DIRECTOR COMPENSATION
We use a combination of cash and common stock to compensate our non-employee directors. Directors who are also our full-time employees are not paid for their services as directors or for attendance at meetings.
For the fiscal year ended April 29, 2017,27, 2019, our non-employee directors received an annual cash retainer of $44,000 and an attendance fee of $1,000 per committee meeting and for each board meeting other than the regularly scheduled quarterly meetings. In addition, in July 2016,2018, the Compensation Committee, upon the recommendation of the Nominating and Governance Committee, granted each non-employee director serving at such time a stock award for 3,000 shares of common stock. Our Chairman of the Board and the Chair of each of our standing board committees received supplemental annual cash retainers in the following amounts: Chairman of the Board, $30,000; Chair of each of the Audit Committee and the Compensation Committee, $24,000; and Chair of each of the Nominating and Governance Committee and the Technology Committee, $12,000. In addition, members of our Audit Committee and Compensation Committee (other than the Chair) received an additional annual cash retainer of $10,000. Pursuant to our Deferred Compensation Plan, our directors may elect to defer up to 100% of their cash retainers and attendance fees per year. Additional information regarding the Deferred Compensation Plan is described under “Executive Compensation — Nonqualified Deferred Compensation” below.
The following table sets forth certain information regarding compensation earned by our non-employee directors during the fiscal year ended April 29, 2017.27, 2019.
| Name | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | ||||||||||||
Martha Goldberg Aronson | 88,000 | 116,250 | 204,250 | ||||||||||||||||
| Walter J. Aspatore | Walter J. Aspatore | 111,270 | 102,870 | 214,140 | 119,000 | 116,250 | 235,250 | ||||||||||||
| Warren L. Batts | 70,770 | 102,870 | 173,640 | ||||||||||||||||
Brian J. Cadwallader | 75,000 | 116,250 | 191,200 | ||||||||||||||||
| Darren M. Dawson | Darren M. Dawson | 84,270 | 102,870 | 187,140 | 90,000 | 116,250 | 206,250 | ||||||||||||
| Stephen F. Gates | 101,770 | 102,870 | 204,640 | ||||||||||||||||
| Martha Goldberg Aronson | 69,770 | 102,870 | 172,640 | ||||||||||||||||
| Isabelle C. Goossen | Isabelle C. Goossen | 101,270 | 102,870 | 204,140 | 108,000 | 116,250 | 224,250 | ||||||||||||
| Christopher J. Hornung | Christopher J. Hornung | 78,770 | 102,870 | 181,640 | 80,000 | 116,250 | 196,250 | ||||||||||||
| Paul G. Shelton | Paul G. Shelton | 87,270 | 102,870 | 190,140 | 90,000 | 116,250 | 206,250 | ||||||||||||
| Lawrence B. Skatoff | Lawrence B. Skatoff | 80,770 | 102,870 | 183,640 | 78,000 | 116,250 | 194,250 | ||||||||||||
| (1) | The reported amounts reflect the fair value at the date of grant calculated in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718. Details of the assumptions used in valuing these awards are set forth in Note 4 to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended April |
| (2) | Directors Crowther and Schwabero were elected to the Board in June, 2019 and will be compensated in a manner consistent with the Company’s other independent directors. |
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SECURITY OWNERSHIP
Five Percent Shareholders
The following table sets forth information regarding all persons known by Methode to be the beneficial owners of more than 5% of Methode’s common stock as of July 17, 2017.18, 2019.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (%) |
BlackRock, Inc. (1) 55 East 52nd Street New York, New York 10055 | 4,106,670 | 11.2 |
The Vanguard Group (2) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 3,040,563 | 8.3 |
The Bank of New York Mellon Corporation (3) 225 Liberty Street New York, New York 10286 | 2,853,738 | 7.8 |
Dimensional Fund Advisors LP (4) Building One 6300 Bee Cave Road Austin, TX 78746 | 2,049,446 | 5.6 |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (%) | ||||
BlackRock, Inc.(1) 55 East 52nd Street New York, New York 10055 | 5,403,585 | 14.6 | ||||
The Vanguard Group(2) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 3,727,168 | 10.1 | ||||
Dimensional Fund Advisors LP(3) Building One 6300 Bee Cave Road Austin, TX 78746 | 2,044,384 | 5.5 | ||||
| (1) | Information is based on a Schedule 13G/A filed with the Securities and Exchange Commission (“SEC”) on January 31, 2019. In the Schedule 13G/A, BlackRock, Inc. reported that, as a parent holding company, as of December 31, 2018, it had sole voting power with respect to 5,317,494 shares and sole dispositive power with respect to 5,403,585 shares. |
| Information is based on a Schedule 13G/A filed with the SEC on January | ||
| (3) | Information is based on a Schedule 13G/A filed with the SEC on February | |
Directors and Executive Officers
The following table sets forth information regarding our common stock beneficially owned as of July 17, 201718, 2019 by (i) each director and nominee, (ii) each of the named executive officers, and (iii) all current directors and executive officers as a group.
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (%) | |
| Walter J. Aspatore | 27,000(2) | * | |
| Warren L. Batts | 76,000 | * | |
| Darren M. Dawson | 13,000 | * | |
| Donald W. Duda | 631,364(3) | 1.7 | |
| Martha Goldberg Aronson | 6,000 (4) | * | |
| Isabelle C. Goossen | 43,450 | * | |
| Christopher J. Hornung | 37,850 | * | |
| Paul G. Shelton | 42,850 | * | |
| Lawrence B. Skatoff | 39,350(5) | * | |
| Timothy R. Glandon | 43,079(6) | * | |
| John R. Hrudicka | 72,000(7) | * | |
| Joseph E. Khoury | 240,600(8) | * | |
| Theodore P. Kill | 211,830(9) | * | |
| Douglas A. Koman | 119,792(10) | * | |
| All current directors and executive officers as a group | 1,604,165(11) | 4.4 | |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class (%) | ||
Martha Goldberg Aronson | 12,000 | (2) | * | |
Walter J. Aspatore | 33,000 | (3) | * | |
Brian J. Cadwallader | 6,000 | * | ||
Bruce K. Crowther | 3,000 | * | ||
Darren M. Dawson | 16,000 | * | ||
Donald W. Duda | 809,882 | (4) | 2.1 | |
Isabelle C. Goossen | 43,450 | * | ||
Christopher J. Hornung | 52,050 | * | ||
Mark D. Schwabero | 3,000 | * | ||
Paul G. Shelton | 47,850 | * | ||
Lawrence B. Skatoff | 44,350 | (5) | * | |
Michael Brotherton | 82,444 | (6) | * | |
Joseph E. Khoury | 283,500 | (7) | * | |
Anil Shetty | 84,306 | (8) | * | |
Ronald L.G. Tsoumas | 108,801 | (9) | * | |
All current directors and executive officers as a group | 1,700,012 | (10) | 4.4 | |
| * | Percentage represents less than 1% of the total shares of common stock outstanding. |
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| (1) | Beneficial ownership arises from sole voting and dispositive power unless otherwise indicated by footnote. |
| (2) | Shares are held in a trust pursuant to which Ms. Goldberg Aronson shares voting and investment power with her husband. |
| (3) | Includes |
| (4) | Includes | ||
| (5) | Shares are held in a trust pursuant to which Mr. Skatoff shares voting and investment power with his wife. |
| (6) | Includes 54,000 shares of performance-based restricted stock subject to forfeiture, options to purchase 1,668 shares of common stock exercisable within 60 days and 458 shares of common stock held in our 401(k) Plan. |
| (7) | Includes options to purchase 12,000 shares of common stock exercisable within 60 days, | ||
| (8) | Includes |
| (9) | Includes options to purchase 8,000 shares of common stock exercisable within 60 days, |
| (10) | Includes | |||
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PROPOSAL ONE
ELECTION OF DIRECTORS
A Board of eight directors will be elected at the annual meeting. Each director will hold office until the next annual meeting of shareholders and until his or her successor is elected and qualified. All of the nominees listed below currently serve as directors. All of the nominees were recommended unanimously to our Board of Directors by our Nominating and Governance Committee and were nominated by our Board of Directors. Mr. BattsIf any nominee is unwilling or unable to serve as a director, an event which our Board does not anticipate, shares represented by the proxies will be voted for the election of another nominee nominated by our Board upon the recommendation of our Nominating and Governance Committee, or the Board may reduce the number of directors to be elected at the annual meeting. Ms. Goldberg Aronson and Messrs. Hornung and Shelton are not be standing for re-election, and the Board expressed its great appreciation for all of the contributions he hasthey have made over the years. The size of the Board will be reduced from nineeleven directors to eight directors as of the date of the annual meeting. If any of these nominees is not a candidate for election at the annual meeting, an event which our Board of Directors does not anticipate, the proxies will be voted for a substitute nominee recommended to our Board of Directors by our Nominating and Governance Committee and nominated by our Board of Directors.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE FOLLOWING NOMINEES.
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Walter J. Aspatore, Chairman Mr. Aspatore has served as Chairman Emeritus of Amherst Partners, LLC, a business consulting firm, since 2010. Prior thereto, Mr. Aspatore was Chairman of Amherst Partners from 1994 through 2010. Mr. Aspatore has served as Chairman of our Board since 2012. Prior to co-founding Amherst Partners, Mr. Aspatore served in various officer positions at diversified manufacturing and technology businesses, including Cross and Trecker Corporation, the Warner and Swasey Company, Bendix Corporation and TRW Corporation. He also served as Vice Chairman and President of Onset BIDCO, a venture capital and subordinated debt fund, from 1992 to 1994. Mr. Aspatore also serves as a director of Mackinac Financial Corporation, a bank holding company. Mr. Aspatore’s consulting experience and service at various consulting, manufacturing and technology businesses has resulted in continued contributions to the Board. Brian J. Cadwallader Mr. Cadwallader served as Vice President, Corporate Secretary and General Counsel of Johnson Controls, Inc. from 2014 to 2016. Prior thereto, Mr. Cadwallader served as Vice President and Assistant General Counsel of Johnson Controls from 2011 to 2014. Mr. Cadwallader served as Group Vice President and General Counsel of Johnson Controls’ Building Efficiency business from 2010 to 2011. Prior to joining Johnson Controls, Mr. Cadwallader served as Associate General Counsel and Assistant Secretary at International Paper Company. In addition to his other responsibilities, Mr. Cadwallader was responsible for international legal and regulatory affairs for Johnson Controls and International Paper for over 15 years. Mr. Cadwallader’s legal background with expertise in international operations, corporate governance, M&A and executive compensation has led to significant contributions to the Board. Bruce K. Crowther Mr. Crowther served as President and Chief Executive Officer of Northwest Community Healthcare from 1992 until his retirement in 2013. Prior thereto, Mr. Crowther served as Executive Vice President and Chief Operating Officer of Northwest Community Healthcare from 1989 to 1991. Mr. Crowther is the past Chairman of the board of directors of the Illinois Hospital Association. Mr. Crowther serves as a director of NeoGenomics, Inc., Wintrust Financial Corporation and Barrington Bank. Mr. Crowther’s extensive leadership experience and significant knowledge regarding the healthcare industry has provided valuable insights to the Board. |
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Dr. Darren M. Dawson
President
The University of Alabama in Huntsville
Director since 2004
Age 56
Dr. Dawson has served as the President of The University of Alabama in Huntsville since April, 2019. Prior thereto, Dr. Dawson served as Dean of the College of Engineering of Kansas State University since 2014. From 1990 to 2014, Dr. Dawson served as a Professor in the Electrical and Computer Engineering Department at Clemson University. His research interests included nonlinear control techniques for mechatronic systems, robotic manipulator systems and vision-based systems. Dr. Dawson’s work has been recognized by several awards, including the Clemson University Centennial Professorship in 2000. Dr. Dawson’s academic and technical background has provided the basis for continued contributions to the Board’s operations and deliberations.
Donald W. Duda
Chief Executive Officer and President
Methode
Director since 2001
Age 64
Mr. Duda has served as our Chief Executive Officer since 2004 and our President since 2001. Mr. Duda joined us in 2000 and served as our Vice President - Interconnect Products Group. Prior to joining Methode, Mr. Duda held several positions with Amphenol Corporation, a manufacturer of electronic connectors, most recently as General Manager of its Fiber Optic Products Division. Mr. Duda has used his executive background and unique understanding of Methode to contribute to the Board.
Isabelle C. Goossen
Retired Vice President and Chief Financial Officer
Chicago Symphony Orchestra Association
Director since 2004
Age 67
Ms. Goossen served as the Chief Financial Officer for the Chicago Symphony Orchestra Association from 2011 thru 2017. Ms. Goossen served as the Vice President for Finance and Administration for the Chicago Symphony Orchestra Association from 2001 thru 2017. From 1986 through 1999, Ms. Goossen held several management positions with Premark International, Inc., most recently as Vice President and Treasurer. Ms. Goossen serves as a director of the Columbian Financial Group, the parent company of Columbian Mutual Life Insurance and Columbian Life Insurance Company, each a life insurance company. In addition, Ms. Goossen is a trustee of Knox College and a director of the Cook County Health Foundation. Ms. Goossen has used her financial expertise and management background to make continued contributions to the Board.
Mark D. Schwabero
Retired Chairman and Chief Executive Officer
Brunswick Corporation
Director since June, 2019
Age 67
Mr. Schwabero served as Chairman, Chief Executive Officer and Director of Brunswick Corporation from 2016 until his retirement in December, 2018. Prior thereto, Mr. Schwabero served as President and Chief Operating Officer of Brunswick Corporation from 2014 to 2016 and as President of its Mercury Marine subsidiary from 2008 to 2014. Mr. Schwabero serves on the Advisory Committee of The Ohio State University Center for Automotive Research and is a director of 1st Source Corporation. Mr. Schwabero’s leadership experience, international expertise and detailed knowledge of the automotive and industrial industries has provided valuable insights to the Board.
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Lawrence B. Skatoff
Retired Executive Vice President and Chief Financial Officer
BorgWarner Inc.
Director since 2004
Age 79
Mr. Skatoff retired in 2001 as Executive Vice President and Chief Financial Officer of BorgWarner Inc. Prior to joining BorgWarner Inc., Mr. Skatoff was Senior Vice President and Chief Financial Officer of Premark International, Inc. from 1991 through 1999. Before joining Premark, Mr. Skatoff was Vice President-Finance of Monsanto Company. Mr. Skatoff’s executive experience and financial background has led to continued contributions to the Board.
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PROPOSAL TWO
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board of Directors is directly responsible for the appointment, termination, compensation, evaluation and oversight of our independent registered public accounting firm. Our Audit Committee has selected Ernst & YoungEY to serve as our independent registered public accounting firm for the fiscal year ending April 28, 2018,May 2, 2020, subject to ratification of the selection by our shareholders. Ernst & YoungEY has served as our independent registered public accounting firm for many years and is considered to be well qualified.
Representatives of Ernst & YoungEY will be present at the annual meeting, will have the opportunity to make a statement and will be available to respond to appropriate questions.
If our shareholders do not ratify the selection of Ernst & Young,EY, our Audit Committee will reconsider the selection. Even if the selection is ratified, our Audit Committee may select a different independent registered public accounting firm at any time during the year if it determines that a change would be in the best interests of Methode and our shareholders.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF OUR AUDIT COMMITTEE’S SELECTION OF ERNST & YOUNGEY AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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proposalPROPOSAL THREEadvisorYADVISORY APPROVAL OF METHODE’S executive compensationEXECUTIVE COMPENSATION
Section 14A of the Securities Exchange Act of 1934 requires that we provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement, commonly known as a “say-on-pay” vote.
As described under “Executive Compensation – Compensation“Compensation Discussion and Analysis,” we seek to align the interests of our executives with the interests of our shareholders and reward performance.
The advisory vote on this resolution is not intended to address any specific element of compensation, but rather the overall compensation of our named executive officers as disclosed in this proxy statement. The vote is advisory, which means that the vote is not binding on Methode, our Board of Directors or our Compensation Committee. Although this vote is nonbinding, our Board of Directors and our Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making decisions concerning executive compensation.
Shareholders may vote for or against the following resolution, or may abstain from voting. The affirmative vote of a majority of the shares present or represented at the annual meeting and entitled to vote is required to approve the proposed resolution.
We ask our shareholders to approve the following resolution:
“RESOLVED, that the compensation of Methode’s named executive officers, as disclosed in Methode’s Proxy Statement for the 2019 Annual Meeting of Shareholders pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure, is hereby approved.” |
“RESOLVED, that the compensation of Methode’s named executive officers, as disclosed in Methode’s Proxy Statement for the 2017 Annual Meeting of Shareholders pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure, is hereby approved.”
Our Board of Directors recommends a voteOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” the approval of the THE APPROVAL OF THE FOREGOING RESOLUTION.
PROPOSAL FOURADVISORY VOTE ON THE FREQUENCY OFFUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
Section 14A of the Securities Exchange Act of 1934 provides that shareholders must be given the opportunity to vote, on a non-binding, advisory basis, on how frequently the advisory vote on executive compensation should be presented to our shareholders, commonly known as “say-on-pay” votes. Shareholders may indicate whether they would prefer that we conduct future “say-on-pay” votes once every one, two or three years. Shareholders also may abstain from casting a vote on this proposal.
We are required to hold an advisory vote regarding the frequency of “say-on-pay” votes every six years. The Company’s shareholders were provided with the opportunity to vote on the frequency of “say-on-pay” votes in 2011. At such time, the shareholders voted in favor of holding “say-on-pay” votes annually and the Board adopted this standard.
After consideration of each alternative, the Board recommends that the advisory vote on executive compensation continue to be submitted to the shareholders every year. Our Board of Directors has determined that an annual advisory vote on executive compensation will allow our shareholders to provide timely input on Methode’s executive compensation philosophy, policies and practices as disclosed in the proxy statement each year.
The proxy card provides shareholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining). Shareholders will not be voting to approve or disapprove the recommendation of the Board of Directors.
While this vote is advisory and not binding on Methode, the Board and the Compensation Committee expect to consider the outcome of the vote, along with other relevant information, in determining the frequency of future advisory votes on executive compensation. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a less frequent basis.
Our Board of Directors recommends a vote for a one-year frequency of the advisory vote on executive compensation.
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AUDIT COMMITTEE MATTERS
Report of the Audit Committee
The Audit Committee oversees our financial reporting process on behalf of our Board of Directors. Our management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. Our Board has determined that each member of our Audit Committee meets the requirements as to independence, experience and expertise established by the New York Stock Exchange. Our Board has designated Mr. Aspatore, Ms. Goossen, Mr. Shelton and Mr. Skatoff as audit committee financial experts as defined by the SEC. In fulfilling its oversight responsibilities, our Audit Committee reviewed and discussed the audited financial statements in the Annual Report on Form 10-K for the year ended April 29, 201727, 2019 with management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements.
Our Audit Committee reviewed and discussed with our independent registered public accounting firm, Ernst & Young LLP (“EY”), which is responsible for expressing an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles, the firm’s judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed under the standards of the Public Company Accounting Oversight Board (United States).
The Committee has received the written disclosures and the letter from Ernst & YoungEY required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young’sEY’s communications with the Committee concerning independence, and has discussed with Ernst & YoungEY the firm’s independence from management and Methode and considered the compatibility of nonaudit services with the firm’s independence.
Our Audit Committee discussed with our internal auditors and Ernst & YoungEY the overall scope and plans for their respective audits. Our Audit Committee met with the internal auditors and Ernst & Young,EY, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting. The Committee also discussed with Ernst & YoungEY the matters required to be discussed byunder the Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees - Public Company Accounting Oversight Board.
(AS 1301). In reliance on the reviews and discussions referred to above, the Committee recommended to our Board of Directors (and our Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended April 29, 201727, 2019 filed with the SEC.
AUDIT COMMITTEE
Isabelle C. Goossen, Chair
Walter J. Aspatore
Paul G. Shelton
Lawrence B. Skatoff
AUDIT COMMITTEE | |
Isabelle C. Goossen, Chair | |
Walter J. Aspatore | |
Paul G. Shelton | |
Lawrence B. Skatoff |
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Auditing and Related Fees
Our Audit Committee engaged Ernst & Young to examine our consolidated financial statements for the fiscal year ended April 29, 2017.27, 2019. Fees paid to Ernst & Young for services performed during the 20172019 and 20162018 fiscal years were as follows:
| Fiscal 2017 | Fiscal 2016 | |||
| Audit Fees (1) | $2,589,140 | $1,960,702 | ||
| Tax Fees (2) | $25,593 | $52,039 | ||
| All Other Fees | -- | -- | ||
| Total | $2,614,733 | $2,012,741 |
Fiscal 2019 | Fiscal 2018 | |||||
Audit Fees(1) | $ | 2,844,199 | $ | 2,669,509 | ||
Tax Fees(2) | $ | 45,326 | $ | 98,389 | ||
All Other Fees(3) | $ | — | $ | 395,929 | ||
Total | $ | 2,889,525 | $ | 3,163,827 | ||
| (1) | Audit fees represent aggregate fees billed for professional services rendered by Ernst & Young for the audit of our annual financial statements and review of our quarterly financial statements, audit services provided in connection with other statutory and regulatory filings and consultation with respect to various accounting and financial reporting |
| (2) | Tax fees primarily include fees for consultations regarding intercompany transfer pricing. |
| (3) | |||||
| All other fees primarily includes fees related to due diligence on acquisition targets. |
Pre-Approval Policy
Our Audit Committee is responsible for reviewing and pre-approving all audit and non-audit services provided by Ernst & Young and shall not engage Ernst & Young to perform non-audit services proscribed by law or regulation. In fiscal 2017,2019, 100% of audit and non-audit services were approved by the Audit Committee.
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COMPENSATION DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion and Analysis describes the key elements of our executive compensation program, including an analysis of compensation awarded to, earned by or paid to our named executive officers in fiscal 2017.2019. Our fiscal 20172019 named executive officers included Donald W. Duda, Chief Executive Officer; John R. Hrudicka,Ronald L.G. Tsoumas, Chief Financial Officer; Joseph E. Khoury, Senior Vice President; Theodore P. Kill,Chief Operating Officer; Michael Brotherton, Vice President Worldwide Automotive Salesand President of Grakon; and Anil Shetty, Vice President and President of Dabir Surfaces; Timothy Glandon, Vice President;Surfaces. Messrs. Brotherton and Douglas Koman, our retired Chief Financial Officer. In July 2016, Mr. Koman resigned as Chief Financial Officer and Mr. Hrudicka was hired as our new Chief Financial Officer. Mr. Koman retired as an employeeShetty were appointed executive officers in September 2016.2018.
Executive Summary
Our Compensation Committee strives to provide compensation programs that align our executives’ interests with those of our shareholders and appropriately reward our executives for performance against annual and multi-year objectives.
The key elements of our fiscal 20172019 compensation program for our named executive officers included the following:
| • | Salary. In reviewing fiscal |
| • | Annual Performance-Based Cash Bonus. After considering the guideline benchmark target, executive performance, retention issues, internal pay equity, market conditions, the advice of our independent compensation consultant and Mr. Duda’s recommendations for the other officers, the Compensation Committee |
| • |
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Our executive compensation program contains the following components and features that are designed to reflect compensation governance best practices and align the interests of our named executive officers and shareholders.
| • | No excessive post-termination benefits: Our executives do not participate in pension plans or receive other post-retirement benefits, nor do they generally have employment or severance agreements (other than in connection with a change of control). |
| • | No “single trigger” change of control benefits: We maintain “double-trigger” change of control agreements, and the executives are only entitled to a severance payment if an executive is terminated without cause or an executive terminates for good reason subsequent to a change of control. In addition, awards under our |
| • | No excise tax gross ups: We do not provide for gross-up payments for excise taxes our executive officers may incur in connection with a change of control. |
| • | Robust performance-based incentives: In general, a significant amount of each of our named executive officer’s compensation is variable compensation and “at risk” for non-payment if we fail or the executive fails to meet performance targets. Consistent with our pay-for-performance philosophy, approximately |
| • | Disclosure of performance measures: We disclose the performance measures for the RSAs |
| • |
| dividends on performance-based stock awards and dividend equivalents on performance-based stock unit awards are paid only to the extent the underlying awards |
| • | Use of an independent compensation consultant: The Compensation Committee directly engages an independent compensation consultant to review the competitiveness and effectiveness of our executive compensation |
| • | Executive officer stock ownership requirements: We require all of our executive officers to hold substantial amounts of our common stock. Our Chief Executive Officer is expected to own stock with a value at least equal to six (6) times his base salary, our Chief Operating Officer is expected to own stock with a value at least equal to three (3) times his base salary and other executive officers are expected to own two (2) times their base salary. The requirements are subject to a phase-in period in the event of a new hire or a promotion. In addition, for the majority of our executive officers, shares of common stock underlying |
| • | Incentive “clawback” policy: In the event we are required to restate our financial statements due to material noncompliance, our Incentive Compensation Recoupment Policy requires us to recover from our current or former executive officers certain amounts of incentive-based compensation paid within the prior three years. |
| • | Policy prohibiting hedging or pledging our stock: Our Insider Trading Policy prohibits our directors, executive officers and certain key employees from engaging in certain transactions involving our common stock, including options trading, short sales, derivative transactions and hedging transactions. In addition, these directors, executive officers and key employees are prohibited from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan. |
| • | Annual say-on-pay advisory vote: We hold an annual advisory vote for our stockholders to review and approve our executive compensation program, which received 95% stockholder support last year. |
prohibited from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan.
Objectives and Measurement Principles
Our executive compensation program supports our objective of enhancing shareholder value through a competitive program that attracts and retains high-quality talent and rewards executives for demonstrating strong leadership and delivering results. Our executive compensation program is designed to:
Our Compensation Process
Our Overall Process.Our Compensation Committee is comprised entirely of independent directors and meets as often as necessary to perform its duties. In fiscal 2017,2019, our Compensation Committee met fivesix times. Our Compensation Committee typically meets with Donald W. Duda, our Chief Executive Officer.Officer, and reserves time at each meeting to hold an executive session without any members of management present.
Our Compensation Committee annually engages a compensation consultant to review the competitiveness and effectiveness of our executive compensation program and annually reviews summaries of our named executive officers’ compensation.compensation relative to peers and survey data. Our Compensation Committee also annually reviews company performance relative to peers and survey data.peers.
Our Chief Executive Officer’s compensation is determined by our Compensation Committee. Management does not make recommendations to our Compensation Committee regarding compensation elements with respect to Mr. Duda’s compensation. For named executive officers other than Mr. Duda, compensation packages are developed and recommended by Mr. Duda, in consultation with the Chief FinancialHuman Resources Officer, based on guidelines provided by our Compensation Committee. Our Compensation Committee determines whether to approve these recommendations, subject to any modifications that it may deem appropriate.
Role of Compensation Consultant. Since 2013, Frederic W. Cook & Co., Inc. (“FWC”FW Cook”) has provided independent executive compensation consulting services to the Compensation Committee. FWCFW Cook is retained by and reports to the Compensation Committee. During fiscal 2017, FWC2019, FW Cook provided the following services:
The Compensation Committee reviewed information provided by FWCFW Cook addressing the independence of FWCFW Cook and the representatives serving the Committee. Based on this information, the Compensation Committee concluded that the work performed by FWCFW Cook and its representatives involved in the engagement did not raise any conflict of interest and that FWCFW Cook and such representatives are independent from the Company’s management.
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Consideration of 20162018 Say-on-Pay Vote Results. At our 20162018 annual meeting, our shareholders approved our fiscal 20162018 executive compensation, with approximately 95% of voted shares cast in favor of the say-on-pay resolution. Our Compensation Committee considered the results of the 20162018 say-on-pay vote along with other factors when making executive compensation decisions.
Risk Assessment. The Compensation Committee, together with the Chief Executive Officer and its independent compensation consultant, annually considers potential risks when reviewing our compensation programs for all employees, including our executive officers. Based on this assessment, the Compensation Committee concluded that our fiscal 2019 compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company. In making this determination, the Compensation Committee reviewed the key features of our compensation programs and policies, including the following:
Market Benchmarking and Positioning of Fiscal 20172019 Executive Compensation
We strive to provide compensation opportunities that are market competitive. In order to assist the Compensation Committee in achieving this objective for fiscal 2017, FWC2019, FW Cook was retained to conduct a review of our executive compensation peer group and benchmark our executive compensation program using a custom peer group and third-party survey data. The Compensation Committee considers this benchmarking information in reviewing each element of our compensation program.
After considering the advice of FWC,FW Cook, the Compensation Committee approved using the fiscal 20162018 peer group for fiscal 2017,2019, subject to a few modifications.one modification. One former peer company, Remy International, Inc.,IPG Photonics Corporation, was eliminated since it had been acquired. Two newis positioned well above the market capitalization range targeted for our peer companies, AVX Corporation and Multi-Fineline Electronix, Inc., were added. Each of the new peer companies satisfies the Compensation Committee’s criteria for the peer group as summarized below.companies.
The peer group used for benchmarking purposes in fiscal 20172019 was selected using the following criteria:
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For compensation decisions affecting fiscal 20172019 compensation, the peer group included the following companies:
AVX Corporation | Kemet Corporation | Rogers Corporation |
CTS Corporation | LCI Industries | Standard Motor Products, Inc. |
Dorman Products, Inc. | Littelfuse, Inc. | Stoneridge, Inc. |
Franklin Electric Company, Inc. | MTS Systems Corporation | TTM Technologies, Inc. |
Gentherm Incorporated | OSI Systems, Inc. | Universal Electronics Inc. |
In benchmarking our compensation program for fiscal 2017,2019, the Compensation Committee also reviewed information compiled by FWCFW Cook from the followingmajor third-party executive pay surveys: (i) 2015 Mercer Executive Benchmark; (ii) 2015 Aon Hewitt Total Compensation Management; (iii) 2015 Willis Towers Watson U.S. Compensation Data Bank; and (iv) 2015 Willis Towers Watson Top Management.surveys.
As a general policy, we targeted fiscal 20172019 executive officer total direct compensation (salary, annual cash bonus and long-term incentive compensation) and each component thereof in the 50th50th to 75th75th percentile range of competitive practice, which aligned with the Company’s relative positioning in terms of revenues, net income and market capitalization versus its peer group. In making benchmarking determinations for fiscal 20172019 compensation, the Compensation Committee assumed that each executive would achieve the target level of performance under all performance-based awards. In addition, in valuing the RSA and RSU awards outstanding under the Fiscal 2016 LTI
Program, the Compensation Committee assumed each executive would achieve the target level of performance under the RSAs and included one-fifth of the grant date fair valuean annualized portion of these shares in thesethe comparative calculations since the Fiscal 2016 LTI Program is intended to cover all long-term equity incentive grants to the participantsnamed executive officers from fiscal 2016 through fiscal 2020. For Mr. Hrudicka, one-fourthOne-fifth of the grant date fair value of these shares is included due to his mid-cycle hiring date.for each executive officer.
In setting each compensation component for our executive officers, the Compensation Committee considered the competitive market data, together with other relevant factors, including the individual performance and experience of each executive, retention issues, internal pay equity and consistency issues, the Company’s performance, expected future contributions of each executive, historical compensation levels, tenure, promotions, increased responsibilities and industry conditions. These and other factors may affect whether one or more of the compensation components for any of our executive officers fallsis set outside of the benchmark range. In addition, the total direct compensation, annual cash bonus and long-term incentive compensation for one or more of our executive officers could be above or below this target range depending on the amounts earned under the performance-based awards.
Consistent with our pay-for-performance philosophy, our executive compensation program is generally structured so that a significant amount of each of our named executive officers’ compensation is variable compensation and “at risk” for non-payment if we fail, or the executive fails, to meet performance targets.
Components of Fiscal 20172019 Compensation
Salary. Our Compensation Committee establishes salaries on an annual basis taking into account the guideline benchmark target, levels of responsibility, prior experience and breadth of knowledge, potentialtarget. In reviewing fiscal 2019 salaries for advancement, recent promotions, past performance, internal equity issues and external pay practices. In setting fiscal 2017 salary levels, theour named executive officers, our Compensation Committee reviewed advice from FWCits independent compensation consultant regarding market practices and considered Mr. Duda’s recommendations for officers other than himself.
The Compensation Committee also considered other relevant factors, including the individual performance, skills and experience of each executive, internal pay equity issues, executive retention, promotions, increased responsibilities, peer comparisons and the Company’s performance. After deliberation, the Compensation Committee decided toincreased Mr. Duda’s salary by 3% and Mr. Khoury’s salary by 10%. In establishing the new salaries for Messrs. Tsoumas, Brotherton and Shetty, the Compensation Committee also considered each officer’s recent promotion and significant increase the salary of each of Messrs. Duda, Khoury, Kill and Koman by 3.0%.in responsibilities. The Compensation Committee setincreased the salaries of our recently promoted named executive officers as follows: Mr. Hrudicka’s salary in connection with hiring him asTsoumas (promoted to Chief Financial Officer. The Compensation Committee maintainedOfficer), 63%; Mr. Glandon’s salary at the same level for fiscal 2017 as fiscal 2016.Brotherton (promoted to President of Grakon), 25%; and Mr. Shetty (promoted to President of Dabir Surfaces), 31%.
Annual Performance-Based Bonuses. In July 2016, ourOur Compensation Committee established fiscal 20172019 annual performance-based cash bonus opportunities for certain of our executive officers after considering the guideline benchmark target, the individual performance and experience of each executive, retention issues, internal pay equity and industry conditions. The Compensation Committee reviewed advice from FWCFW Cook regarding market practices and considered Mr. Duda’s recommendations for officers other than himself. In setting the performance measures, our Compensation Committee considered, among other matters, past performance, the fiscal 20172019 operating budget Methode’s strategic plan, product development matters and general economic conditions. For Mr. Duda, the target amount payable under the annual performance-based cash
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bonus was set at 100% of base salary. For all other executive officers, the amount payable at target was set at 66% of base salary. The Compensation Committee determined that 70% of the target annual performance-based cash bonus for Messrs. Duda, Hrudicka, Khoury and Koman would be based on a Company pre-tax income measure (as adjusted for acquisitions(excluding costs and related expenses and divestitures and related gains/losses and expenses)earnings from the Grakon acquisition) and 30% would be based on salesnew business bookings or revenue objectives and/or individual management objectives. For Mr. Kill, 25% of the target annual performance-based cash bonus would be based on the Company pre-tax income measure and 75% would be based on performance measures related to our Dabir Surface medical device products described below. The maximum amount payable with respect to the Company pre-tax income measuremeasures and new business objectives was set at 200% of the amount payable at the target level of performance, in order to alignwhich aligns the awardopportunity with competitive practice among the peer group. Due to Mr. Koman’s retirement, he was entitled to a pro-rata payment of his annual bonus based on his retirement date and the performance achieved with respect to the measures described below. In connection with his hiring, Mr. Hrudicka was guaranteed a minimum bonus of $150,000 for fiscal 2017. The Compensation Committee did not provide for an annual performance-based bonus opportunity for Mr. Glandon for fiscal 2017.
Set forth below is an outline of the annual performance-based cash bonus awards for fiscal 20172019 performance, including the maximum bonus, the relevant performance measures and the bonus paid. As a result of Mr. Koman’s retirement, the amounts set forth below have been adjusted pro rata based on his September retirement date.
Executive | Target Bonus | Performance Measures and Amounts Payable* | Bonus Earned | ||||
Donald W. Duda | $ | 759,719 | (1) Achieve consolidated pre-tax income (excluding costs and earnings from the Grakon acquisition) of $124.0 million (threshold), $130.5 million (target) and $150.1 million (maximum), with $265,902, $531,803 and $1,063,606 payable at threshold, target and maximum, respectively. The Company achieved consolidated adjusted pre-tax income (excluding costs and earnings from the Grakon acquisition) below the threshold level of performance. (2) Obtain certain new business bookings of $62.0 million (threshold), $65.0 million (target) and $75.0 million (maximum), with $113,958, $227,916 and $455,832 payable of threshold, target and maximum respectively. The Company booked $78.8 million for such new business and Mr. Duda earned $455,832. | $ | 455,832 | ||
Ronald L.G. Tsoumas | $ | 264,000 | (1) Achieve consolidated pre-tax income (excluding costs and earnings from the Grakon acquisition) of $124.0 million (threshold), $130.5 million (target) and $150.1 million (maximum), with $92,400, $184,800 and $369,600 payable at threshold, target and maximum, respectively. The Company achieved consolidated adjusted pre-tax income (excluding costs and earnings from the Grakon acquisition) below the threshold level of performance. (2) Update the Company’s Enterprise Risk Management program to the satisfaction of the Audit Committee ($39,600 payable). This performance measure was not achieved as of this time. (3) Implement certain analytics reports for forecasting, account reconciliation and budget planning ($39,600 payable). This performance measure was achieved. | $ | 39,600 | ||
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Executive | Target Bonus | Performance Measures and Amounts Payable* | Bonus Earned | ||||
Joseph E. Khoury | $ | 294,756 | (1) Achieve consolidated pre-tax income (excluding costs and earnings from the Grakon acquisition) of $124.0 million (threshold), $130.5 million (target) and $150.1 million (maximum), with $103,165, $206,329 and $412,658 payable at threshold, target and maximum, respectively. The Company achieved consolidated adjusted pre-tax income (excluding costs and earnings from the Grakon acquisition) below the threshold level of performance. (2) Obtain certain new business bookings of $62.0 million (threshold), $65.0 million (target) and $75.0 million (maximum), with $44,214, $88,427 and $176,854 payable at threshold, target and maximum, respectively. The Company booked $78.8 million for such new business and Mr. Khoury earned $176,854. | $ | 176,854 | ||
Michael Brotherton | $ | 224,400 | (1) Achieve consolidated pre-tax income (excluding costs and earnings from the Grakon acquisition) of $124.0 million (threshold), $130.5 million (target) and $150.1 million (maximum), with $78,540, $157,080 and $314,160 payable at threshold, target and maximum, respectively. The Company achieved consolidated adjusted pre-tax income (excluding costs and earnings from the Grakon acquisition) below the threshold level of performance. (2) Achieve Grakon pre-tax income (excluding amortization and purchase accounting adjustments) of $24.8 million (threshold), $26.1 million (target) and $30.0 million (max), with $33,660, $67,320 and $134,640 payable at threshold, target and maximum, respectively. Grakon achieved adjusted pre-tax income (excluding amortization and purchase accounting adjustments) of $33.1 million and Mr. Brotherton earned $134,640. | $ | 134,640 | ||
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Executive | Target Bonus | Performance Measures and Amounts Payable* | Bonus Earned | ||||
Anil Shetty | $ | 245,520 | (1) Achieve consolidated pre-tax income (excluding costs and earnings from the Grakon acquisition) of $124.0 million (threshold), $130.5 million (target) and $150.1 million (maximum), with $85,932, $171,864 and $343,728 payable at threshold, target and maximum, respectively. The Company achieved consolidated adjusted pre-tax income (excluding costs and earnings from the Grakon acquisition) below the threshold level of performance. (2) Upgrade the Dabir Surfaces sales structure and salesforce to the satisfaction of the Chief Executive Officer ($36,828 payable). This performance measure was achieved. (3) Expand Dabir Surfaces sales into new hospital customers (defined as being hospitals with different addresses from existing hospital customers) that are part of multi-institutional hospital networks, with 2 such hospitals at threshold, 5 such hospitals at target and 10 such hospitals at maximum, with $18,414, $36,828 and $73,656 payable at threshold, target and maximum, respectively. Dabir Surfaces achieved maximum performance and Mr. Shetty earned $73,656. | $ | 110,484 | ||
| * |
Executive | Maximum Bonus | Performance Measures and Amounts Payable* | Bonus Earned |
Donald W. Duda
| $1,217,383 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million (maximum), with $250,638, $501,276 and $1,002,551 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $117.3 million and Mr. Duda earned $740,709. (2) Achieve $60.0 million in certain new business annual sales with a minimum established pre-tax margin ($214,832 payable). The Company achieved annual sales of $74.0 million for such new business. | $955,541 |
| John R. Hrudicka | $504,900 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million (maximum), with $103,950, $207,900 and $415,800 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $117.3 million and Mr. Hrudicka earned $307,203. (2) Implement changes to the ERP system related to foreign currency conversions ($89,100 payable). This performance measure was achieved. | $396,303 |
| Joseph E. Khoury | $408,020 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million (maximum), with $84,004, $168,008 and $336,016 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $117.3 million and Mr. Khoury earned $248,257. (2) Achieve $60.0 million in certain new business annual sales with a minimum established pre-tax margin ($72,004 payable). The Company achieved annual sales of $74.0 million for such new business. | $320,261 |
| Theodore P. Kill | $263,210 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million (maximum), with $26,321, $52,642 and $105,284 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $117.3 million and Mr. Kill earned $77,786. (2) Achieve $2.0 million in revenue from our Dabir Surface medical device products ($78,963 payable). This performance measure was not met. (3) Obtain a reimbursement code for our Dabir Surface medical device products ($78,963 payable). This performance measure was not met due to the Company’s decision to defer acceptance of the reimbursement code until a later year. After reviewing the basis for this decision, the Compensation Committee determined that it would be appropriate to approve the payout for fiscal 2017 with the understanding that Mr. Kill would not be eligible to be rewarded for the same performance in the future. | $156,749 |
| Douglas A. Koman | $175,788 | (1) Achieve consolidated pre-tax income (as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million (maximum), with $36,250, $72,499 and $144,999 payable at threshold, target and maximum, respectively. The Company achieved consolidated pre-tax income of $117.3 million and Mr. Koman earned $107,137. (2) Implement changes to the ERP system related to foreign currency conversions ($31,171 payable). This performance measure was achieved. | $138,307 |
*
Prior to his promotion as executive officer in fiscal 2019, Mr. Brotherton participated in the Company’s new business bookings incentive plan for certain non-executive officers which provides for payments following the completed launch of certain new business programs. In fiscal 2019, Mr. Brotherton received a final payment of $50,000 under the new business bookings incentive plan.
Other Benefits and Perquisites. Our U.S.-based executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability and, as applicable, our 401(k) savings plan (with a company contribution equal to three percent (3%) of salary, subject to certain limitations), in each case,
on the same basis as our other employees. Prior to their promotion as executive officers in fiscal 2019, Messrs. Brotherton and Shetty participated in a discretionary matching program for certain non-executive officers. The program awards a discretionary matching payment equal to the amount paid to the employee three years earlier, subject to the employee’s continued employment. In fiscal 2019, Messrs. Brotherton and Shetty received matching payments of $125,000 and $150,000, respectively, pursuant to the program. Messrs. Brotherton and Shetty are eligible to receive matching payments through fiscal 2021. Our U.S.-based executive officers are also provided deferred compensation opportunities through a non-qualified Deferred Compensation Plan. We have never contributed any amounts to the Deferred Compensation Plan on behalf of any of the named executive officers. For a description of the Deferred Compensation Plan, please see “Executive Compensation — Nonqualified Deferred Compensation,” below. In addition, a few perquisites are provided to the named executive officers. Perquisites include a company car allowance, professional association dues and provision for an annual physical exam.
Change of Control Arrangements. We have entered into change of control agreements with all of our named executive officers, other than Mr. Khoury, that provide certain benefits upon termination in connection with a change of control event, including Mr. Hrudicka upon his hiring in fiscal 2017.event. As a Lebanese resident, Mr. Khoury is entitled to certain payments in the event of his termination under the Lebanese Labor Laws. These change of control agreements are designed to promote stability and continuity of senior management if a change of control event were to occur, both of which are in the best interest of Methode and our shareholders. Our executives are not entitled to a gross-up payment for excise taxes under our change of control agreements. In addition, our change of control agreements are “double trigger” whereby the executives are
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only entitled to a severance payment if an executive is terminated without cause or an executive terminates for good reason subsequent to a change of control. Our change of control provisions for the named executive officers are summarized below under “Executive Compensation − Potential Payments Upon Termination or Change of Control.”
Fiscal 2016 to 2020 Long-Term Incentive Program
During fiscal 2016, our Compensation Committee adopted a five-year, long-term incentive program consisting of a mix of 60% performance-based RSAs, at target performance, and 40% time-based RSUs (the “Fiscal 2016 LTI“LTI Program”). Mr. Hrudicka received an award under the Fiscal 2016 LTI Program in fiscal 2017. The number of RSAs earned will vary based on performance relative to established goals for threshold, target and maximum performance. Performance will be based on the Company’s earnings before net interest, taxes, fixed asset depreciation and intangible asset amortization (“EBITDA”) for fiscal 2020, subject to certain adjustments, including adjustments for certain acquisitions and divestitures. The RSUs are subject to a vesting period based on continued service, with no RSUs vesting prior to the end of fiscal 2018, subject to acceleration in certain limited circumstances. The Compensation Committee intends for the Fiscal 2016 LTI Program to cover all long-term equity incentive grants to the participants through fiscal 2020.
A key consideration of the Compensation Committee in developing the Fiscal 2016 LTI Program was the success of the prior five-year, long-term incentive program which concluded as of the end of fiscal 2015 (the “Fiscal 2011 LTI Program”). The Fiscal 2011 LTI Program included performance-based RSAs, performance-based tandem cash awards, RSUs and stock options. During the five-year period of the Fiscal 2011 LTI Program, revenues grew at an annualized rate of 18.5%, which supported annualized pre-tax profit growth and diluted earnings per share growth of 73.0% and 47.5%, respectively. In addition, we realized strong annualized total shareholder return of 34.0% during the period. During this period, our industry-leading performance reflected the introduction of numerous new products and technologies, the benefits of selective licensing and other business arrangements, the expansion of lower-cost manufacturing facilities and further vertical integration The Compensation Committee concluded that the Fiscal 2011 LTI Program succeeded in focusing our executive officers on growing the Company and appropriately rewarded our executive officers for creating value for our shareholders.
The Compensation Committee intends for the Fiscal 2016 LTI Program to continue creating value for our shareholders using a long-term program that aligns pay with performance and includes a strong retention feature. In structuring the Fiscal 2016 LTI Program, the Compensation Committee considered the advice of FWC,FW Cook, its independent executive compensation consultant, regarding market practices, award mix and size, possible performance criteria and alternative program structures. The Compensation Committee also considered Mr. Duda’s recommendations for officers other than himself.
The Compensation Committee considered multiple approaches for the Fiscal 2016 LTI program, including the use of annual grants and alternative performance periods. After careful review, the Compensation Committee determined that the five-year program is appropriate after considering the success of the Fiscal 2011 LTI Program discussed above, as well as the lengthy sales and product development cycles and significant upfront capital requirements for many of the Company’s products. The Compensation Committee believes the five-year term will focus our executive officers on the Company’s long-term objectives and retain our top executive talent over the period.
The Fiscal 2016 LTI Program is comprised entirely of equity awards in order to directly align the interests of our executive officers with those of our shareholders. The Compensation Committee believes that the award mix of 60% performance-based RSAs, at target performance, and 40% time-vested RSUs supports the Company’s operating performance and retention objectives, respectively. Unlike the Fiscal 2011 LTI Program, stock options and performance-based tandem cash awards are not components of the Fiscal 2016 LTI Program, in part due to accounting considerations, including the high costs of stock options relative to historical grants. Instead, the Compensation Committee elected to place greater emphasis on the performance-based RSAs, which are subject to forfeiture if the performance goals are not met.
The Compensation Committee applied EBITDA, as adjusted, EBITDA as the RSA performance metric because it is one of the primary operating metrics tracked by the Company and its shareholders. The adjusted EBITDA performance goals set forth below align with the Company’s targeted 9% to 10% annual growth rate for EBITDA for the period. The adjustments to EBITDA for acquisitions and divestitures are designed to mitigate unintended windfalls to management for transactionscertain acquisitions and also to safeguard management from unintended penalties for shareholder-friendly transactionsdivestitures that negatively impact the fiscal 2020 performance results.
In general, the Compensation Committee targeted the Fiscal 2016 LTI Program awards in the 50th50th to 75th75th percentile range of competitive practice, which aligned with the Company’s relative positioning in terms of revenues, net income and market capitalization versus its peer group. In making these benchmarking determinations, the Compensation Committee assumed that each executive would achieve the target level of performance under the RSAs and included
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one-fifth of the grant date fair value of these shares in these comparative calculations. For Mr. Hrudicka, one-fourth of the grant date fair value of these shares was included due to his mid-cycle hiring date. In determining the size of the award to each of our executive officers, the Compensation Committee also considered other relevant factors, including the individual performance and experience of each executive, internal pay equity and consistency issues, expected future contributions of each executive, historical compensation levels and tenure.
The table below sets forth the number of target RSAs and RSUs awarded to Messrs. Duda, Hrudicka, Khoury, Kill and Komanthe named executive officers (“Target Shares”). Mr. Glandon did not receive an award under the Fiscal 2016 LTI Program.
Executive | Number of Shares | |
| Target RSAs* | RSUs | |
| Donald W. Duda | 180,000 | 120,000 |
| John R. Hrudicka | 48,000 | 32,000 |
| Joseph E. Khoury | 90,000 | 60,000 |
| Theodore P. Kill | 90,000 | 60,000 |
| Douglas A. Koman | 60,000 | 40,000 |
* The number of shares earned will depend on performance and may be up to 150% of this number.
Executive | Number of Shares | |||||
Target RSAs* | RSUs | |||||
Donald W. Duda | 180,000 | 120,000 | ||||
Ronald L.G. Tsoumas | 33,000 | 22,000 | ||||
Joseph E. Khoury | 90,000 | 60,000 | ||||
Michael Brotherton | 36,000 | 24,000 | ||||
Anil Shetty | 36,000 | 24,000 | ||||
| * | The number of shares earned will depend on performance and may be up to 150% of this number. |
Performance-Based RSAs. The number of RSAs earned will vary based on performance relative to established goals for threshold performance, target performance and maximum performance. The executive will not earn any shares if threshold performance is not met. Performance will be based on the Company’s EBITDA for fiscal 2020, subject to certain adjustments. All positive EBITDA from acquisitions that close during the term of the program and that are not accretive (as defined in the respective award agreement) in fiscal 2020 will be excluded. All positive EBITDA from acquisitions that close during fiscal 2019 or fiscal 2020 that are accretive in fiscal 2020 shall be included for purposes of determining fiscal 2020 EBITDA up to the target level and shall be excluded for purposes of determining fiscal 2020 EBITDA above the target level. For any divestitures approved by the Board during the period, the final four quarters of EBITDA from the divested business will be included in fiscal 2020 EBITDA. The performance measures and corresponding percentages of the target shares earned are set forth below.
Performance Measure | Fiscal 2020 EBITDA, As Adjusted | Percentage of Target RSAs | ||
Threshold Performance | $198.9 million | 50 | % | |
Target Performance | $221.0 million | 100 | % | |
Maximum Performance | $243.1 million | 150 | % | |
* Payouts are interpolated for performance falling between established performance measures.
| * | Payouts are interpolated for performance falling between established performance measures. |
Dividends will not be paid on the RSAs until the shares have been earned. At such time, the executive will be entitled to a dividend equivalent payment based on the dividends declared during the restricted period and the number of shares earned.
In the event of an executive’s death or disability, he or she will earn all of the Target Shares. In the event of an executive’s qualified retirement, the executive will be eligible to earn a prorated number of shares based on the number of months during the 60-month performance period that have elapsed prior to retirement and Methode’s actual fiscal 2020 adjusted EBITDA. In connection with Mr. Koman’s retirement, he is eligible to earn 28.3% of his Target Shares at target performance.EBITDA result. In the event of a change of control in which the successor company does not assume the RSAs, the executive will earn a prorated number of the Target Shares based on the number of months during the 60-month performance period that have elapsed prior to the change of control. If the successor company assumes the RSAs and, if the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for Messrs.Mr. Duda and Hrudicka and one year for Messrs. Khoury and Kill)our other executive officers), then the executive will earn a prorated number of the Target Shares based on the number of months during the 60-month performance period that have elapsed prior to termination of employment. The Compensation Committee believes these provisions regarding the treatment of the RSAs in the event of death, disability, retirement or a change of control reflect fair and reasonable treatment under these scenarios based on current governance best practices and competitive standards.
Time-Based RSUs. The RSUs are subject to a vesting period based on continued service, with 30% vestingvested at the end of fiscal 2018 30% at the end ofand fiscal 2019, and 40% vesting at the end of fiscal 2020. Following vesting, the delivery of the stock underlying the RSUs will be deferred for Messrs. Duda, Tsoumas and Khoury until the earlier of the executive’s
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termination of employment or a change of control. Dividend equivalents will not be paid on the RSUs until the units have vested. Following vesting and until the delivery of the underlying common stock, each executive will be entitled to a quarterly payment in an amount equal to the aggregate per share cash dividend paid during the quarter multiplied by the number of vested RSUs held by the executive.
In the event of an executive’s death or disability, all unvested RSUs will become immediately and fully vested. In the event of an executive’s qualified retirement, a prorated number of RSUs will vest based on the months during the 60-month vesting period that have elapsed prior to retirement. In connection with Mr. Koman’s retirement, 11,333 of his RSUs vested. In the event of a change of control in which the successor company does not assume the RSUs, all unvested RSUs will become immediately and fully vested. If the successor company assumes the RSUs and, if the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for Messrs.Mr. Duda and Hrudicka and one year for Messrs. Khoury and Kill)our other executive officers), then all unvested RSUs will become immediately and fully vested. The Compensation Committee believes these provisions regarding the treatment of the RSUs in the event of death, disability, retirement or a change of control reflect fair and reasonable treatment under these scenarios based on current governance best practices and competitive standards.
Significant Policies and Procedures
Stock Ownership Policy. Our Compensation Committee considers stock ownership by management to be an important means of linking management’s interests with those of our shareholders. After considering the importance of stock ownership, our Compensation Committee maintains stock ownership guidelines for our executive officers. The requirements are subject to a phase-in period in the event of a new hire or a promotion. Our Chief Executive Officer is expected to own stock with a value at least equal to six (6) times his base salary, our Chief Operating Officer is expected to own stock with a value at least equal to three (3) times his base salary and all other executive officers are expected to own stock with a value at least equal to two (2) times their base salary. Vested and unvested time-based RSUs are included in the calculation of stock ownership for purposes of these guidelines. The value of each executive officer’s common stock holdings is determined as of the end of each fiscal year based on the average daily closing price of Methode’s common stock for such fiscal year. All of our named executive officers were in compliance with our stock ownership guidelines for fiscal 2017.2019, subject to the phase-in-period for new hires and promotions.
Insider Trading Policy. Our Insider Trading Policy prohibits our directors, executive officers and certain key employees from engaging in certain transactions involving our common stock, including options trading, short sales, derivative transactions and hedging transactions. In addition, these directors, executive officers and key employees are prohibited from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan.
Policy With Respect to Deductibility of Compensation. Internal Revenue Code Section 162(m) generally limits the deductibility of the Code generally denies corporate tax deductions for annual compensation exceedingin excess of $1 million paid to certain employees (generallyour named executive officers. Under the
chief executive officer tax rules in effect before 2018, compensation that qualified as “performance-based” was deductible without regard to this $1 million limit. In prior years, the awards of options, performance-based RSAs, and the three other most highly compensatedannual performance-based cash bonuses to our named executive officers were structured in order to qualify for this performance-based compensation exception. However, the 2017 Tax Cuts and Jobs Act (the “Tax Act”), eliminated this performance-based compensation exception effective January 1, 2018, subject to a special rule that “grandfathers” certain prior awards. As a result, compensation that the Compensation Committee structured in 2017 and prior years with the intent of a public company, but excluding the chief financial officer), unless that compensation qualifiesqualifying as performance-based compensation or otherwise being deductible under a shareholder approved planSection 162(m) that is paid on or after January 1, 2018 may not be fully deductible, depending on the application of the special grandfather rules. Moreover, from and meets certain other technical requirements. While it isafter January 1, 2018, compensation awarded in excess of $1 million to our named executive officers generally will not be deductible. Going forward, the general intention of our Compensation Committee will continue to maximize deductibility, our Compensation Committee seeksretain the flexibility to make decisionsdesign compensation programs that are in the best interestlong-term interests of Methodethe Company and itsour shareholders even if those decisions do not result in full deductibility under Section 162(m).after taking into account a variety of factors, including deductibility.
Clawback Policy. In the event we are required to restate our financial statements due to material noncompliance, our Incentive Compensation Recoupment Policy requires us to recover from our current or former executive officers certain amounts of incentive-based compensation paid within the prior three years.years that were erroneously paid.
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COMPENSATION COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussion, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION COMMITTEE | |
Martha Goldberg Aronson, Chair | |
Brian J. Cadwallader Darren M. Dawson | |
Christopher J. Hornung | |
Paul G. Shelton |
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain summary information regarding the compensation awarded to, earned by or paid by us to, or for the account of, our Chief Executive Officer, our Chief Financial Officer our retired Chief Financial Officer and our three other most highly compensated executive officers (the “named executive officers”) for the threefour fiscal years ended April 29, 2017.27, 2019.
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($)(1) | Stock Awards ($) (2) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) (7) | Total ($) | ||
| RSAs(3) | RSUs(4) | Tandem Cash (5) | Annual Bonus (6) | |||||||
Donald W. Duda President and Chief Executive Officer | 2017 | 716,108 | -- | -- | -- | -- | -- | 955,541 | 138,169 | 1,809,818 |
| 2016 | 695,588 | -- | 6,080,400 | 4,053,600 | -- | -- | 572,102 | 311,114 | 11,712,805 | |
| 2015 | 675,000 | 115,000 | -- | -- | 599,600 | 3,487,200 | 1,147,500 | 429,130 | 6,453,430 | |
John R. Hrudicka Chief Financial Officer and | 2017 | 346,154 | -- | 1,675,200 | 1,116,800 | -- | -- | 396,303 | 12,481 | 3,546,938 |
Joseph E. Khoury Senior Vice President (9) | 2017 | 362,518 | -- | -- | -- | -- | -- | 320,261 | 14,482 | 697,261 |
| 2016 | 359,600 | -- | 3,040,200 | 2,026,800 | -- | -- | 184,127 | 90,221 | 5,700,948 | |
| 2015 | 352,324 | 65,000 | -- | -- | 179,880 | 1,046,160 | 401,676 | 107,330 | 2,152,370 | |
| Theodore P. Kill, Vice President, Worldwide Automotive Sales and President of Dabir Surfaces | 2017 | 316,720 | -- | -- | -- | -- | -- | 156,749 | 37,760 | 511,229 |
| 2016 | 310,034 | -- | 2,704,500 | 1,803,000 | -- | -- | 191,079 | 113,866 | 5,122,478 | |
| 2015 | 295,000 | 65,000 | -- | -- | 179,880 | 1,046,160 | 230,100 | 123,880 | 1,940,020 | |
Timothy R. Glandon Vice President | 2017 | 295,000 | -- | -- | -- | -- | -- | -- | 31,455 | 326,455 |
| 2016 | 295,000 | -- | -- | -- | -- | -- | -- | 103,952 | 398,952 | |
| 2015 | 295,000 | 50,000 | -- | -- | 179,880 | 1,046,160 | 272,580 | 119,063 | 1,962,683 | |
Douglas A. Koman Retired Chief Financial Officer and Vice President, Corporate Finance (8) | 2017 | 197,363 | -- | -- | -- | -- | -- | 138,307 | 13,258 | 348,928 |
| 2016 | 365,855 | -- | 2,026,800 | 1,351,200 | -- | -- | 204,539 | 223,893 | 4,172,287 | |
| 2015 | 355,000 | 90,000 | -- | -- | 239,840 | 1,394,880 | 362,165 | 148,817 | 2,590,702 | |
Name and Principal Position | Fiscal Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||
RSAs(2) | RSUs(3) | ||||||||||||||||||||
Donald W. Duda President and Chief Executive Officer | 2019 | 759,719 | — | — | 455,832 | 174,027 | 1,389,578 | ||||||||||||||
2018 | 736,476 | — | — | 660,991 | 148,159 | 1,545,626 | |||||||||||||||
2017 | 716,108 | — | — | 955,541 | 138,169 | 1,809,818 | |||||||||||||||
2016 | 695,588 | 6,080,400 | 4,053,600 | 572,102 | 311,114 | 11,712,804 | |||||||||||||||
Ronald L.G. Tsoumas Chief Financial Officer and Vice President, Corporate Finance | 2019 | 420,749 | — | — | 39,600 | 28,682 | 489,031 | ||||||||||||||
2018 | 245,942 | — | — | 155,532 | 30,174 | 431,648 | |||||||||||||||
2017 | 238,703 | — | — | 210,425 | 27,017 | 476,145 | |||||||||||||||
2016 | 231,880 | 1,114,740 | 743,160 | 129,628 | 21,976 | 2,241,384 | |||||||||||||||
Joseph E. Khoury Chief Operating Officer(6) | 2019 | 446,607 | — | — | 176,854 | 22,062 | 645,523 | ||||||||||||||
2018 | 400,025 | — | — | 280,340 | 15,682 | 696,047 | |||||||||||||||
2017 | 362,518 | — | — | 320,261 | 14,482 | 697,261 | |||||||||||||||
2016 | 359,600 | 3,040,200 | 2,026,800 | 184,127 | 90,221 | 5,700,948 | |||||||||||||||
Michael Brotherton Vice President and President of Grakon(7) | 2019 | 309,996 | — | — | 184,640 | 167,549 | 662,185 | ||||||||||||||
Anil Shetty Vice President and President Dabir Surfaces(7) | 2019 | 372,000 | — | — | 110,484 | 170,014 | 652,498 | ||||||||||||||
| Reflects the fair value at the date of grant. The value is calculated in accordance with Accounting Standards Codification Topic 718, Stock Compensation (“ASC 718”). Details of the assumptions used in valuing the awards are set forth in Note 4 to our audited financial statements included in our Annual Report on Form 10-K for such fiscal year. |
| (2) | These performance-based RSAs are eligible for vesting based on fiscal 2020 EBITDA, as adjusted, relative to established goals for threshold, target and maximum performance. At the time of the grants, we deemed achievement of target performance probable, and therefore the grant date fair values reflected above were calculated on that basis. If, instead, the RSA amounts had been calculated assuming the Company would achieve maximum performance, the grant date fair values for these RSAs would have been as follows: Mr. Duda, $9,120,600; Mr. |
| (3) | These RSUs are subject to a vesting period based on continued service, with 30% |
| Amounts reflect annual performance-based cash bonuses. For Mr. Brotherton, also includes a payment of $50,000 pursuant to the Company’s new business bookings incentive plan for non-executive officers. |
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| (5) | Amounts included in All Other Compensation reflect the following for fiscal |
| Executive | Vested RSU Dividend Equivalents ($) | 401(k) Contribution ($) | Life Insurance ($) | Car Allowance ($) | Executive Physical ($) | Gift Card ($) |
| Mr. Duda | 112,826 | 7,950 | 3,564 | 9,600 | 4,179 | 50 |
| Mr. Hrudicka | 0 | 7,950 | 428 | 0 | 4,053 | 50 |
| Mr. Khoury | 10,800 | 0 | 0 | 0 | 3,682 | 0 |
| Mr. Kill | 10,800 | 7,950 | 3,048 | 12,000 | 3,912 | 50 |
| Mr. Glandon | 10,800 | 7,950 | 552 | 8,400 | 3,753 | 50 |
| Mr. Koman | 3,600 | 4,310 | 1,348 | 4,000 | 0 | 0 |
Executive | Vested RSU Dividend Equivalents ($) | 401(k) Contribution ($) | Life Insurance ($) | Car Allowance ($) | Executive Physical ($) | ||||||||||
Mr. Duda | 145,664 | 8,467 | 3,564 | 9,600 | 6,732 | ||||||||||
Mr. Tsoumas | 11,704 | 9,949 | 1,029 | 6,000 | 0 | ||||||||||
Mr. Khoury | 21,120 | 0 | 0 | 0 | 942 | ||||||||||
Mr. Brotherton | 0 | 9,112 | 804 | 7,650 | 0 | ||||||||||
Mr. Shetty | 0 | 8,634 | 580 | 10,800 | 0 | ||||||||||
For Mr. Brotherton, also includes the following: (i) a monthly housing allowance of $7,500 and a monthly living allowance of $2,500 in connection with his relocation to Seattle; and (ii) a discretionary matching payment of $125,000 pursuant to the Company’s discretionary matching program for non-executive officers. For Mr. Shetty, also includes a matching payment of $150,000 pursuant to the Company’s discretionary matching program for non-executive officers.
Mr. Khoury is a Lebanese resident and we paid Mr. Khoury’s cash compensation in Euros. For purposes of the Summary Compensation Table, this cash compensation was converted from Euros to U.S. Dollars using the average exchange rate of |
| (7) | Messrs. Brotherton and Shetty were appointed executive officers in September 2018. |
Grants of Plan-Based Awards
The following table sets forth certain information regarding grants of plan-based non-equity incentive awards to the named executive officers during the fiscal year ended April 29, 2017.27, 2019.
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) | Grant Date Fair Value of Stock and Option Awards ($) (4) | ||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||
| Donald W. Duda | 7/12/2016 | 465,470 | 716,108 | 1,217,383 | -- | -- | -- | -- | -- |
| John R. Hrudicka | 7/25/2016 | 193,050 | 297,000 | 504,900 | 24,000 | 48,000 | 72,000 | 32,000 | 2,792,000 |
| Joseph E. Khoury | 7/12/2016 | 156,008 | 240,012 | 408,020 | -- | -- | -- | -- | -- |
| Theodore P. Kill | 7/12/2016 | 184,247 | 210,568 | 263,210 | -- | -- | -- | -- | -- |
| Timothy R. Glandon | 7/12/2016 | -- | -- | -- | -- | -- | -- | -- | -- |
| Douglas A. | 7/12/2016 | 67,376 | 103,653 | 175,788 | -- | -- | -- | -- | -- |
| Koman | |||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | ||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||
Donald W. Duda | 7/31/2018 | 379,860 | 759,719 | 1,519,438 | ||||||
Ronald L.G. Tsoumas | 7/31/2018 | 171,600 | 264,000 | 448,800 | ||||||
Joseph E. Khoury | 7/31/2018 | 147,379 | 294,756 | 589,512 | ||||||
Michael Brotherton | 9/12/2018 | 112,200 | 224,400 | 448,800 | ||||||
Anil Shetty | 7/31/2018 | 159,588 | 245,520 | 417,384 | ||||||
| (1) | Reflects annual performance-based cash bonus awards pursuant to the Methode Electronics, Inc. 2014 Omnibus Incentive Plan (the “2014 Plan”). The executive officers’ bonus amounts are based on achieving certain performance measures. For purposes of this table, for any award components that include only one level of performance, we have included such amount in each of the threshold, target and maximum columns. | |
Alternative Summary Compensation Table
As discussed in “Compensation Discussion and Analysis-Fiscal 2016 to 2020 Long-Term Incentive Program,” in fiscal 2016, our Compensation Committee adopted a five-year, long-term equity incentive program consisting of a mix of 60% performance-based RSAs, at target performance, and 40% time-based RSUs (the “Fiscal 2016 LTI“LTI Program”). Mr. Hrudicka received an award under the Fiscal 2016 LTI Program in fiscal 2017. The number of RSAs earned will vary based on performance relative to established goals for threshold, target and maximum performance. Performance will be based on the Company’s earnings before net interest, taxes, fixed asset depreciation and intangible asset amortization (“EBITDA”) for fiscal 2020, subject to certain adjustments for acquisitions and divestitures. The RSUs are subject to vesting based on continued service, with no RSUs vesting prior to the end of fiscal 2018, subject to acceleration in certain limited circumstances. The Compensation Committee intends for the Fiscal 2016 LTI Program to cover all long-term equity incentive grants to the participants through fiscal 2020.
A key consideration of the Compensation Committee in developing the Fiscal 2016 LTI Program was the success of the prior five-year, long-term incentive program adopted in fiscal 2011 (the “Fiscal 2011 LTI Program”). The Fiscal 2011 LTI Program included performance-based RSAs, performance-based tandem cash awards, RSUs and stock options. The vesting of the performance-based RSAs and tandem cash awards were based on the achievement of internal enterprise value hurdles at the end of fiscal 2015. The time-based RSUs vested annually through fiscal 2015. Stock options were granted annually from fiscal 2011 through fiscal 2015.
Under the SEC’s proxy statement disclosure rules, the grant date fair value of the number of RSAs eligible for vesting at the target level of performance and the total number of RSUs awarded under the Fiscal 2016 LTI Program has been reported in the Summary Compensation Table above in fiscal 2016 for Messrs. Duda, Khoury, Kill and Koman and in fiscal 2017 for Mr. Hrudicka. The amounts earned pursuant to the performance-based tandem cash awards under the Fiscal 2011 LTI Program have been reported in the Summary Compensation Table above in fiscal 2015.2016.
The Company is presenting the following Alternative Summary Compensation Table in order to illustrate how the Compensation Committee views annualized total compensation under the Fiscal 2016 LTI Program and the Fiscal 2011 LTI Program. The Compensation Committee believes that due to the front-loaded nature of the RSA and RSU awards, and the reporting of the total tandem cash award values in fiscal 2015, the compensation amounts
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disclosed in the Summary Compensation Table for our named executive officers other than Mr. Hrudicka overstate compensation attributable to fiscals 2015 andfiscal 2016 and understate compensation attributable to fiscal 2017. For Mr. Hrudicka, the Compensation Committee believes that the compensation amounts disclosed in the Summary Compensation Table overstate his2017, fiscal 2017 compensation.2018 and fiscal 2019.
The values in this table differ from the values disclosed in the Summary Compensation Table on page 29 of this proxy statement in that the value of the RSAs and the RSUs have been annualized equally over the respective five-year periods of the programs. For Mr. Hrudicka, the value of the grants has been annualized over four years due to his mid-cycle hiring date. In addition, the amounts earned under the tandem cash awards and reported entirely as fiscal 2015 compensation in the Summary Compensation Table have been annualized, with one-fifth of the value reported in fiscal 2015. In both the Summary Compensation Table and the Alternative Summary Compensation Table, the values for the RSA and RSU awards reflect grant date fair values calculated in accordance with the applicable accounting rules. The Alternative Summary Compensation Table below has been revised as described and does not comply with SEC rules for the Summary Compensation Table. Shareholders should not view this alternative table as a substitute for the Summary Compensation Table on page 30 and should review this Alternative Summary Compensation Table together with the Summary Compensation Table and other compensation tables contained herein that have been prepared in accordance with SEC rules.
Alternative Summary Compensation Table
Name and Principal Position | Fiscal Year |
Salary ($) | Bonus ($) (1) | Annualized Value of Stock Awards ($)(2) |
Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(10) | Total ($) | ||||||||
| RSAs | RSUs | Annualized Value of Tandem Cash (8) | Annual Bonus (9) | |||||||||||||
Donald W. Duda President and Chief Executive Officer | 2017 | 716,108 | -- | 1,216,080(4) | 810,720(5) | -- | -- | 948,700 | 138,169 | 3,836,618 | ||||||
2016 2015 | 695,598 675,000 | -- 115,000 | 1,216,080(4) 388,000(6) | 810,720(5) 194,000(7) | -- 599,600 | -- 697,440 | 572,102 1,147,500 | 311,114 429,130 | 3,605,614 4,245,670 | |||||||
John R. Hrudicka Chief Financial Officer and Vice President, Corporate Finance (11) | 2017 | 346,154 | -- | 418,800(4) | 279,200(5) | -- | -- | 396,303 | 12,481 | 1,452,938 | ||||||
Joseph E. Khoury Senior Vice President (12) | 2017 | 362,518 | -- | 608,040(4) | 405,360(5) | -- | -- | 320,261 | 14,482 | 1,710,661 | ||||||
2016 2015 | 359,600 352,324 | -- 65,000 | 608,040(4) 116,400(6) | 405,360(5) 58,200(7) | -- 179,880 | -- 209,232 | 184,127 401,676 | 90,221 107,330 | 1,647,348 1,490,042 | |||||||
Theodore P. Kill Vice President, Worldwide Automotive Sales and President of Dabir Surfaces | 2017 | 316,720 | -- | 540,900(4) | 360,600(5) | -- | -- | 156,749 | 37,760 | 1,412,279 | ||||||
| 2016 | 310,034 | -- | 540,900(4 | 360,600(5) | -- | -- | 191,079 | 113,866 | 1,516,479 | |||||||
| 2015 | 295,000 | 65,000 | 116,400(6) | 58,200(7) | 179,880 | 209,232 | 230,100 | 123,880 | 1,277,692 | |||||||
Timothy R. Glandon Vice President | 2017 | 295,000 | -- | -- | -- | -- | -- | -- | 31,455 | 326,455 | ||||||
2016 2015 | 295,000 295,000 | -- 50,000 | -- 116,400(6) | -- 58,200(7) | -- 179,880 | -- 209,232 | -- 272,580 | 103,952 119,063 | 398,952 1,300,355 | |||||||
Douglas A. Koman Retired Chief Financial Officer and Vice President, Corporate Finance (11) | 2017 | 197,363 | -- | 405,360(4) | 270,240(5) | -- | -- | 138,307 | 13,258 | 1,024,528 | ||||||
| 2016 | 365,855 | -- | 405,360(4) | 270,240(5) | -- | -- | 204,539 | 223,893 | 1,469,887 | |||||||
| 2015 | 355,000 | 90,000 | 155,200(6) | 77,600(7) | 239,840 | 278,976 | 362,165 | 148,817 | 1,707,598 | |||||||
| (1) | Reflects discretionary cash bonuses awarded in early fiscal 2015 by the Compensation Committee in light of the Company’s strong fiscal 2014 performance. | |||||||||||||||
| (2) | Reflects the annualized fair value at the date of grant. See footnotes (2), (3) and (4) of the Summary Compensation Table for additional information. | |||||||||||||||
| (3) | Reflects the fair value at the date of grant. See footnote (2) to the Summary Compensation Table for additional information. | |||||||||||||||
| (4) | These performance-based RSAs are eligible for vesting based on fiscal 2020 EBITDA relative to established goals for threshold, target and maximum performance. The grant date fair values reflected above were calculated assuming the achievement of the target level of performance. | |||||||||||||||
| (5) | These RSUs are subject to vesting based on continued service, with 30% vesting at the end of fiscal 2018, 30% vesting at the end of fiscal 2019 and 40% vesting at the end of fiscal 2020. The RSUs are not eligible to be converted into common stock until a change of control or the executive officer leaves Methode. | |||||||||||||||
| (6) | These performance-based RSAs vested based on fiscal 2015 internal enterprise value relative to established goals for threshold and target performance. | |||||||||||||||
| (7) | These RSUs vested 20% each year on the last day of Methode’s fiscal year from fiscal 2011 through fiscal 2015. The vested RSUs are not eligible to be converted into common stock until a change of control or the executive officer leaves Methode. | |||||||||||||||
| (8) | Reflects the annualized amounts paid under the performance-based tandem cash awards under the Fiscal 2011 LTI Program. | |||||||||||||||
| (9) | Amounts reflect annual performance-based cash bonuses. | |||||||||||||||
| (10) | See footnote (7) of the Summary Compensation Table for information regarding the amounts included in All Other Compensation. | |||||||||||||||
| (11) | See footnote (8) of the Summary Compensation Table for information regarding the hiring of Mr. Hrudicka and Mr. Koman’s retirement. | |||||||||||||||
| (12) | Mr. Khoury is a Lebanese resident and we paid Mr. Khoury’s cash compensation in Euros. For purposes of the Alternative Summary Compensation Table, this cash compensation was converted from Euros to U.S. Dollars. See footnote (9) of the Summary Compensation Table for information regarding the exchange rates. | |||||||||||||||
Name and Principal Position | Fiscal Year | Salary ($) | Annualized Value of Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||
RSAs(2) | RSUs(3) | ||||||||||||||||||||
Donald W. Duda President and Chief Executive Officer | 2019 | 759,719 | 1,216,080 | 810,720 | 455,832 | 174,027 | 3,416,378 | ||||||||||||||
2018 | 736,476 | 1,216,080 | 810,720 | 660,991 | 148,159 | 3,572,426 | |||||||||||||||
2017 | 716,108 | 1,216,080 | 810,720 | 948,700 | 138,169 | 3,829,777 | |||||||||||||||
2016 | 695,598 | 1,216,080 | 810,720 | 572,102 | 311,114 | 3,605,614 | |||||||||||||||
Ronald L.G. Tsoumas Chief Financial Officer and Vice President, Corporate Finance | 2019 | 420,749 | 222,948 | 148,632 | 39,600 | 28,682 | 860,611 | ||||||||||||||
2018 | 245,942 | 222,948 | 148,632 | 155,532 | 30,174 | 803,228 | |||||||||||||||
2017 | 238,703 | 222,948 | 148,632 | 210,425 | 27,017 | 847,725 | |||||||||||||||
2016 | 231,880 | 222,948 | 148,632 | 129,628 | 21,976 | 755,064 | |||||||||||||||
Joseph E. Khoury Chief Operating Officer(6) | 2019 | 446,607 | 608,040 | 405,360 | 176,854 | 22,062 | 1,658,923 | ||||||||||||||
2018 | 400,025 | 608,040 | 405,360 | 280,340 | 15,682 | 1,717,170 | |||||||||||||||
2017 | 362,518 | 608,040 | 405,360 | 320,261 | 14,482 | 1,710,661 | |||||||||||||||
2016 | 359,600 | 608,040 | 405,360 | 184,127 | 90,221 | 1,647,348 | |||||||||||||||
Michael Brotherton Vice President and President Grakon(7) | 2019 | 309,996 | 243,216 | 162,144 | 184,640 | 167,549 | 1,067,545 | ||||||||||||||
Anil Shetty Vice President and President Dabir Surfaces(7) | 2019 | 372,000 | 243,216 | 162,144 | 110,484 | 170,014 | 1,057,858 | ||||||||||||||
| (1) | Reflects the annualized fair value at the date of grant. See footnotes (1), (2) and (3) of the Summary Compensation Table for additional information. |
| (2) | These performance-based RSAs are eligible for vesting based on fiscal 2020 EBITDA, as adjusted, relative to established goals for threshold, target and maximum performance. The grant date fair values reflected above were calculated assuming the achievement of the target level of performance. |
| (3) | These RSUs are subject to vesting based on continued service, with 30% vested at the end of fiscal 2018 and fiscal 2019 and 40% vesting at the end of fiscal 2020. For Messrs. Duda, Tsoumas and Khoury, the RSUs are not eligible to be converted into common stock until a change of control or the executive officer leaves Methode. |
| (4) | Amounts reflect annual performance-based cash bonuses. |
| (5) | See footnote (5) of the Summary Compensation Table for information regarding the amounts included in All Other Compensation. |
| (6) | Mr. Khoury is a Lebanese resident and we paid Mr. Khoury’s cash compensation in Euros. For purposes of the Alternative Summary Compensation Table, this cash compensation was converted from Euros to U.S. Dollars. See footnote (7) of the Summary Compensation Table for information regarding the exchange rates. |
| (7) | Messrs. Brotherton and Shetty were appointed executive officers in September 2018. |
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding the outstanding equity awards of the named executive officers at April 29, 2017.27, 2019.
| Name | Option Awards | Stock Awards | |||||||
Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Share of Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Numbers of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($)(3) | ||
| Donald W. Duda | 26,667 | 13,333 | (1) | 37.01 | 7/7/2024 | 120,000 | 5,346,000 | 270,000 | 12,028,500 |
| John R. Hrudicka | -- | -- | -- | -- | 32,000 | 1,425,600 | 72,000 | 3,207,600 | |
| Joseph E. Khoury | 8,000 | 4,000 | (1) | 37.01 | 7/7/2024 | 60,000 | 2,673,000 | 135,000 | 6,014,250 |
| Theodore P. Kill | -- | -- | -- | -- | 60,000 | 2,673,000 | 135,000 | 6,014,250 | |
| Timothy R. Glandon | 8,000 | 4,000 | (1) | 37.01 | 7/7/2024 | -- | -- | -- | -- |
| Douglas A. Koman | -- | -- | -- | -- | -- | -- | 25,499 | 1,135,980 | |
Name | Option Awards | Stock Awards | ||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Share of Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Numbers of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($)(3) | |||||||||||||||||
Donald W. Duda | 40,000 | — | 37.01 | 7/7/2024 | 48,000 | 1,407,840 | 180,000 | 5,279,400 | ||||||||||||||||
Ronald L.G. Tsoumas | 8,000 | — | 37.01 | 7/7/2024 | 8,800 | 258,104 | 33,000 | 967,890 | ||||||||||||||||
Joseph E. Khoury | 12,000 | — | 37.01 | 7/7/2024 | 24,000 | 703,920 | 90,000 | 2,639,700 | ||||||||||||||||
Michael Brotherton | 1,668 | — | 37.01 | 7/7/2024 | 9,600 | 281,568 | 36,000 | 1,055,880 | ||||||||||||||||
Anil Shetty | 5,000 | — | 37.01 | 7/7/2024 | 9,600 | 281,568 | 36,000 | 1,055,880 | ||||||||||||||||
| (1) | These options were granted in July |
| (2) | These RSUs are subject to vesting based on continued service |
| (3) | Calculated based on the closing price of the Company’s common stock on April |
| (4) | These performance-based restricted stock awards are eligible for vesting based on the achievement of certain financial targets for fiscal 2020 |
Option Exercises and Stock Vested
The following table sets forth certain information regarding option exercises by the named executive officers and the vesting of restricted stock units during fiscal 2017.2019.
| Name | Option Awards | Stock Awards | ||
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) (2) | Value Realized on Vesting ($) (3) | |
| Donald W. Duda | 40,000 | 841,938 | -- | -- |
| John R. Hrudicka | -- | -- | -- | -- |
| Joseph E. Khoury | 16,000 | 429,609 | -- | -- |
| Theodore P. Kill | 12,000 | 226,452 | -- | -- |
| Timothy R. Glandon | 12,000 | 236,381 | -- | -- |
| Douglas A. Koman | 42,666 | 615,230 | 11,333 | 393,255 |
Name | Option Awards | Stock Awards | ||||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(3) | |||||||||
Donald W. Duda | — | — | 36,000 | 1,055,880 | ||||||||
Ronald L.G. Tsoumas | — | — | 6,600 | 193,578 | ||||||||
Joseph E. Khoury | — | — | 18,000 | 527,940 | ||||||||
Michael Brotherton | — | — | 7,200 | 211,176 | ||||||||
Anil Shetty | — | — | 7,200 | 211,176 | ||||||||
| (1) | Calculated based on market value of Methode’s common stock at the time of exercise, minus the exercise cost. |
| (2) | Reflects RSUs awarded pursuant to our |
| (3) | Calculated based on the closing price of Methode’s common stock on |
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Nonqualified Deferred Compensation
The following table sets forth certain information regarding deferred compensation with respect to the named executive officers for fiscal 2017.2019.
| Name | Executive Contributions in Last Fiscal Year ($) (1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) (2) | Aggregate Balance at Last Fiscal Year-End ($) | ||||
| Donald W. Duda | 0 | 0 | 90 | 0 | 31,071 | ||||
| John R. Hrudicka | 0 | 0 | 0 | 0 | 0 | ||||
| Joseph E. Khoury | 0 | 0 | 0 | 0 | 0 | ||||
| Theodore P. Kill | 29,450 | 0 | 143,874 | 0 | 1,203,393 | ||||
| Timothy R. Glandon | 0 | 0 | 60,473 | (122,408) | 423,416 | ||||
| Douglas A. Koman | 0 | 0 | 255,479 | (143,295) | 1,431,539 | ||||
| (1) | All executive contributions were reported as compensation in the “Summary Compensation Table” under the “Salary” and/or “Non-Equity Incentive Plan Compensation” columns, depending on the source of the executive contribution. | ||||||||
| (2) | Reflects distributions in accordance with the terms of each executive’s deferral election. | ||||||||
Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($)(2) | Aggregate Balance at Last Fiscal Year-End ($) | ||||||||||
Donald W. Duda | 0 | 0 | 610 | 0 | 31,973 | ||||||||||
Ronald L.G. Tsoumas | 33,847 | 0 | 24,198 | 0 | 1,162,631 | ||||||||||
Joseph E. Khoury | 0 | 0 | 0 | 0 | 0 | ||||||||||
Michael Brotherton | 20,000 | 0 | 4,263 | 0 | 85,837 | ||||||||||
Anil Shetty | 16,000 | 0 | 733 | 0 | 16,733 | ||||||||||
| (1) | All executive contributions were reported as compensation in the “Summary Compensation Table” under the “Salary” and/or “Non-Equity Incentive Plan Compensation” columns, depending on the source of the executive contribution. |
| (2) | Reflects distributions in accordance with the terms of each executive’s deferral election. |
The Methode Electronics, Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) allows a select group of management and highly compensated employees to defer up to 75% of their annual base salary, 100% of their annual bonus, and/or 100% of their tandem cash award, if applicable, with an aggregate minimum deferral of $3,000. The minimum period of deferral is three years. Participants are immediately 100% vested.
In addition to employee-directed deferrals, we may make contributions to the Deferred Compensation Plan to make up for limits applicable under our qualified plans and may make additional discretionary contributions as well. Participants vest in company contributions in accordance with the schedule set forth in the applicable agreement or plan governing such contributions. We made no contributions to the Deferred Compensation Plan in fiscal 2017.2019.
Participants may elect from a list of certain mutual funds to determine any amounts credited or debited from their accounts, although we are under no obligation to invest the deferred amounts in any specified fund. This list is made available to all participants and account balances are credited or debited based on the current market rates for these funds. Participants may reallocate account balances and/or future deferrals on a daily basis.
Participants are entitled to receive a distribution from their account balances at the earlier of the end of the elected deferral period or retirement, disability, termination of employment or a change of control. Accounts are distributed in a lump sum or, in certain circumstances, in installments over a period of up to 15 years. Participants can also petition the Compensation Committee to receive a full or partial payout from the Deferred Compensation Plan in the event of an unforeseeable financial emergency.
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Potential Payments Upon Termination or a Change of Control
In the event our named executive officers are terminated or Methode undergoes a change of control, our named executive officers are entitled to certain payments under their change of control agreements, our stock plans and certain other benefit plans.
The following table summarizes payments payable to our named executive officers upon a change in control or the executive’s death, disability or qualified retirement under our outstanding equity and cash bonus awards.
Type of Award | Termination Scenario | ||
Change in Control | Death or Disability | Qualified | |
Annual Performance-Based Cash Bonus | If the successor company does not assume the award, or if the successor company assumes the award and the executive is terminated without cause or resigns for good reason prior to payment, the executive will be entitled to the bonus payable assuming achievement of the target level of performance. | Entitled to the bonus payable assuming achievement of the target level of performance. | Eligible to earn a prorated bonus based on the number of months elapsed since the start of the fiscal year and the actual performance achieved as of the end of such fiscal year. |
Restricted Stock Units | If the successor company does not assume the RSUs, or if the successor company assumes the RSUs and the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for | All unvested RSUs will become immediately and fully vested. | A prorated number of RSUs will vest based on the months elapsed since May 3, 2015. |
Restricted Stock Awards | If the successor company does not assume the RSAs, or if the successor company assumes the RSAs and the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for
| The number of RSAs eligible for vesting assuming the achievement of the target level of performance will become immediately and fully vested.
| Eligible to earn a prorated number of shares based on the number of months elapsed since May 3, 2015 and Methode’s fiscal 2020 EBITDA, as adjusted. |
| (1) | An executive’s qualified retirement occurs at or after age 65, or after age 55 with |
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Messrs. Duda, Hrudicka, Kill and GlandonAll of our executive officers other than Mr. Khoury are parties to change of control agreements with the Company. Mr. Khoury is not a party to a change of control agreement. Pursuant to these change of control agreements, if within two years of a change of control or during a period pending a change of control, we terminate the executive’s employment without good cause or the executive voluntarily terminates his or her employment for good reason, the executive is entitled to the following:
The following table shows the potential amounts payable to our currently serving named executive officers upon termination or a change of control of Methode. The information shown for Mr. Koman reflects the compensation received in connection with his qualified retirement in September 2016. The amounts shown assume that such termination was effective as of April 28, 201726, 2019 (the last trading day of our 20172019 fiscal year), and reflect the price of our common stock on such date ($44.55)29.33) and reflects awards outstanding and unvested on such date. The table below does not reflect amounts payable to our named executive officers pursuant to plans or arrangements that are available generally to salaried employees, such as payments under the 401(k) Plan, the life insurance plan, the disability insurance plan and the vacation pay policy, payment of accrued base salary and accrued bonuses and, in the case of Mr. Khoury, payments under the Lebanese Labor Laws. In addition, the table does not reflect the distribution of each officer’s account balance in our Deferred Compensation Plan or the delivery of common stock underlying outstanding vested restricted stock units. For purposes of this table, we have assumed that our Compensation Committee has elected to accelerate all awards in each instance in which acceleration is subject to the discretion of our Compensation Committee.
Name | Termination Scenario (on 4/26/19) | Salary and Bonus Severance ($) | Payment of Annual Performance- Based Bonus ($) | Vesting of RSUs ($) | Vesting of RSAs ($)(1) | Health and Welfare Benefits ($)(2) | ||||||||||
Donald W. Duda | Upon Change of Control(3) | — | 759,719 | 1,407,840 | 5,623,200 | — | ||||||||||
Resignation for Good Reason/Termination Without Cause Following Change of Control(4) | 3,646,653 | — | — | — | 68,165 | |||||||||||
Death or Disability | — | 759,719 | 1,407,840 | 5,623,200 | — | |||||||||||
Qualified Retirement | — | 759,719 | 1,126,272 | 4,498,560 | — | |||||||||||
Ronald L.G. Tsoumas | Upon Change of Control(3) | — | 264,000 | 258,104 | 1,030,920 | — | ||||||||||
Resignation for Good Reason/Termination Without Cause Following Change of Control(4) | 920,698 | — | — | — | 29,919 | |||||||||||
Death or Disability | — | 264,000 | 258,104 | 1,030,920 | — | |||||||||||
Qualified Retirement | — | 264,000 | 206,483 | 824,726 | — | |||||||||||
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Name | Termination Scenario (on 4/26/19) | Salary and Bonus Severance ($) | Payment of Annual Performance- Based Bonus ($) | Vesting of RSUs ($) | Vesting of RSAs ($)(1) | Health and Welfare Benefits ($)(2) | ||||||||||
Joseph E. Khoury | Upon Change of Control(3) | — | 294,756 | 703,920 | 2,811,600 | — | ||||||||||
Resignation for Good Reason/ Termination Without Cause Following Change of Control | — | — | — | — | — | |||||||||||
Death or Disability | — | 294,756 | 703,920 | 2,811,600 | — | |||||||||||
Qualified Retirement | — | 294,756 | 563,136 | 2,249,280 | — | |||||||||||
Michael Brotherton | Upon Change of Control(3) | — | 224,400 | 281,568 | 1,124,640 | — | ||||||||||
Resignation for Good Reason/ Termination Without Cause Following Change of Control(4) | 1,114,272 | — | — | — | 47,758 | |||||||||||
Death or Disability | — | 224,400 | 281,568 | 1,124,640 | — | |||||||||||
Qualified Retirement | — | 224,400 | 225,254 | 899,712 | — | |||||||||||
Anil Shetty | Upon Change of Control(3) | — | 245,520 | 281,568 | 1,124,640 | — | ||||||||||
Resignation for Good Reason/ Termination Without Cause Following Change of Control(4) | 1,114,968 | — | — | — | 44,702 | |||||||||||
Death, Disability | — | 245,520 | 281,568 | 1,124,640 | — | |||||||||||
Qualified Retirement | — | 245,520 | 225,254 | 899,712 | — | |||||||||||
| Name | Termination Scenario (on 4/28/17) | Salary and Bonus Severance ($) | Payment of Annual Performance-Based Bonus ($) | Vesting of Option Awards ($) | Vesting of RSUs ($) | Vesting of RSAs ($)(1) | Health and Welfare Benefits ($) (2) |
| Donald W. Duda | Upon Change of Control (3) | -- | 716,108 | 100,533 | 5,346,000 | 8,132,400 | -- |
| Resignation for Good Reason/Termination Without Cause Following Change of Control (4) | 4,296,648 | -- | -- | -- | -- | 71,021 | |
| Death or Disability | -- | 716,108 | 100,533 | 5,346,000 | 8,132,400 | -- | |
| Qualified Retirement | -- | 716,108 | 100,533 | 2,138,400 | 3,363,120 | -- | |
| John R. Hrudicka | Upon Change of Control (3) | -- | 297,000 | -- | 1,425,600 | 2,151,360 | -- |
| Resignation for Good Reason/Termination Without Cause Following Change of Control (4) | 1,929,462 | -- | -- | -- | -- | 71,021 | |
| Death or Disability | -- | 297,000 | -- | 1,425,600 | 2,151,360 | -- | |
| Qualified Retirement | -- | 297,000 | -- | 570,240 | 547,560 | -- | |
| Joseph E. Khoury | Upon Change of Control (3) | -- | 240,012 | 30,160 | 2,673,000 | 4,066,200 | -- |
| Resignation for Good Reason/ Termination Without Cause Following Change of Control | -- | -- | -- | -- | -- | -- | |
| Death or Disability | -- | 240,012 | 30,160 | 2,673,000 | 4,066,200 | -- | |
| Qualified Retirement | -- | 240,012 | 30,160 | 1,069,200 | 1,681,560 | -- | |
| Theodore P. Kill | Upon Change of Control (3) | -- | 210,568 | -- | 2,673,000 | 4,066,200 | -- |
| Resignation for Good Reason/ Termination Without Cause Following Change of Control (4) | 1,054,576 | -- | -- | -- | -- | 15,480 | |
| Death or Disability | -- | 210,568 | -- | 2,673,000 | 4,066,200 | -- | |
| Qualified Retirement | -- | 210,568 | -- | 1,069,200 | 1,681,560 | -- | |
| Timothy R. Glandon | Upon Change of Control (3) | -- | -- | 30,160 | -- | -- | -- |
| Resignation for Good Reason/ Termination Without Cause Following Change of Control (4) | 590,000 | -- | -- | -- | -- | 47,347 | |
| Death, Disability | -- | -- | 30,160 | -- | -- | -- | |
| Qualified Retirement | -- | -- | 30,160 | -- | -- | -- | |
| Douglas A. Koman | Qualified Retirement | -- | 138,307 | 26,894 | 393,255 | 794,047 | -- |
| (1) | For purposes of this table, we have assumed that the target performance level will be achieved with respect to the RSAs. Amounts include an amount equal to the cash dividends declared during the period from the date of grant thru April |
| (2) | Reflects the estimated lump-sum present value of all future premiums which will be paid on behalf of the executive under our health and welfare benefit plans. |
| (3) | Includes amounts payable where the successor company assumed an award and then terminated an executive without cause or the executive resigned with good |
| (4) | These amounts are in addition to amounts payable under the preceding row “Upon Change of Control.” | |
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of SEC Regulation S-K, we are providing the following information about the ratio of the median annual total compensation of our employees to the annual total compensation of our Chief Executive Officer, Donald W. Duda.
For fiscal 2019, the median of the annual total compensation of all of our employees (other than Mr. Duda) was $10,571 and Mr. Duda’s annual total compensation was $1,389,578, as reported in the Summary Compensation Table. Based on this information, the ratio of the annual total compensation of Mr. Duda to the median of the annual total compensation of all of our employees (other than Mr. Duda) was 131 to 1. In our view, this ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of SEC Regulation S-K using the data and assumptions summarized below. Using Mr. Duda’s adjusted annual total compensation of $3,416,378 as reported in the Alternative Summary Compensation Table increases the ratio to 323 to 1.
To identify the median of the annual total compensation of all of our employees, we first determined our employee population as of February 1, 2019. As a global manufacturer, we have employees in the United States, Mexico, Malta, Egypt, China, Canada, India, Belgium, Lebanon, the United Kingdom, Switzerland, Singapore and Hong Kong. As of February 1, 2019, we had 6,187 employees worldwide.
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For purposes of identifying the median employee from our employee population, we considered annual base salary as of February 1, 2019, plus overtime, allowances and short-term incentive compensation for the trailing twelve months, each as reported in our payroll records and adjusted to US dollars based on foreign currency exchange rates in effect as of March 12, 2019. We did not make any cost-of-living adjustments to the pay of employees living in different jurisdictions than our CEO, but we did include certain adjustments for the annualization of pay for employees who were employed for only part of the period.
Using the above methodology, we determined that our median employee was a full-time stamping technician located in Mexico. We then calculated the elements of such employee’s compensation for fiscal 2019 in accordance with the requirements of Item 402(c)(2)(x) of SEC Regulation S-K, resulting in annual total compensation in the amount of $10,571.
The pay ratio and median annual total compensation disclosed above reflect that the bulk of our employees are located in countries that have much lower prevailing wages than the United States. The assumptions used in the calculation of our estimated pay ratio are specific to our company and our employee population. As such, our pay ratio may not be comparable to the pay ratios of other companies, including companies in our compensation peer group.
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OTHER INFORMATION
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Under the securities laws, our directors and executive officers are required to report their initial ownership of our common stock and any subsequent changes in that ownership to the SEC. Specific due dates for these reports have been established and we are required to disclose in this proxy statement if a director or executive officer filed a late report. During fiscal 2017,2019, all such reports were timely filed. In making these disclosures, we have relied solely on written representations of our directors and executive officers and copies of the reports filed with the SEC.
Methode is providing its Annual Report to shareholders who receive this proxy statement. Methode will provide copies of the Annual Report to brokers, dealers, banks, voting trustees and their nominees for the benefit of their beneficial owners of record. Additional copies of this proxy statement, the Annual Report and Methode’s Annual Report on Form 10-K for the fiscal year ended April 29, 201727, 2019 are available, without charge, upon written request to Methode Electronics, Inc., 74018750 West WilsonBryn Mawr Avenue, Suite 1000, Chicago, Illinois 60706,60631, Attention: Chief Financial Officer. You may also review Methode’s SEC filings by visiting our website atwww.methode.comwww.methode.com..
Shareholder Proposals and Director Nominations
If you wish to submit a shareholder proposal for inclusion in our proxy materials for our 2018 Annual Meeting,2020 annual meeting, our Corporate Secretary must receive your proposal no later than April 3, 2018.March 28, 2020. Your proposal must be in writing and must comply with the proxy rules of the SEC.
Our advance notice by-law provisions require that any shareholder proposal or director nomination to be presented from the floor of our 2018 Annual Meeting2020 annual meeting must be received by our Corporate Secretary not later than the 60th60th day nor earlier than the 90th90th day prior to September 14, 201812, 2020 (the first anniversary of the preceding year’s annual meeting). If the date of our 2018 Annual Meeting2020 annual meeting is more than 30 days before or more than 60 days after September 14, 2018,12, 2020, shareholder proposals must be delivered no earlier than the 90th90th day prior to such annual meeting date and not later than the later of the 60th60th day prior to such annual meeting date or the 10th10th day following our public announcement of the meeting date for such annual meeting. Any shareholder proposal must be, under law, an appropriate subject for shareholder action in order to be brought before the meeting. In addition, in order to present a shareholder proposal or nominate a director at our 2018 Annual Meeting,2020 annual meeting, the shareholder must satisfy certain other requirements set forth in our Amended and Restated By-Laws. Shareholder proposals and director nominations should be directed to the Corporate Secretary of Methode Electronics, Inc. at 74018750 West WilsonBryn Mawr Avenue, Suite 1000, Chicago, Illinois 60706.60631.
Other Matters
Neither our Board of Directors nor management knows of any other business that will be presented at the annual meeting. Should any other business properly come before the annual meeting, the persons named in the proxy will vote on such matters in accordance with their best judgment.
By Order of
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