its successor modifies any of such goals or criteria without the Participant’s consent; provided, however, that a modification to such goals or criteria only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. Notwithstanding anything in this Section to the contrary, if a payment under an Award Agreement is subject to Section 409A and if the change in control definition contained in the Award Agreement does not comply with the definition of “change in control event” for purposes of a distribution under Section 409A, then any payment of an amount that otherwise is accelerated under this Section will be delayed until the earliest time that such payment would be permissible under Section 409A without triggering any penalties applicable under Section 409A. 14.4Outside Director Awards. With respect to Awards granted to an Outside Director that are assumed or substituted for in the event of a Change in Control, if on the date of or following such assumption or substitution, the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant (unless such resignation is at the request of the acquirer), then the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares underlying such Award, including those Shares which would not otherwise be vested or exercisable, all restrictions on Restricted Stock Awards, Restricted Stock Units and Other Stock-Based Awards will lapse, and, with respect to Awards with performance-based vesting, all performance or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met, unless specifically provided otherwise under the applicable Award Agreement or other written agreement between the Participant and the Company or other Employer. SECTION 15. 15.1Legal Compliance Required. In no event will Shares be issued or delivered pursuant to the exercise or settlement of an Award unless such exercise or settlement and the issuance and delivery of such Shares complies or will comply with Applicable Laws, as determined by the Administrator, with such determination subject to the further approval of counsel for the Company. 15.2Section 409A. Awards will be designed and operated in such a manner that they are intended to be either exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or deferral thereof, as applicable, will not be subject to the additional tax or interest applicable under Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement is intended to meet the requirements of Section 409A, to the extent applicable, and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Section 409A, the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A. In no event will the Company or other Employer have any A-21 Exhibit A – Woodward Omnibus Incentive Plan, as amended obligation under the Plan to reimburse a Participant for any taxes or other costs that may be imposed on the Participant as a result of Section 409A. 15.3Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
15.4Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any state, federal or foreign law or under the rules and regulations of the U.S. Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Company’s counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance will not have been obtained. 15.5Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award will be subject to the reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of the Award. Notwithstanding any contrary provision of the Plan, an Award will be subject to the Company’s clawback policy or other compensation recoupment policy as may be established and/or amended from time to time (the “Clawback Policy”). The Administrator may require a Participant to forfeit, return or reimburse the Company all or a portion of the Award and any amounts paid thereunder pursuant to the terms of the Clawback Policy or as necessary or appropriate to comply with Applicable Laws. 15.6Leaves of Absence or Transfers Between Locations. Unless the Administrator provides otherwise, as set forth in the applicable Award Agreement, the vesting of an Award will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee or Director in the case of (a) any leave of absence approved by the Employer or (b) transfers between locations of the Company, between the Company and another Employer or between an Employer and another Employer. For purposes of Incentive Stock Options, no leave of absence may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Employer is not so guaranteed, then six (6) months following the first (1st) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonqualified Stock Option. 15.7Limited Transferability of Awards. Unless determined otherwise by the Administrator, as set forth in the applicable Award Agreement, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, the related Award Agreement will contain such additional terms and conditions as the Administrator deems appropriates. 15.8Dividends on Unvested Full Value Awards. Notwithstanding any contrary provision of the Plan, but subject to Section 14, any dividends or distributions (as determined by the Administrator) that are paid on Shares underlying an unvested Full Value Award will not be immediately paid to the Participant and instead will A-22 Exhibit A – Woodward Omnibus Incentive Plan, as amended accrue and be subject to the same vesting schedule, forfeiture provisions, and payout timing as then applicable to the Full Value Award on which such dividends or other distributions accrued. 15.9Indemnification. Subject to the requirements of Delaware law, each individual who is or has been a member of the Board and/or any Committee, or who is an Employee to whom authority was delegated in accordance with Section 3 (an “Indemnitee”), will be indemnified and held harmless by the Company against and from (a) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by the Indemnitee in connection with or resulting from any claim, action, suit, or proceeding to which the Indemnitee may be a party or in which the Indemnitee may be involved by reason of any action taken or failure to act under the Plan or any Award Agreement, and (b) any and all amounts paid by the Indemnitee in settlement thereof, with the Company’s approval, or paid by the Indemnitee in satisfaction of any judgment in any such claim, action, suit, or proceeding against the Indemnitee, provided the Indemnitee gives the Company an opportunity, at its own expense, to handle
and defend the same before the Indemnitee undertakes to handle and defend it on the Indemnitee’s own behalf, unless such loss, cost, liability or expense is a result of the Indemnitee’s gross negligence or willful misconduct or except as expressly provided by statute. The foregoing right of indemnification, if any, will not be exclusive of any other rights of indemnification to which the Indemnitee may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify or hold harmless the Indemnitee. 15.10No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Employer, nor will they interfere in any way with the Participant’s right or the right of the Employer to terminate such relationship at any time, with or without cause, to the extent permitted by law. 15.11Participation. No Service Provider will have the right to be selected to receive an Award or, having been so selected, to be selected to receive any future Award. 16.1General Requirements. Prior to the issuance of any Shares or cash pursuant to an Award (or exercise thereof) or such earlier time as any Tax Obligations with respect to the Award are due, the Company and/or other Employer, as applicable, will have the power and the right to deduct or withhold, or require a Participant to remit to the Company or other Employer, as applicable, an amount sufficient to satisfy all Tax Obligations with respect to the Award (or exercise thereof). 16.2Withholding or Remittance Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may require or permit a Participant to satisfy such Tax Obligations, in whole or in part, by (without limitation): (a) paying cash, check or other cash equivalents, (b) electing to have the Company (or other Employer, as applicable) withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld or remitted, or such greater amount as the Administrator may determine if such amount will not cause adverse accounting consequences, as the Administrator determines, in its sole discretion (the “Applicable Withholding Amount”), (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the Applicable Withholding Amount, provided that the delivery of such Shares will not result in any adverse accounting consequences, as the Administrator determines, in its sole discretion, (d) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld or remitted, (e) A-23 Exhibit A – Woodward Omnibus Incentive Plan, as amended any other means that the Administrator, in its sole discretion, determines to both comply with Applicable Laws and to be consistent with the purposes of the Plan, or (f) any combination of the foregoing arrangements. Unless otherwise specifically determined by the Administrator, the withholding arrangements approved by the Administrator under this Section 16.2 shall be intended to avoid the applicable Award being subject to liability accounting under ASC 718. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the Tax Obligations are required to be withheld or remitted.
SECTION 17. 17.1Amendment, Suspension or Termination Authority. Except as otherwise specified in this Section, the Company, by action of the Board (or its authorized delegate), may at any time and for any reason amend, alter, suspend or terminate the Plan, or any part thereof. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. Any amendment, alteration, suspension or termination of the Plan will not impair in any material way the rights or obligations of any Participant under any Award that is outstanding as of the effective date of the Plan amendment, alteration, suspension of termination, without the written consent of the Participant. However, a termination of the Plan will not affect the Administrator’s ability to exercise its authority under the Plan with respect to any Awards that are outstanding as of the effective date of the termination. No Award may be granted during any period of suspension or after termination of the Plan. 17.2Duration of Plan. The Plan is effective as of the Effective Date, and subject to Section 17, will remain in effect thereafter. Notwithstanding the foregoing, without further stockholder approval, no Incentive Stock Option may be granted under the Plan after September 13, 2026. 18.1Governing Law. The Plan and each Award Agreement will be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might other otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the applicable Award Agreement, a Participant is deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware, to resolve any and all issues that may arise out of or relate to the Plan or the Award Agreement. 18.2Severability. In the event any provision of the Plan is held illegal or invalid for any reason, such illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provision had not been included. 18.3Captions. Captions in the Plan are provided for convenience only and will not serve as a basis for the interpretation or construction of the Plan.
Woodward, Inc. Annual Meeting of INTERNET Go To: www.proxypush.com/WWD Cast your vote online Have your Proxy Card ready Follow the simple instructions to record your vote PHONE Call 1-866-829-5209 Use any touch-tone telephone Have your Proxy Card ready Follow the simple recorded instructions MAIL Mark, sign and date your Proxy Card Fold and return your Proxy Card in the postage-paid envelope provided You must
Woodward, Inc. Annual Meeting of Stockholders Please make your marks like this: THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR ON PROPOSALS 1, 2, 4 AND 5 THE BOARD RECOMMENDS THAT AN ADVISORY VOTE ON THE COMPENSATION FOR NAMED EXECUTIVE OFFICERS BE HELD EVERY 1 YEAR. PROPOSAL YOUR VOTE BOARD OF DIRECTORS RECOMMENDS 1. Election of Director FOR AGAINST ABSTAIN 1.01 David P. Hess FOR 2. Vote on an advisory resolution regarding the compensation of the Company's named executive officers; FOR 1YR 2YR 3YR ABSTAIN 3. Vote on an advisory proposal regarding the frequency of stockholder advisory votes on executive compensation; 1 YEAR FOR AGAINST ABSTAIN 4. Ratify the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending September 30, 2023; FOR 5. Approve an amendment to the Amended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan to increase the number of shares reserved for issuance by 500,000; and FOR 6. The transaction of such other business as may properly come before the meeting, or any postponement or adjournment thereof. You must register to attend the meeting online and/or participate at www.proxydocs.com/WWD Authorized Signatures - Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy card. Signature (and Title if applicable) Date Signature (if held jointly) Date |