UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
SCHEDULE 14A
(Rule 14a - 101)
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August 28, 2018September 1, 2020
Dear Shareholder,To our shareholders:
On February 5, 2018, Herman Miller announcedOur fiscal 2020 was like nothing we’ve seen before. We began the year with great momentum, executing extremely well against our corporate strategy and generating strong financial performance. Our momentum was demonstrated by sales levels that Brian C. Walker plannedwere 6% ahead of last year and adjusted operating income that was 19%(1) above prior year through the first three quarters of the year.
Moving into the fourth quarter, the rapid spread of COVID-19 brought incredible challenges and heartache. Like so many, we turned our attention to retireresponding to the crisis that was unfolding around the world. Government directives impacted our operations across the globe as President and Chief Executive Officer and a memberwe suspended the majority of our Boardmanufacturing operations and closed most of Directors by August 31, 2018. Followingour retail studios. Our priorities were centered around protecting the announcement,health of our Board established a CEO Search Committee composedemployees and customers, and the health of independent directors to identify and evaluate internal and external candidates. To begin the search process, the Search Committee created a CEO profile outlining desired qualities relating to cultural fit and leadership style, differentiating competencies, motivational fit and experience.our business.
To assistWe pivoted quickly, activating those facilities that were able to maintain full or partial operations and shifting capacity to produce the most urgently needed products in identifying potential candidates based onsupport of frontline essential and critical infrastructure customers. We quickly created processes for sharing research, best practices, and workspace designs for the desired CEO profile,changing world. While studios were closed, our Retail business optimized our eCommerce platforms and digital marketing capabilities and accelerated the Search Committee selected the search firmintroduction of Korn Ferry, who identified a numbervirtual selling tool that enabled us to continue offering personalized, consultative engagements with customers virtually. Our portfolio of external candidates. Upon evaluation of the final slate of impressive candidates, the Search Committee selected Ms. Andrea Owenproducts for home offices were in demand as its recommendation to the Board of Directors to become the new President and Chief Executive Officer and a member of the Board of Directors. After careful consideration, the Board approved the Search Committee’s recommendation.consumers sought high-quality solutions for working from home.
PriorNeedless to joining Herman Miller, Ms. Owen enjoyedsay, our full-year financial results reflected the fallout from this global pandemic. We finished fiscal 2020 with sales of $2.49 billion, a 25-year career at Gap Inc., where she most recently served as Global Presidentdecrease of Banana Republic, a division of Gap Inc., leading 11,000 employees across over 600 wholly-owned and franchise specialty and outlet stores in over 27 countries. During her tenure at Gap, her career spanned many verticals and brands within3% from the global business. She developed a diversified skillset that aligns with the strategic direction of Herman Miller today, ranging from digital and omnichannel transformation to design, product development and supply chain management. Ms. Owen achieved impressive results with a strong focus on building people-first teams centered on the values shared by Herman Miller today. Her background demonstrates that she will be able to effectively serve as a market visionary, performance strategist, change sponsor and organization builder at Herman Miller.
As we look ahead, Ms. Owen will be focused on solidifying the momentum of our business and identifying opportunities that will lead to growth in new markets for both contract and consumer customers. The Board and I are confident that Ms. Owen, in partnership with our existing leadership team, is the perfect candidate to take our portfolio of brands to the next level and to seize opportunities that will ultimately unearth long-term value for our shareholders.
Please join me in welcoming Ms. Owen to the role and we thank you for your continued commitment to Herman Miller.
Sincerely,
Michael A. Volkema
Chairman of the Board
August 28, 2018
Dear Fellow Herman Miller Shareholder,
For several years now, we’ve had a clear vision to transform Herman Miller into a global provider of inspiring designs to help people do great things. We have focused on expanding our addressable markets and creating new channels of distribution to serve our customers. This strategy includes five key priorities, which I will provide an update on shortly. Achieving this vision requires imagination, stretches our resources, and pulls us to constantly re-examine what we do and how we do it. I’m proud that Herman Miller’s 8,000 employees continue to respond with the spirit and creativity that have propelled Herman Miller for more than 100 years.
Sales of $2.38 billion for fiscal 2018 marked a record level for the third year in a row and reflected growth across each of our business segments. The organization did a great job of managing operating expenses over the full year, helping to mitigate gross margin pressures.prior year. We reported EPSa loss per share on a GAAP basis of $2.12$0.15 for fiscal 2018,2020, which was significantly impacted by certain impairment, restructuring, and other special charges in the fourth quarter resulting from the impact of COVID-19. On an adjusted EPSbasis, we delivered positive earnings per share of $2.30$2.61(1) increased by 6% overfor the full year, which compares to adjusted earnings per share of $2.97(1) in the prior year. ReflectingOur capital priority of maintaining a durable balance sheet served us well. We closed the strengthyear with $454 million of cash on hand to support our business moving forward.
As one of a few companies that has maintained continuous operations for more than 100 years, we have demonstrated our ability to navigate turbulent times. Like previous challenges, we have learned a great deal from this crisis and we will emerge stronger. In fact, I am more confident now than I have ever been in this business, our strategy, and the potential ahead of us. The global economy is beginning to restart, our manufacturing facilities and retail stores and studios are largely re-opened, and our supply base and global dealer networks are healthy.
Even in a changed world, we strongly believe in the power of place to create culture and community, and we enter this “new normal” in a position of unique strength. Our early research shows that people crave the connection, community, and in-person collaboration the workplace experience affords them. In the future, organizations will be challenged to deliver workplace solutions that offer outstanding employee experiences and support culture, innovation, and productivity regardless of where their people choose to work. We have the expertise and solutions to guide our customers as they look to re-imagine their spaces to become safer, smarter, and more engaging collaboration centers. At the same time, we have the channels we need to meet our customers wherever they are, with physical and digital distribution capabilities across the globe to serve both contract and consumer audiences.
The four pillars of our current financial position and confidence in our growth strategy we announced a 10% dividend increase in July.
Our business and the realities our customers face continue to evolve. The following five key priorities aim to help us create value for bothfocus the collective efforts of our customers andorganization:
First, we are being very intentional about unlocking the power of One Herman Miller to fully leverage our amazing portfolio of brands and we made meaningful progress on each of them over the past year.global capabilities.
Realize the Living Office
The Living Office is a research-based framework to help our customers design compelling, high-performing work spaces and a critical foundation for setting our innovation agenda and leveraging our dealer eco-system. In the past year, we added significantly to our research into workplace environments, and through a combination of partnerships and a new range of technology-focused work space settings,Second, we are integrating technology more powerfully than ever before. We also launched the Live OS technology platform to improve workplace performancebuilding a customer-centric and help achieve wellness goals with real-time data.
Deliver Innovation
Innovation remains at the forefront for Herman Miller. Sales from new products in 2018 reflected 29% of total sales for the year, well above our annual target of 20%. We launched 46 new products in the past year and announced a number of upcoming launches at the NeoCon industry tradeshow this past June. These launches included Cosm, a performance task chair designed by our long-time design partner in Berlin, Studio 7.5., that won a Best of NeoCon Gold award in the ergonomic seating category for its innovative design. Altogether, our new products have the Herman Miller and dealer sales teams energized and well-positioned for the opportunities ahead.
Leverage our Dealer Eco-system
Strengthening our dealer eco-system remains a focal point. We expanded our product offerings into growing categories like performance seating and enclosures. The seating launches of Cosm, Verus, and Lino expand our leading line-up of seating designs. With the recently announced investment in Maars Living Walls, a global leader in interior wall solutions; the launch of Overlay, a system of sub-architectural, moveable walls; and an alliance with Framery, a provider of high performance soundproof enclosures, we have made a strong push into the enclosures category. The Herman Miller Elements team continues to help our dealers fully understand the breadth of our offering across the Herman Miller group of brands in the fast-growing ancillary space. To further support our dealers, we’ve made significant progress this year enhancing our digital tools to make it as easy as possible for dealers to order, specify, and visualize the entire product offering across all of our group of brands. We’ll continue to enhance these tools with new search and visualization features planned for the year ahead.
Scale our Consumer Business
Fiscal 2018 was a year of great progress scaling our Consumer business. Revenues grew by 12% over last year, as comparable brand sales increased each quarter and we expanded selling space by 40,000 square feet. Our mix of exclusive modern designs also continues to grow. Finally, our June investment in HAY, a Denmark-based design leader in ancillary furnishings in Europe and Asia, supports our priorities around scaling our Consumerdigitally enabled business and the Dealer Eco-System. Activemodel in both the contract and residential furnishing markets, the HAY brand expands our portfolio of leading global brands and allows us to scale the Consumer business by accessing a growing customer base that prizes both industry-leading design and value. Over the course of the coming fiscal year, HAY’s goods will be available through our Design Within Reach channels. HAY products will also be integrated into the contract furnishings business across our dealer network as part of the Herman Miller family of brands.
Drive Profit Optimization
We made progress this year on our corporate-wide profit optimization goal, our fifth strategic priority. Given inflationary pressures over the past year, this work, combined with pricing actions we implemented in the third quarter of fiscal 2018 and a planned price increase in January of 2019, is proving to be critical to helping to address those pressures and drive improvements in operating margins. Across three phases of workretail markets.
Third, we have a range of initiatives focused on accelerating profitable growth in each of our business segments.
Finally, we are reinforcing our commitment to our people, planet, and communities in a more integrated and deliberate way than ever before.
that are in progress, we are building line of sight toward achieving between $60 million and $90 million of profit optimization, including run rate savings of approximately $30 million that we have generated to date.
Let me provide more perspective onWe advanced each of the phases. The initial corporate-wide push that we began 18 months ago has generatedthese priorities in a run-rate of $23 million of annual savings to date and we believe will realize another $5 million from our recent manufacturing consolidation efforts. In August of 2017, we also began a focused initiative aimed at profit optimization within our Consumer business. We believe we can drive $15 million to $20 million of profit improvement in the Consumer segment as part of our drive to achieve sustained operating margins of 8% to 10% in that business. This includes $2 million of initial benefits realized in the fourth quartermeaningful way in fiscal 2018. As most2020. We’ve fully aligned our product, operations, and functional teams to new global structures to increase agility and speed across our organization, and we’ve deployed our sales teams to more effectively leverage the power of all our brands. Our customer-first mindset led to the benefitsdevelopment of several important new digital solutions, including the workcreation of Scout, a digital platform that helps our contract customers and design partners visualize, search, and select products from across our family of brands for their workspaces. eCommerce platform enhancements such as video and chat capabilities, in addition to date have been offset by increased inflationnew financing options, are helping increase retail conversion rates and discounting,proved critical to our virtual customer engagements while stores and studios were closed this spring.
The acquisition of majority interests in HAY and naughtone provided us with two growing design brands—valuable additions as we have recently increased the scopecontinue to accelerate profitable growth. Our entry into new markets like gaming, leveraging creative partnerships with industry leaders like Logitech, will extend our reach into new customer segments and generate exciting new opportunities across our family of our efforts to include the North America business. While we are still in the opportunity confirmation stage, we see the potential for $20 million to $40 million of benefit based on the distinct work streams identified to date. All together, these phases will be critical in helping us fund growth initiatives, offset potential inflationary pressures and, ultimately, achieve or exceed our goal of consolidated operating margins of 10% by the end of fiscal year 2020.
We made important progress on all five strategic priorities in the past year. As we enter fiscal 2019 with tremendous momentum toward delivering sustainable, profitable growth for our stakeholders, these five priorities will remain a focus for us.brands. At the same time, our profitability improvement initiatives in the North America Contract business delivered over $40 million of annual run-rate savings, and we will support these priorities with three additional areas that will requirecontinue to leverage the learning from this work across our attention, effort and investment.entire business.
First,
We are humbled by the recognition we must increasecontinue to receive for our efforts to have a positive impact on society, including being named one of Newsweek’s Most Responsible Companies, earning a perfect score for the 13th consecutive year on the Human Rights Campaign Foundation’s Corporate Equality Index, and being recognized as Corporation of the Year by the National Minority Supplier Development Council for companies under $10 billion in sales.
That said, our commitment toward building an inclusiveto our people, planet, and diverse culture. Diverse perspectives, thoughts, and experiences are critical to attracting and keeping the best talent, as well as to understanding the diverse perspectives and needs of our customers. While thiscommunities is not new to us,about awards and recognition. It’s about speaking up for what we know is right and creating opportunities for people everywhere. Most recently, we have been deeply moved by the outcry for racial equality and are holding ourselves accountable in the pursuit of social justice.
I recently joined more than 1,000 CEOs in signing the CEO Action for Diversity & Inclusion Pledge. This is not a competitive issue, it’s a societal issue, and we are committed to continuingworking with organizations around the world to growadvance diversity and inclusion in this area. We’re building intentionality and purpose into everything we do to ensure we’re creating systems that afford every person at Herman Miller the opportunity to achieve their full potential.
The second areaworkplace. In addition, we are ramping up is modernizingtaking action and creating change as part of a movement toward equality in our manufacturing capabilities. The first step is to stabilizecompany, our core competenciesindustry, and bring our capacities in line with market demands. This work is well underway. We’re in the process of resettingcommunities. We recently shared our footprint in China by consolidating the Dongguan and Ningbo plants, and in the U.S., we have approved nearly $100M in investments to modernize our capabilities. Along with stabilizing our core, we must also further integrate technology with our manufacturing equipment and processes. Increasing computing power, combined with proven manufacturing techniques, will help us redefine what’s possible. We’ll build the next stage of our lean journey by incorporating automation into all of our thinking.
Last, and a more long-range objective, is “becoming a digital enterprise.” This begins with a shift in perspective. Our information technology teams are moving from a “boxes and wires” focus to helping drive growth as digital business partners. This work will buildcommitments on the progress“Taking Action” page on our website. You can expect to see and hear more from us as we have already madeturn these commitments into reality. We recognize that meaningful change begins at home, and will happen in four areas. First, we are simplifying and expanding the digital highway in the dealer eco-system. Second, we are expanding our digital service offering with platforms like Live OS. Third, artificial intelligence, data, and visualization tools will help us become better at core competencies like customer service, training, and design. Finally, technology will help us with the modernizationon behalf of manufacturing.
Considering the wide and deep array of products, capabilities, and brands now available from theall Herman Miller Group and a clear set of priorities for the work ahead of us, we’re more confident than ever in our future. The diversity of our portfolio and the capabilitiesemployees, I assure you we are building within thecommitted to doing our part.
There has always been something special about our Herman Miller community, will enable usand that spirit is alive and well today. From our manufacturing employees who volunteered to providereturn to work early in the pandemic to support our customers withon the most comprehensive solutionsfront lines, to meetour employees of color who are leading us in our own journey of understanding and inclusion by so bravely speaking out about their needs in working, living, healing,lived realities, to everyone who has sacrificed together to strengthen our business—the heart, soul, and learning environments.
On a personal note, as Herman Miller moves with commitment toward the goals mentioned above, a new CEO will see us achieve them. After a career of 29 years and a tenure of 14 years as CEO, I will be retiring in August 2018. My time at Herman Miller has been an inimitable period of wonderful relationships, great personal growth, and tremendous learning. I’m humbled to join the listfuture of Herman Miller leaders,Group is stronger than ever because of the incredible people who make up our global community.
Guided by our recently restated purpose and I’m still awed by the chance I was given to help this great community change and grow. With the announcementvalues, we are more unified than at any point in our company history. The strength of Andrea Owen as the next CEO of Herman Miller, I am looking forward to working with Andrea through a seamless transition. Herman Miller is only just beginning to scratch the surfaceeach of our addressable market opportunity. Andrea’s experience driving resultsbrands is immense, but with a shared understanding of why we exist as a seasoned leader, coupledfamily of brands, we can truly unlock the power of One Herman Miller: serving our customers everywhere, driving our growth strategies, returning value to all our stakeholders, and becoming a force for positive change in our communities.
Our purpose, “Design for the good of humankind,” is a simple statement that holds so much meaning. It reflects the ideals we hold closest in all we do: our unique approach to solving whatever problem we face, our commitment to continuous improvement, the ways we lead with kindness and empathy in all our outstanding leadership team, will takeinteractions, the high quality and
sustainable materials we use to manufacture our products, the reach we can have with the solutions we bring to market, and the inherent idea that we exist as a business for reasons greater than our products and solutions.
Our values provide the framework by which we live our purpose in the way we lead, the way we see one another, and the way we work.
The beliefs behind these values represent ideals that connect with people across our family of brandsbrands. With these values and our shared purpose as guideposts, we enter this next era in our history assured that Herman Miller Group will continue to create places that matter for our customers and contribute to a better world.
As we reflect on a year of incredible highs and lows, I’d also like to pause to remember our friend and colleague, Barry Griswell, who passed away in June. Barry served on our Board of Directors for 16 years and helped lead us through some very challenging—and very exciting—times. More important than that, though, was Barry’s heart for the next level.underserved and underrepresented. He gave so much of himself to lift up others. He was a role model for me, and business leaders around the world, in terms of corporate stewardship. We are much better because Barry was part of our world, and he will be missed.
Today we move forward. We are confident in our ability to do so with creativity, courage, and commitment. Guided by our purpose, and with a relentless focus on innovation and problem-solving design, we will continue to deliver solutions that meet the needs of people in a changing world, wherever they live, work, learn, heal, and play.
Thank you for your ongoing supportbeing part of Herman Miller. I wishour story and coming along on this community called Herman Miller only the best in the future.exciting journey with us.
Sincerely,
Andrea (Andi) R. Owen
Brian C. Walker
President and Chief Executive Officer
(1) Non-GAAP measurements; see accompanying reconciliations and explanations.
Notice of Annual Meeting of Shareholders of Herman Miller, Inc.
The Annual Meeting of the Shareholders of Herman Miller, Inc. (the “Company”) will be held virtually on October 8, 2018, by means of remote communication on the Internet at www.virtualshareholdermeeting.com/MLHR18,12, 2020, beginning promptly at 10:30 a.m. (ET) foram EDT. You will be able to listen, vote, and submit questions from any remote location that has Internet connectivity. There will be no physical location. You may participate online by logging in at www.virtualshareholdermeeting.com/MLHR2020 and entering the following purposes:16-digit control number included on your Notice of Internet Availability of the proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials.
Items of Business:
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| 1. | To elect fourthree directors, each for a term of three yearsyears. |
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| 2. | To approve an amendment to our Articlesratify the Audit Committee's selection of Incorporation to allow our by-laws to provideKPMG LLP as Herman Miller's independent registered public accounting firm for a majority voting standard for the election of directors in uncontested electionsfiscal year 2021. |
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| 3. | To ratifyapprove the appointment of Ernst & Young LLP as our independent registered public accounting firmHerman Miller, Inc. 2020 Long-Term Incentive Plan. |
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| 4. | To vote, on an advisory basis, to approve the annual compensation paid toof the company's named executive officersNamed Executive Officers. |
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| 5. | To transact such other business as may properly come before the meeting or any adjournment thereofthereof. |
Shareholders of record at the close of business on August 10, 2018,14, 2020, will be entitledeligible to vote at the meeting.
Please note that this year's Annual Shareholders' Meeting will be held via the Internet only. The accompanying proxy materials include instructions on how to participate in the meeting and the means by which you may vote your shares of company stock.Meeting.
We encourage youeach shareholder to vote your Proxy, at your earliest convenience, by one of the following means:
By visiting www.proxyvote.com on the Internet
And if you request paper materials:online
By calling (within the U.S. or Canada) toll freetoll-free at 1-800-690-6903;1 800 690 6903; or
By signing and returning your Proxy cardproxy card.
You may also vote at the meeting via the internetonline by visiting www.virtualshareholdermeeting.com/MLHR18MLHR2020 and following the instructions. Regardless of whether you expect to attend the virtual meeting through the Internet,online, please vote your shares in one of the ways listed above.
By order of the Board of Directors
Jacqueline H. Timothy Lopez,Rice, General Counsel and Corporate Secretary
August 28, 2018September 1, 2020
Table of Contents
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| | Page No. |
| Solicitation of Proxies and Voting (Q&A) | |
Proxy Statement Summary | |
Financial Highlights from 2018Fiscal 2020 | |
| Proposal #1 - Election of Directors | |
| Corporate Governance and Board Matters | |
| Board Committees | |
Proposal #2 - Approval of Amendment to Articles of Incorporation | |
Proposal #3 - Ratification of AppointmentAudit Committee's Selection of Independent Registered Public Accounting Firm | |
| Report of the Audit Committee | |
| Proposal #3 - Approval of the Herman Miller, Inc. 2020 Long-Term Incentive Plan | |
| Proposal #4 - Proposal to Approve, on an Advisory Basis, the Annual Compensation Paid to the Company's Named Executive Officers | |
| Voting Securities and Principal Shareholders | |
| Director and Executive Officer Information | |
| Letter from Board Executive Compensation Committee Chair | |
| Compensation Discussion and Analysis | |
| Executive Compensation Committee Report | |
| Summary Compensation Table | |
| Grants of Plan-Based Awards | |
| Outstanding Equity Awards at Fiscal Year-End | |
| Option Exercises and Stock Vested | |
Pension Benefits | |
| Nonqualified Deferred Compensation | |
| Potential Payments upon Termination, Death, Disability, Retirement, or Change in Control | |
| Pay Ratio | |
| Director Compensation | |
| Equity Compensation Plan Information | |
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports | |
| Certain Relationships and Related Party Transactions | |
| Reconciliation of Non-GAAP Financial Measures | |
| Submission of Shareholder Proposals | |
| Miscellaneous | |
| Appendix I - Herman Miller, Inc. 2020 Long-Term Incentive Plan | |
Herman Miller, Inc.
855 East Main Avenue
PO Box 302
Zeeland, Michigan 49464-0302
Proxy Statement Dated August 28, 2018September 1, 2020
This Proxy Statement and the accompanying Proxy, which we are making available to shareholders on or about August 28, 2018,September 1, 2020, are furnished to the shareholders of Herman Miller, Inc. in connection with the solicitation by the Board of Directors of proxies to be used at the Annual Meeting of Shareholders. This meeting will be held on October 8, 2018,12, 2020, at 10:30 a.m. (ET).am EDT. Please note that this year's Annual Meeting will once again be held via the Internetonline rather than in person.
What is a proxy?
A proxy is your authorization for someone else to vote your shares for you in the way that you want to vote and allows you to be represented at our Annual Meeting if you are unable to attend the meeting.attend. When you complete and submit a proxy card, or use the automated telephone voting system, or use the Internetinternet voting system, you are therefore submitting a proxy. As used in this Proxy Statement, the terms “the company,Company,” “we,” “our” and “us” all refer to Herman Miller, Inc. and its subsidiaries.
What is a Proxy Statement?
A Proxy Statement is a document the United States Securities and Exchange Commission (“SEC”) requires to explain the matters on which we are asking you to vote at our Annual Meeting by proxy and to disclose certain information that may be helpful to you in deciding how to vote. This Proxy Statement was first made available to the shareholders on or about August 28, 2018.
Why am I receiving my proxy materials electronically instead of receiving paper copies through the mail?
We are furnishing proxy materials to our shareholders primarily via the Internet,online, instead of mailing printed copies of the Proxy Statement and Annual Report. This supports our on-goingongoing commitment to sustainability by reducing the amount of paper needed to circulate the proxy material and at the same timematerials while reducing our costs associated with mailing the proxy materials to shareholders.
On or about August 28, 2018,September 1, 2020, we mailed to our shareholders of record (other than those who previously requested electronic delivery) a Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy Statement and our Annual Report online. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials in the mail. The Notice of Internet Availability of Proxy Materials instructs you on how to electronically access and review all information contained in this Proxy Statement and the Annual Report, and it provides you with information on voting.
If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a paper copy of our proxy materials, follow the instructions contained in the Notice of Internet Availability of Proxy Materials abouton how you mayto request to receive your materials in printed form on a one-time or ongoing basis.
Where is this year’s Proxy Statement available electronically?
You may view this Proxy Statement and the 20182020 Annual Report electronically by going to www.proxyvote.com.visiting
www.hermanmiller.com/investors/annual-reports/.
Who can vote?
Only record holders of our common stock at the close of business on August 10, 201814, 2020 can vote at the Annual Meeting. We refer to that date as the Record Date for the meeting. Each shareholder of record has one vote for each share of common stock owned, on each matter presented for a vote at the Annual Meeting.
What is the difference between a shareholder of record and a “street name” holder?
If your shares are registered directly in your name on the records of our transfer agent, then you are the shareholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank or other nominee, then the brokerage firm, bank or other nominee is considered to be the shareholder of record with respect to those shares. However, you still are considered the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank, or other nominee how to vote their shares. See “How can I vote?” below.
How can I vote?
If your shares are held in “street name,” follow the instructions provided by your brokerage firm, bank, or other nominee. If your shares are registered directly in your name on our records, you can vote in one of four ways:
Via Internet
Online before the Annual Meeting: Go to www.proxyvote.com and follow the instructions. You may do this at your convenience, 24 hours a day, 7 days a week. You will need to have your proxy card or Notice of Internet Availability of Proxy Materials in hand. The deadline for Internetonline voting is 11:59 p.m., Eastern Time, pm EDT, October 7, 2018.11, 2020.
By Telephone: If you have requested paper materials, callCall toll-free 1-800-690-69031 800 690 6903 and follow the instructions. You may do this at your convenience, 24 hours a day, 7 days a week. You will need to have your proxy card or Notice of Internet Availability of Proxy Materials in hand. The deadline for voting by phone is 11:59 p.m., Eastern Time, pm EDT, October 7, 2018.11, 2020.
In Writing: If you received a proxy card, complete, sign, and date the proxy card and return it in the return envelope that we provided with your proxy card.
At the Annual Meeting: Log on to the Internet at www.virtualshareholdermeeting.com/MLHR18. At this site, youMLHR2020. You will be able to vote electronically. You will also be able toelectronically and submit questions.questions at this site.
If you submit a proxy to the companyCompany before the Annual Meeting, whether by proxy card, by telephone, or by Internet, the persons named as proxies will vote your shares as you direct. If no instructions are specified, the proxy will be voted for the fourthree directors nominated by the Board of Directors; for the proposal to approve an amendment to our Articles of Incorporation to allow our by-laws to provide for a majority voting standard for the election of directors in uncontested elections; for the ratification of the appointment of Ernst & YoungKPMG LLP as the company’sCompany’s independent registered public accounting firm for the fiscal year ending June 1, 2019;May 29, 2021; for the approval of the Herman Miller, Inc. 2020 Long-Term Incentive Plan; and for the non-binding advisory proposal to approve the compensation of our Named Executive Officers.
Can I revoke my proxy?
You may revoke a proxy at any time before the proxy is exercised by:
(1) delivering written notice of revocation to the Corporate Secretary of the company,Company, 855 East Main Street, P.O. Box 302, Zeeland, Michigan 49464-0302;
(2) submitting another properly completed proxy card that is later dated;
(3) voting by telephone at a subsequent time;
(4) voting via the Internetonline at a subsequent time; or
(5) voting at the Annual Meeting.
If you hold your shares in “street name,” you must vote your shares in the manner that your brokerage firm, bank, or other nominee has prescribed.
Herman Miller, Inc., and Subsidiaries7
How many votes do we need to hold the Annual Meeting?
To carry on the business of the meeting, we must have a quorum. This means that at least a majority of the shares that are outstanding and entitled to vote as of the Record Date must be present in personattendance at the Annual Meeting or by proxy.
Shares are counted as presentin attendance at the meeting if the shareholder has either:
has properly
submitted a signed proxy card or other form of proxy (through the telephone or Internet)internet); or
is present at
logged into the Annual Meetingvirtual meeting using their 16-digit control number and votesvoted electronically at theduring meeting.
On the Record Date, there were 59,497,05658,871,099 shares of common stock issued and outstanding. Therefore, at least 29,748,52929,435,550 shares need to be present at the Annual Meeting.Meeting for a quorum to be present.
What matters will be voted on at the meeting?
We are asking you to vote on: (i) the election of fourthree directors to serve three-year terms expiring in 2021;2023; (ii) a proposal to approve an amendment to our Articles of Incorporation to allow our by-laws to provide for a majority voting standard for the election of directors in an uncontested election: (iii) the ratification of the appointment of Ernst & YoungKPMG LLP as our independent registered public accounting firm for the fiscal year ending June 1, 2019;May 29, 2021; (iii) the approval of the Herman Miller, Inc. 2020 Long-Term Incentive Plan; and (iv) a non-binding advisory proposal on the compensation of our Named Executive Officers, otherwise known as a “say-on-pay” proposal. We describe these matters more fully in this Proxy Statement.
How many votes are needed for each proposal?
Except with respect to the election of directors and approval of the amendment to our Articles of Incorporation to allow our by-laws to provide for a majority voting standard for the election of directors in uncontested elections, aA majority of votes cast at the meeting will approve each matter that arises at the Annual Meeting.
The directors are elected by a plurality of votes cast. This means that the four individuals receiving the highest number of votes cast “for” their election will be elected as directors of the company. A “withhold authority” vote will have no effect on the election of a particular nominee. However, our Board's Governance Guidelines include a form of majority voting for directors. Under the Governance Guidelines, in an election where the only nominees are those recommended by the Board, any director who receives a greater number of votes "withheld" than those "for" must tender his or her resignation. Under the Guidelines, the Nominating and Governance Committee will consider the resignation and recommend to the Board whether to accept or reject the tendered resignation. The Board must act on the resignation no later than 90 days after certification of the shareholderCompany’s majority vote at the meeting. The company will publicly disclose the Board's decision whether to accept any resignation or the reasons for rejecting the resignation, if applicable.
The amendment to our Articles of Incorporation to allow our by-laws to provide for a majority voting standard for the election of directors (included in the Company’s Bylaws and described in more detail below), a nominee must receive a greater number of votes cast “for” his or her election than the number of votes “withheld” with respect to that director’s election in order to be elected. Because the “say-on-pay” vote is advisory, it will not be approved if it receivesbinding upon the affirmative voteBoard of a majorityDirectors or the Executive Compensation Committee of the outstanding shares entitled toBoard.
The election of directors and the say-on-pay vote on the proposed amendment.
Ifare considered non-routine matters. Consequently, if your shares are held by ain “street name,” the broker bank or other nominee, theform of record holder of your shares cannot vote your shares on the election of directors, the proposal to amend our Articles of Incorporation, or the say-on-pay votethese matters unless it has received voting instructions from you. Each of these matters is considered a non-routine matter, and if you fail to provide instructions, the result is a “broker non-vote”.
Abstentions and broker non-votes, are counted for the purpose of determining the presence or absence of a quorum. Abstentions and broker non-votes areif any, will not however,be counted as votes cast on matters submittedbut will count for shareholder vote. However,purposes of determining whether or not a quorum is present. So long as a quorum is present, abstentions and broker non-votes will have no effect on any of the effect ofmatters presented for a vote "against"at the amendment to our Articles of Incorporation to allow our by-laws to provide for a majority voting standard for the election of directors.Annual Meeting.
What happens if a nominee is unable to stand for re-election?
The Board may by resolution, provide for a lesser number of directors or designate a substitute nominee.nominee by resolution. In the latter case, shares represented by proxies may be voted for a substitute nominee. Proxies cannot be voted for more than fourthree nominees. We have no reason to believe any nominee will be unable to stand for re-election.
What alternatives do I have in voting on each of the proposals?
Except with respect to the election of directors, you may vote “for,” “against,” or “abstain” on each proposal. In the election of directors, you may vote “for” or “withhold authority to vote for” each nominee.
Will
How can I participate in the Virtual Annual Meeting be Webcast?Meeting?
Yes. You may attend and participate in the Annual Meeting by logging onto the Internetonline at www.virtualshareholdermeeting.com/MLHR18. At this site, youMLHR2020. You will be able to vote electronically and submit questions during the meeting.meeting on this site. You will need the 16-digit control number that you received with your proxy card or Notice of Internet Availability to enter and attend the meeting.
How can I ask questions during the Virtual Annual Meeting?
You may submit questions by logging in to the virtual meeting platform at www.virtualshareholdermeeting.com/MLHR2020, entering your 16-digit control number, typing your question into the "Ask a Question" field, and then clicking "Submit." Questions pertinent to meeting matters will be answered during the meeting, subject to time
constraints. Inappropriate questions including those not pertinent to the meeting matters, relating to non-public material information, relating to pending litigation, or not otherwise suitable for the conduct of the Annual Meeting will not be addressed. Any questions pertinent to meeting matters, including those that cannot be answered during the meeting due to time constraints, will be posted online and answered at investors.hermanmiller.com/.
How can I get help with technical support during the virtual meeting?
We will have technicians available to assist you with any technical difficulties you may have accessing the virtual meeting. For any technical assistance needed while participating in the Annual Meeting of Shareholders, please contact our virtual meeting service provider at 1 855 449 0991 (US) or +1 720 378 5962 (International).
Where do I find the voting results of the meeting?
If available, weWe will announce voting results at the Annual Meeting.Meeting if available. We will also disclose the voting results on a Current Report on Form 8-K that we will file with the SEC within four business days after the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on October 8, 201812, 2020
This Proxy Statement along with our Annual Report are available at: www.proxyvote.com.
at www.hermanmiller.com/investors/annual-reports. You may obtain a copy of the company’sCompany’s Annual Report on Form 10-K for the fiscal year ended June 2, 2018,May 30, 2020, as filed with the SEC, without charge upon written request to the Corporate Secretary of the company,Company, Herman Miller, Inc., 855 East Main Street, P.O. Box 302, Zeeland, Michigan 49464-0302.
Proxy Statement Summary
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all information that you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding the company’s fiscal 2018 performance, please review the company’s Annual Report on Form 10-K for the year ended June 2, 2018.
Proxy Statement Availability and Annual Meeting Information
This Proxy Statement and the accompanying Proxy, which we are making available to shareholders on or about August 28, 2018, are furnished to the shareholders of Herman Miller, Inc. in connection with the solicitation by the Board of Directors of proxies to be used at the 2018 Annual Meeting of Shareholders. This meeting will be held on October 8, 2018, at 10:30 a.m. (ET). Please note that this year's Annual Meeting will once again be held via the Internet rather than in person.
We hold the Annual Meeting via the Internet due to the ease, and convenience in attending, which is likely to increase participation levels. We also believe that holding the Annual Meeting via the Internet is beneficial to both shareholders and the company because it eliminates travel costs to shareholders and it eliminates costs to the company associated with holding an in-person meeting.
Voting Matters and Board Recommendations
The Board is not aware of any matter that will be presented for a vote at the 2018 Annual Meeting of Shareholders other than those shown below.
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| Board Vote Recommendation |
Proposal #1 - Election of Directors | FOR each Director Nominee
|
The Board and Nominating and Governance Committee believe that the nominees described in this Proxy Statement have the necessary skills and qualifications to provide effective oversight and strategic guidance. |
Proposal #2 - Approval of Amendment to Articles of Incorporation | FOR |
The Board has adopted, subject to shareholder approval, an amendment to our Articles of Incorporation that would allow us to amend our Bylaws to provide that, in an uncontested election, a nominee must receive a majority of the votes cast to be elected as a director. Under this proposal, in contested elections, where the number of nominees exceeds the number of directors to be elected, the voting standard would continue to be a plurality of the votes cast. |
Proposal #3 - Ratification of Appointment of Independent Registered Public Accounting Firm | FOR |
The Audit Committee believes that the retention of Ernst & Young LLP to serve as the Independent Auditors for fiscal 2019 is in the best interest of the company and its shareholders and we are asking shareholders to ratify the Audit Committee's selection of Ernst & Young LLP for fiscal 2019. |
Proposal #4 - Proposal to Approve, on an Advisory Basis, the Annual Compensation Paid to the Company's Named Executive Officers | FOR |
The company seeks a non-binding advisory vote to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis section of this Proxy Statement. The Board of Directors and Executive Compensation Committee value shareholders' opinions and will review and consider the voting results in connection with future deliberations concerning our executive compensation program. |
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Financial Highlights from Fiscal 20182020
Company Performance
Net sales increased in 2018 to $2,381.2 million, an increasefiscal 2020 of 4.5%$2.49 billion reflected a decrease of 3.1% from the prior fiscal year and a record level of sales for the company.year. On an organic basis, which adjusts for dealer divestitures, changes in foreign currency translation rates and the impact of the extra week in fiscal 2017,acquisitions, net sales increaseddecreased by 6.5%6.6%(1) compared to last fiscal year. EachThe mid-year acquisitions of majority interests in HAY and naughtone added two leading global design brands to the Herman Miller portfolio and contributed $93 million to consolidated net sales in fiscal 2020.
Prior to the disruption resulting from the COVID-19 pandemic, net sales through the first three quarters of fiscal 2020 were 6.0% higher than the prior year. The temporary shutdown of manufacturing operations and retail studios as part of global efforts to contain the virus resulted in a net sales decline of 29.1% in the fourth quarter relative to the fourth quarter of fiscal 2019. While the challenging fourth quarter resulted in lower sales levels compared to the prior year for each of our business segments deliveredon a full year basis, net sales growth overfor our International segment were nearly 8% higher than last year led by double digit growth in(down 3.5%(1) organically), while our North America and Retail segments were both approximately 6% higher than last year through the ELA and Consumer segments duringfirst three quarters of the fiscal year.
While gross marginsGross margin of 36.6% was 40-basis points higher than the prior fiscal year. Net pricing realization and favorable commodity trends over the full year helped offset the challenge of lower manufacturing production leverage in the fourth quarter related to lower shipping volumes as a result of the temporary manufacturing shutdowns. Operating expenses of $717 million were impacted by higher commodity costs, unfavorable product mix and a competitive pricing environmentessentially flat compared to lastthe prior year. Including impairment, restructuring, and special charges of $244 million (primarily associated with the impact of COVID-19 on the business), the Company reported an operating loss of $38 million for the fiscal year on a GAAP-basis. Excluding impairment, restructuring, and other special charges, the Company delivered operating expenses were well controlled during the year, and we continued to execute on our profit optimization efforts to help mitigate these factors. Consolidated diluted earnings per shareincome of $2.12 and adjusted diluted earnings per share of $2.30$206(1) increased compared to prior year diluted earnings per sharemillion, reflecting an adjusted operating margin of $2.05 and adjusted diluted earnings per share of $2.16(1), respectively. Operating cash flow generation of $167 million for the year enabled the company to fund capital expenditures supporting the business, repurchase $46 million of company shares and, subsequent to the end of the fiscal year, announce a 10% increase in the quarterly dividend to $0.1975 per share, the highest quarterly rate in Herman Miller's history.
Despite choppy industry order levels in the North America and an uncertain political environment, the North America business segment delivered reported sales growth of 0.6% and organic growth of 4.2%(1) compared to the prior fiscal year. The North America segment continued to deliver the highest operating margins of the company's business units. We made meaningful investments in design and innovation during the year, launching a full slate of new products and services aimed at delivering high performing solutions that meet our evolving customers’ needs.
The ELA segment recorded an increase in net sales of 12.7% for the year. After adjusting for the impact of changes in foreign currency and the impact of the extra week of operations in the prior fiscal year, organic net sales grew at a rate of 11.3%8.3%(1) for the fiscal year. The improvement in net sales reflected growth across eachCompany reported a loss per share of our geographic regions$0.15 on a GAAP-basis and adjusted earnings per share of EMEA, Asia-Pacific and Latin America. The ELA segment posted a decline in operating earnings of 1% relative to the prior year. However, after adjusting for the impact of restructuring and other special charges, adjusted operating earnings improved by 14%$2.61(1).
Sales for the Specialty segment were 2.5% higher than, which compared to prior year as reported and 3.9% higher than prior year on an organic basis(1). Operating earnings increased by 10% compared to the prior year, while adjusted operating earnings decreased by 45%(1). Lower profitability for the Nemschoff and Maharam businesses for the year primarily tied to lower demand levels and unfavorable product mix was partially offset by operating earnings growth for Geiger and the Herman Miller Collection. We believe the Specialty brandsper share of Geiger, Maharam, Nemschoff and the Herman Miller Collection represent a powerful combination of inspiring brands that connect us to architect and design specifiers, expand our market opportunity in both traditional and ancillary workspaces, and serve as an important part of our economic engine.
Our Consumer segment reported strong momentum with net sales growth of 12.2% over last year, including four quarters of comparable brand(2) growth from Design Within Reach during the year and the addition of approximately 40,000 square feet of retail selling space. Growth was delivered from multiple channels this year, including studios, eCommerce, catalog and contract channels. Operating earnings$2.70 and adjusted operating earnings increased by 190% and 157%per share of $2.97(1), respectively. While
Operating cash flow of $222 million for the real estate expansion and investmentsyear increased by $6 million over the prior year. These cash flows were deployed during the fiscal year to fund capital expenditures of $69 million to support long-term growththe business, invest $111 million in the consumer business have limited near-term profitability over the past two years, the expansionstep-acquisitions of operating earnings this year, particularly in the second halfHAY and naughtone, repurchase $27 million of fiscal 2018, highlights the traction we are gaining as we scale the Consumer business.company shares, and pay dividends totaling $36 million.
(1) Non-GAAP measurements; see accompanying reconciliations and explanations on pg 55.
(2) DWR comparable brand sales reflects the year-over-year change in net sales across the multiple channels that DWR serves, including studios, outlets, contract, catalog, phone and e-commerce. Comparable brand growth was presented on a pro forma basis using a 52-week average to normalize results for the impact of an extra week of operations in the first quarter of fiscal 2017.explanations.
Proposal #1 - Election of Directors
The Board of Directors of the companyCompany has nominated David A. Brandon, Douglas D. French, JohnMary Vermeer Andringa, Andi R. Hoke III,Owen, and Heidi J. ManheimerCandace S. Matthews, for election as directors. All nominees woulddirectors to serve untilthree-year terms expiring at the 20212023 annual meeting. Each of the nominees is now serving as a directorMs. Andringa and Ms. Owen are both incumbent directors previously has been elected as a director by our shareholders, and theshareholders. Ms. Matthews was appointed to our Board on August 21, 2020. The Board approved each of the nominees following the recommendation of our NominatingGovernance and GovernanceCorporate Responsibility Committee.
We include more
More information about the nominees, and theas well as directors who will continue in office following the Annual Meetingannual meeting, is below. Unless otherwise directed by a shareholder’s proxy, the persons named as proxy holders in the accompanying proxy will vote for the nominees named above. If any of the nominees becomes unavailable, which we do not anticipate, then the Board of Directors at its discretion, may designate substitute nominees at its discretion, in which event your proxy will be voted for such substituted nominees unless you have withheld authority to vote for directors. Shares cannot be voted for a greater number of people than the number of nominees named.
Our Bylaws provide that each director will be elected by the majority of the votes cast with respect to that director’s election at any meeting of shareholders for the election of directors, other than a contested election. A majority of the votes cast means that the number of votes cast “for” a director’s election exceeds the number of votes “withheld” with respect to that director’s election. In a contested election, each director will be elected by a plurality of the votes cast with respect to that director’s election at the Annual Meetingmeeting. An election is required to electconsidered contested if the nominees as our directors. Accordingly, the four individuals who receive the largest number of votes cast atnominees exceeds the Annual Meeting willnumber of directors to be elected as directors. Shares not voted at the Annual Meeting, whether by abstention, broker non-vote, or otherwise, will not be treated as votes cast at the Annual Meeting. that meeting.
In an uncontested election where the only nominees are those that the Board recommended,of directors, any nominee for director who is already serving as a director and receives a greater number of votes “withheld” from his or her election than thosevotes “for” musthis or her election (a “Majority Against Vote”) is required to promptly tender his or her resignation under the majority voting provisions of our Boardresignation. Abstentions and broker non-votes are not counted as votes cast either “for” or “withheld” with respect to that director’s election. The Governance Guidelines. Under those Guidelines, the Nominating and Corporate GovernanceResponsibility Committee of the Board will then promptly consider the resignation submitted by a director receiving a Majority Against Vote, and that Committee will recommend to the Board whether to accept or reject the tendered resignation.
The Board must act on the resignationCommittee’s recommendation no later than 90 days after certificationfollowing the date of the shareholder voteshareholders’ meeting at that meeting.which the election occurred. In considering the Committee’s recommendation, the Board will consider the factors considered by the Committee and such additional information and factors the Board believes to be relevant. The companyCompany will promptly publicly disclose the Board’s decision whether to accept anythe resignation oras tendered, including a full explanation of the process by which the decision was reached and the reasons for rejecting the tendered resignation if applicable. Any director who tenders a resignation pursuant to those procedures may not participate in the Committee recommendation or the Board consideration regarding whether to accept the tendered resignation.
The Board of Directors currently consists of ten10 directors, nine of whom are independent. Mr. David O. Ulrich resigned from the Board effective December 8, 2017, and Mr. Brian C. Walker is scheduled to retire as President and Chief Executive Officer and from the Board, effective August 21, 2018. The maximum number of directors for the Board is thirteen. The Amended and RestatedOur Bylaws of Herman Miller, Inc. require that directors be divided into three classes, each class to be as nearly equal in number as possible. Members of each class hold office until the third succeeding annual meeting following their election and until their successors are duly elected and qualified or until their removal or resignation.
The Board of Directors recommends a vote FOR the election of each person nominated by the Board.
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| Nominees for Election as Directors for Term to Expire in 2021 |
| | Board Committees |
| | Age | Director Since | Independent | Other Public Directorships (past 5 years) | NGC | AC | ECC | EC |
David A. Brandon Former Chairman and Chief Executive Officer Toys "R" Us, Inc. | 66 | 2011 | X | Domino's Pizza, Inc. DTE Energy Company Kaydon Corporation (formerly publicly traded) | | | X | |
Douglas D. French Managing Director Santé Health Ventures | 64 | 2002 | X | N/A | X | X | | |
John R. Hoke III Vice President Global Design Nike, Inc. | 53 | 2005 | X | N/A | | | X | |
Heidi J. Manheimer Executive Chairman of Surratt Cosmetics, LLC | 55 | 2014 | X | N/A | | X | | |
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| Directors Whose Term Expires in 2019 |
| | Board Committees |
| | Age | Director Since | Independent | Other Public Directorships (past 5 years) | NGC | AC | ECC | EC |
Lisa A. Kro Co-Founder, Managing Director Mill City Capital L.P. | 53 | 2012 | X | Famous Dave's of America, Inc. | | C | | X |
Michael A. Volkema Chairman of the Board Herman Miller, Inc. | 62 | 1995 | X | Wolverine Worldwide, Inc. | | | | C |
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| Directors Whose Term Expires in 2020 |
| | Board Committees |
| | Age | Director Since | Independent | Other Public Directorships (past 5 years) | NGC | AC | ECC | EC |
Mary Vermeer Andringa Chief Executive Officer and Board Chair Vermeer Corporation | 68 | 1999 | X | N/A | C | | | X |
Brenda Freeman Chief Marketing Officer Magic Leap | 54 | 2016 | X | Caleres Inc. Under Armour, Inc | X | | | |
J. Barry Griswell Retired, President and Chief Executive Officer Community Foundation of Greater Des Moines | 69 | 2004 | X | Voya Financial Inc. OZ Management | | | C | X |
Andrea Owen President and Chief Executive Officer Herman Miller, Inc. | 53 | 2018 | | Taylor Morrison Home Corporation | | | | |
| NGC: Nominating and Governance Committee AC: Audit Committee ECC: Executive Compensation Committee EC: Executive Committee C: Chair X: Member | | | | | | | | |
Information about the Nominees and Directors
Certain information with respect to the nominees for election at Annual Meeting, as well as each of the other Directors,directors, is set forth below andincluded on the following pages, including their names, ages, a brief description of their recent business experience including(including present occupations and employment,employment), certain directorships that each person held during the last five years, and the year in which each person became a Directordirector of the company.Company. We also includehave included additional information below and on the following pages about each Directordirector describing some of the specific experiences, qualifications, attributes, or skills that each Directordirector possesses which the Board believes has prepared them to be effective Directors.directors.
Herman Miller, Inc., and Subsidiaries11
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Nominees for Election as Directors for TermTerms to Expire in 2023 |
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| Mary Vermeer Andringa, Age 70, Director since 1999 |
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| Principal Occupation(s) During Past Five Years: Chair of the Board, Vermeer Corporation since 2015 CEO and Chair of the Board, Vermeer Corporation, 2014 to 2015 President and CEO, Vermeer Corporation, 2003 to 2014 | Other Public Directorships: None |
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Ms. Andringa has been an executive officer of Vermeer Corporation, a leading manufacturer of agricultural, construction, environmental, and industrial equipment located in Pella, Iowa since 1989. She served as President and Chief Executive Officer of Vermeer from 2003 to 2014. At that time, she became Chief Executive Officer and Chair of the Board. She transitioned exclusively to Chair of the Board in 2015. Ms. Andringa's tenure with Vermeer has spanned the gamut of functional expertise from marketing to international sales and acquisitions. With over 30 years of manufacturing experience, Ms. Andringa is past Chair of the National Association of Manufacturers which represents over 14,000 US-based manufacturing entities. Ms. Andringa served as the co-chair for the B20 Task Force for Small and Medium Enterprises from 2014 to 2018. The B20 is a group of business leaders from the G20 countries who develop and advise the political leaders for the G20 on proposals to improve global growth. Ms. Andringa's experience as a Chief Executive Officer coupled with her focused efforts on lean manufacturing and continuous improvement initiatives, as well as her involvement in international product sales and distribution, provide an important resource to management and the Board of Directors. |
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| Andi R. Owen, Age 55, Director since 2018 |
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| Principal Occupation(s) During Past Five Years: President and CEO, Herman Miller, Inc. since 2018 Global President, Banana Republic, 2014 to 2017 Executive Vice President, GAP Global Outlet, 2010 to 2014 | Other Public Directorships: Taylor Morrison Home Corporation |
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Ms. Owen serves as the Company’s President and Chief Executive Officer, effective as of August 22, 2018. Prior to joining Herman Miller, she served a 25-year career at Gap Inc., where she most recently acted as Global President of Banana Republic, leading 11,000 employees in over 600 stores across 27 countries.
Ms. Owen is the only member of Company management on the Board of Directors. She has developed a diversified skill set that aligns with the strategic direction of Herman Miller today, ranging from digital and omni-channel transformation to design, development, and supply chain management, making her an important contributor to the Board. |
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| Candace S. Matthews, Age 61, Director since 2020 |
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| Principal Occupation(s) During Past Five Years: Chief Reputation Officer, Amway since 2019 Regional President Americas, Amway, 2014 to 2020 Chief Marketing Officer, Amway, 2007 to 2014 | Other Public Directorships: Société Bic S.A. |
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Ms. Matthews is the Chief Reputation Officer of Amway Corporation, a leading health and wellness company and the world’s largest in the direct selling channel. Her tenure at Amway includes serving as Regional President Americas from 2014 to 2020 and Chief Marketing Officer from 2007 to 2014. Ms. Matthews has over 20 years of leadership experience across a variety of highly competitive consumer-product industries, including L’Oréal S.A., the Coca-Cola Company, CIBA Vision Corporation, Bausch + Lomb, Procter & Gamble, and General Mills. She currently sits on the Board of Directors of Société Bic S.A., having been appointed in 2017.
Ms. Matthews’ extensive experience in corporate social responsibility, consumer marketing, and brand management will bring significant expertise as we continue to accelerate our focus on strategic growth and culture building objectives. |
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| Directors Whose Terms Expire in 2021 |
Name and Age | Year First
Became
a Director
| Principal Occupation(s) During Past 5 years | Other Directorships of Public Companies
held during Past 5 years
|
David A. Brandon, 66Age 68, Director since 2011 |
| 2011 | |
| Principal Occupation(s) During Past Five Years: Chairman and CEO, Toys "R" Us, Inc. | Domino's Pizza, Inc. |
| | , 2015 to 2018 | DTE Energy Company |
| | Director of Intercollegiate Athletics, University of Michigan, | Kaydon Corporation |
| | 2010 to 2014 | (formerly publicly traded)Other Public Directorships: Domino's Pizza, Inc. DTE Energy Company |
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Mr. Brandon is the former Chairman and Chief Executive Officer of Toys "R" Us, Inc., a retailer of toys and juvenile products. Mr. Brandon joined Toys "R" Us in 2015 and officially left the company in May 2018. On September 18, 2017, Toys "R" Us filed a voluntary petition for relief under the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia (Richmond Division). Mr. Brandon served as the Directordirector of Intercollegiate Athletics at the University of Michigan from 2010 to 2014. Prior to that, he served as Chairman and Chief Executive Officer of Domino's Pizza, Inc., an international pizza delivery company operating over 9,000 stores in over 60 countries. Mr. Brandon was alsoand as President and Chief Executive Officer of Valassis, Inc. from 1989 to 1998, and Chairman of its Board of Directors from 1997 to 1998. Mr. Brandon's years of experience as a chief executive officerChief Executive Officer of several publicly-tradedpublicly traded companies, his experience in global brand management, and his for-profit and non-profit board service bring a unique perspective to the Board of Directors. These factors contributed to his recommendation by the Board for continued service as a director. |
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Douglas D. French, 64 | 2002 | ManagingAge 66, Director Santé Health Ventures | Nonesince 2002 |
| | | since 2007 | |
| Principal Occupation(s) During Past Five Years: Managing Director, Santé Health Ventures since 2007 | Other Public Directorships: None |
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Mr. French has served as the founding partner of Santé Health Ventures, an early-stage healthcare venture fund, since 2007. Prior to joining Santé Health Ventures, he served as the President and Chief Executive Officer of Ascension Health, the largest not-for-profit health system in the U.S.US Mr. French has also served as CEO for St. Mary's Medical Center and St. Vincent Health System, both of Midwest Indiana. He has more than three decades of health management experience, including serving as a director for numerous public and private companies. Mr. French's governance experience, as well as his leadership roles and expertise in the health management industry, provides a valuable resource to management and the Board of Directors; accordingly, the Board recommended his nomination for re-election as a director.Directors. |
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John R. Hoke III, 53 | Age 55, Director since 2005 | Chief Design Officer, Nike, Inc. | None |
| | | since 2017 | |
| | Principal Occupation(s) During Past Five Years: Chief Design Officer, Nike, Inc. since 2017 Vice President, Nike Global Design, 2010 to 2017 | Other Public Directorships: None |
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Since joining Nike, Inc., a marketer of athletic footwear, apparel, equipment, accessories, and services, in 1993, Mr. Hoke has led the communication of Nike's culture of creativity internally and externally. He is currently the Chief Design Officer of Nike, Inc., having previously served as Vice President of Global Design, inspiring and overseeing an international team of designers. Mr. Hoke also serves as a director to several not-for-profit organizations relating to art and design. Mr. Hoke's design expertise, both domestically and internationally, including his leadership role in a major, global enterprise, brings additional, insightful perspective to our Board discussions and decisions, and contributed to his recommendation by the Board for continued service as a director.of Directors. |
Herman Miller, Inc., and Subsidiaries13
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| Directors Whose Terms Expire in 2021 (continued) |
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Heidi J. Manheimer, 55 | Age 57, Director since 2014 | Executive Chairman, Surratt Cosmetics LLC | None |
| | | since December 2017 | |
| | Principal Occupation(s) During Past Five Years: Executive Chairman, Surratt Cosmetics LLC since 2017 Independent Consultant, 2015 to 2017 | |
| | Chief Executive Officer, Shiseido Cosmetics America, | |
| | from 2006 to 2015 | Other Public Directorships: None |
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Ms. Manheimer is the Executive Chairman of Surratt Cosmetics LLC, a customizable beauty products and cosmetics company. Ms. Manheimer served as the Chief Executive Officer of Shiseido Cosmetics America, a global leader in skincare and cosmetics, from 2006 to 2015, as President of U.S.US Operations from 2002 to 2006, and as Executive Vice President and General Manager from 2000 to 2002. Prior to that she spent seven years at Barney's New York and seven years at Bloomingdales in the beauty care divisions, rising to senior leadership positions within each company. Ms. Manheimer currently sits on the Board of Directors of Burton Snowboards having been appointed in 2006. For many years, she has served on nonprofit and trade association boards, and she was elected Chairwoman of the Cosmetic Executive Women Foundation in 2014.
Ms. Manheimer’s extensive experience as a senior executive in the retail industry, experience with both e-commerceecommerce and international business practices, and service as a board member for both profit and nonprofit businesses provide a valuable resource to management and the Board of Directors, accordingly, the Board recommended her nomination for re-election as a director.Directors. |
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Directors Whose Terms Expire in 20192022 |
Name and Age | Year First
Became
a Director
| Principal Occupation(s) During Past 5 years | Other Directorships of Public Companies
held during Past 5 years
|
| | | |
Lisa A. Kro, 53 | 2012 | Co-Founder, ManagingAge 55, Director | Famous Dave's of America, Inc. |
| | Mill City Capital L.P. since 2010 | 2012 |
| | | | |
Ms. Kro is a founding partner of Mill | Principal Occupation(s) During Past Five Years: Chief Financial and Administrative Officer, Ryan Companies since 2019 Co-Founder, Managing Director, Mil City Capital L.P., 2010 to 2018 | Other Public Directorships: None |
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Ms. Kro is the Chief Financial and Administrative Officer at Ryan Companies, a national real estate services company. From 2010 to 2018 she co-founded and was Managing Director at the private equity firm where she is Managing Director.Mill City Capital. From 2004 to 2010, Ms. Kro was the Chief Financial Officer and a Managing Director of Goldner Hawn Johnson & Morrison, also a private equity firm. Prior to joining Goldner Hawn, she was a partner at KPMG LLP, an international public accounting firm.
Ms. Kro's service in auditing, as well as her experience in the finance and capital environments, enable her to contribute to a number of financial and strategic areas of the company.Company. Her experience on other boards, including previous service as the financial expert on the audit committeeAudit Committee of another publicly-tradedpublicly traded company, contributes to the oversight of the company's financial accounting controls and reporting.
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| Michael C. Smith, Age 50, Director since 2019 |
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| Principal Occupation(s) During Past Five Years: President and Chief Operating Officer, Stitch Fix, Inc. since 2012 | Other Public Directorships: Ulta Beauty, Inc. |
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Mr. Smith is the President and Chief Operating Officer of Stitch Fix, an online personal styling platform with more than 2.9 million clients. Mr. Smith has been an innovative leader in the digital and fast-paced online consumer sectors for more than 15 years, with leadership positions in eCommerce, operations, customer experience, and finance. He joined Stitch Fix in 2012 and was instrumental in helping to scale the business from a small start-up to the innovative public company it is today. Mr. Smith leads all operations for the company, including the Styling, Merchandising, and Customer Experience Teams.
Mr. Smith's expertise and passion for building smart, efficient, and customer-centric online experiences will help us improve our customer experience initiatives and growth of our global businesses.
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Michael A. Volkema, 62Age 64, Director since 1995 |
| 1995 | |
| Principal Occupation(s) During Past Five Years: Chairman of the Board, Herman Miller, Inc. since 2000 | Other Public Directorships: Wolverine Worldwide, Inc. |
| | | since 2000 | |
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Mr. Volkema has been Chairman of the Board of Directors of Herman Miller, Inc. since 2000, serving as non-executive Chairman since 2004. He also served as CEO and President of the companyCompany from 1995 to 2004. Mr. Volkema has more than thirty30 years of experience as a senior executive in the home and office furnishings industry. This experience includes corporate leadership, branded marketing, international operations, and public company finance and accounting through audit committee service.
Mr. Volkema is a key contributor to the Board based upon his knowledge of the company'sCompany's history and culture, operational experience, board governance knowledge, service on boards of other publicly held companies, and industry experience.
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Directors Whose Terms Expire in 2020 |
Name and Age | Year First
Became
a Director
| Principal Occupation(s) During Past 5 years | Other Directorships of Public Companies
held during Past 5 years
|
Mary Vermeer Andringa, 68 | 1999 | Chair of the Board | None |
| | Vermeer Corporation since 2015 | |
| | Chief Executive Officer and Chair of the Board | |
| | Vermeer Corporation from 2014 to 2015 | |
| | President and Chief Executive Officer | |
| | Vermeer Corporation from 2003 to 2014 | |
| | | |
Since 1989, Ms. Andringa has been an executive officer of Vermeer Corporation, a leading manufacturer of agricultural, construction, environmental and industrial equipment located in Pella, Iowa. She served as President and Chief Executive Officer of Vermeer from 2003 to 2014. At that time, she became Chief Executive Officer and Chair of the Board. She transitioned exclusively to Chair of the Board in 2015. Ms. Andringa's tenure with Vermeer has spanned the gamut of functional expertise from marketing to international sales and acquisitions. With over thirty years of manufacturing experience, Ms. Andringa is past Chair of the National Association of Manufacturers which represents over 14,000 U.S.-based manufacturing entities. Ms. Andringa has served the last four years as the co-chair for the B20 Task Force for Small and Medium Enterprises. The B20 is a group of business leaders from the G20 countries who develop and advise the political leaders for the G20 on proposals to improve global growth.
Ms. Andringa's experience as a chief executive officer coupled with her focused efforts on lean manufacturing and continuous improvement initiatives as well as her involvement in international product sales and distribution provide an important resource to management and the Board of Directors.
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Directors Whose Terms Expire in 2020 (continued)
|
Name and Age | Year First
Became
a Director
| Principal Occupation(s) During Past 5 years | Other Directorships of Public Companies
held during Past 5 years
|
Brenda Freeman, 54 | 2016 | Chief Marketing Officer, Magic Leap since 2017 | Caleres, Inc. |
| | Chief Marketing Officer, National Geographic Channel | Under Armour, Inc. |
| | 2015 to 2017 | |
| | Global Head of Television Marketing, DreamWorks Animation SKG | |
| | 2014 to 2015 | |
| | Chief Marketing Officer, Turner Animation | |
| | 2008 to 2014 | |
Ms. Brenda Freeman is the Chief Marketing Officer for Magic Leap, a technology company that is developing a mixed reality computing platform that is on the cutting edge of the virtual and augmented reality world of wearable technology. She is responsible for all aspects of brand and product marketing, including the customer journey experience - CRM, social, digital, publicity, experiential and influencer marketing. Prior to her current role, Freeman was Chief Marketing Officer for the National Geographic Channels, a naturalist cable television production platform, where she oversaw brand development, multi-platform creative architecture and consumer communication. She was also global head of television marketing for DreamWorks, a television and movie production and distribution company, Chief Marketing Officer of Cartoon Network at Turner Broadcasting and Senior Vice President for Nickelodeon integrated marketing and partnerships at Viacom. Early in her career, she held consumer marketing and product development positions for Frito-Lay and Pepsi-Cola, both divisions of PepsiCo.
Ms. Freeman's experience as marketing executive and her specific experience with digital marketing and programming brings significant strength to the Board in advising management as it develops and executes the company’s brand and demand pull marketing strategies. |
J. Barry Griswell, 69 | 2004 | Retired President and CEO, Community Foundation of Greater | Voya Financial Inc. |
| | Des Moines 2008 to 2013 | OZ Management |
| | | |
Mr. Griswell is the retired chairman and chief executive officer of the Principal Financial Group and Principal Life, a global financial services provider which offers a wide range of insurance and financial products and services. With more than thirty years of financial services experience, Mr. Griswell was the president and CEO of MetLife Marketing Corporation prior to joining The Principal. He is a former director and non-executive chairman of the board of the Principal Financial Group. Mr. Griswell is a director of Voya Financial, where he serves on the Executive Committee and as chair of the Risk, Investment and Finance Committee.
Mr. Griswell's financial expertise, governance experience and service as an executive of a publicly-traded corporation make him a key contributor to the Board of Directors.
|
Andrea Owen, 53 | 2018 | President and Chief Executive Officer | Taylor Morrison Home Corporation |
| | Herman Miller, Inc. since 2018 | |
| | Global President, Banana Republic 2014 to 2017 | |
| | Executive Vice President GAP Global Outlet | |
| | 2010 to 2014 | |
| | | |
Ms. Owen has been elected by the Board of Directors to succeed Brian C. Walker as the company’s next President and Chief Executive Officer, effective August 22, 2018. Ms. Owen was also elected to the company’s Board of Directors as of August 22. She joins Herman Miller after a 25-year career at Gap Inc., where she most recently served as Global President of Banana Republic, leading 11,000 employees in over 600 stores across 27 countries. She has developed a diversified skillset that aligns with the strategic direction of Herman Miller today and ranges from digital and omni-channel transformation to design, development and supply chain management, making her an important contributor to the Board. |
The NominatingGovernance and GovernanceCorporate Responsibility Committee has not received any nominations from any of our shareholders in connection with our 20182020 Annual Meeting. The nominees who are standing for election as directors at the 2018 Annual Meeting are incumbent directors.
Herman Miller, Inc., and Subsidiaries15
Corporate Governance and Board Matters
Board Governance Guidelines
Our Board of Directors is committed to sound and effective corporate governance practices, ethical conduct, and strong oversight of corporate risk management, ethical conduct and compensation. These practices reflect the Board's long-standing philosophy that a proper structure, appropriate policies and procedures, and reflective cultural factors provide the cornerstone to good governance. The Board documented those practices by adopting our Board Governance Guidelines ("Guidelines"). These Guidelines address director responsibilities, the composition of the Board, required Board meetings and materials, Board committeeCommittee composition and responsibilities, and other corporate governance matters. Under ourthe Guidelines, a majority of the members of our Board must qualify as independent under the listing standards of the NASDAQ National Markets. Our Guidelines also require the Board to have, among other committees,Committees, an Audit Committee, an Executive Compensation Committee, and a NominatingGovernance and GovernanceCorporate Responsibility Committee, and that each member of those committeesCommittees qualifies as an independent director under the NASDAQ listing standards. Our Guidelines, as well as the charters of each of the foregoing committees,Committees, are available for review on our website at www.hermanmiller.com/governance.governance.
Leadership Structure
The Guidelines, with respect to the position of Chief Executive Officer (“CEO”) and Chairperson, state that “the Board believes the roles of CEO and Chairperson should normally be separated. If the positions are combined, the Board will closely monitor the performance and working relationship between the CEO/Chairperson and the Board and will establish a Lead Director to act as a liaison between directors and the CEO/Chairperson and who chairs meetings of the independent directors.” Consistent with our Guidelines, the roles of CEO and Chairperson are currently separate. Mr. Volkema currently serves as Chairman of the Board. As Mr. Volkema is not an employee of the company,Company, he serves as a non-executive Chairman.
The Board's Role in Risk Oversight
The company'sCompany's management annually engages in an enterprise risk management process, the key output of which is a series of risk matrices intended to identify and categorize strategic risks. The matrices also identify (1) those members of senior management who are responsible for monitoring each major risk, and (2) whether that risk is reviewed by the Board or a committeeCommittee of the Board. The development of the matrices is facilitated by the company'sour Business Risk Group (the internal audit function of the Company), through discussions with executive and senior management. Management and the Business Risk Group annually review and discuss the (1) risk assessment process, (2) top enterprise risks, and results(3) mitigation plans to address the top enterprise risks with the Audit Committee and if applicable, recommend what risks are being adequately addressed, directly or indirectly, on a regular basis and what risks should be further discussed with the full Board or other committees and the appropriate form and timing of such discussions. The Business Risk Group is the internal audit group of the company.Board.
During the past fiscal year, the Business Risk Group reviewed the company'sour compensation policies and practices to determine if those policies or practices are reasonably likely to have a material adverse impact on the company.Company. The Business Risk Group conducted its review in late 2017 and provided a report to the Audit Committee in January 2018.July 2020. In conducting its review of the compensation plans, the Audit Committee considered both the structure of the compensation plans and the presence of risk mitigating features such as caps, multi-year earning requirements, vesting provisions, and “clawbacks.”clawback provisions. Based on the evaluation, the Audit Committee concurs with management's determination that the company'sour compensation policies and practices are not reasonably likely to create a material adverse impact on the company.Company.
Under the Guidelines, the Board of Directors is responsible for evaluating CEO performance, monitoring succession planning, reviewing the company'sCompany's major financial objectives, evaluating whether the business is being properly managed, and overseeing the processes for maintaining the integrity of the companyCompany with respect to itsour financial statements, public disclosures, and compliance with laws. The Board has delegated the primary oversight for managing the risk with respect to some of these to the various board committeesBoard Committees as described in the committeeCommittee charters.
Code of Conduct
Our Board has adopted a Code of Conduct that applies to all our employees, officers, and directors. This code also serves as the code of ethics for our CEO and senior financial officers. This code is posted on our website at http://www.hermanmiller.com/about-us/who-is-herman-miller/legal/corporate-code-of-conduct.html.corporate-code-of-conduct. Any changes to or waivers of the code must be approved by the Board of Directors and will be disclosed on the company'sour website. The Code of Conduct was last materially modified in
December 2015. The Code of Conduct is reviewed annually andannually; there were no modifications to or waivers of the code in fiscal 2018.2020. The Code of Conduct meets the requirements of the NASDAQ listing standards.
Determination of Independence of Board Members
As required by our Guidelines, our Board has determined that each of our directors, other than Ms. Owen, (effective August 22, 2018), qualifies as an “Independent Director,” as such term is defined in the NASDAQ listing standards, and that none of those independent directors has a material relationship with the company.Company. The Board's determination was made as a result of its review of completed individual questionnaires addressing the nature and extent of each member's relationship with the companyCompany and taking into consideration the definition of “Independent Director” under the NASDAQ rules.
Our Board also determined that each member of the Audit Committee, Governance and Corporate Responsibility Committee, and Executive Compensation Committee, meets the independence requirements applicable to those committeesCommittees as prescribed by the NASDAQ listing standards and, as to the Audit Committee, the applicable rules of the SEC.
Corporate Governance and Board Matters (continued)
Meeting Attendance
Each of our directors is expected to attend all meetings of the Board and applicable committeeCommittee meetings, and Directorsdirectors are encouraged to join the webcast for the Annual Meeting. All of our then currentthen-current directors did so for our 20172019 Annual Shareholders Meeting, including Ms. Dorothy Terrell, Mr. David O. Ulrich, and Mr. Brian C. Walker, who ceased to be directors subsequent to the meeting.Meeting. During fiscal 2018,2020, the Board held sevenfour meetings; each director attended at least 75 percent90% of the aggregate number of meetings of our Board and Board Committees on which they served. Consistent with the requirements of our Guidelines, the independent members of our Board met in executive sessions without the presence of management at the conclusion of each regularly scheduled Board meeting.
Communications with the Board
Shareholders and other parties interested in communicating directly with one or more of our directors may do so by writing to us, c/o Corporate Secretary, 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302. The Corporate Secretary will forward all relevant correspondence to the director or directors to whom the communication is directed.
Director Nominations
Our Bylaws contain certain procedural requirements applicable to shareholder nominations of directors. Shareholders may nominate a person to serve as a director if they provide written notice to us notno earlier than the close of business on the 120th day and notno later than the close of business on the 90th day prior to the first anniversary of the preceding year's Annual Meeting of Shareholders and, with respect to any special meeting of shareholders, notwritten notice must be provided no later than the close of business on the 10th day following the date on which the meeting is first publicly announced or, if there is no announcement, the 10th day following the date on which the notice of that meeting was first sent to our shareholders. The notice must include (1) the name and address of the shareholder providing notice and of the person or persons nominated, including information on the securities of the companyCompany held by those individuals, including any derivative securities, the details of which are set forth in our Bylaws,Bylaws; (2) a representation that the shareholder is a current record holder and will continue to hold those shares through the date of the meeting and intends to attend the meeting in person or by proxy,proxy; (3) for each proposed nominee, (a) all information relating to that person that would be required to be disclosed in a Proxy Statement required to be made in connection with solicitations or proxies for election of directors in a contested election pursuant to Section 14 of the Securities and Exchange Act of 1934 (including that person's written consent to be named in the Proxy Statement as a nominee and to serve as a director if elected), and (b) a description of all direct and indirect compensation and other material monetary arrangements existing during the past three years, as well as any other material relationships between or among the shareholders (and beneficial owner, if any) and their respective affiliates and associates and the proposed nominee and his or her respective affiliates and associates, including all information required to be disclosed pursuant to Rule 404 under Regulation S-K,S-K; and (4) the completed and signed questionnaire from each nominee with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made.
Our NominatingGovernance and GovernanceCorporate Responsibility Committee is responsible for reviewing the qualifications and independence of the members of the Board. To meet the needs of the companyCompany in a rapidly changing environment, the
Herman Miller, Inc., and Subsidiaries17
Guidelines explain that the companyCompany requires a high-performance boardBoard of directorsDirectors whose members subscribe to our values and meet the specific resource needs of the business. To that end, the NominatingGovernance and GovernanceCorporate Responsibility Committee considers a number of factors it deems appropriate when considering candidates for the Board; such factors may include experience and knowledge of the company'sCompany's history and culture,culture; technical experience and backgrounds such as manufacturing, design, marketing, technology, finance, management structure, and philosophy, experience as a senior executive of a public company,company; and diversity. The NominatingGovernance and GovernanceCorporate Responsibility Committee may also consider experience in a variety of industries in annually assessing and reviewing the current slate of directors and potential director candidates as the need arises. The NominatingGovernance and GovernanceCorporate Responsibility Committee is responsible for assessing the appropriate skills and characteristics required of Board members. These factors, and others as considered useful by the NominatingGovernance and GovernanceCorporate Responsibility Committee or the Board, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time. As referenced above, the Board has appointed Ms. Matthews to the Board on August 21, 2020, based upon the recommendation of management, and her excellent attributes and qualifications, including her broad range of experience and specific focus on corporate social responsibility, sustainability, and diversity and inclusion.
A shareholder may also make a recommendation to the NominatingGovernance and GovernanceCorporate Responsibility Committee regarding any individual that the shareholder desires the Committee to consider for possible nomination as a candidate for election to the Board. The Board believes that all candidates, including those that shareholders recommend, should be evaluated in the same manner.
Under our Bylaws and Governance Guidelines, no person is tomay be elected as a director: (a)director after he or she attains age 72, and a director who attains age 72 while in office is required to tender his or (b) for a term that expiresher written resignation, which resignation shall be effective as of (or no later thanthan) the annual meeting of shareholders at or immediately after such person attains age 72.
Board Committees
Our Board has four standing committees.Committees. Committee responsibilities are detailed in written charters. These charters are available on our website at www.hermanmiller.com/charters. The committeesCommittees are as follows:
Nominating
Governance and GovernanceCorporate Responsibility Committee
We have a Governance and Corporate Responsibility Committee (previously referred to as the Nominating and Governance CommitteeCommittee) comprised of Mary Vermeer Andringa (chair), Brenda FreemanJohn R. Hoke III, and Douglas French.Candace S. Matthews. The NominatingGovernance and GovernanceCorporate Responsibility Committee develops and recommends to the Board governance standards and policies and board compensation to the Board, including that of the Chairman of the Board. In addition, the committeeCommittee identifies and recommends candidates for election to the Board. The Committee also reviews and assesses the effectiveness of the Company's goals and objectives relating to environmental, social, and governance responsibility, stewardship, and sustainability practices, and recommends to the Board candidates for election tosuch measures and actions deemed appropriate by the Board.Committee. The Committee met four times during the last fiscal year.
Audit Committee
We have an Audit Committee comprised of Lisa A. Kro (chair), Douglas D. French and Heidi J. Manheimer.Manheimer, and Michael C. Smith. The Board has determined that Ms. Kro is qualified as an “audit committee“Audit Committee financial expert” within the meaning of the applicable SEC regulations. This committee,Committee, composed entirely of independent directors under the applicable listing standards of the NASDAQ listing requirements, as well as the requirements of the Sarbanes-Oxley Act of 2002, is responsible for overseeing management's reporting practices, internal controls, and risk management on behalf of the Board of Directors, including overseeing and regularly evaluating (quarterly) the Company's cybersecurity risks, which are regularly reported to and discussed among members of the Board of Directors. The committeeCommittee is also responsible for appointing, approving the compensation of, and overseeing our independent registered public accounting firm. The Audit Committee met eight times during the last fiscal year.
Executive Compensation Committee
We have an Executive Compensation Committee comprised of J. Barry Griswell (chair), David A. Brandon (chair), Douglas D. French, and John R. Hoke III.Heidi J. Manheimer. The Executive Compensation Committee recommends to the Board the annual executive incentive plan and the annual remunerationcompensation of our Chief Executive Officer and President to the Board, approves the annual remunerationcompensation and executive incentive plan for the other executive officers, approves the grants of employee equity awards, and acts as the administrative committeeCommittee for our equity-based compensation plans. A description of the committee'sCommittee's processes and procedures for the consideration and determination of executive and director compensation is set forth under the caption “Compensation Discussion and Analysis - Executive Summary” below in this Proxy Statement. The committeeCommittee met four times during the last fiscal year.
Executive Committee
We have an Executive Committee comprised of Michael A. Volkema (chair), Mary Vermeer Andringa, J. Barry GriswellDavid A. Brandon, and Lisa A. Kro. The Executive Committee acts from time to time on behalf of the Board in managing our business and affairs (except as limited by law or our Bylaws) and is delegated certain assignments and functions by the Board of Directors. The committeeCommittee met fourseven times during the last fiscal year.
Executive Compensation Committee Interlocks and Insider Participation
No member of the Executive Compensation Committee is or has been an officer or employee of the company or had any relationship that is required to be disclosed as a transaction with a related party except as noted under Certain Relationships and Related Party Transactions. In addition, no current executive officer of the company has ever served as a member of the Board of Directors or compensation committeeCommittee of any other entity that has or has had one or more executive officers serving as a member of our Board of Directors or Executive Compensation Committee.
Herman Miller, Inc., and Subsidiaries19
Proposal #2 - Approval of Amendment to Articles of Incorporation
Current Standard and Policy
Michigan law provides that directors are elected by a plurality of the votes cast unless otherwise provided in a corporation’s articles of incorporation. Because our Articles of Incorporation do not provide otherwise, our directors are currently elected by a plurality of the votes cast. This means that the director nominees with the most votes cast in their favor are elected, regardless of any withheld votes.
Description of Amendment Generally
The Board has adopted, subject to shareholder approval, an amendment to our Articles of Incorporation that would allow us to amend our Bylaws to provide that, in an uncontested election, a nominee must receive a majority of the votes cast to be elected as a director. Under this proposal, in contested elections, where the number of nominees exceeds the number of directors to be elected, the voting standard would continue to be a plurality of votes cast.
Background
Shareholders of many public companies have urged that directors be elected by a majority of the votes cast rather than being elected by a plurality of the votes cast. Under the plurality standard, the directors who receive the most votes are elected. Because the number of nominees and the number of open seats are the same in an uncontested election, a nominee need only receive a single affirmative vote to be elected. As a result, a number of public companies have adopted charter or bylaw provisions implementing a majority vote standard or have adopted bylaws or corporate governance guidelines requiring a director who does not receive a majority of votes to submit his or her resignation to the board or one of its committees. Charter or bylaw provisions implementing a majority vote standard also typically require a director who does not receive a majority of votes to submit his or her resignation to the board or one of its committees to address the typical state law provision that provides that a director remains in office until his successor is elected, even if the director has not received a vote sufficient for re-election. Michigan law has such a provision regarding director succession. As discussed above under the heading “How many votes are needed for each proposal?,” we have a resignation policy in our Governance Guidelines.
The Nominating and Governance Committee and the Board have carefully considered the arguments for and against a majority voting standard. We believe that the plurality voting standard provides greater certainty that the annual election will result in a full and duly elected board of directors. However, the Board also recognizes that requiring a majority of the votes cast ensures that only directors with broad acceptability among the voting shareholders will serve on the Board and enhances the accountability of each director to our shareholders. While the current resignation policy in our Governance Guidelines seeks to address the same issues as the proposed amendment, the proposed amendment, if adopted by the shareholders, would enable us to implement a majority voting standard and provide more certainty regarding the majority voting standard over the longer term. In recent elections, our director nominees have received votes for election that exceeded a majority of the number of our shares outstanding. As a result, the difference in voting standards would have had no impact on us. On balance, the Board has concluded that the proposed amendment to allow for a majority voting standard is in the best interest of the company and our shareholders and therefore recommends that you approve this Proposal 2.
Amendment of Articles of Incorporation
Under Michigan law, a standard for election of directors other than a plurality may be used only if the articles of incorporation provide for a different standard. If shareholders approve the amendment, then a new Article IX of our Articles of Incorporation will be added which will read as follows:
ARTICLE IX
The Bylaws of the Corporation may provide that, to the extent provided in such Bylaws, each director of the Corporation shall be elected by the affirmative vote of a majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum is present, subject to the terms and conditions set forth within such Bylaws. For purposes of clarity, the provisions of the foregoing sentence do not apply to vacancies or newly created directorships filled by a vote of the Board of Directors.
Amendments to Bylaws and Board Governance Guidelines
The Board has adopted, subject to shareholder approval of the amendment to the Articles of Incorporation described above, amendments to our Bylaws and Governance Guidelines that will become effective upon filing the Certificate of Amendment to the Articles of Incorporation with the Michigan Department of Licensing and Regulatory Affairs. The amendments to our Bylaws and Governance Guidelines do not require any shareholder action. If the shareholders do not approve the proposed amendment to the Articles of Incorporation, then the amendments to our Bylaws and Governance Guidelines will not become effective.
Proposal #2 - Approval of Amendment to Articles of Incorporation (continued)
The amendments to the Bylaws provide that each director will be elected by the majority of the votes cast with respect to that director’s election at any meeting of shareholders for the election of directors, other than a contested election. A majority of the votes cast will mean that the number of votes cast “for” a director’s election exceeds the number of votes “withheld” with respect to that director’s election. In a contested election, each director will be elected by a plurality of the votes cast with respect to that director’s election at the meeting.
The amendments to the Bylaws further provide that, in an uncontested election of directors, any nominee for director who is already serving as a director and receives a greater number of votes “withheld” from his or her election than votes “for” his or her election (a “Majority Against Vote”) will promptly tender his or her resignation. The Nominating and Governance Committee of the Board will then promptly consider the resignation submitted by a director receiving a Majority Against Vote, and the committee will recommend to the Board whether to accept the tendered resignation or reject it.
The Board will act on the committee’s recommendation no later than 90 days following the date of the shareholders’ meeting at which the election occurred. In considering the committee’s recommendation, the Board will consider the factors considered by the committee and such additional information and factors the Board believes to be relevant. Following the Board’s decision, we will promptly publicly disclose the Board’s decision whether to accept the resignation as tendered, including a full explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation.
Any director who tenders a resignation pursuant to this provision will not participate in the committee recommendation or the Board consideration regarding whether to accept the tendered resignation. The amendments to the Bylaws also set forth a procedure for acting if a majority of the members of the committee receive Majority Against Votes at the same election.
In light of the proposed addition of a director resignation policy in our Bylaws, the amendment to the Governance Guidelines that the Board has adopted, subject to shareholder approval of the amendment to the Articles of Incorporation, would remove the director resignation policy that is currently part of that document.
Required Vote
The approval of the amendment to the Articles of Incorporation requires the affirmative vote of a majority of the outstanding shares entitled to vote on this proposal.
The Board of Directors recommends a vote FOR this proposal.
Proposal #3 - Ratification of AppointmentAudit Committee's Selection of Independent Registered Public Accounting Firm
Our Audit Committee has appointed Ernst & YoungKPMG LLP as our independent registered public accounting firm for the fiscal year ending June 1, 2019.May 29, 2021. Representatives of Ernst & YoungKPMG LLP will participate in the Annual Meeting of Shareholders and will be available to respond to appropriate questions submitted in advance. Shareholders may submit questions in advance by logging on toonline at www.virtualshareholdermeeting.com/MLHR18.MLHR2020. The Ernst & YoungKPMG LLP representatives will have the opportunity to make a statement if they so desire.
The Audit Committee approved the engagement of KPMG as the Company’s independent registered public accounting firm for purposes of auditing our financial statements effective June 2, 2019 for fiscal 2020. This selection resulted in the dismissal of Ernst & Young LLP (“E&Y”), which had served in that role, effective upon the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended June 1, 2019.
The audit reports of E&Y on the consolidated financial statements of the Company as of and for the fiscal year ended June 1, 2019, did not contain an adverse opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Company’s recent fiscal year ended June 1, 2019, and the subsequent interim period through July 30, 2019, the effective date of E&Y’s dismissal (the “Relevant Period”), (i) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) between the Company and E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures that, if not resolved to satisfaction of E&Y, would have caused E&Y to make reference to the subject matters of the disagreement in its report, and (ii) there were no reportable events (as defined in item 304(a)(1)(v) of Regulation S-K).
During the Relevant Period, neither the Company nor anyone acting on our behalf consulted KPMG LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was produced to the Company that KPMG LLP concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in item 304(a)(1)(v) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
Although the submission of this matter for approval by shareholders is not legally required, our Board of Directors believes that such submission follows sound corporate business practice and is in the best interests of our shareholders. If our shareholders do not approve the selection of Ernst & Young,KPMG LLP, the selection of this firm as our independent registered public accounting firm will be reconsidered by the Audit Committee. This ratification of the appointment of Ernst & YoungKPMG LLP requires the affirmative vote of a majority of the votes cast on this proposal. Unless otherwise instructed by you, brokers, banks, and other street name holders will have the discretionary authority to vote your shares on this matter.
The Board of Directors recommends a vote FOR the ratification ofthis proposal to ratify the appointment of Ernst & YoungKPMG LLP as our company’s independent registered public accounting firm.firm for Fiscal 2021.
Disclosure of Fees Paid to Independent Auditors
AggregateThe following table summarized the aggregate fees billed to us by E&Y for the fiscal yearsyear ended June 3, 20171, 2019, and June 2, 2018, by our independent registered public accounting firm, Ernst & Young were as follows:KPMG LLP for the fiscal year ended May 30, 2020.
| | | Fiscal Year Ended | June 3, 2017 |
| June 2, 2018 |
| |
Fiscal Year Ended (in millions) | | June 1, 2019 |
| May 30, 2020 |
|
Audit Fees (1) | $ | 1,865,000 |
| $ | 2,153,500 |
| $ | 2.2 |
| $ | 2.6 |
|
| Audit Related Fees | — |
| — |
| 0.1 |
| — |
|
Tax Fees (2) | 136,920 |
| 445,000 |
| — |
| 0.3 |
|
| Total | $ | 2,001,920 |
| $ | 2,598,500 |
| $ | 2.3 |
| $ | 2.9 |
|
| |
| (1) | Includes fees billed for the audit of and accounting consultations related to our consolidated financial statements included in our Annual Report on Form 10-K, including the associated audit of our internal controls, the review of our financial statements included in our quarterly reports on Form 10-Q, and services in connection with statutory and regulatory filings. |
| |
| (2) | Includes fees billed for tax compliance, tax advice, and tax planning. |
Our Audit Committee has adopted a policy for pre-approving services performed by Ernst & Youngour independent registered accounting firm and other firms. This policy requires the Audit Committee's pre-approval of all services that may be provided by our independent registered public accounting firm and certain audit services provided by other firms. The policy authorizes the committeeCommittee to delegate to one or more of its members pre-approval authority with respect to permitted services. All services provided by Ernst & Young under the captions “Audit Fees,” “Audit Related Fees,” and “Tax Fees” were approved by the Audit Committee under this policy.
Herman Miller, Inc., and Subsidiaries21
Report of the Audit Committee
TheOur Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the company,Company; the audits of the company’sour financial statements and management’sManagement’s assessment of the company’s internal controls,controls; the qualifications of the public accounting firm engaged as the company’sCompany’s independent registered public accounting firm,firm; and the performance of the company’sour internal auditors and independent registered public accounting firm. The Committee’s function is more fully described in its charter, which the Board has adopted and is available on the company's web siteour website at http://www.hermanmiller.com/content/dam/hermanmiller/documents/investors/audit_committee_charter.pdf. The Committee reviews the charter on an annual basis. The Board annually reviews the NASDAQ listing standards definition of independence for audit committeeAudit Committee members and has determined that each member of the Committee meets that standard.
Management is responsible for the preparation, presentation, and integrity of the company’sCompany’s financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. The company’sOur independent registered public accounting firm, Ernst & YoungKPMG, LLP is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with U.S. generally accepted accounting principles. Ernst & YoungUS Generally Accepted Accounting Principles (GAAP). KPMG, LLP is also responsible for auditing and providing an opinion on the effectiveness of the company’sour internal control over financial reporting.
We have
The Audit Committee of the Herman Miller Inc. Board of Directors (“Committee” or “we”) has reviewed and discussed with managementManagement and Ernst & YoungKPMG, LLP the company’sCompany’s audited financial statements for the year ended June 2, 2018, management’sMay 30, 2020, Management’s assessment of the effectiveness of the company’sCompany’s internal controls over financial reporting, and Ernst & YoungKPMG, LLP’s evaluation of the company’sour internal controls over financial reporting.
We have
The Committee has discussed with Ernst & YoungKPMG, LLP the results of the independent auditors’ examinations and the judgments of the independent auditors concerning the quality, as well as the acceptability, of the company’sCompany’s accounting principles and such other matters that we are required to discuss with the independent auditors under applicable rules, regulations, or generally accepted auditing standards, including the matters required to be discussed by applicable rules of the Public Company Accounting Oversight Board (PCAOB). We have also received and reviewed the written disclosures and the letter from Ernst & YoungKPMG, LLP per the applicable requirements of the PCAOB regarding Ernst and YoungKPMG, LLP's communications with the Audit Committee around independence and we have discussed with Ernst & YoungKPMG, LLP their independence including a consideration of the compatibility of non-audit services with their independence.
Based on the reviews and discussions referred to above, wethe Committee recommended to the Board of Directors that the financial statements referred to above be included in the company’sCompany’s Form 10-K Report for the year ended June 2, 2018,May 30, 2020, and we selected Ernst & YoungKPMG, LLP as the independent auditor for fiscal year 2019.2021. The Board is recommending that shareholders ratify that selection at the annual meeting.
|
| | |
| Lisa A. Kro (Chair) | Heidi J. Manheimer | Douglas D. FrenchMichael C. Smith |
Proposal #3 - Proposal to Approve the Herman Miller, Inc. 2020 Long-Term Incentive Plan
The Board has adopted, subject to shareholder approval, the 2020 Long-Term Incentive Plan (the "Plan"). The Plan will replace our existing Long-Term Incentive Plan approved by our shareholders in 2011. Upon approval of the Plan, no additional awards will be granted under the previous plan. No awards under the Plan have been granted or will be granted unless and until the Plan is approved by shareholders at the Annual Meeting. The Plan provides for the grant of a variety of equity-based awards, described in more detail below, such as stock options, including incentive stock options as defined in section 422 of the Internal Revenue Code as amended (the "Code"), stock appreciation rights, restricted stock and restricted stock units, performance stock units, and other stock-based awards. A copy of the Plan is attached as Appendix I to this Proxy Statement.
Description of the Plan
The following paragraphs summarize the material features of the Plan. The full text of the Plan is included as Appendix I to this Proxy Statement.
Administration
The Plan is administered by the Executive Compensation Committee of the Board (the "Committee"), which is required to consist of no fewer than three non-employee directors, as defined in Rule 16b-3(b)(3) of the Securities Exchange Act of 1934. The Committee determines who may participate in the Plan; the types of awards (or combinations thereof) to be granted; the number of shares of common stock to be covered by each award; the terms and conditions of any award, such as conditions of forfeiture, transfer restrictions; and vesting requirements.
Eligibility
The Plan authorizes awards to non-employee directors and all employees of the Company or its subsidiaries.
Shares Available for Issuance
As of August 14, 2020, under the 2011 Long-Term Incentive Plan, there were 272,670 shares of common stock available for the grant of future awards; 1,762,380 stock options outstanding with a weighted exercise price of $24.96 and a weighted average remaining term of 9.1 years; and 680,380 full-value awards outstanding. The 272,670 shares remaining available for grant will be rolled into the 2020 Long-Term Incentive Plan upon shareholder approval. Subject to certain adjustments, the maximum number of shares that may be issued under the Plan is 7,182,670 shares.
Any shares subject to an award that terminates without the issuance of the shares, including awards that are settled in cash in lieu of shares, will be available again for issuance under the Plan and will increase the total number of shares available for grant by (a) two shares if such share is subject to a Full Value Award and (b) one share if such share was subject to any other type of award. The number of shares available for issuance under the Plan will not, however, be increased by the number of shares that are (1) tendered by the participant or withheld by the Company in payment of the purchase price of an option, (2) tendered by the participant or withheld by the Company to satisfy any tax withholding obligation with respect to an award, (3) purchased by the Company with proceeds received from the exercise of an option, (4) subject to a stock appreciation right that is not issued in connection with the stock settlement of that right upon its exercise, (5) subject to the cancellation of a stock appreciation right granted in tandem with an option upon the exercise of the option, and (6) subject to the cancellation of an option granted in tandem with a stock appreciation right upon the exercise of that right.
The maximum number of shares of common stock that may be subject to any Full Value Award under the Plan to any one employee during any fiscal year may not exceed 250,000 shares. Also, the maximum number of shares of common stock that may be subject to any award under the Plan that is not a Full Value Award to any one employee during any fiscal year may not exceed 500,000 shares. All limitations are subject to adjustment from time to time in accordance with the provisions of the Plan. In addition, there is a maximum annual limit of 40,000 shares of common stock that may be subject to any award granted to a non-employee director.
Types of Awards
The following types of awards may be granted under the Plan.
Herman Miller, Inc., and Subsidiaries23
An "Option" is a contractual right to purchase a number of shares at a price determined at the date the option is granted. The exercise price included in both incentive stock options and nonqualified stock options must equal at least 100% of the fair market value of our stock at the date of the grant. The Plan prohibits the repricing of options. Subject to these limitations, options will be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and set forth in the option agreement.
A "Stock Appreciation Right" is an award with the right to receive stock or cash of an equivalent value in an amount equal to the difference between the price specified in the stock appreciation right and the prevailing market price of the Company's common stock at the time of exercise. As with options, the per share exercise price for a stock appreciation right may not be less than 100% of the fair market value of our stock on the date of grant. The Plan prohibits the repricing of stock appreciation rights. Except as otherwise provided in the Plan, stock appreciation rights may not be exercised prior to the first anniversary of the date they are granted. Subject to these limitations, stock appreciation rights will be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee on the date the award is made.
"Restricted Stock" is an award of common stock granted to an employee for no or nominal consideration. A recipient of a restricted stock award will have all the rights of a shareholder, including the right to vote, and receive dividends once the Restricted Stock becomes vested. In general, shares of restricted stock are subject to forfeiture if the participant does not meet certain conditions such as continued employment over a specified vesting period and/or the attainment of specified company performance objectives.
"Restricted Stock Unit" is an award representing the right to receive, in cash and/or shares of common stock, subject to certain conditions such as continuing employment and/or the achievement of specified performance or other objectives.
“Performance Stock Unit” is an award of the right to receive stock or cash of an equivalent value at the end of the designated performance period upon the attainment of specified performance goals. Performance Awards are a type of award where the grant, exercise, and/or settlement of such award is contingent upon the achievement of pre-established performance goals and other terms established by the Committee.
An "Other Stock-Based Award" is any other award that may be granted under the Plan that is valued in whole or in part by reference to or is payable in or otherwise based, on common stock.
Forfeiture of Awards
Awards may be subject to forfeiture by participants to the extent a participant violates or breaches any agreement between the participant and the Company or any company policy or procedure, including our Code of Conduct. Awards may be subject to forfeiture if a participant is terminated for cause. Awards under the Plan are subject to mandatory repayment by a participant to the extent that participant is or becomes subject to any company clawback or recoupment policy or any law or regulation that imposes mandatory recoupment.
Termination of Employment
The award agreement will specify the terms relating to the exercise, vesting, settlement, cancellation, or forfeiture, including the terms relating to the satisfaction of performance goals and the termination of the vesting period or performance period, of an award based on the reasons for termination.
Amendment or Termination of the Plan
The Board may at any time amend, discontinue, or terminate all or any part of the Plan. No amendment may be made without shareholder approval that would increase the aggregate number of shares of common stock that may be issued under the Plan, change the definition of employees eligible to receive awards under the Plan, or otherwise materially increase the benefits to participants in the Plan. Except as required by law, the termination or any amendment of the Plan may not impair the rights of any participant without his or her consent.
Federal Tax Consequences
The following summarizes the consequences of the grant and acquisition of awards under the Plan for federal income tax purposes, based on management's understanding of existing federal income tax laws. This summary is necessarily general in nature and does not purport to be complete. Also, state and local income tax consequences are not discussed and may vary from locality to locality. The exact federal income tax treatment of transactions under the Plan will vary depending upon the specific facts and circumstances involved and participants are advised to consult their personal tax advisors with regard to all consequences arising from the grant or exercise of awards and the disposition of any acquired shares.
Stock Options
Plan participants will not recognize taxable income at the time an option is granted under the Plan unless the option has readily ascertainable market value at the time of grant. Management understands that options to be granted under the Plan will not have readily ascertainable market value; therefore, income will not be recognized by participants before the time of exercise of an option. For Nonqualified Stock Options, the difference between the fair market value of the shares at the time an option is exercised and the option price generally will be treated as ordinary income to the optionee, in which case the Company will be entitled to a deduction equal to the amount of the optionee's ordinary income.
Stock Appreciation Rights
Upon the grant of stock appreciation right ("SAR"), the participant will realize no taxable income, and the Company will receive no deduction. Upon the exercise of the stock appreciation right, the value of the shares and/or cash received is generally taxable to the participant as ordinary income, and the Company generally will be entitled to a corresponding tax deduction. If the stock appreciation right is settled in shares of common stock, upon the participant’s subsequent disposition of such shares, the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the exercise date).
Restricted Stock
Recipients of shares of restricted stock that are not transferable and are subject to substantial risk of forfeiture at the time of grant will not be subject to federal income taxes until the lapse or release of the restrictions or sale of the shares, unless the recipient files a specific election under the Code to be taxed at the time of grant. The recipient's income and the Company's deduction will be equal to the excess of the then fair market value (or sale price) of the shares less any purchase price. Any otherwise taxable disposition of the restricted stock after the time the restrictions lapse or are released will result in a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the date the restrictions lapse or are released). Dividends paid in cash and received by a participant prior to the time the restrictions lapse or are released will constitute ordinary income to the participant in the year paid and the Company will generally be entitled to a corresponding deduction for such dividends. Any dividends paid in stock may be treated as an award of additional restricted stock subject to the tax treatment described herein.
Restricted Stock Units
No taxable income is realized by a participant upon the grant of restricted stock unit ("RSU") awards. Upon distribution of the shares subject to the award or payment of cash, the participant would recognize ordinary income based upon the fair market value of the shares at the time the stock is delivered or in the amount of cash received by the participant. The Company will be entitled to a deduction at the time and in the amount that the participant recognized ordinary income. If the RSUs are settled in whole or in part in shares, upon the participant’s subsequent disposition of the shares the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized upon disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).
Performance Stock Units
Participants are not taxed upon the grant of performance stock unit ("PSU") awards. Upon receipt of the underlying shares or cash, a participant will be recognized ordinary income on the amount of cash received and/or the current fair
Herman Miller, Inc., and Subsidiaries25
market value of stock received; the Company will be entitled to a corresponding deduction. Upon the participant’s subsequent disposition of any shares received, the participant will recognize a capital gain or loss (long-term or short-term depending on the holding period) to the extent the amount realized from the disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).
Tax Deductibility Limitations
The Plan is intended to enable the Company to provide certain forms of performance-based compensation to executive officers that will meet the requirements for tax deductibility under Section 162(m) of the Code. The Code limits the allowable tax deduction that may be taken by the Company for compensation paid to its Chief Executive Officer and certain other highly compensated executive officers of a publicly traded company. The compensation limit is currently set at $1,000,000 per executive per year.
Adjustment for Certain Corporate Transactions
General Anti-Dilution Adjustments
The Plan provides for the adjustment of the terms of outstanding awards in order to preserve the proportionate interest of the holders in those awards if the number of outstanding shares of the Company's common stock has increased or decreased or other changes in the Company's stock occur due to the result of any recapitalization, reclassification, stock split, adverse stock split, spin-off, combination of stock, exchange of stock, stock dividend or other distributions payable in capital stock, or other similar adjustments in the Company's common stock. If the Company is the surviving entity in any reorganization, merger, or similar transaction with one or more entities which does not result in the change of control, any options, stock appreciation rights, restricted stock, or restricted stock units will pertain to and apply to the securities to which a holder of the number of shares of common stock subject to those awards would have been entitled immediately after the transaction, with any corresponding proportionate adjustment to the per share option price or SAR price. In addition, as a result of any such transaction, performance-based awards will be adjusted to apply to the securities that a holder of the number of shares of stock subject to such performance-based awards would have been entitled to receive immediately after the transaction. The Plan also provides for the adjustment of the share limits in the Plan, including those under the Amendment, under these circumstances.
Adjustments for Change in Control Transactions in Which Awards Are Assumed or the Company is the Surviving Entity
Except as otherwise provided in an award agreement, in the event of a change in control in which the Company is the surviving entity or under which outstanding awards are assumed or continued, the Plan provides for a corresponding adjustment to the outstanding awards to preserve the intrinsic value of those awards by the Company or its successor; provided those outstanding awards would be subject to accelerated vesting, if, within a two (2) year period following a change in control, the participant's employment is terminated without cause, the participant terminates for good reason, or the participant’s employment terminates under circumstances that entitle the participant to accelerated exercisability under any individual employment agreement with the participant.
Adjustments for Change in Control Transactions in Which Awards Are Not Assumed
Except as otherwise provided in an award agreement, upon a change in control of the Company in which the outstanding awards are not assumed or continued, awards other than performance-based awards will be deemed to be immediately vested, or the Committee, at its election, may cancel those awards and pay the value of those awards to participants. With respect to performance-based awards under any such transaction, if less than half the performance period has lapsed, those awards will be converted into shares or similar securities assuming target performance has been achieved. If at least half of the performance period has lapsed, those performance-based awards will be converted into shares or similar securities based upon actual performance to date.
New Plan Benefits
All future grants under the Herman Miller, Inc. 2020 Long-Term Incentive Plan are within the discretion of the Executive Compensation Committee. For this reason, it is not possible as of the date of this Proxy Statement to determine the future awards that will be received by our Named Executive Officers ("NEOs") or others under the 2020 Long-Term Incentive Plan.
Required Vote for Approval
The affirmative vote of the majority of the Company's outstanding common stock represented and voted at the Annual Meeting, by person or by proxy, is required to approve the proposed Plan. Broker non-votes and abstentions will not be treated as votes cast on the proposal. Unless otherwise directed by marking the accompanying proxy the proxy holders named therein will vote for the approval of the proposed Plan.
The Board of Directors recommends a vote FOR the approval of the proposed plan.
Herman Miller, Inc., and Subsidiaries27
Proposal #4 - Proposal to Approve, on an Advisory Basis, the Compensation Paid to the Company's Named Executive Officers
Consistent with our Board's recommendation, as approved by our shareholders and as required pursuant to Section 14A of the Securities Exchange Act, we allow our shareholders the opportunity to vote on the compensation of our Named Executive Officers ("Say on Pay") on an advisory and annual basis, on the compensation of our named executive officers ("say on pay").basis. Thus, you are asked to vote upon the following resolution at this year's annual meeting.
We have designed the compensation of the named executive officers to vary based on the performance of the business and to reward consistent improvement in the results delivered to shareholders. In fiscal 2018, we approved changes in the compensation of each executive officer primarily to maintain competitive pay levels for each position. The Committee believes that the compensation to each named executive officer as disclosed in the Compensation Discussion and Analysis is appropriate in the light of the company's and the officer's performance during the fiscal year.
The Executive Compensation Committee ("Committee") has considered the results of the 2017 Say2019 advisory vote on Pay vote -executive compensation in which approximately 82%more than 95% of the votes cast were voted for the approval, on an advisory basis, of the compensation of our named executive officersNamed Executive Officers as described in the 20172019 Proxy Statement. AroundConsistent with those voting results, the timeCommittee believes that the total compensation paid to the Chief Executive Officer and the other Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, is fair and appropriate and should be approved by our shareholders. The compensation of that advisory vote, membersthe Named Executive Officers is designed to vary with the results of management contacted 13 ofthe business and reward consistent improvement in the results delivered to shareholders. The incentive compensation each executive earns each year is directly tied to our largest shareholders, representing approximately 25% of total shares outstanding. Some investors shared their desire to see a relative measure offinancial and operational performance as part of our executive long-term incentive awards.against the criteria approved by the Committee and Board. The Committee considered our investors' feedbackbelieves that the compensation paid to each Named Executive Officer, as disclosed in the Compensation Discussion and Analysis, is appropriate in light of the Company's and the outcomeofficer's performance during the fiscal year. In addition, each of the voteelements of compensation, and the total compensation opportunity at target for each officer, has been benchmarked against comparable positions in general when considering future NEO compensation design features, including the additioncompetitive market. While the Committee elected to make some modifications to our traditional programs in the near-term to recognize the impact of relative total shareholder return (TSR) measureCOVID-19 and the criticality of the work that management is doing and continues to do, we believe our programs and the long-term incentive awards for fiscal 2019. See page 27 for more information regarding our shareholder outreach process.Committee's governance of the programs remains exceptionally strong.
Shareholders are being asked to approve the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the company's named executive officers,Company's Named Executive Officers, as disclosed in the company'sCompany's Proxy Statement for this annual meeting pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables, and narrative disclosure, is hereby APPROVED."
The Board of Directors recommends a vote FOR this proposal.
This vote is advisory and non-binding; however, the Board of Directors and Committee will review and consider the voting results in connection with future deliberations concerning our executive compensation program.
Voting Securities and Principal Shareholders
On August 10, 2018,14, 2020, we had 59,497,05658,871,099 shares of common stock issued and outstanding, par value $.20 per share. Shareholders are entitled to one vote for each share of common stock registered in their names at the close of business on August 10, 2018,14, 2020, the record dateRecord Date for the Annual Meeting fixed by our Board of Directors. Votes cast at the meeting and submitted by proxy will be tabulated by Broadridge Financial Solutions, Inc. As of August 10, 2018,14, 2020, no person was known by management to be the beneficial owner of more than five percent5% of our common stock, except as follows.
| | | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class |
BlackRock, Inc.(1) | 6,934,391 |
| 11.66 | 6,721,830 |
| 11.42 |
| 55 East 52nd Street | | | | |
| New York, NY 10055 | | | | |
The Vanguard Group, Inc.(2) | 5,796,909 |
| 9.74 | 5,439,299 |
| 9.24 |
| PO Box 2600 | | | | |
| Valley Forge, PA 19482 | | | | |
AQR Capital Management, LLC(3) | | 2,950,905 |
| 5.01 |
| Two Greenwich Plaza | | | |
| Greenwich, CT 06830 | | | |
| |
| (1) | This information is based solely upon information as of June 30, 2018,2020, contained in filings with the SEC on August 9, 201814, 2020 by BlackRock, Inc., including notice that it has, along with certain institutional investment managers for which it is the parent holding company, sole voting power as to 6,749,4366,582,183 shares and sole dispositive power as to 6,934,3916,721,830 shares. |
| |
| (2) | This information is based solely upon information as of June 30, 2018,2020, contained in a filing with the SEC on August 14, 20182020 by The Vanguard Group Inc., including notice that it has sole voting power as to 113,274 shares and sole dispositive power aswith respect to 5,681,2105,335,259 shares, and shared voting power with respectas to 8,10661,677 shares, and shared dispositive power with respect to 115,699104,040 shares. |
| |
| (3) | This information is based solely upon information as of June 30, 2020, contained in a filing with the SEC on August 17, 2020 by AQR Capital Management, LLC, including notice that it has sole voting power as to 2,695,236 shares and shared dispositive power with respect to 2,950,905 shares. |
Herman Miller, Inc., and Subsidiaries29
Director and Executive Officer Information
Security Ownership of Directors
The following table shows, as of August 10, 2018,14, 2020, the number of shares beneficially owned by each of the nominees and directors. Except as described in the notes following the table, the following persons have sole voting and dispositive power as to all their respective shares.
| | | Name | Amount and Nature of Beneficial Ownership | Percent of Class(1) | Amount and Nature of Beneficial Ownership | Percent of Class(1) |
| Mary Vermeer Andringa | 41,550 |
| 0.07 |
| 37,017 |
| 0.06 |
David A. Brandon | 16,809 |
| 0.03 |
| 16,809 |
| 0.03 |
Brenda Freeman(2) | — |
| — |
| |
| Douglas D. French | 11,618 |
| 0.02 |
| |
| J. Barry Griswell | 20,913 |
| 0.04 |
| |
Douglas D. French(2) | | 12,056 |
| 0.02 |
| John R. Hoke III | 30,269 |
| 0.05 |
| 31,520 |
| 0.05 |
| Lisa A. Kro | 19,978 |
| 0.03 |
| 22,025 |
| 0.04 |
| Candace S. Matthews | | — |
| 0.00 |
| Heidi J. Manheimer | 13,193 |
| 0.02 |
| 18,938 |
| 0.03 |
| Brian C. Walker | see table below |
| | |
| Andi R. Owen | | see table below |
| Michael C. Smith | | 5,726 |
| 0.01 |
| Michael A. Volkema | 75,000 |
| 0.13 |
| 125,000 |
| 0.21 |
| |
| (1) | Percentages are calculated based upon shares outstanding plus shares that may be acquired under stock options exercisable within 60 days. |
| |
| (2) | Ms. Freeman’sExcludes 2,199 Shares held in Mr. Brandon's deferred compensation account allocation holds 8,171and 3,880 shares of Herman Miller stock which would equate to a Percent of Class of 0.01.held in Mr. French's deferred compensation account holds 3,756 shares which would equate to an additional Percent of Class of 0.01.account. |
Security Ownership of Management
The following table shows, as of August 10, 2018,14, 2020, the number of shares beneficially owned by each of the Named Executive Officers (NEOs) identified in the executive compensation tables of this Proxy Statement, and by all directors and executive officers as a group. Except as described in the notes following the table, the following persons have sole voting and dispositive power as to all their respective shares.
| | | Name | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) |
| Brian C. Walker | 56,301 |
| 0.09 |
| |
| Andi R. Owen | | 51,632 |
| 0.09 |
|
| Jeffrey M. Stutz | 64,232 |
| 0.11 |
| 102,865 |
| 0.17 |
|
| Gregory J. Bylsma | 109,333 |
| 0.18 |
| 52,820 |
| 0.09 |
|
| Andrew J. Lock | 4 |
| — |
| |
| B. Ben Watson | 72,989 |
| 0.12 |
| 87,334 |
| 0.15 |
|
All executive officers and directors as a group (20 persons)(3) | 626,185 |
| 1.05 |
| |
| Megan Lyon | | 1,253 |
| — |
|
All executive officers and directors as a group (21 persons)(3) | | 616,727 |
| 1.05 |
|
| |
| (1) | Includes the following number of shares with respect to which the NEOs have the right to acquire beneficial ownership under stock options exercisable within 60 days: no51,632 shares for Mr. Walker; 48,423Ms. Owen; 72,068 shares for Mr. Stutz; 59,79521,629 shares for Mr. Bylsma; noand 49,111 shares for Mr. Lock; and 49,423 sharesWatson. Includes the following number of deferred equity units; 3,900 units for Mr. Watson.Stutz. |
| |
| (2) | Percentages are calculated based upon shares outstanding plus shares that may be acquired under stock options exercisable within 60 days. |
| |
| (3) | Included in this number are 226,915218,005 shares with respect to which executive officers and directors that have the right to acquire beneficial ownership under options exercisable within 60 days. Includes the following number of deferred equity units 6,079. |
Letter from the Executive Compensation Committee Chair
Dear Fellow Herman Miller Shareholder,
Fiscal 2018 was underpinned by positive financial
Assessing our fiscal 2020 performance requires looking beyond the numbers to consider the operational effectiveness and advancement of key initiatives, while also marking the start of a key leadership transition. We announced the retirement of Brian Walker and we are both grateful for his many contributions to Herman Miller over his long career and excited for our new CEO, Ms. Andrea Owen, to lead Herman Miller going-forward.
We are proudagility of the successes we achieved financiallybusiness given what were truly unprecedented global social and operationally during fiscal 2018 as discussedeconomic circumstances in the Financial Highlights from Fiscal 2018 sectionlater part of this proxy statement.the fiscal year. Our executive compensation programs exhibitedfull year results were impacted significantly by the COVID-19 pandemic, especially in our fiscal fourth quarter. That said, we executed incredibly well against our strategic priorities and delivered strong alignment with this performance:sales, operating income, and margin performance through the first three quarters of the year. As a result, the business was on solid operational footing when the crisis struck and the leadership team has navigated the uncertainty by implementing a series of short- and long-term strategies to protect our people, contribute to our community, support those on the front lines — all while maintaining liquidity and ensuring financial stability.
Executive annual incentive awards were paid at 92.5%In April we announced a series of target, which reflected adjusted EBITDA performance (as described in the "Reconciliation of Non-GAAP Measures" on pg. 55) of $266.4 million versus a target of $269.0 million
Our HMVA units granted for the 2016-2018 performance period were earned at 137% of target
Our Relative TSR units granted for the 2016-2018 performance period were earned at 200% of target reflecting our 40.81% cumulative TSR over the three-year periodcompensation-related actions designed to reduce expenses, including:
10% pay reductions for all salaried staff. Andi Owen and the members of her leadership team took additional salary deferrals (50% and 15%, respectively)
Suspension of both the fiscal 2021 bonus plan and fiscal 2021 merit increases
Suspension of US retirement plan contributions
A global workforce rebalancing effort in early May that further reduced our compensation-related obligations
While these were difficult decisions to make, they were necessary given the economic realities the business was facing. We conducted shareholder outreach meetingsapproached these decisions with the same strong governance and calls before and afteroversight we have always applied to our fiscal 2017 Say on Pay vote, connecting with 13 holders representing approximately 25% of total outstanding shares. Our shareholders provided feedback on a number of aspects of our executive compensation program. programs.
The Executive Compensation Committee (the Committee)has long believed in the need to adapt our approach based on the circumstances in which we are operating to ensure we maintain a focus on attracting and management discussedretaining the talent necessary to support our long-term value creation efforts. In this feedback,spirit, and considering the extraordinary and disruptive conditions brought on by the COVID-19 pandemic, the Committee approved changesa series of one-time actions designed to support our compensation programs:
Approved an adjusted fiscal 2020 bonus, pro-rated and determined by performance through the first three quarters of the fiscal year (versus full-year performance) resulting in an annualized payout at 69.23% of target.
Approved vesting of July 2017 HMVA awards at 49.50% of target, determined by performance for the first 11 of 12 quarters of the 2017-2020 performance period.
Granted premium-priced stock options to the programsCompany’s leadership team on July 14, 2020 intended to further align the leadership team with the goal of increasing shareholder value. These awards enhance the focus on the long-term impact of the critical steps management is taking to aid in response. Because the feedbackrecovery from the effects of the COVID-19 pandemic and position the Company for future growth. The Board determined to grant premium-priced stock options, as opposed to other forms of incentive compensation, because of the long-term nature of options and their direct alignment with share price appreciation. These options vest ratably over a three-year period commencing on the first anniversary of the grant date and are in addition to the Company’s customary long-term incentive awards for fiscal 2021. The exercise price of each option was received afterestablished at 110% of the startclosing stock price on the grant date (July 14, 2020).
Revisited the mix of our long-term incentives and approved the grant of fiscal 2018, we have made these changes effective for fiscal 20192021 LTI awards in a mix of 30% RSUs, 30% stock options, and beyond:
Elimination of single-trigger vesting40% in our equity award agreements - while our long-term incentive plan provides for double-trigger vesting it also provides for Committee discretion to define vesting treatment in individual award agreements. Beginning with the annual awardsPSUs. The RSUs and options were granted in July 2018, per our normal grant cycle. The PSU grant was delayed until no later than the end of the third quarter to provide management and
Herman Miller, Inc., and Subsidiaries31
the Committee has prohibited award agreements from providing for anything other than double-trigger vestingadditional time to more thoroughly assess the rigor of the goals underlying the PSUs and ensure the awards are aligned with the business objectives.
While we have a long way to go to full recovery, our evaluation of the current state of the business resulted in restoring a portion of the compensation-related reductions we enacted in the event of a change-in-control.spring:
Incorporation of performance-based long-term incentive (LTI) awards tied to the relative performance of our total shareholder return (TSR). While the company moved away from relative TSR PSUs
The temporary salary reductions described above were rescinded in fiscal years 2017 and 2018 (choosing to focus on absolute TSR via stock options instead), our shareholders indicated a strong preferenceearly August.
We are evaluating alternatives for a relative TSR component. Therefore, awards granted in fiscal 2019, tie 25% of our executives’ LTI awards to PSUs earned based on our relative TSR performance compared to our peer group.2021 bonus if we outperform the fiscal 2021 business plan.
Enhanced disclosure of the robust nature
Merit and conclusions of the Committee’s incentive goal setting process - shareholders expressed a desire for more clarity about the means by which we set targets for fiscal 2017 in the Herman Miller Value Added (HMVA) program. In this year’s Compensation Discussion and Analysis (CD&A), we have provided detailed information on the factors the Committee considered when setting the 2018 HMVA goals, and weretirement plan contributions remain suspended.
We will continue to provide such detail in future years’ CD&As.
These changes complement the existing strong governancemonitor and best practices already underlyingrespond to what we expect will be a fluid situation through fiscal 2021, continuously balancing our executivepriority to deliver compensation programs that incent our world-class talent to balance the inherent needhighest levels of performance with our commitment to retain, motivate and attract top-quality executives while aligning them directly with long-term shareholder interests.
Our Saynavigating the uncertain business conditions brought on Pay Proposal is found on page 22 of this proxy statement, andby the Board recommends that you vote ‘FOR’ this proposal. We also invite you to consider additional information on our compensation philosophy and decisions in the CD&A, which can be found on the following pages.COVID-19 pandemic. I amremain confident that our executive compensation programs motivatewill drive the behaviors and results the Board expects and those that are in the best long-term interest of our shareholders expect.shareholders.
Sincerely,
J. Barry GriswellDavid A. Brandon
Chair, Board Executive Compensation Committee
Compensation Discussion and Analysis
Executive Summary
Executive Officers Covered by this Compensation Discussion and Analysis
We are required to provide information regarding our compensation policies and decisions relatingrelated to our President and Chief Executive Officer (CEO)(including any individual who served as our Chief Executive Officer during the past fiscal year), our Chief Financial Officer, (CFO) and the three other most highly compensatedhighly-compensated executive officers serving as executive officers at the end of the year.fiscal year (including up to two additional officers who would qualify as a NEO but for the fact that he or she was not serving as such as of fiscal 2020 year-end). We refer to our CEO, our CFO and the other executive officersforegoing individuals for whom disclosure is required as our “named executive officers” or “NEOs”.NEOs. We intend this Compensation Discussion and Analysis to provide information regarding, among other things, the overall objectives of our compensation program and each element of compensation provided to the NEOs.
The NEOs for fiscal 20182020 and their titles are listed in the following table:
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| Name | Title |
Brian C. WalkerAndi R. Owen | President and Chief Executive Officer (retiring effective August 21, 2018)(CEO) |
| Jeffrey M. Stutz | Executive Vice President and Chief Financial Officer (CFO) |
| Gregory J. Bylsma | President, North America Contract |
Andrew J. Lock | Former President, Herman Miller International (retired July 31, 2018)& Global Operations |
| B. Ben Watson | Chief Creative Officer |
| Megan Lyon | Chief Strategy Officer |
Fiscal 20182020 Company Performance
The COVID-19 pandemic significantly disrupted fourth quarter results. We continuedhave been focused on key short-term and long-term actions to make significant progress in fiscal 2018 toward our long-term vision and financial objectives: delivering on our strategy for diversified growth, expanding into higher margin segments and categories, and continuing to enhance the Herman Miller global brand. In addition to meaningful progress on our long-term objectives, we achieved increased sales and orders for the eighth consecutive year and delivered consolidated revenue of $2,381.2 million in fiscal 2018. Revenue growth, strong expense management and a lower tax rate helped offset commodity and pricing headwinds to deliver adjusted EPS 6% ahead of the prior year, which is discussed elsewhere in this Proxy Statement. We also continued to maintain a strong balance sheet and cash flow profile. As a result of this financial performance, we recently announced a 10% increase to our quarterly dividend rate beginning in October 2018.
Alignment of Pay and Performance
In fiscal 2018, consistent with prior years, the Board’s Executive Compensation Committee (Committee) reviewed multi-year analyses that evaluated the relationship between CEO realizable pay and financial performance (including total shareholder return) for Herman Miller and its peer group companies (described below in detail in the section entitled "Benchmarking of Compensation"). The Committee conducts these analyses to ensure the desired linkage between executive pay and company performance.
The following graph illustrates the relationship, compared to our peers, between:
CEO Realizable Pay (fiscal years 2015 through 2017 which is the most recent 3-year time period for which peer data is available): Calculated as the sum of annual base salary, actual annual incentive award paid and the value of stock awards granted (based on each company’s fiscal year end closing stock price) divided by target pay
Total Shareholder Return (TSR): Annualized TSR for fiscal years 2015 through 2017
Compensation Discussion and Analysis (continued)
2017 Say on Pay Vote and Shareholder Outreach During Fiscal Year 2018
Prior to our 2017 Say on Pay Vote, we had historically received overwhelming support of our executive compensation program, averaging 98%. Around the time of the 2017 Annual Shareholders Meeting, we contacted shareholders over the course of the proxy voting period to hear their views regarding our executive compensation program. A majority of the investors with whom we spoke supported our compensation program, which was further exhibited by 82% of shareholders voting in favor of our 2017 Say on Pay proposal.
When engaging with shareholders in fiscal 2018, around the time of our 2017 Annual Shareholders Meeting, the discussions focused primarily on the following items regarding our compensation program:
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| |
What We Heard; | What We Did: |
A portion of our long-term incentive awards should factor in relative performance measures | We added PSUs, based on relative TSR compared to the peer group to the fiscal 2019 LTI mix |
It is not clear how the Committee sets goals for the Herman Miller Value Added Performance Share Units | We have provided additional details below to provide further clarity on our goal setting process and will continue to do so in future years |
All equity awards should be double-trigger | At its June 2018 meeting the Committee decided that all equity awards, starting with those granted in July 2018, will be double-trigger. |
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1. | Our Long-Term Incentive Mix. Our Committee regularly reviews the mix of our incentives. For awards granted to NEOs in fiscal 2018, the LTI value was equally split among performance shares units, restricted stock units and stock options. Based on investor feedback, we increased the weighting for performance share units (from 33% to 50%) and added a relative TSR metric (see the "Compensation Program Changes for Fiscal 2019" section for additional details).
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2. | How We Set Performance Goals for our Herman Miller Value Added Performance Share Units. Our Herman Miller value added performance share units vest if the company’s annual earnings before interest, taxes, depreciation and amortization (EBITDA) less a capital charge exceed certain pre-established goals. We refer to EBITDA less a capital charge as HMVA. Each year we set the level of HMVA needed for threshold, target, and maximum payout based on a certain average annual percentage increase over the three year performance period. In absolute terms, the threshold and maximum performance goals for the 2018-2020 awards were lower than those for the 2017-2019 awards.
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Compensation Discussion and Analysis (continued)
This was primarily due to our fiscal 2017 year being comprised of 53 weeks, but our 2018 fiscal year only being comprised of 52 weeks. As a result, we adjusted our fiscal 2017 HMVA to excluderecover from the impact of the extra weekpandemic and increase shareholder value. Net sales in fiscal 2020 of operations for$2.49 billion reflected a decrease of 3.1% from the purposeprior fiscal year. Prior to the disruption resulting from the COVID-19 pandemic, net sales through the first three quarters of setting our fiscal 2018 HMVA performance goals. After such adjustment, our actual fiscal 2016 HMVA (which served as the starting point for our fiscal 2017-2019 HMVA performance goals) was2020 were 6.0% higher than our actual fiscal 2017 HMVA (which served as the starting point for our fiscal 2018 HMVA performance goals). When adjusted for this factor, our 2018-2020 goals are equally aggressive to those of the prior cycle and reflect significant growth overyear. Gross margin of 36.6% was 40-basis points higher than the prior years. As such, our threshold and maximum goalsyear for our fiscal 2018-2020 HMVA awards were, in absolute dollar terms, less than our threshold and maximum goals for our fiscal 2017-2019 HMVA awards. But, they remained unchanged from our fiscal 2017-2019 HMVA in terms of the percentage increase required for threshold and maximum payout. The table below illustrates our HMVA goals for the three most recent performance cycles.
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| | | |
| Payout % of Target | 2018-2020 Average Value Added | 2017-2019 Average Value Added | 2016-2018 Average Value Added |
| 200% of Target PSUs | $230 million or more | $239 million or more | $193 million or more |
| 100% of Target PSUs | $210 million | $210 million | $170 million |
| No PSUs earned | Less than $183 million | Less than $191 million | Less than $154 million |
| Capital Charge | 10% | 10% | 10% |
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3. | How We Treat Equity Awards Upon a Change in Control. Our 2011 Long-Term Incentive Plan provides that, upon a change in control, if the surviving company assumes an award (or if we are the surviving company), then the vesting of the award will be accelerated only if the award recipient’s employment is terminated under certain circumstances within two years of the change in control (a “double-trigger”). However, the plan allows an award agreement to provide for different treatment, and the terms of certain restricted stock unit and performance share unit award agreements that we have provided to our NEOs state that the awards will vest immediately upon a change in control. We quantify the benefits that each named executive officer would receive upon a change in control in the table under the heading “Potential Payments upon Termination, Death, Disability, Retirement or Change in Control.” Starting in July 2018, all equity award agreements will be double-trigger.
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The Committee believes that the performance of our executive compensation program during fiscal 2018 was consistent with our compensation philosophy and objectives, as we describe below, and that the compensation we paid to our NEOs was appropriate and reflective of our overall performance. However, we value investor input and, based on the suggestions of our investors, we made several changes to our long-term incentive compensation for fiscal 2019 (see the “Changes to Compensation Program for 2019 -Long-Term Equity Incentives” section below).
Our shareholders will have the opportunity to cast an advisory “Say on Pay” vote at this year’s annual meeting as well. The Committee will take the vote into consideration when evaluating the effectiveness of the company’s executive compensation program.
Overview of Compensation Philosophy and How We Set Pay
Overview of Compensation Program
We have designed our compensation program to provide corporateexecutive officers who performperforming their duties at a proficient level with the opportunity to earntarget compensation levels that reflectsreflect the market median compensation for their position based upon data that our independent compensation consultant provides (as we describefurther described in the section on Benchmarkingtitled "Benchmarking of Compensation)Compensation"). The compensation program requires that a majority of the corporateexecutive officer’s compensation be determined based upon the company’sCompany’s performance. The Committee believes that the compensation program, through the use of base salary, an annual incentive, and long-term incentive awards (referred to collectively as "total annual compensation") operates in a manner consistent with these objectives. The Committee also believes that the compensation program rewards performance that generates both consistent and long-term enhancement of shareholder value.
Compensation Discussion and Analysis (continued)
Compensation Philosophy
The Committee'sOur compensation philosophy, as approved by the Executive Compensation Committee, is to allowreward our executives for an appropriate level of risk and a correspondingcreating shareholder value. We establish market-competitive target compensation reward within a range that bears a relationshiplevels but provide the opportunity to the competitive market, to the responsibilities of the employee and to the performance of the employee and our company.earn above or below-target levels based on performance. Consistent with this philosophy, the key objectives of our executive officer compensation program are to:
Link a material portion of executives'executive officers' total annual compensation directly to the company's performanceCompany's performance.
Reinforce our values, build corporate community,commitment to our people, planet, and focus employees on common goalscommunities.
Align the interests of executivesexecutive officers with the long-term interests of shareholdersshareholders.
Attract, motivate, and retain executivesexecutive officers of outstanding abilityability.
Herman Miller, Inc., and Subsidiaries33
Compensation Policies and Practices That Reflect Our Compensation Philosophy
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| What We Do |
| a | Pay for Performance |
| a | Balance Long-Term and Short-Term Incentives |
| a | Benchmark Compensation Against an Appropriate Peer Group |
| a | Maintain Clawback RightPolicy |
| a | Monitor for Risk-Taking IncentivesConduct an Annual Risk Assessment |
| a | Maintain Stock Ownership Requirements |
| a | Prohibit Hedging and Pledging |
| a | Limit Perquisites |
| a | Engage an Independent Compensation Consultant |
| a | Hold Executive Sessions at Each Committee Meeting |
| What We Do Not Do |
| x | No Gross-Ups for Excise Taxes |
| x | No "Single Trigger" Severance |
| x | No Repricing of Options |
| x | No Guaranteed Compensation |
| x | No Dividends on Unvested Equity |
| | |
Compensation Discussion and Analysis (continued)
Elements of the Compensation Program
The following table provides an executive summary of our fiscal 20182020 compensation program for our corporateexecutive officers:
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| | |
|
| Compensation Element | General Description | Objective of Compensation Element |
| Base Salary | Base salaries reflect market rates for comparative positions, and each NEO's historical level of proficiency and performance.performance, and their roles and duties. | The base salary of NEOs typically varies around the median depending on an individual’s experience, performance, and internal equity considerations. The Committee or the Board in each circumstance uses its judgment and experience in setting the specific level of base salary relative to the general market median data. |
| Annual Incentive | We provide corporateexecutive officers the opportunity to earn an incentive bonus pursuant to the Annual Executive Incentive Cash Bonus Plan. The plan provides for the annual payment of a cash bonus (incentive bonus)(incentive) to selected corporateexecutive officers based upon the performance of the companyCompany (and in some cases, various business units and/or functional goals) during the fiscal year. The primary measure of financial performance for the bonus is EBITDA, which represents the company's earnings before interest, taxes, depreciation and amortization (excluding non-controlling ownership interests).fiscal 2020 incentive was Adjusted Operating Income. | The purpose of the EBITDA-based Annual Executive Incentive Cash Bonus Plan is to closely link incentive cash compensation to the creation of shareholder value. We intend for the plan to foster a culture of performance, and ownership, promote employee accountability, and establish a framework of manageable risks imposed by variable pay. We also intend the plan to reward long-term, continued improvements in shareholder value with a share of the wealth created. |
The Committee believes that, into support of the company'sour strategy organizing around operating as a single business unit and vertical markets,as well as supporting functional business units, it is important to tie a significant portion of the corporateexecutive officers' cash bonusannual incentive to the overall Company performance of the various operating(as well as functional business units and vertical business that is within the officer's span of control. Additionally, some corporatesupported by executive officers have functional objectives that determine up to 25% of their annual incentive bonus. |
An executive's total cash compensation is comprised of both base salary and annual incentive bonus.
as applicable). |
| Long-Term Equity Incentives | The Committee and Board have historically granted various types of long-term incentive awards:awards including: Restricted Stock Restricted Stock Units, Herman Miller Value Added Performance Share Units,Awards, RSUs, PSUs, Relative TSR Performance Share Units,Total Shareholder Return ("TSR") PSUs, and Stock Options.Options with a three-year vesting period. | The key objectives of granting long-term equity incentive awards are: |
- to provide an appropriate level of equity reward to corporateexecutive officers that ties a meaningful part of their compensation to the long-term returns generated for shareholders. |
- to provide an appropriate equity award to the next level of corporateexecutive officers where market data would support their inclusion in an annual equity award plan. |
- to assist the achievement of ourin developing an ownership stake and achieving share ownership requirements. |
- to attract, retain, and reward key employees. We believe a significant portion of executive officer pay should be aligned with long-term shareholder returns and that encouraging long-term strategic thinking and decision-making requires that corporateexecutive officers have a significant stake in the long-term success of Herman Miller. |
| Retirement and Health Benefits | We maintain retirement plans along with a broad base of health insurance plans available to full-time and most part-time employees. | The NEOs participate in such retirement plans and health insurance plans on the same terms as all other employees within their respective geographic region or business unit. |
Compensation Discussion and Analysis (continued)
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| Other Executive Compensation Plans | We provide limited additional compensation programs to our corporateexecutive officers, including a compensation protection program in the form of executive long-term disability;disability and a retirement equalization program in the form of a non-qualified retirement match program with an optional deferred compensation element; and in the case of NEOs, a perquisites program with a value of between $20,000 (CEO) and $12,000 (other NEOs) per year.element. | It is our goal to provide market competitive benefits which allow us to attract and retain critical executive talent. |
Herman Miller, Inc., and Subsidiaries35
The following charts illustrate the key elements of our compensation for our NEOs:
CurrentElements of Total Annual Compensation
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Base Salary Paid in Cash
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Short-Term Incentive Paid in Cash Based on EBITDA Performance
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FY18 and FY19 Long-Term Incentives
Compensation Discussion and Analysis (continued)
The Committee determined that the total direct compensation for each NEO for fiscal 2018, and as approved for fiscal 2019, is within the benchmarked range given each NEO’s performance, position and the company’s performance. We provide more detail regarding each element of compensation for fiscal 2018 in the sections below.2020
Base Salary
The Committee and the Board granted merit increases for fiscal 2018 to our employees, including the NEOs. The base salaries of each of our NEOs was within the range established based on market data for their position. Salary changes went into effect July 18, 2017 and are detailed as follows:
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| | | | | |
| Name | Salary for Fiscal 2018 | Percent Increase |
| Brian C. Walker | $ | 975,000 |
| 6.0 | % |
| Jeffrey M. Stutz | $ | 450,000 |
| 12.5 | % |
| Gregory J. Bylsma | $ | 465,000 |
| 5.7 | % |
| Andrew J. Lock * | $ | 344,000 |
| 2.7 | % |
| B. Ben Watson | $ | 430,000 |
| 6.2 | % |
* Measured in pounds sterling at an exchange rate of 1.2794 would yield £268,876.
The Board approved the fiscal 2018 salary for each of the NEOs based on its review of market data, corporate results and individual performance. Specifically, Mr. Walker’s increase reflects the Board’s recognition of Mr. Walker’s continued efforts to grow the business opportunities for the company. Mr. Stutz’s increase was a result of his continued growth and development in his role, his efforts to structure a financial strategy that aligns with the company’s business objectives and the gap between prior salary and market rates. Mr. Bylsma’s increase is a reflection of his continued improvement of the company’s operations capabilities as well as his new responsibility for the overall North America Contract business which includes North America Work, Government, Healthcare and Education businesses. Mr. Lock’s increase is in recognition of his implementation of infrastructure to grow the company’s International business. Mr. Watson’s increase is in recognition of the improvement in the company’s brand strategy and messaging, his new responsibility for R&D and his new responsibility for streamlining our global portfolio of new products.
Annual Executive Incentive Cash Bonus Plan
Setting Target BonusesIncentive Targets
TheEach year, the Committee at the beginning of each fiscal year, establishes a target bonus pool representing the amount of incentive bonuses that may be paid under the Annual Executive Cash Incentive Bonus Plan if the company achieves the EBITDA amount contained in the company’s annual financial plan as approved by the Committee and the Board. The Committee also establishes a target bonus for each participant expressed as a percentage of base salary, which is the bonusincentive amount the NEO would receive if all performance goals were achieved at target. The NEOs each have the opportunity to earn up to a maximum of 200% of target, however, no bonuses are earned unless performance exceeds the target bonus and may earn zero bonus if our goals are not achieved.threshold level. The annual cash incentive opportunity levels for each of our NEOs for 2018,fiscal 2020, as a percentage of base salary, were as follows:
| | | Name | Threshold Bonus as % of Base Salary | Target Bonus as % of Base Salary | Maximum Bonus as % of Base Salary | Threshold Incentive as % of Base Salary | Target Incentive as % of Base Salary | Maximum Incentive as % of Base Salary |
| Brian C. Walker | 0% | 100% |
| 200% |
| |
| Andi R. Owen | | 0% | 115% | 230% |
| Jeffrey M. Stutz | 0% | 65 | % | 130 | % | 0% | 65% | 130% |
| Gregory J. Bylsma | 0% | 65 | % | 130 | % | 0% | 65% | 130% |
| Andrew J. Lock | 0% | 65 | % | 130 | % | |
| B. Ben Watson | 0% | 65 | % | 130 | % | 0% | 65% | 130% |
| Megan Lyon | | 0% | 65% | 130% |
We set the target incentive bonus percentage for the NEOs so that the incentive bonus at target performance will generally equal 100% ofapproximate the market median bonusincentive amount for comparable positions as shown in the market data and yield a median target total compensation opportunity, although we may adjust base pay and bonusincentive to maintain total compensation in an amount that is consistent with our compensation philosophy. The Committee believes that this use of incentive bonus is consistent with the objective of making compensation for senior corporateexecutive officers more variable with the company’sCompany’s performance.
At the beginning of each fiscal year, the Committee establishes threshold, target, and maximum performance goals under our Annual Executive Cash Incentive Bonus Plan. The Committee determines these performance goals after review and discussion with management of the Company’s annual financial plan as approved by the Committee and
Compensation Discussion and Analysis (continued)
The Committee is responsible for setting performance goals for our annual incentive bonuses for each of our NEOs, other than our CEO, whose goals the full Board sets.Board. For fiscal 2018, we based2020, each NEO’s annual incentive bonuswas tied to our fiscal 2020 consolidated Adjusted Operating Income results.
Fiscal 2020 Performance Results and Incentive Payouts
For fiscal 2020, consistent with our focus on our 2018growth and operating margin expansion, the Committee established consolidated EBITDA results. Messrs. Bylsma, Lock and Watson also had a portion of their compensationAdjusted Operating Income performance goals based on functional goals and/or business unit operating results. Specifically, for fiscal 2018, the table below illustrates the portion of each NEO’s bonus that is tied to corporate and functional or business unit goals.
The consolidated Corporate EBITDA target for fiscal 2018, which would result in 100% payoutits review of the Board-approved financial plan and discussions with management. The target was set to reflect our overall growth imperative and our expectations of continued growth in specified markets. As discussed in our 2019 Proxy Statement, Adjusted Operating Income replaced Adjusted EBITDA portion ofas the primary financial metric in the annual incentive bonus, was $269.0 million. Achieving 113%program to better align our performance targets with a sharp focus on operating income growth and margin expansion. Additionally, incentive payout targets for the entire leadership team were based on consolidated corporate performance to better align them with our One Herman Miller strategic priority.
As discussed previously, the extraordinary impact of the EBITDA target ($304.0 million) would result in a 200%COVID-19 pandemic required the Committee to carefully consider the appropriate measurement of fiscal 2020 performance for the purpose of determining annual incentive payout levels. Given the uniqueness of the eligible bonus payout,situation and anything below 94.4%the impact of the COVID-19 pandemic on our fourth quarter results, the Committee determined it was appropriate to provide a prorated, below target EBITDA ($254.0 million) would result in no payout.annual incentive payment of 69.23% based on our year-to-date performance through the end of the third quarter. Specifically, the total payout opportunity was reduced to provide only ¾ of target, which was then adjusted for our results through the third quarter. Through the end of the third quarter, the annual incentive payout was tracking at over 90% of target on a full year basis. The maximumCommittee’s decision to pay a prorated bonus for fiscal 2020 reflects strong execution against our strategic priorities and strong sales, operating income, and margin performance delivery through the first three quarters of the year prior to the unforeseen and unprecedented impact of COVID-19. The business was on solid operational footing when the crisis struck and the leadership team has navigated the uncertainty by implementing a series of short- and long-term strategies to protect our people, continue contributing to our community, supporting those on the front lines, all while maintaining liquidity and ensuring financial stability as we navigate the continuing COIVD-19 crisis. Prior to incentive payout, the Audit Committee approved the financial results for the portion of our NEOs’ bonuses based on functional goals or business unit EBITDA was also limited to 200%.year and the resulting Company performance factor.
2018 Performance Results and Bonus Payouts
ForBased on the performance results for fiscal 2018,2020, the company’s actual EBITDA (as adjusted inincentive amounts the manner we describe below) was $266.4 million, which was between the target amount of $269.0 million (100%) and the minimum amount of $254.0 million (0%) and resulted in a payout percentage of approximately 93% of the target value for the fiscal year. The EBITDA bonus amounts weCompany paid to the NEOs were as follows:
| | | Name | Target Bonus Percent Tied to Company EBITDA |
Company Performance Factor | Bonus Earned For Company Performance |
Target Bonus Percent tied to Function/Bus Unit |
Function/ Bus Unit Performance Factor | Bonus Earned For Function/Bus Unit Performance |
Total Bonus Amount Paid |
Bonus Amount Deferred (1) | Target Incentive Tied to Adjusted Operating Income | Company Performance Factor | Total Incentive Amount Earned | Incentive Amount Deferred (1) |
| Brian C. Walker | 100.00 | % | 0.9253 |
| $ | 894,142 |
| | | | $ | 894,142 |
| $ | 71,531 |
| |
| | | ($) | (%) | | ($) |
| Andi R. Owen | | $ | 1,141,154 |
| 115.00 | % | 0.6923 | $ | 789,976 |
| $ | 39,499 |
|
| Jeffrey M. Stutz | 65.00 | % | 0.9253 |
| $ | 265,888 |
| | | $ | 265,888 |
| $ | 26,589 |
| $ | 332,205 |
| 65.00 | % | 0.6923 | $ | 229,988 |
| $ | 25,299 |
|
| Gregory J. Bylsma | 32.50 | % | 0.9253 |
| $ | 138,160 |
| 32.50 | % | 0.8761 |
| $ | 131,263 |
| $ | 269,423 |
| $ | 26,990 |
| $ | 358,005 |
| 65.00 | % | 0.6923 | $ | 247,850 |
| $ | 24,785 |
|
| Andrew J. Lock | 32.50 | % | 0.9253 |
| $ | 108,635 |
| 32.50 | % | 2.0000 |
| $ | 234,829 |
| $ | 343,464 |
| | |
| B. Ben Watson | 48.75 | % | 0.9253 |
| $ | 192,195 |
| 16.25 | % | 1.0000 |
| $ | 69,234 |
| $ | 261,429 |
| $ | 26,143 |
| $ | 312,855 |
| 65.00 | % | 0.6923 | $ | 216,592 |
| $ | 21,659 |
|
| Megan Lyon | | $ | 312,855 |
| 65.00 | % | 0.6923 | $ | 216,592 |
| $ | — |
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(1) - This amount represents the portion of the bonus that the NEO elected to defer under the Herman Miller, Inc. Executive Equalization Retirement Plan described later in this Compensation Discussion and Analysis.
Prior to payout of the bonuses, the Audit Committee approves the calculation of EBITDA results for the year and the resulting company performance factor. The Committee also certifies the company performance factor and the function/business unit performance factors for use in the Incentive bonus calculation.
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| (1) | This amount represents the portion of the bonus that the NEO elected to defer under the Herman Miller, Inc. Executive Equalization Retirement Plan described later in this Compensation Discussion and Analysis. |
Long-Term Equity Incentives
Setting Target LTILong-Term Incentive ("LTI") Values
For each NEO,Executive Officer, the Committee calculates a target value of LTI grants for the current fiscal year that is expressed as a percentage of base salary and determines the percent of the target LTI value that should be allocated to each award type. The Committee sets the total target value of the LTI grants for each NEO at a level intended to ensure that the NEO’s total direct compensation would correspond with the market median of the market data for a comparable NEO’s individual position. Following the end of the fiscal year, the Committee determines the total value of LTI grants for each NEO based on each NEO’s target value and the company’s financial performance for that year relative to target.value. We convert that value for each NEO into grants of restricted stock unitsRSUs and performance share unitsPSUs based on the closing price of our stock on the date of grant and grants of stock options, as applicable, using a Black-Scholes valuation on the date of grant usingand the share price on the date of grant as the exercise price.
Herman Miller, Inc., and Subsidiaries37
Grants Awarded in Fiscal 20182020
The table below illustrates the target value of the LTI grants, expressed as a percentage of theirthe NEO's base salary, to our NEOs that the Committee and Board established and granted in July 2017.2019. The target values associated with these grants were allocated approximately equally among the following three award types: 25% delivered in RSUs, Herman Miller Value Added Performance Share Units30% delivered in Revenue Growth PSUs, and stock options.45% delivered in Operating Income Growth PSUs. The Revenue Growth and Operating Income PSUs are both subject to a three-year relative TSR modifier. Each of these awards, described in more detail below, directly ties management’s compensation opportunity to the creation of shareholder value.
The following table discloses the types of awards granted in July 2017 (fiscal 2018). It does not include grants of restricted stock units that we awarded to the NEOs (excluding Brian Walker) in connection with the retention agreements discussed in the paragraph entitled "Retention Agreements" later in this Compensation Discussion and Analysis. Those units are disclosed in the "Grants of Plan-Based Awards" table.
Compensation Discussion and Analysis (continued)fiscal 2020:
| | | Name | Target of LTI as a % of Salary | Restricted Stock Units | Herman Miller Value Added Performance Share Units | Number of Options | Option Exercise Price | Target of LTI as a % of Base Salary | Restricted Stock Units | Adjusted Operating Income Performance Stock Units at Target | Revenue Growth Performance Stock Units at Target |
| Brian C. Walker | 300 | % | 27,259 |
| 27,259 |
| 143,975 |
| $ | 33.75 |
| |
| Andi R. Owen | | 275 | % | 15,319 |
| 25,976 |
| 17,317 |
|
| Jeffrey M. Stutz | 110 | % | 4,346 |
| 4,346 |
| 22,953 |
| 33.75 |
| 125 | % | 3,593 |
| 6,093 |
| 4,062 |
|
| Gregory J. Bylsma | 125 | % | 5,432 |
| 5,432 |
| 28,691 |
| 33.75 |
| 125 | % | 3,871 |
| 6,565 |
| 4,377 |
|
| Andrew J. Lock | 95 | % | 3,145 |
| 3,145 |
| 16,611 |
| 33.75 |
| |
| B. Ben Watson | 80 | % | 3,200 |
| 3,200 |
| 16,901 |
| 33.75 |
| 125 | % | 3,384 |
| 5,738 |
| 3,826 |
|
| Megan Lyon | | 125 | % | 3,384 |
| 5,738 |
| 3,826 |
|
Key Features of Each Award
Restricted Stock Units: The restricted stock units (RSU)RSUs represent the right to receive shares of Herman Miller, Inc. common stock. Each unit represents the equivalent of one share of the common stock as of the date of grant and cliff vests after three years. RSUs convert into shares upon vesting. Dividends are not paid over the vesting period but accrue on the RSUs and are added to the total value of the units at the time of vesting.
Herman Miller Value Added
Performance ShareStock Units: The Herman Miller value added performance share units are units representing PSUs represent the right to receive Company shares of Herman Miller, Inc. at the end of the specified performance period. The Committee establishes the goals at the start of each three-year performance period. These units cliff vest after three years if certain Herman Miller Value Added goals are met. The awards provide that the total number of shares that finally vest may vary between 00% and a maximum of 200% of thenumber of units awarded depending upon performance relative to the established Herman Miller Value Added goal. The Committee establishes the Herman Miller Value Added goals at the start of each three-year performance period. The awards also provide the Committee the ability to extend the performance period to a total of five years; however, if the extension is granted, then no more than 34% of the target grant may vest. UnitsPSUs convert into sharesCompany stock upon vesting. Dividends do not accrue on the awards.
For fiscal 2020, the Company issued Adjusted Operating Income and Revenue Growth PSUs. Operating Income and Revenue Growth provide clear line of sight for our employees and our shareholders on the alignment of our financial performance with share price. The growth orientation of these measures is clearly linked to our strategy.
Relative Total Shareholder Return ("TSR") modifier: The payout opportunity for all PSUs is subject to modification based on our TSR performance relative to the peer group. The relative TSR modifier provides for a 25% increase to the PSU vesting if our relative TSR performance is at or above the 75th percentile of our peer group or a 25% decrease to the PSU vesting if our relative TSR performance is below the 25th percentile of our peer group. The relative TSR modifier cannot increase the PSU payout above 200%.
TSR is the total shareholder return to Herman Miller Value Addedshareholders, including reinvested dividends and share price changes that occur during a fiscal year. We determine TSR performance by comparing our TSR to a peer group of companies. The peer group of companies for fiscal 2020 is definedsubstantially the same as the company’s annual earnings before interest, taxes, depreciation and amortization (EBITDA) (excluding non-controlling ownership interests) less a capital charge. The capital charge for each cycle is determined by multiplying the company’s capital by its cost of capital. The Committee approves the determination of the cost of capital and EBITDApeer group that we use for purposes of benchmarking NEO compensation, and those companies are described below in the section entitled "Benchmarking of Compensation".
Program Changes for Fiscal 2021
In the spirit of considering the extraordinary and disruptive conditions brought on by the COVID-19 pandemic, there are design changes to the fiscal 2021 compensation plans that are intended to align and motivate our executive officers toward achieving key strategic priorities while delivering strong financial performance and creating shareholder value.
Base Salary for Fiscal 2021
As discussed previously, as part of the expense and liquidity management actions we have taken, there are no planned increases in the base salaries for our NEOs for fiscal 2021.
Fiscal 2021 Annual Incentive
In April 2020, we announced the suspension of the fiscal 2021 annual incentive plan. The Committee will evaluate alternatives to provide for fiscal 2021 bonus funding, if the Company outperforms the fiscal 2021 business plan.
LTI Grants Awarded in Fiscal 2021
The target value of the LTI grants that the Committee and Board established for our NEOs that will occur in fiscal 2021 as a percent of base salary are the same as fiscal 2020 (excluding the special stock option award discussed below). In fiscal 2020, a new long-term incentive design structure was implemented for the leadership team. This program was tied to aggressive growth goals that reflect our One Herman Miller Value Added Performance Share Units.strategy. The Committee has determined that for fiscal 2021, a more balanced approach is necessary to appropriately reflect the business challenges and work that management needs to do to address those challenges. Specifically, the Committee approved:
For grants made
A mix of award vehicles to deliver the target annual LTI award value: 30% RSUs, 30% stock options, and 40% PSUs
Granting the RSUs and stock options on our typical grant cycle in July
Delaying the grant of PSUs until no later than the end of the third quarter in fiscal 2018,2021 to allow management and the Value-AddedCommittee additional time to more thoroughly assess the rigor of the goals underlying the PSUs
Retaining a relative TSR modifier of +/- 25% for the PSUs
In addition, the Committee approved a grant of premium-priced stock options to the leadership team, including the NEOs on July 14, 2020. The premium-priced option awards are intended to further align the leadership team with the goal of increasing shareholder value. These awards enhance the focus on the long-term impact of the critical steps management is taking to aid in the recovery from the effects of the COVID-19 pandemic on the business and position the Company for future growth. The Board determined to grant premium-priced stock options, as follows:opposed to other forms of incentive compensation, because of the long-term nature of options and their direct alignment with share price appreciation. These options vest ratably over a three-year period commencing on the first anniversary of the grant date. These options only have value to the executives if our stock price increases by more than 10% of the stock price on date of grant.
The following table discloses the types of awards granted in July 2020 (fiscal 2021):
|
| | | | |
| Name | Restricted Stock Units | Stock Options (1) |
| Andi R. Owen | 35,408 |
| 400,177 |
|
| Jeffrey M. Stutz | 8,305 |
| 104,182 |
|
Gregory J. Bylsma (2) | — |
| — |
|
| B. Ben Watson | 7,822 |
| 90,007 |
|
| Megan Lyon | 7,822 |
| 69,102 |
|
|
| |
Payout %(1) | Stock Options include the grant of Targetpremium-priced options as follows: Ms. Owen, 275,930 options; Mr. Stutz, 75,040 options; Mr. Watson, 62,560 options; and Ms. Lyon, 41,655 options. |
| 2018 - 2020 Average Value Added |
200%(2) | As disclosed in our Form 8-K report filed on July 6, 2020, Mr. Bylsma notified the Company of Target PSUs | $230 million or more |
100% of Target PSUs | $210 million |
No PSUs Earned | Below $183 million |
Capital Charge | 10%his intent to retire no later than December 31, 2020, and therefore did not receive an LTI award in fiscal 2021. |
Stock Options: The options vest ratably over three years and have a ten-year life, and the exercise price of each option equals the fair market value of our stock on the date of grant. In fiscal 2018, we granted stock options to all NEOs.
Details of our Executive Compensation Program
Role of the Committee
The Committee consists of three directors, each qualifying as independent under NASDAQ’s listing requirements. The Board has determined that each member of the Committee also meets the definition of independence under our corporate governance guidelines and qualifies as a non-employee director for purposes of Rule 16b-3 under the Securities Exchange Act of 1934.
Herman Miller, Inc., and Subsidiaries39
The Committee’s primary functions are to oversee the compensation philosophy and strategy, to determine or recommend to the Board the compensation of companyCompany executive officers, including the NEOs, and to act as the Administrativeadministrative Committee for our executive compensation and broad-based equity and benefit plans.
Compensation Discussion and Analysis (continued)
The Committee is also responsible for providing recommendations to the full Board with respect to all aspects of the annual compensation of our President and CEO. In addition, the Committee, based upon recommendations from our CEO, approves the annual compensation for all other officers covered by Section 16 of the Securities Exchange Act of 1934 including the NEOs and other corporateexecutive officers. Our President and CEO establishes the base salary of all other executives.executive officers.
Among other responsibilities, the Committee establishes the performance objectives for the Annual Executive Incentive Cash Bonus Plan and our equity-based compensation plans, which cover the President and CEO, NEOs, other corporateexecutive officers, and other executive employees.
The Committee is also tasked to review and advise on the compensation philosophy and strategy of the company, review and approve compensation and benefit plans as required by the Committee Charter and review the annual compensation plans’ risk analysis.assessment. The Committee annually reviews tally sheets for each NEO that reflect the total direct compensation provided to the NEOs and information relating to all other elements of compensation, including payments under severance or change in control obligations. The Committee uses this information to help determine that our compensation program is consistent with market norms, our compensation philosophy, and the objectives referenced above.
Role of the External Compensation Consultants
The Committee has the authority and sole discretion to select independent compensation consultants, legal consultants, and other advisors to provide it independent advice. During July of fiscal 2018, theThe Committee retained Pay Governance LLC as its independent compensation consultants with respect to the compensation matters regarding our corporate officers. Prior to that time, Pearl Meyer & Partners served as the Committee's independent compensation consultant, including advisory services related to compensation of corporateexecutive officers for fiscal 2018.2020. The independent services that Pearl MeyerPay Governance provided to the Committee included reviewing the elements of compensation of the President and CEO as well as the other corporateexecutive officers and comparing those elements to our compensation philosophy and objectives and to market practices. We do not permit Pearl Meyer or Pay Governance to provide other consulting services to the company.Company.
Pearl Meyer
Pay Governance concluded that our compensation program established for those officers is consistent with our compensation philosophy and objectives as well as with market practices. With the approval of the Committee, wemanagement retained Meridian Compensation Partners LLC in fiscal 20182020 to provide marketplace compensation data and compensation consulting services to management for employees other than the corporateexecutive officers.
Benchmarking of Compensation
To ensure that executive officer compensation is competitive, the Committee uses marketplace compensation data to compare our compensation program to market pay practices. The Committee in determining fiscal 2018 compensation, also used a specific peer group for benchmarking pay (we list the memberscompensation in determining fiscal 2020 compensation. A listing of the peer group in the Additional Compensation Information, Peer Group section later in this Compensation Discussion and Analysis).members is provided below. This peer group included both direct competitors as well as comparable companies in other industries to reflect the competitive market for talent in which we compete.
Pearl Meyer
Pay Governance used the peer group information along with the following survey sources when analyzing the fiscal 20182020 market competitiveness of pay levels of corporateexecutive officers: Willis Towers Watson Executive Compensation Database, Aon Hewitt Executive Total Compensation Measurement Database, and Mercer Executive Database and Equilar Insight Database (we refer to the peer group information and these survey sources collectively as “market data”). We use theThe market data is used to determine competitiveness of base pay, annual incentive, and long-term incentive awards. Pearl MeyerPay Governance uses a regression analysis and aging to make allowances for time differences in the data and to align the data so that it is representative of companies having revenues equivalent to the operations that our individual corporateexecutive officers manage. Pearl MeyerPay Governance compared the base salary, target total cash, and target total direct compensation of each corporateexecutive officer to the 25th, 50th (market median), and 75th percentile of the Market Datamarket data for a comparable benchmark position.
Pearl Meyer
Pay Governance provided the Committee with benchmarking data, market practices and trends, peer group selection, and pay for performance evaluation information to provide appropriate context for the Committee’s deliberations. Our CEOMs. Owen made recommendations to the Committee regarding the compensation package for each of the corporateexecutive officers (other than himself)herself). The CEOMs. Owen based hisher recommendations with respect to corporateexecutive officers on the Pearl MeyerPay Governance information, hisher evaluation of the individual’s performance, the company’sCompany’s performance, and other factors. The Committee based its approval of the CEO’sMs. Owen’s recommendations for the compensation of corporateexecutive officers (other than the CEO) on the Committee’s review of the information from Pearl MeyerPay Governance relative to market pay, advice from Pearl MeyerPay Governance, and the Committee members’ own judgment, including their judgment on the relative performance of both the companyCompany and its corporateexecutive officers. Based upon these same factors relativeDecisions related to the CEO's performance,Ms. Owen’s compensation were determined by the Committee made a recommendation toand approved by the full Board for the CEO’s compensation. The Board of Directors determines the compensation of the CEO and the CEO did not participate in any conversations about his own compensation.Directors.
Compensation Discussion and Analysis (continued)
The Committee reviews and approves the peer group that we use in benchmarking compensation on an annual basis. The peers that we used for fiscal 20182020 are set forth below:
|
| | |
Aaron's Inc. | HNI Corporation | Lennox International, Inc. |
Acuity Brands, Inc. | Interface, Inc. | Polaris Industries, Inc. |
Belden Inc. | Kimball International, Inc. | Restoration Hardware Holdings, Inc. |
Brunswick Corporation | Knoll, Inc. | Select Comfort Corporation |
Ethan Allen Interiors, Inc. | La-Z-Boy, Inc. | Steelcase, Inc. |
Hill-Rom Holdings, Inc. | Leggett & Platt, Inc. | Tempur-Pedic International, Inc. |
During fiscal 2018, after we had already set executive compensation for 2018, the Committee worked with Pay Governance to revise our peer group. We are using this revised peer group when setting executive compensation for fiscal year 2019. The revised peer group is set forth below:
|
| | |
| American Woodmark Corporation | JELD-WENKimball International, Inc. | Steelcase, Inc. |
| Armstrong World Industries, Inc. | Knoll, Inc. | Tempur Sealy International, Inc. |
| Ethan Allen Interiors, Inc. | La-Z-Boy, Inc. | Universal Forest Products, Inc. |
| Hill-Rom Holdings, Inc. | Leggett & Platt, Inc. | Williams-Sonoma, Inc. |
| HNI Corporation | Masonite International Corporation | Wayfair, Inc. |
| Interface, Inc. | RH aka Restoration Hardware Holdings, Inc. | |
Armstrong World Industries, Inc. | Kimball International,JELD-WEN Holdings, Inc. | Sleep Number Corporation |
Ethan Allen Interiors, Inc. | Knoll, Inc. | Steelcase, Inc. |
Hill-Rom Holdings, Inc. | La-Z-Boy, Inc. | Tempur Sealy International, Inc. |
HNI Corporation | Leggett & Platt, Inc. | Universal Forest Products, Inc. |
Interface, Inc. | Masonite International Corporation | Williams-Sonoma, Inc. |
Our peer group is intended to represent companies against which we may compete for talent, with an emphasis on a number of criteria. For fiscal 2019,2020, we made a number of changes to the peer group in light of these criteria: We removed Aaron’s, Acuity Brands, Belden, Brunswick, Lennox Internationaladded Wayfair, which aligns with our global, retail, and Polaris because of differences in industry and customer focus. We replaced these six companies with American Woodmark, Armstrong World Industries, JELD-WEN, Masonite, Universal Forest Products and Williams Sonoma which better meet our selection criteria and enable us to maintain a peer group of robust size.
EBITDA Adjustments
The Committee has adopted guidelines for determining when adjustments to the company’s EBITDA are appropriate in calculating incentive plan performance. Under these guidelines, the Committee will consider whether adjustments are appropriate to best reflect the operating results of our business and appropriately incent management in a manner that is in the best interest of shareholders. Some common examples of potential adjustments under the guidelines include excluding restructuring costs from EBITDA in the period incurred and amortizing them back into the calculation over a five-year period, certain contingent consideration, transaction costs, effects of purchase accounting and income associated with acquisitions. We may exclude these items only in limited circumstances or only for certain periods or specified awards. The guidelines also include a framework for evaluating potential EBITDA adjustments that considers as to a potential item of adjustment:
Whether it is material to the result of the business;
Its impact on near-term cash flows;
Whether it is an accounting adjustment that does not reflect the ongoing operations of the business;
Whether it aligns the company’s performance outlook with long-term shareholder interests;
Whether the adjustment unfairly impacts one particular business unit;
Whether the company has made similar adjustments in recent reporting periods; and
Whether the related income or expense was offset in a prior reporting period (and, if so, if it was excluded from EBITDA).
For fiscal 2018, company EBITDA performance was adjusted for incentive plan purposes to reflect the following items (refer to the section “Reconciliation of Non-GAAP Measures” for further information):
Compensation Discussion and Analysis (continued)
|
| | |
Description | Adjustment to EBITDA
($ millions)
| Rationale for the Adjustment |
1. Amortization of previously excluded restructuring | $(1.9) | Board approved restructuring actions are not included in the calculation of adjusted EBITDA to help ensure management’s near-term compensation goals are not in conflict with the long-term strategic objectives of the business. Instead, related costs are amortized over a 5-year period and such amortization will be included in the calculation. |
2. Current year pre-tax restructuring expense | $8.2 | Board approved restructuring actions are not included in the calculation of adjusted EBITDA to help ensure management’s near-term compensation goals are not in conflict with the long-term strategic objectives of the business. Instead, these costs will be amortized over a 5-year period and such amortization will be included in the EBITDA calculation. |
3. Third party consulting costs related to profit optimization plans, net of amortization | $4.8 | The Committee determined it is appropriate to exclude from the calculation of EBITDA the third party consulting costs associated with the company's profit optimization plans for the Consumer and North America business segments to help ensure management’s near-term compensation goals are not in conflict with the long-term strategic objectives of the business. Instead, related costs are amortized against EBITDA as the savings from the initiatives are realized on a dollar-for-dollar basis. |
4. Costs associated with the CEO transition plan announced in February 2018 | $4.4 | The Committee determined it is appropriate to exclude the costs associated with the CEO transition plan announced in February 2018 as the costs are not reflective of the ongoing operation of the business. |
digital strategic initiatives.
Long-Term Equity Incentives
Our 2011 Long-Term Incentive Plan (which we refer to as the LTI Plan)Plan, which is intended to be replaced by the proposed 2020 Long-Term Incentive Plan, as described in the preceding section of this Proxy Statement) authorizes us to grant various forms of equity-based compensation (which we refer to as Long-Term Incentive Grants or LTI grants or awards). The Committee is responsible for administering all elements of the LTI Plan and for making all Long-Term Incentive Grants, with the exception of the CEO whose grants the Board approves.
Historically, the
The Committee has establishedestablishes targets relating to Long-Term Incentive awards at the beginning of each fiscal year (during the month offor grants typically made in July for that fiscal year) and made actual grants of awards during the month of July following the end of the fiscal year considering the company’s financial performance for that year. Typically, the Committee and the Board at their June and July meetings take four actions in connection with our LTI Plan: (a) set the target value for the LTI awards for the current fiscal year,year; (b) determine the types of awards to be used for the current fiscal year,year; (c) establish the performance criteria, if any, for certain awards for the current fiscal year; and (d) grant the long-term incentiveLong-Term Incentive awards for the just completedcurrent fiscal year based upon the company’s performance relative to target.year.
Grants under the LTI Plan are typically made in connection with the Board of Directors meeting in July of each year following the public release of our fiscal year-end financial results. As discussed previously, the fiscal 2021 LTI awards will be delivered to participants in two steps, with the initial one occurring in July, and the second step following by the end of the third quarter. We do not attempt to influence the amount of executive officer compensation by timing equity grants in connection with the disclosure of material information to the public. The backdating of equity award dates is specifically prohibited under policies adopted by the Board of Directors.
Other Considerations
Tally Sheet Review
In June 2017, the Committee reviewed executive compensation tally sheets that Pearl Meyer provided with respect to each corporate officer which reflected the total direct compensation to the NEOs and also information relating to all other elements of compensation including payments under severance or change in control obligations. The Committee uses this information to help it determine that our compensation program is consistent with market norms and with our compensation philosophy and the objectives referenced above.
Compensation Discussion and Analysis (continued)
Impact of Prior Compensation. Prior compensation of the NEOs does not normally impact how the Committee sets the current elements of compensation. The Committee believes the current competitive environment is more relevant in determining an NEO’s current total level of compensation. As described above, the Committee uses tally sheets to track all elements of current compensation. The Committee, however, has the ability to consider the impact of any special equity grants upon the value of future grants that we make to corporate officers under the 2011 Long-Term Incentive Plan.
Retirement and Health Benefits
Health Plans
We maintain a broad-basebroad base of health insurance plans available to all full-time and mostqualified part-time employees. The NEOs participate in such health insurance plans on the same terms as all other employees within their respective geographic region or business unit.
Herman Miller, Inc., and Subsidiaries41
Retirement Plans
We maintain broad-based retirement plans available for employees in the United States and the United Kingdom (UK).States. Our retirement plans are designed to provide an appropriate level of replacement income upon retirement. The benefits available to NEOs are the same as those available to other non-executive employees in their respective geographic region subject to limitations provided by law or regulation. The retirement plans include:
The Herman Miller, Inc. Profit Sharing and 401(k) Plan
The Herman Miller Limited Retirement Benefits Plan (UK)
Profit Sharing Plan and 401(k) Plan: The Herman Miller, Inc. Profit Sharing and 401(k) Plan consists of two parts. First, we make a core contribution to an employee’s 401(k) account equal to 4% of base salary on a quarterly basis. The amount of salary included in the calculation is limited to the maximum salary level permitted by the IRS. Second, the 401(k) portion of the plan permits employees to make salary deferrals into the plan up to the maximum amount permitted by law. We also make a matching contribution to fully match employee contributions up to 4% of the employee’s compensation contribution.
Herman Miller Limited Retirement Plan: Herman Miller Limited, our wholly owned UK subsidiary, provides a defined contribution retirement plan which provides for a non-discretionary fixed company contributionAs discussed previously, the Company has suspended contributions to the Profit Sharing and a company matching contribution. The fixed company contribution for employees varies between 2.4%401k Plans, as part of previously disclosed expense and 6.4% of the employee’s eligible compensation depending upon age and date of hire. In addition, the company will match an employee’s contributions up to an additional 2.8% of eligible compensation. Andrew Lock is the only NEO who participates in this defined contribution retirement plan. He is also a participant in the frozen defined benefit plan sponsored by Herman Miller Limited for employees hired prior to March 1, 2012.
liquidity management actions.
Other Executive Compensation Plans
Deferred Compensation Plan
The Herman Miller, Inc. Executive Equalization Retirement Plan was approved by the Committee and the Board in 2007. The plan is a supplemental deferred compensation plan and became available for salary deferrals beginning in January 2008. The plan is available to highly compensated United States employees who are selected for participation by the Committee. All NEOs are currently able to participate, except Andrew Lock due to his employment outside the United States.participate. The plan allows participants to defer up to 50% of their base salary and 100% of their annual incentive bonus. companycompensation. Company contributions to the plan “mirror” the amounts we would have contributed to the Herman Miller Profit Sharing and 401(k) Plan had the employee’s compensation not been above the statutory ceiling (currently $275,000)$285,000). Investment options under this plan are the same as those available under the 401(k) Plan. companyCompany contributions for amounts deferred in fiscal 20182020 appear in the 20182020 Summary Compensation Table under All Other Compensation.
Executive Long-Term Disability Plan
TheThis plan covers 60% of the rolling two-year average of compensation. CorporateExecutive officers are eligible to participate when they have earned over $6,000 in annual executive incentive compensation. This benefit continues as long as the executive officer remains disabled until age 65. The monthly benefit is capped at $10,000.
Compensation Discussion and Analysis (continued)
Perquisites
We provideAs described in last year's Proxy Statement, we eliminated the bundled benefits program previously provided to executive officers, effective May 31, 2019. In fiscal 2020, we provided a limited number of perquisitesselect benefit to corporate officers. We normally provide each NEO with a specified dollar amount which can be used for a variety of approved perquisites. These perquisites include financial planning, life insurance, spousal travel and other benefits. The Committee has adopted a policy that specifically restricts the use of corporate aircraft for non-business purposes. The 2018 calendar year perquisite maximum was $20,000 for the CEO and $12,000 for each of the other NEOs. Unspent allowances may be carried over into the next calendar year provided an executive continues to participate in this benefit. The total maximum allowance (new calendar year allowance plus amount carried over) may not exceed the sum of reimbursement allowances approved for the prior two calendar years.
In addition to the above perquisite allowances, in fiscal 2018, we also provided the NEOs and all other corporateexecutive officers with the opportunity to obtain comprehensive physicals at our cost.
Retirement, Retention, and Change in Control Agreements
Mr. Brian C. Walker’s Retirement
As we have previously disclosed, Mr. Walker announced his intention to retire from his position with the company by August 31, 2018. In connection with his retirement, Mr. Walker agreed to extend his post-employment non-compete and non-solicitation covenants from 12 to 18 months and to an unlimited confidential information and non-disparagement covenant. He also agreed to be available on a consultative basis for 18-months after his retirement to help with the transition to the new CEO and specifically to provide the new CEO with guidance and back- ground on our unique “contract” furniture business. In exchange for agreeing to extend his post-employment non-compete and non-solicitation covenants and to provide consulting services for up to 18 months, we agreed to pay Mr. Walker his base salary for an additional six months. Because Mr. Walker was already entitled to 12 months of base salary in exchange for his original 12 months of non-compete and non-solicitation covenants, he will receive base salary continuation for a total of 18 months following his retirement. We also agreed to provide Mr. Walker with a lump sum payment equal to 18 months of the employer portion of the premiums for his health and dental benefits. In the unlikely event Mr. Walker resigns prior to the identification of the new President and CEO of the company or is terminated for cause prior to August 31, 2018, he will not receive any of these payments. Given his retirement, the Committee determined that Mr. Walker would not be eligible for any equity compensation grants for fiscal 2019 or for a 2019 annual incentive opportunity.
Retention Agreements
Recognizing that the transition to a new CEO creates a period of uncertainty for our other employees, the Committee approved retention agreements for certain key executives, including our NEOs (other than the CEO), in February 2018. These agreements, which were intended to ensure the executives’ commitment to the company while we search for a new CEO, provide the following benefits:
A retention bonus equal to the executive’s actual annual bonus for fiscal 2018. The retention bonus will be payable in two equal installments on (a) the date the fiscal 2018 annual incentives are payable and (b) as part of the last payroll in December 2018, provided the executive remains employed on those dates and, in the discretion of the Board, a successful transition of the CEO position from Mr. Walker to the new CEO has occurred.
A grant of restricted stock units with a value equal to the executive’s base salary, which we granted in February 2018. Such restricted stock units will vest on the second anniversary of the grant date provided the executive remains employed on that date. These units are disclosed in the "Grants of Plan-Based Awards" table.
However, if we terminate the executive’s employment without cause or the executive elects to cease employment with the company for good reason prior to payment of the retention bonus or vesting of the RSUs, then the executive will continue to be eligible to receive the retention bonus and his or her RSUs will automatically vest if he or she signs and does not revoke a general release of claims. If no release is signed, the executive forfeits the retention bonus.
As we also previously disclosed, on March 2, 2018, Mr. Lock announced his intent to retire, and did so retire, effective July 31, 2018. As a result, Mr. Lock will receive a prorated (up to July 31,018) value of his restricted stock and will only receive 50% of the retention bonus, in accordance with the terms of his agreement described above. Mr. Lock has agreed to provide consulting services to our new President of International for 12 months following his retirement for no additional compensation.
Compensation Discussion and Analysis (continued)
Change in Control Agreements
Each NEO is party to a change in control agreement with us. The Committee believes the use of change in control agreements is appropriate as they help ensure a continuity of management during a possible take-over and help ensure that management remains focused on completing a transaction that is likely to maximize shareholder value. Benefits are payable under the agreements only if there is both a change in control and actual or constructive termination of employment. Potential payments under the change in control agreements are included in the tally sheets that the Committee reviews annually.
The narrative and footnotes to the tables entitled Potential Payments upon Termination, Death, Disability, Retirement, or Change in Control describe the change in control payments in greater detail.
Compensation Program Changes for Fiscal 2019
The following is a summary of changes that our Committee and Board of Directors have made to our executive compensation program for fiscal 2019 as of the date of this proxy statement.
Base Salary in Fiscal 2019
The Committee and Board of Directors approved the following changes in the base salaries of the continuing NEOs for fiscal 2019 as we discuss below:
|
| | | | | |
| Name | Salary for Fiscal 2019 | Percent Increase |
| Brian C. Walker | $ | — |
| — | % |
| Jeffrey M. Stutz | $ | 480,000 |
| 6.7 | % |
| Gregory J. Bylsma | $ | 480,000 |
| 3.2 | % |
| Andrew J. Lock | $ | — |
| — | % |
| B. Ben Watson | $ | 445,000 |
| 3.5 | % |
The Committee decided not to increase Mr. Walker’s compensation in light of his impending retirement. Mr. Stutz's increase is the result of his proficient performance in his role having completed a full three years in 2018 as CFO particularly in light of complexities in the global financial environment. Mr. Bylsma’s increase is a reflection of his continued improvement of the company’s operations capabilities as well as his new responsibility for the overall North America Contract business which includes North America Work, Government, Healthcare and Education businesses. Mr. Lock has no increase due to his retirement on July 31, 2018. Mr. Watson’s increase is in recognition of the improvement in the company’s brand strategy and messaging, his new responsibility for R&D and his new responsibility for streamlining our global portfolio of new products.
Each of the base salaries set for the NEOs was within the range established for his performance and position.
Incentive Cash Bonus for Fiscal 2019
For fiscal 2019, the measure of achievement under the Executive Incentive Cash Bonus Plan continues to be EBITDA. For fiscal 2019 awards, we are eliminating the function goals for Mr. Watson and other functional leaders, such that their 2019 annual incentive bonus will be based 100% on corporate EBITDA. Other provisions of the fiscal 2019 plan, such as the use of business unit goals, are the same as the fiscal 2018 plan. As discussed above, Mr. Walker is not eligible for a 2019 annual incentive bonus given that he is retiring by August 31, 2018.
LTI Grants Awarded in Fiscal 2019
The Committee approved several changes to our LTI grants for fiscal 2019. First, based on feedback we received from shareholders during fiscal 2018, we decided to add to our fiscal 2019 LTI mix for our executive leadership team performance share units that vest based on our TSR relative to our peer group. For fiscal 2019, applicable executives (including NEOs) received a mix of relative TSR performance share units, Herman Miller Value-Added performance share units, restricted stock units, and stock options, each making up 25% of the total LTI grant value.
Compensation Discussion and Analysis 42(continued)2020 Proxy Statement
The target levels for the relative TSR performance share unit payouts are as follows:
|
| |
Relative TSR Performance Percentile Compared to Peers | Payout % of Target |
80th percentile or greater
| 200% |
65th percentile
| 150% |
50th percentile = target performance
| 100% |
40th percentile
| 75% |
30th percentile = minimum performance
| 50% |
Below 30th percentile
| 0% |
Second, we eliminated the share pool concept for fiscal 2019. The share pool was intended to allow all of our LTI awards to be fully deductible under Section 162(m) as performance-based compensation, but given the elimination of the performance-based exception under 162(m) due to the Tax Cuts and Jobs Act, the pool is no longer relevant. (See the discussion under the heading “Deductibility of Compensation” below for more information.)
The target value of the LTI grants that the Committee and Board established for our NEOs (including all types) in July 2017 for final grants to occur in July 2018 (fiscal 2019) based on fiscal 2018 performance as a percent of base salary was 125% for Jeffrey Stutz and Gregory Bylsma and 90% for Ben Watson. The total target value was allocated approximately equaling among the award types that we granted to each NEO: RSUs, Herman Miller Value Added Performance Share Units, Relative Total Shareholder Return Performance Share Units and stock options. Mr. Walker is not eligible to receive a fiscal 2019 LTI award due to his retirement effective August 21, 2018.
The following table discloses the types of awards granted in July 2018 (fiscal 2019) based upon fiscal 2018 performance:
|
| | | | | | | | | | |
| Name | Restricted Stock Units | Herman Miller Value Added Performance Share Units | Relative Total Shareholder Return Performance Share Units | Number of Options | Option Exercise Price |
| Brian C. Walker | — |
| — |
| — |
| — |
| — |
|
| Jeffrey M. Stutz | 3,672 |
| 3,672 |
| 2,633 |
| 17,512 |
| $38.30 |
| Gregory J. Bylsma | 3,794 |
| 3,794 |
| 2,721 |
| 18,096 |
| $38.30 |
| Andrew J. Lock | — |
| — |
| — |
| — |
| — |
|
| B. Ben Watson | 2,526 |
| 2,526 |
| 1,812 |
| 12,049 |
| $38.30 |
Hedging and Pledging Policy
The Committee and the Board of Directors have adopted a policy prohibiting the Board of Directors and the corporateexecutive officers from hedging the economic risk of their ownership of our stock, including options or other derivatives related to the stock, and are prohibited from pledging Herman Miller stock.
Stock Ownership Guidelines
The Committee believes that significant stock ownership by top management is of critical importance to our ongoing success, as it helps link the interests of senior management and our shareholders. As such, we have established stock ownership guidelines, which apply to the nine members of the executive leadership team and beginning January 1, 2018, certain other corporateexecutive officers who work alongside the Executive Leadership Teamleadership team to ensure global strategic alignment across business units and functions. The stock ownership guidelines require these individuals to own shares of our common stock equal to a specified multiple of their annual base salary. The applicable levels are as follows:
President and Chief Executive Officer - 6 times base salary
Corporate
Executive officers with LTIP target equal to or greater than 100% of salary - 4 times base salary
Certain other direct reports to the CEO - 3 times base salary
Other corporateexecutive officers - 1 times base salary
Compensation Discussion and Analysis (continued)
Stock Retention Requirements
Until the ownership guidelines are met, the executive officer must retain in Company stock, 40% of the pretax spread value of vested restricted stock, performance shares, restricted stock units,PSUs, RSUs, deferred stock, and 40% of the pretax spread value of exercised stock options must be retained in company stock.options. Compliance with the requirements is determined at each time an executive officer disposes of companyCompany stock.
Incentive Clawback
We have not had any material restatementThe Herman Miller Compensation Recovery Policy provides for the recoupment of prior financial results. If such restatements were to occur, the Committee would review the matterboth cash compensation and determine what, if any, adjustment to current compensation might be appropriate. The LTI Plan and the Annual Executive Incentive Cash Bonus Plan give the Committee the ability to “claw back” incentive bonus payments and LTI grantsequity incentives from executive officers in the event of certain restatements.a restatement and/or improper conduct. The Board may, in its sole discretion, after evaluating the associated costs and benefit, and any other factors it deems relevant, seek to recover all or any portion of the recoverable incentive paid to any such executive officer during the applicable period.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid for any fiscal year to individuals who are covered executives. For compensation paid for fiscal 2018, our covered executives were limited to our CEO and our other three most highly compensated corporate officers for that year, other than our CFO. However, for compensation that we paid for fiscal 2018, Section 162(m) generally exempted compensation that qualified as “performance based” from the $1 million deduction limit. It was generally our intention that the compensation we paid to our covered executives for fiscal 2018 was deductible under Section 162(m) of the Code. Despite our intentions, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued under that section, we cannot assure that compensation we intend to satisfy the requirements for deductibility under Section
162(m) will so qualify. In addition, the Committee reserved the right to provide compensation during fiscal 2018 that did not qualify as performance-based compensation under Section 162(m) to the extent it believed such compensation was necessary or appropriate to continue to provide competitive arrangements intended to attract and retain, and provide appropriate incentives to, corporate officers and other key employees.
Starting with our fiscal 2019,2020, as a result of changes made to the applicability of Section 162(m) of the Code pursuant to the Tax Cuts and Jobs Act, our number of covered executives will expandexpanded to include our covered executives for 2018fiscal 2020 plus any executive who starting with fiscal 2019, serves as our CEO or CFO, or who is among the three most highly compensated executive officers for any fiscal year. In addition, only qualifying performance-based compensation that is paid pursuant to a binding contract in effect on November 2, 2017 will be exempt from the deduction limit. Accordingly, any compensation that we pay in the future pursuant to new compensation arrangements entered into after November 2, 2017, even if performance-based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive. Because of these changes to Code Section 162(m) by the Tax Cuts and Jobs Act, some of the compensation that we provide to our named executive officersNEOs in 2019 and future years may not be deductible under Section 162(m).
Post-Employment Compensation
The NEOs are generally “at will” employees. This means that they can be discharged at any time and for no reason. We have agreed to pay corporate officersexecutive officers' severance if they are terminated for reasons other than malfeasance or voluntary separation. For each NEO, severance would be equal to 18 months of base salary subject to the employee not competing with us during that period. The Committee’s determination as to the amount of severance payments for these NEOs is the result of benchmarking our practices to the Market Data.market data. In addition, we maintain the health insurance on such employee during the salary continuation period. In exchange for such payments the employee
Herman Miller, Inc., and Subsidiaries43
provides the companyCompany with a mutual release of all claims and agrees not to work for a competitor or solicit our employees during the salary continuation period.
Executive Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Managementmanagement and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement.
|
| | |
J. Barry GriswellDavid A. Brandon (chair) | David BrandonDouglas D. French | John R. Hoke IIIHeidi J. Manheimer |
Summary Compensation Table
The summary compensation table below shows the compensation for the NEOs for the fiscal years ended May 30, 2020 (2020), June 1, 2019 (2019) and June 2, 2018 (2018), June 3, 2017 (2017) and May 28, 2016 (2016). The details of the company'sCompany's executive officer compensation program are found in the Compensation Discussion and Analysis (or CD(CD&A) above.
| | Name and Principal Position
| Year | Salary ($) |
| Stock Awards ($)(1) |
| Option Awards ($)(1) |
| Non-Equity Incentive Plan Compensation ($)(2) |
| Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) |
| All Other Compensation ($)(4) |
| Total ($) |
| Year | Salary ($)(1) |
| Stock Awards ($)(2) |
| | Option Awards ($)(2) |
| Non-Equity Incentive Plan Compensation ($)(3) |
| All Other Compensation ($)(4) |
| Total ($) |
|
| Brian C. Walker | 2018 | 966,327 |
| 1,782,466 |
| 920,000 |
| 894,142 |
| | 165,106 |
| 4,728,041 |
| |
Andi R. Owen (6) | | 2020 | 992,308 |
| 2,749,995 |
| | — |
| 789,976 |
| 126,185 |
| 4,658,464 |
|
| President and Chief Executive Officer | 2017 | 916,846 |
| 1,626,984 |
| 1,240,002 |
| 684,059 |
| | 233,597 |
| 4,701,488 |
| 2019 | 742,308 |
| 1,837,820 |
| | 624,997 |
| 776,100 |
| 226,895 |
| 4,208,120 |
|
| Jeffrey M. Stutz | | 2020 | 511,084 |
| 747,908 |
| (5) | — |
| 229,988 |
| 59,365 |
| 1,548,345 |
|
| Chief Financial Officer | | 2019 | 482,308 |
| 413,575 |
| | 140,621 |
| 243,324 |
| 321,011 |
| 1,600,839 |
|
| | 2016 | 896,635 |
| 1,800,797 |
| 612,500 |
| 1,287,926 |
| | 116,742 |
| 4,714,600 |
| 2018 | 442,116 |
| 734,197 |
| | 146,670 |
| 265,888 |
| 40,183 |
| 1,629,054 |
|
| Jeffrey M. Stutz | 2018 | 442,116 |
| 734,197 |
| 146,670 |
| 265,888 |
| | 40,183 |
| 1,629,054 |
| |
| Executive Vice President and Chief | 2017 | 392,115 |
| 225,982 |
| 316,667 |
| 190,176 |
| | 57,383 |
| 1,182,323 |
| |
| Financial Officer | 2016 | 336,538 |
| 122,480 |
| | 314,226 |
| | 11,432 |
| 784,676 |
| |
| Gregory J. Bylsma | 2018 | 461,058 |
| 820,191 |
| 183,335 |
| 269,903 |
| | 49,080 |
| 1,783,567 |
| 2020 | 550,777 |
| 823,583 |
| (5) | — |
| 247,850 |
| 44,320 |
| 1,666,530 |
|
| President, North America Contract | 2017 | 438,423 |
| 347,057 |
| 379,166 |
| 214,257 |
| | 83,616 |
| 1,462,519 |
| |
| | 2016 | 426,904 |
| 478,629 |
| | 437,662 |
| | 42,984 |
| 1,386,179 |
| |
Andrew J. Lock(5) | 2018 | 360,062 |
| 549,812 |
| 106,144 |
| 343,464 |
| 12,882 |
| 207,131 |
| 1,579,495 |
| |
| President, Herman Miller International | 2017 | 334,713 |
| 237,645 |
| 272,695 |
| 230,863 |
| 144,700 |
| 205,312 |
| 1,425,928 |
| |
| | 2016 | 386,188 |
| 371,695 |
| | 346,899 |
| 59,521 |
| 90,709 |
| 1,255,012 |
| |
| President, North America & | | 2019 | 493,846 |
| 427,319 |
| | 145,311 |
| 252,010 |
| 322,357 |
| 1,640,843 |
|
| Global Operations | | 2018 | 461,058 |
| 820,191 |
| | 183,335 |
| 269,903 |
| 49,080 |
| 1,783,567 |
|
| B. Ben Watson | 2018 | 426,058 |
| 639,249 |
| 107,997 |
| 261,429 |
| | 40,737 |
| 1,475,470 |
| 2020 | 481,315 |
| 683,247 |
| (5) | — |
| 216,592 |
| 111,603 |
| 1,492,757 |
|
| Chief Creative Officer | 2017 | 403,108 |
| 190,314 |
| 223,246 |
| 227,474 |
| | 66,257 |
| 1,110,399 |
| 2019 | 450,769 |
| 284,507 |
| | 96,753 |
| 227,413 |
| 407,293 |
| 1,466,735 |
|
| | 2016 | 391,923 |
| 283,019 |
| | 354,377 |
| | 60,450 |
| 1,089,769 |
| 2018 | 426,058 |
| 639,249 |
| | 107,997 |
| 261,429 |
| 126,104 |
| 1,560,837 |
|
Megan Lyon (7) | | 2020 | 481,315 |
| 607,503 |
| | — |
| 216,592 |
| 100,925 |
| 1,406,335 |
|
| Chief Strategy Officer | | |
|
|
|
| |
|
|
|
|
|
|
|
|
| |
| (1) | Effective April 3, 2020, amounts reflect salary reductions of 10% of base salary for each NEO and an additional base salary deferral of 50% for Ms. Owen, and a 15% base salary deferral for Mr. Stutz, Mr. Bylsma, Mr. Watson, and Ms. Lyon. |
| |
| (2) | For all NEOs, amounts represent the aggregate grant date fair value of stock awards and option awards computed in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in Note 9 of the company'sCompany's consolidated financial statements for the fiscal year ended June 2, 2018May 30, 2020 included in our Annual Report on Form 10-K. |
| |
(2)(3) | Includes the amounts earned in fiscal 20182020 and paid in fiscal 20192021 under the ExecutiveAnnual Incentive Cash Bonus Plan as described in the Compensation Discussion and Analysis for the NEOs. Certain executives have elected to defer a part of the bonusincentive under the Key Executive Deferred Compensation Plan. The amount of the deferrals and the corresponding companyCompany contributions will be shown in next year's Nonqualified Deferred Compensation Table. |
| |
(3) | Amounts represent the aggregate change in the actuarial present value of the accumulated benefits under the company's Retirement Plans. |
| |
| (4) | The amounts for fiscal 20182020 for all other compensation are described in the table below. |
| |
| (5) | All amountsThis reported for Mr. Lock were paidvalue includes the incremental cost recognized due to him in British pounds sterling. The U.S. dollarthe modification of our 2017 HMVA PSU awards. On the modification date, the new fair value of the amounts paid to him for2017 HMVA PSU award are as follows: Mr. Stutz, $102,870; Mr. Bylsma, $128,575; and Mr. Watson, $75,744. |
| |
| (6) | Ms. Owen's employment with the fiscalCompany commenced on August 21, 2018 is calculated based(fiscal 2019). |
| |
| (7) | Ms. Lyon's employment with the Company commenced on the average annual conversion rate for fiscal 2018 of £1=$1.34303.February 4, 2019 (fiscal 2019). |
Herman Miller, Inc., and Subsidiaries45
| | | | Bundled Benefits(a) |
| Car allowance (UK only) |
| Payment in lieu of Pension Contribution |
| Long-term Disability Insurance |
| Nonqualified Deferred Compensation Contribution(b) |
| Total Other Compensation |
| Bundled Benefits(1) |
| Long-term Disability Insurance |
| Relocation Expenses |
| Personal Use of Company Property |
| Nonqualified Deferred Compensation Contribution(2) |
| Comprehensive Physical Exam |
| Total Other Compensation |
|
| Brian C. Walker | 26,383 |
| | 3,888 |
| 134,835 |
| 165,106 |
| |
| Andi R. Owen | | — |
| 2,897 |
| — |
| — |
| 119,688 |
| 3,600 |
| 126,185 |
|
| Jeffrey M. Stutz | 3,889 |
| | 2,417 |
| 33,877 |
| 40,183 |
| 15,216 |
| 2,943 |
| — |
| — |
| 37,606 |
| 3,600 |
| 59,365 |
|
| Gregory J. Bylsma | 6,281 |
| | 3,435 |
| 39,364 |
| 49,080 |
| — |
| 3,435 |
| — |
| — |
| 40,885 |
| — |
| 44,320 |
|
Andrew J. Lock(c) | 33,679 |
| 12,007 |
| 161,445 |
| |
| 207,131 |
| |
| B. Ben Watson | | 3,543 |
| 37,194 |
| 40,737 |
| 16,033 |
| 3,543 |
| — |
| 58,171 |
| 33,856 |
| — |
| 111,603 |
|
| Megan Lyon | | — |
| 377 |
| 93,348 |
| — |
| — |
| 7,200 |
| 100,925 |
|
| |
(a)(1) | Bundled Benefits are provided on a calendar year basis and include accounting fees, cell phone fees, club dues, family travel, education and training, home office expenses, vehicle expenses, and life insurance. Benefits for Mr. WalkerMessrs. Stutz and Watson include the approved amount for calendar 2018 plus carryover for2019. The bundled benefits program was discontinued as of 2019 fiscal year-end and all allowable calendar years 2017 and 2016.year expenses were incurred during fiscal 2019. |
| |
(b)(2) | Amounts represent the company'sCompany's contribution to the Herman Miller, Inc. Executive Equalization Retirement Plan. |
| |
(c) | Mr. Lock serves the company through its United Kingdom subsidiary. As such, his benefits are paid according to the benefits paid in the United Kingdom, which are different from the benefits in the United States. His benefits include medical insurance, car allowance, spouse travel, and contributions to a pension plan. All amounts are converted from GBP to USD at the average annual conversion rate for fiscal 2018 of £1=$1.34303. |
Grants of Plan-Based Awards
The Grants of Plan-Based Awards table below sets forth information on equity awards granted by the companyCompany to the NEOs during fiscal 20182020 under the Long-Term Incentive Plan (LTI Plan) and the possible payouts to the NEOs under the Annual Executive Incentive Cash Bonus Plan (Annual Cash Bonus Plan) for fiscal 2017.2020. The Compensation Discussion and Analysis provides further details of grants under the LTI Plan, as well as the performance criteria under the Annual Cash Bonus Plan. (ThePlan (the LTI grants are discussed in the CD&A under the heading Long-Term Equity Incentives Grants Awarded in Fiscal 2018)fiscal 2020).
| | | Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | |
| | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) |
| All Other Option Awards: Number of Securities Underlying Options (#)(4) |
| Exercise or Base Price of Option Awards ($/Sh)(5) |
| Grant Date Fair Value of Stock and Option Awards ($)(6) |
| | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) |
| All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) |
|
| | | Threshold ($) |
| Target ($) |
| Maximum ($) |
| | Threshold (#) | Target (#) |
| Maximum (#) |
| | | Threshold ($) |
| Target ($) |
| Maximum ($) |
| | Threshold (#) | Target (#) |
| Maximum (#) |
| |
| Brian C. Walker | 07/18/17 | | | 0 | 27,259 |
| 54,518 |
| | | 862,475 |
| |
| Andi R. Owen | | 07/16/19 |
| | 0 | 25,976 |
| 51,952 |
| |
|
|
| 1,237,497 |
|
| | 07/18/17 | | | |
| | 27,259 |
| | 919,991 |
| 07/16/19 |
| |
| 17,317 |
| 34,634 |
| |
|
| 824,982 |
|
| | 07/18/17 | | | | | | 143,975 |
| 33.75 |
| 920,000 |
| 07/16/19 |
| |
|
| | 15,319 |
|
| 687,517 |
|
| | | 0 |
| 966,327 |
| 1,932,654 |
| | | | |
|
| 0 |
| 1,141,154 |
| 2,282,308 |
| |
|
| |
|
|
|
| Jeffrey M. Stutz | 07/18/17 | | | 0 | 4,346 |
| 8,692 |
| | | 137,507 |
| 07/16/19 |
| | 0 | 6,093 |
| 12,186 |
| |
|
|
| 290,271 |
|
| | 07/18/17 | | | |
| | 4,346 |
| | 146,678 |
| 07/16/19 |
| |
| 4,062 |
| 8,124 |
| |
|
|
| 193,514 |
|
| | 07/18/17 | | | | | | 22,953 |
| 33.75 |
| 146,670 |
| 07/16/19 |
| |
|
| | 3,593 |
|
|
| 161,254 |
|
| | 02/09/18 | |
| | | | | 12,346 |
| | 450,012 |
|
| 0 |
| 332,205 |
| 664,410 |
| |
|
| |
|
|
|
|
|
| | | 0 |
| 287,375 |
| 574,750 |
| | | | | |
| Gregory J. Bylsma | 07/18/17 | | | 0 | 5,432 |
| 10,864 |
| | | 171,868 |
| 07/16/19 |
| | 0 | 6,565 |
| 13,130 |
| |
|
|
| 312,757 |
|
| | 07/18/17 | | | |
| | 5,432 |
| | 183,330 |
| |
| | 07/18/17 | | | | | | 28,691 |
| 33.75 |
| 183,335 |
| |
| | 02/09/18 | |
| | | | | 12,757 |
| | 464,993 |
| |
| | | 0 |
| 299,688 |
| 599,376 |
| | | | | | |
| Andrew J. Lock | 07/18/17 | | | | 0 | 3,145 |
| 6,290 |
| | | 99,508 |
| |
| | 07/18/17 | | | |
| | 3,145 |
| | 106,144 |
| |
| | 07/18/17 | | | | | | 16,611 |
| 33.75 |
| 106,144 |
| 07/16/19 |
| |
| 4,377 |
| 8,754 |
| |
|
|
| 208,520 |
|
| | 02/09/18 | |
| | | | | 9,442 |
| | 344,161 |
| 07/16/19 |
| |
|
| | 3,871 |
|
| 173,730 |
|
| | | 0 |
| 234,040 |
| 468,080 |
| | | | |
| 0 |
| 358,005 |
| 716,010 |
| |
|
|
| |
|
|
|
| B. Ben Watson | 07/18/17 | | | 0 | 3,200 |
| 6,400 |
| | | 101,248 |
| 07/16/19 |
| | 0 | 5,738 |
| 11,476 |
| |
|
|
| 273,358 |
|
| | 07/18/17 | | | |
| | 3,200 |
| | 108,000 |
| 07/16/19 |
| |
| 3,826 |
| 7,652 |
| |
|
|
| 182,271 |
|
| | 07/18/17 | | | | | | 16,901 |
| 33.75 |
| 107,997 |
| 07/16/19 |
| |
|
| | 3,384 |
|
| 151,874 |
|
| | 02/09/18 | |
| | | | | 11,797 |
| | 430,001 |
|
| 0 |
| 312,855 |
| 625,710 |
| |
|
| |
|
|
|
| Megan Lyon | | 07/16/19 |
| | 0 | 5,738 |
| 11,476 |
| |
|
|
| 273,358 |
|
| | | 0 |
| 276,938 |
| 553,876 |
| | | | |
| 07/16/19 |
| |
| 3,826 |
| 7,652 |
| |
|
|
| 182,271 |
|
| | | 07/16/19 |
| |
|
| | 3,384 |
|
| 151,874 |
|
| | |
| 0 |
| 312,855 |
| 625,710 |
| |
|
| |
|
|
|
| |
| (1) | Under the AnnualExecutive Incentive Cash Bonus Plan, executives can earn incentive compensation based on the achievement of certain companyCompany performance goals. The actual Cash Bonus amount paid with respect to any year may range from 0zero to 2two times of the target based upon the relative achievement of our EBITDAAdjusted Operating Income targets as set forth in the Summary Compensation Table above. |
| |
| (2) | The performance share unitsPSUs represent the right to receive shares of the company'sCompany's common stock, and such shares are to be issued to participants at the end of a measurement period beginning in the year that performance sharesPSUs are granted. The units reflect the number of shares of common stock that may be issued if certain EBITDA (earnings before interest, taxes, depreciationRevenue and amortization) and TSR returnOperating Income goals are met.met, subject to a modifying metric of relative TSR. The PSUs provide that the total number of shares which finally vest may vary between 0 and 200% of the target amount depending upon performance relative to the established EBITDA and TSR goals respectively, and cliff vest after three years. |
| |
| (3) | The restricted stock unitsRSUs represent the right to receive shares of the company'sCompany's common stock. These units reflect fair market value of the common stock as of the date of grant and cliff vest after three years. |
| |
| (4) | Each option has a term of ten years and vests pro rata over three years. |
| |
(5) | Stock options are awarded at an option price not less than the market value of the company's common stock at the grant date in accordance with the LTI Plan. |
| |
(6) | Aggregate grant date values are computed in accordance with FASB ASC Topic 718. For performance share units,PSUs, the grant date fair value was determined based upon the vesting at 100% of the target units awarded. |
Herman Miller, Inc., and Subsidiaries47
Outstanding Equity Awards at Fiscal Year-End
The Outstanding Equity Awards at Fiscal Year-End table below shows the option awards and stock awards that were outstanding as of June 2, 2018.May 30, 2020. The table shows both exercisable and unexercisable options. The table also shows share units and equity plan awards that have not vested.
| | | Name | Grant Date | Option Awards | | Stock Awards | Grant Date | Option Awards | | Stock Awards |
| | | Number of Securities Underlying Unexercised Options (#)(1) Exercisable |
| Number of Securities Underlying Unexercised Options (#)(1) Unexercisable |
| Option Exercise Price ($) |
| Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) |
| Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) |
| | Number of Securities Underlying Unexercised Options (#)(1) Exercisable |
| Number of Securities Underlying Unexercised Options (#)(1) Unexercisable |
| Option Exercise Price ($) |
| Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) |
| Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) |
|
| Brian C. Walker | 07/13/15 | | 30,362 |
| 29.030 |
| 07/13/25 | | 22,339 |
| 733,836 |
| 38,565 |
| 1,266,860 |
| |
| | 07/19/16 | | 150,198 |
| 31.860 |
| 07/19/26 | | 27,359 |
| 898,743 |
| 26,365 |
| 866,090 |
| |
| Andi R. Owen | | 08/22/18 | 25,816 |
| 51,631 |
| 38.15 |
| 08/22/28 | | 16,901 |
| 389,061 |
| 28,547 |
| 657,152 |
|
| | 07/18/17 | | 143,975 |
| 33.750 |
| 07/18/27 | | 27,671 |
| 908,992 |
| 27,259 |
| 895,458 |
| 07/16/19 |
|
|
|
|
|
| | 15,470 |
| 356,119 |
| 43,293 |
| 996,605 |
|
| Jeffrey M. Stutz | 01/19/11 | 646 |
| | 25.060 |
| 01/19/21 | | | — |
| | — |
| 07/19/16 | 37,441 |
| — |
| 31.86 |
| 07/19/26 | |
|
| | 07/18/11 | 1,773 |
| | 25.750 |
| 07/18/21 | | | — |
| | — |
| 07/18/17 | 15,301 |
| 7,652 |
| 33.75 |
| 07/18/27 | | 4,572 |
| 105,247 |
| 4,346 |
| 100,045 |
|
| | 07/13/15 | | | 1,519 |
| 49,899 |
| 2,623 |
| 86,166 |
| 07/16/18 | 5,837 |
| 11,675 |
| 38.30 |
| 07/19/26 | | 3,788 |
| 87,200 |
| 6,319 |
| 145,463 |
|
| | 07/19/16 | 19,177 |
| 38,356 |
| 31.860 |
| 07/19/26 | | 3,800 |
| 124,830 |
| 3,662 |
| 120,297 |
| 07/16/19 |
|
|
|
| | 3,628 |
| 83,517 |
| 10,155 |
| 233,768 |
|
| | 07/18/17 | | 22,953 |
| 33.750 |
| 07/18/27 | | 4,412 |
| 144,934 |
| 4,346 |
| 142,766 |
| |
| | 02/09/18 | | | 12,415 |
| 407,833 |
| | — |
| |
| Gregory J. Bylsma | 07/18/11 | 4,310 |
| | 25.750 |
| 07/18/21 | | | — |
| | — |
| 07/18/17 | — |
| 9,565 |
| 33.75 |
| 07/18/27 | | 5,715 |
| 131,559 |
| 5,432 |
| 125,045 |
|
| | 07/13/15 | | | 5,938 |
| 195,063 |
| 10,250 |
| 336,713 |
| |
| | 07/19/16 | 22,962 |
| 45,926 |
| 31.860 |
| 07/19/26 | | 5,836 |
| 191,713 |
| 5,624 |
| 184,748 |
| |
| | 07/18/17 | | 28,691 |
| 33.750 |
| 07/18/27 | | 5,514 |
| 181,135 |
| 5,432 |
| 178,441 |
| |
| | 02/09/18 | | | 12,828 |
| 421,400 |
| | — |
| |
| Andrew J. Lock | 07/13/15 | | | 4,610 |
| 151,439 |
| 7,960 |
| 261,486 |
| |
| | 07/19/16 | 16,514 |
| 33,030 |
| 31.860 |
| 07/19/26 | | 3,996 |
| 131,269 |
| 3,851 |
| 126,505 |
| |
| | 07/18/17 | | 16,611 |
| 33.750 |
| 07/18/27 | | 3,193 |
| 104,890 |
| 3,145 |
| 103,313 |
| 07/16/18 | 6,032 |
| 12,064 |
| 38.30 |
| 07/16/28 | | 3,914 |
| 90,100 |
| 6,529 |
| 150,298 |
|
| | 02/09/18 | | | 9,494 |
| 311,878 |
| | — |
| 07/16/19 |
|
|
|
|
|
| | 3,909 |
| 89,985 |
| 10,942 |
| 251,885 |
|
| B. Ben Watson | 07/18/11 | 7,388 |
| | 25.750 |
| 07/18/21 | | | — |
| | — |
| 07/18/11 | 7,388 |
| — |
| 25.75 |
| 07/18/21 | |
|
|
|
|
|
|
|
| | 07/17/12 | 9,363 |
| | 18.170 |
| 07/17/22 | | | — |
| | — |
| 07/17/12 | 9,363 |
| — |
| 18.17 |
| 07/17/22 | |
|
|
|
|
|
|
|
| | 07/13/15 | | | 3,510 |
| 115,304 |
| 6,061 |
| 199,104 |
| 07/19/16 | 22,710 |
| — |
| 31.86 |
| 07/19/26 | |
|
| | 07/19/16 | 13,520 |
| 27,040 |
| 31.860 |
| 07/19/26 | | 3,200 |
| 105,120 |
| 3,084 |
| 101,309 |
| 07/18/17 | — |
| 5,634 |
| 33.75 |
| 07/18/27 | | 3,367 |
| 77,508 |
| 3,200 |
| 73,664 |
|
| | 07/18/17 | | 16,901 |
| 33.750 |
| 07/18/27 | | 3,248 |
| 106,697 |
| 3,200 |
| 105,120 |
| 07/16/18 | — |
| 8,033 |
| 38.30 |
| 07/16/28 | | 2,606 |
| 59,990 |
| 4,347 |
| 100,068 |
|
| | 02/09/18 | | | 11,863 |
| 389,700 |
| | — |
| 07/16/19 |
|
|
|
|
|
| | 3,417 |
| 78,659 |
| 9,564 |
| 220,163 |
|
| Megan Lyon | | 02/04/19 |
|
|
|
|
|
| | 2,549 |
| 58,678 |
|
|
|
|
| | | 07/16/19 |
|
|
|
|
|
| | 3,417 |
| 78,659 |
| 9,564 |
| 220,163 |
|
| |
| (1) | Options vest in three equal annual installments beginning on the first anniversary of the grant date. |
| |
| (2) | The 02/09/18 awards issued reflect credited dividends through the end of fiscal 2018 and cliff vest after two years. The remaining awards reflect credited dividends through the end of fiscal 20182020 and cliff vest after three years. |
| |
| (3) | Assumes a stock price of $32.85$23.02 per share, which was the closing price of a share of common stock on the last trading day of fiscal 2018.2020. |
| |
| (4) | The Performance Share UnitPSU awards cliff vest after three years, depending upon the achievement of certain EBITDA and TSR returnperformance goals. |
Option Exercises and Stock Vested
This table provides information on the number and value of options exercised in fiscal 20182020 and the vesting of restricted stock (on an aggregate basis).
| | | Name | Option Awards | | Stock Awards | Option Awards | | Stock Awards |
| | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) |
| | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) |
| Number of Shares Acquired on Exercise (#) |
| Value Realized on Exercise ($)(1) |
| | Number of Shares Acquired on Vesting (#) |
| Value Realized on Vesting ($)(2) |
|
| Brian C. Walker | 306,860 | 2,134,198 |
| | 55,252 | 1,892,379 |
| |
| Andi R. Owen | | — |
| — |
| | — |
| — |
|
| Jeffrey M. Stutz | 5,765 | 93,469 |
| | 3,069 | 105,130 |
| 20,092 |
| 261,598 |
| | 12,866 |
| 522,781 |
|
| Gregory J. Bylsma | 20,631 | 257,951 |
| | 17,535 | 599,583 |
| 63,791 |
| 807,533 |
| | 19,284 |
| 809,009 |
|
| Andrew J. Lock | 22,491 | 312,582 |
| | 13,359 | 456,883 |
| |
| B. Ben Watson | | | | 9,118 | 311,813 |
| 33,133 |
| 367,521 |
| | 15,578 |
| 646,948 |
|
| Megan Lyon | | — |
| — |
| | — |
| — |
|
| |
| (1) | Represents the difference between the exercise price and the fair market value of our common stock on the date of exercise. |
| |
| (2) | Value based on the closing market price of the company'sCompany's common stock on the vesting date. |
HMVA PSUs Vesting in fiscal 2020
Pension Benefits
The Pension Benefits table below provides certain information regardingHMVA PSUs granted in fiscal 2018 were eligible to vest in fiscal 2020. As discussed previously, the retirement benefits available under the only retirement planextraordinary impact of the company that is not a defined contribution planCOVID-19 pandemic required the Committee to carefully consider the appropriate measurement of performance related to the only NEO that participates in2018 HMVA PSUs to determine the plan atpayout level. Given the enduniqueness of fiscal 2018.
The retirement plan is described in the Compensation Discussionsituation and Analysis.the impact of the COVID-19 pandemic on our fourth quarter results, the Committee determined it was appropriate to provide a prorated, below target annual incentive payment of 49.50% based on performance for the first 11 of 12 quarters of the 2017-2020 performance period.
|
| | | | | | |
| Name | Plan Name | Number of Years Credited Service (#) |
| Present Value of Accumulated Benefit ($) |
| Payments During Last Fiscal Year ($) |
Andrew J. Lock(1) | Herman Miller Limited Retirement Plan | 14 |
| 1,323,243 |
| |
| |
(1) | Mr. Lock was covered from 1990-2002 and beginning again during fiscal 2011 under the UK Pension Plan which is now frozen. |
Herman Miller, Inc., and Subsidiaries49
Nonqualified Deferred Compensation
The Nonqualified Deferred Compensation table below provides certain information relating to our two compensation plans that provide for the deferral of compensation on a basis that is not tax-qualified.
| | | Name | Executive Contributions in Last Fiscal Year ($)(1) |
| Registrant Contributions in Last Fiscal Year ($)(2) |
| Aggregate Earnings in Last Fiscal Year ($)(3) |
| Aggregate Withdrawals/ Distributions ($) |
| Aggregate Balance at Last Fiscal Year End ($) |
| Executive Officer Contributions in Last Fiscal Year ($)(1) |
| Registrant Contributions in Last Fiscal Year ($)(2) |
| Aggregate Earnings in Last Fiscal Year ($)(3) |
| Aggregate Withdrawals/ Distributions ($) |
| Aggregate Balance at Fiscal Year End ($) |
|
| Brian C. Walker | 131,876 |
| 134,835 |
| 325,032 |
| 324,477 |
| 3,295,447 |
| |
| Andi R. Owen | | 86,497 |
| 119,688 |
| (6,030 | ) | — |
| 221,350 |
|
| Jeffrey M. Stutz | 24,680 |
| 33,877 |
| 17,041 |
| 1,913 |
| 237,697 |
| 67,176 |
| 37,606 |
| 24,313 |
| — |
| 464,057 |
|
| Gregory J. Bylsma | 49,089 |
| 39,364 |
| 22,591 |
| 87,751 |
| 474,141 |
| 79,784 |
| 40,885 |
| 26,699 |
| 254,709 |
| 378,952 |
|
| Andrew J. Lock | | 38,373 |
| | 315,411 |
| |
| B. Ben Watson | 46,489 |
| 37,194 |
| 34,866 |
| | 488,511 |
| 70,312 |
| 33,856 |
| 38,504 |
| — |
| 739,967 |
|
| Megan Lyon | | 6,075 |
| — |
| (242 | ) | — |
| 5,833 |
|
| |
| (1) | Amounts in this column represent the deferrals of base salary earned in fiscal 20182020 which are included in Summary Compensation Table under Salary, plus deferral of amounts earned in fiscal 20172019 and paid in fiscal 20182020 under the Annual Executive Incentive Cash Bonus Plan which was included in the fiscal 20172019 Summary Compensation Table under Non-Equity Incentive Plan Compensation. |
| |
| (2) | Amounts in this column represent the company'sCompany's contribution and are included in the "All Other Compensation" column of the Summary Compensation Table. |
| |
| (3) | Amounts reflect increases (decreases) in value of the employee's account during the year, based upon deemed investment of deferred amounts. |
The company's Nonqualified Deferred Compensation Plan, which was terminated in fiscal 2007, allowed certain employees to defer part or all of their Annual Executive Incentive Cash Bonus Plan payment each year. The company matched any such deferral, up to 50 percent of the incentive bonus payment. The matching payment vested over three years and vesting was dependent upon the executive remaining employed with the company. Amounts deferred were converted into units having the same value as the company's stock and were credited with amounts at the same rate as the company's dividend on its common stock. Units are converted into shares of the company's common stock at the time of distribution.
The Committee approved The Herman Miller, Inc. Executive Equalization Retirement Plan for salary and incentive compensation deferrals that began in January 2008, which replaced the company's Nonqualified Deferred Compensation Plan.2008. The Plan allows all United States employees who have compensation above the statutory ceiling to defer income in the same proportion as if the statutory ceiling did not exist. The company makesWe make contributions to the plan such that the amounts in the plan “mirror” the amounts the companywe would have contributed to the company’sCompany’s tax-qualified 401(k) plan had the employee's compensation not been above the statutory ceiling. Distributions from the plan are paid out in cash based on the deferral election specified by the participant. We do not guarantee a rate of return under the Plan. Instead, participants make investment elections for their deferrals and company contributions. Investment options are the same as those available under our 401(k) plan.
Potential Payments upon Termination, Death, Disability, Retirement, or Change in Control
The following table quantifies the estimated payments that would be made to each NEO in the event of his or her termination by the companyCompany without cause, in the event of his termination under circumstances that would trigger payments under change in control agreements, and upon a change in control without a termination of employment, in each case assuming that the change in control and/or termination occurred June 2, 2018.on May 30, 2020.
|
| | | | | | | | | | | |
| Name | Benefit | Death |
| Disability |
| Retirement |
| Without Cause |
| Change in Control |
|
| Brian C. Walker | Cash Severance(1) (2) | | | | $1,462,500 | $5,850,000 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units | 2,541,575 |
| 2,541,575 |
| 2,427,018 |
| 1,532,427 |
| 2,541,575 |
|
| | Performance Shares(3) (4) | 1,366,466 |
| 1,366,466 |
| | 1,366,466 |
| 2,001,056 |
|
| | Unexercisable Options | | | | | 264,679 |
|
| | Total | 3,908,041 |
| 3,908,041 |
| 2,427,018 |
| 2,898,893 |
| 4,807,310 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 26,637 |
| 53,274 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 51,637 |
| 78,274 |
|
| | Total | $3,908,041 | $3,908,041 | $2,427,018 | $4,413,030 | $10,735,584 |
| Jeffrey M. Stutz | Cash Severance(1) (2) | | | | $945,650 | $1,755,650 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units | 727,487 |
| 727,487 |
| 709,222 |
| 575,990 |
| 727,487 |
|
| | Performance Shares(3) (4) | 116,792 |
| 116,792 |
| | 116,792 |
| 217,967 |
|
| | Unexercisable Options | | | | | 37,972 |
|
| | Total | 844,279 |
| 844,279 |
| 709,222 |
| 692,782 |
| 983,426 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 6,107 |
| 8,142 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 31,107 |
| 33,142 |
|
| | Total | $844,279 | $844,279 | $709,222 | $1,669,539 | $2,772,218 |
| Gregory J. Bylsma | Cash Severance(1) (2) | | | | $969,767 | $1,806,767 |
| | Prorated Annual Incentive | | | | | |
| | Equity | | | | | |
| | Restricted Stock Units | 989,298 |
| 989,298 |
| 966,469 |
| 781,670 |
| 989,298 |
|
| | Performance Shares(3) (4) | 345,823 |
| 345,823 |
| | 345,823 |
| 472,280 |
|
| | Unexercisable Options | | | | | 45,467 |
|
| | Total | 1,335,121 |
| 1,335,121 |
| 966,469 |
| 1,127,493 |
| 1,507,045 |
|
| | Retirement Benefits | | | | | |
| | Other Benefits | | | | | |
| | Health and Welfare(5) | — |
| — |
| — |
| 23,013 |
| 30,684 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
|
| | Total | — |
| — |
| — |
| 48,013 |
| 55,684 |
|
| | Total | $1,335,121 | $1,335,121 | $966,469 | $2,145,273 | $3,369,496 |
Potential Payments upon Termination, Death, Disability, Retirement or Change in Control (continued)
| | | Name | Benefit | Death |
| Disability |
| Retirement |
| Without Cause |
| Change in Control |
| Benefit | Death ($) |
| Disability ($) |
| Retirement ($) |
| Without Cause ($) |
| Change in Control ($) |
|
| Andrew J. Lock | Cash Severance(1) (2) | | $843,060 | $1,476,786 | |
| Andi R. Owen | | Cash Severance(1) | — |
| — |
| — |
| 1,500,000 |
| 6,450,000 |
|
| | Prorated Annual Incentive | | Restricted Stock Units(2) | 745,181 |
| 745,181 |
| — |
| 325,877 |
| 745,181 |
|
| | Equity | | Performance Stock Units(3) (4) | — |
| — |
| — |
| — |
| 162,409 |
|
| | Restricted Stock Units | 699,512 |
| 699,512 |
| 686,295 |
| 570,263 |
| 699,512 |
| Stock Options | — |
| — |
| — |
| — |
| — |
|
| | Performance Shares(3) (4) | 258,294 |
| 258,294 |
| | 258,294 |
| 331,510 |
| Health and Welfare(5)(6) | — |
| — |
| — |
| 46,619 |
| 46,619 |
|
| | Unexercisable Options | | 17,986 |
| Total | 745,181 |
| 745,181 |
| — |
| 1,872,496 |
| 7,404,209 |
|
| Jeffrey M. Stutz | | Cash Severance(1) | — |
| — |
| — |
| 774,000 |
| 1,702,800 |
|
| | Total | 957,806 |
| 957,806 |
| 686,295 |
| 828,557 |
| 1,049,008 |
| Restricted Stock Units(2) | 275,985 |
| 275,985 |
| — |
| 175,902 |
| 275,985 |
|
| | Retirement Benefits | | Performance Stock Units(3) (4) | — |
| — |
| — |
| — |
| 35,342 |
|
| | | Stock Options | — |
| — |
| — |
| — |
| — |
|
| | | Health and Welfare(5)(6) | — |
| — |
| — |
| 31,647 |
| 31,647 |
|
| | | Total | 275,985 |
| 275,985 |
| — |
| 981,549 |
| 2,045,774 |
|
| Gregory J. Bylsma | | Cash Severance(1) | — |
| — |
| — |
| 834,000 |
| 1,834,800 |
|
| | Other Benefits | | Restricted Stock Units(2) | 311,647 |
| 311,647 |
| 296,649 |
| 204,308 |
| 311,647 |
|
| | Health and Welfare(5) | — |
| — |
| — |
| 8,010 |
| 10,681 |
| Performance Stock Units(3) (4) | — |
| — |
| — |
| — |
| 36,517 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
| Stock Options | — |
| — |
| — |
| — |
| — |
|
| | Total | — |
| — |
| — |
| 33,010 |
| 35,681 |
| Health and Welfare(5)(6) | — |
| — |
| — |
| 47,191 |
| 47,191 |
|
| | Total | $957,806 | $686,295 | $1,704,627 | $2,561,475 | Total | 311,647 |
| 311,647 |
| 296,649 |
| 1,085,499 |
| 2,230,155 |
|
| B. Ben Watson | Cash Severance(1) (2) | | $908,848 | $1,682,848 | Cash Severance(1) | — |
| — |
| — |
| 729,000 |
| 1,603,800 |
|
| | Prorated Annual Incentive | | Restricted Stock Units(2) | 216,156 |
| 216,156 |
| 203,045 |
| 131,707 |
| 216,156 |
|
| | Equity | | Performance Stock Units(3) (4) | — |
| — |
| — |
| — |
| 24,313 |
|
| | Restricted Stock Units | 716,855 |
| 716,855 |
| 703,605 |
| 587,966 |
| 716,855 |
| Stock Options | — |
| — |
| — |
| — |
| — |
|
| | Performance Shares(3) (4) | 204,383 |
| 204,383 |
| | 204,383 |
| 278,879 |
| Health and Welfare(5)(6) | — |
| — |
| — |
| 37,601 |
| 37,601 |
|
| | Unexercisable Options | | 26,770 |
| Total | 216,156 |
| 216,156 |
| 203,045 |
| 898,308 |
| 1,881,870 |
|
| Megan Lyon | | Cash Severance(1) | — |
| — |
| — |
| 729,000 |
| 1,603,800 |
|
| | Total | 921,238 |
| 921,238 |
| 703,605 |
| 792,349 |
| 1,022,504 |
| Restricted Stock Units(2) | 137,349 |
| 137,349 |
| — |
| 46,303 |
| 137,349 |
|
| | Retirement Benefits | | Performance Stock Units(3) (4) | — |
| — |
| — |
| — |
| — |
|
| | Other Benefits | | Stock Options |
| — |
|
| | Health and Welfare(5) | — |
| — |
| — |
| 18,978 |
| 25,304 |
| Health and Welfare(5)(6) | — |
| — |
| — |
| 27,797 |
| 27,797 |
|
| | Outplacement | — |
| — |
| — |
| 25,000 |
| 25,000 |
| Total | 137,349 |
| 137,349 |
| — |
| 803,100 |
| 1,768,946 |
|
| | Total | — |
| — |
| — |
| 43,978 |
| 50,304 |
| |
| | Total | $921,238 | $703,605 | $1,745,175 | $2,755,656 | |
| |
| (1) | "Without Cause" amount equals 18 months of base salary and "CIC" amount equals 3x (CEO) or 2x (Other NEOs) base salary + greater of prior year actual bonus or current year target bonus. |
| |
| (2) | Includes 2018 retention bonus (1x actual 2018 bonus amount)Awards are not pro-rated for all NEOs, other than"Death", "Disability" and "CIC." Awards are pro-rated for "Retirement" (if granted within the CEO.past 12 months and Retirement definition is met) and "Without Cause". |
| |
| (3) | ActualFor "Death," awards are either pro-rated for the number of months between the grant date or start of performance period and termination date. For "Disability" and "Without Cause," awards are eligible for continued vesting (i.e., no accelerated vesting) after pro-ration. For "CIC," actual shares earned are based onequal to target shares adjusted for actual performance through the end of the performance period for outstanding performance share units (PSUs) where more than 50% of the performance period has elapsed and target for outstanding PSUs where less than 50% of the performance period has elapsed. For PSUs with a performance period ending after June 2, 2018 (our 2018 fiscal year end), theperformance. The following actual performance estimates were used: Relative TSR PSUs granted in 2015 = 200% of target, Herman Miller Value Added PSUs granted in 20162018 = 0% of target, Herman Miller Value AddedRelative TSR PSUs granted in 2017 =100%2018 = 58% of target, (less than 50%Operating Income PSUs granted in 2019 = 0% of the performance period has elapsed).target. |
| |
| (4) | There is no accelerated vesting of performance share unitsstock options or stock optionsPSUs under a "Retirement" scenario (awardsscenario. Awards, in full or pro-rated, either continue to vest or are pro-rated for time employed since grant)forfeited (if Retirement definition is not met). |
Herman Miller, Inc., and Subsidiaries51
| |
| (5) | "WithoutFor Health and Welfare benefits, "Without Cause" amount equals 18 months of benefits continuation and "CIC" amount equals 36 months (CEO) or 24 months (Other(other NEOs) benefits continuation. |
| |
| (6) | Other benefits reflect outplacement ($25,000). |
Potential Payments upon Termination without Change in Control
The company under its18 months’ base salary continuation plan has agreed to pay corporate officers and other executives severancefor NEOs if they are terminated for reasons other than cause. The payments are equal to 18 months' basecause
Maintain health insurance during salary continuation for the NEOs. In addition, the company maintains the health insurance on such employee during the salary continuation period. In exchange for such payments, the employeeperiod
Employee provides the companyCompany with a mutual release of all claims and agrees not to work for a competitor during the salary continuation period. In the event of a termination covered by the change in control agreements described below, the payments under those agreements are reduced by any amounts received under the salary continuation plan.period
The Executive Long-Term Disability Plan provides a monthly benefit to an executive of 60% of his two-year average executive incentive up to a monthly maximum of $10,000. Each of the NEOs would be entitled to a $10,000 monthly benefit if he became disabled as of June 2, 2018, for as long as he is disabled or until age 65.
Potential Payments upon Termination, Death, Disability, Retirement or Change in Control (continued)
Potential Payments upon Termination in Connection with Change in Control
In fiscal 2018,2020, each NEO was party to a Management Continuity Agreement with the Company that contains “double trigger” change in control agreement with the company. The change in control agreements are all “double trigger” agreements. This meansprovisions. These provisions state that both thesethere must be both a change in control and the employee must incur an actual or constructive termination of employment by us to be entitled to a payment.
The agreements defineA change in control as having occurred (1) when a third party becomes the owner of 35 percent or more of the company's stock, (2) when a majority of the Board of Directors is composed of persons who are not recommended by the existing Board, or (3) under certain transactions involving a merger or reorganization, sale of all or substantially all of the company's assets or a liquidation in which the company does not maintain certain control thresholds.(as defined) occurs if:
| |
| – | A third party becomes the owner of 35% or more of the Company's stock, |
| |
| – | A majority of the Board of Directors is composed of persons who are not recommended by the existing Board, or |
| |
| – | Under certain transactions involving a merger or reorganization, a sale of all or substantially all of the Company's assets, or a liquidation in which the Company does not maintain certain control thresholds. |
An employee is entitled to a payment under the change in control agreementManagement Continuity Agreement if within 2 years after a change in control he or she (1) has his or herthe Company terminates the employment withof the company terminated by the company for reasons other thanExecutive without cause or (2) voluntarily terminates hisfor good reason, which is defined as the occurrence of any one or her employment if (a) the responsibilities of his or her job are significantly reduced, (b) the base salary or bonus he or she receives is reduced, (c) the benefits he or she receives are reduced by more than 5 percent, (d) the location of his or her job is relocated more than 50 miles from its current location, or (e) the obligations of the change in control agreements are not assumed by any successor company.following without the Executive's express written consent
| |
| – | The Executive is assigned duties which are materially different from or inconsistent with the duties, responsibilities and status of Executive's position at any time during the six (6) month period prior to the Change of Control , or which result in a significant reduction in Executive's authority and responsibility as an executive of the Company or a Subsidiary, |
| |
| – | A reduction in the Executive's base salary, target value of the annual incentive, or target value of the long-term incentive plan awards, |
| |
| – | The Company requires the Executive be based at a location in excess of 50 miles from the facility, which is the Executive’s principal business office, |
| |
| – | A reduction of 5% or more in the aggregate benefits provided to the Executive and their dependents under the Company’s employee benefit plans, or |
| |
| – | The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement. |
If both triggering events occur, then the NEO is entitled to a change in control payment. The change in control payment consists of three elements (1) amounts owed for current year base salary, on-target bonus prorated to the date of termination and all amounts of deferred income, (2) medical and other insurance benefits, and (3) a separation payment. In addition, all existing unvested options and other equity units become immediately vested and exercisable. The separation payment in the case of the CEO is to be equal to three times the amount described below and in the case of all other NEOs the payment is equal to two times the amount described below. The separation payment is a lump sum equal to either two or three times the sum of (a) the executive's base salary plus (b) the greater of the executive's actual bonus for the preceding year or his or her on-target bonus for the current year. This amount is reduced by any severance payment that executive receives under the severance benefit described above.consists of:
| |
| – | A lump sum cash amount equal to Executive-'s annual base salary, multiplied by two |
| |
| – | A lump sum cash amount equal to two (or three, in the case of the CEO) times the greater of (1) the Executive's average bonus of the previous three years or (2) the Executive's target bonus for the fiscal year in which the Change of Control occurs, plus a prorated amount of Executive's target bonus for the fiscal year in which the termination date occurs |
| |
| – | Healthcare coverage, and life and disability insurance for the twenty-four (or thirty-six, in the case of the CEO) consecutive month period beginning immediately after the Termination Date |
| |
| – | Outplacement services up to a maximum of $25,000 |
| |
| – | All outstanding awards held by Executive under the Company’s Long-Term Incentive Plan shall vest in full as of the Termination Date. Specific treatment of each award type is summarized in the "Vesting of Outstanding Long-Term Incentive Awards" section below. |
The companyCompany has no obligation to make a “gross up” payment to the executive officer if the amount of the payments under the change in control agreements is subject to an excise tax under Section 4999 of the Internal Revenue Code of 1986.
To receive the payments, the NEO is obligated to comply with the non-competition covenant of the agreement, committing him or herthe Executive to refrain from competing with the companyCompany for a period equal to the number of years of compensation received by the NEO under the agreement.
Accelerated Vesting upon Death, Disability, Retirement, or Change in Control
Various compensation plans containThe Executive Equalization Retirement Plan, as described earlier in the Deferred Compensation Plan section of the proxy, contains provisions that permit accelerated vesting upon death, disability, or change in control. In the event of a change in control, the Key Executive Deferred CompensationEqualization Retirement Plan and the Executive Incentive Cash Bonus Plan provideprovides for the acceleration of payment even if the NEO has not been terminated. In addition, the vesting of each restricted stock unit and performance share unit will accelerate upon a change in control under the terms of the award agreements. These are so-called single trigger payment provisions. These so-called single trigger payments will no longer exist starting with grants in July 2018. The Long-Term Incentive Plan, Executive Incentive Cash Bonus Plan and Key Executive Deferred Compensation Plan each has provisions dealing with vesting upon death, disability or retirement. The definition of change in control for these plansthis plan is the definition contained in Treasury Regulations for Section 409A of the Internal Revenue Code.
Key Executive Deferred Compensation PlanVesting of Long-Term Incentive Awards
The Key Executive Deferred Compensation Plan, which terminatedChange in fiscal 2007, permitsControl (with a participant to elect to have his or her account distributed immediately upon his or her death, disability, or termination of employment in addition to change in control. The plan also permits the Committee to distribute to the employee amounts deferred before December 31, 2005 in the event of his death, disability or termination of employment.
Potential Payments upon Termination,qualifying termination), Death, Disability, Retirement, or Change in Control (continued)
Long-Term Incentive Plan
Change in Control
Under our 2011 Long-Term Incentive Plan, except as otherwise provided in an award agreement, awards that are outstanding at the time ofand Termination without Cause unrelated to a change in control transaction, will accelerate and immediately vest if (1) awards are not assumed or continued by the surviving corporation or (2) if the participant’s employment is terminated without cause or by the participant with good reason within a one-year period following the change in control. However, all our award agreements for currently outstanding awards provide that the awards will vest immediately upon a change in control. Going forward starting in July 2018, all awards shall be double-trigger awards. Specifically, with respect to performance-based awards,, if less than half the performance period has lapsed, those awards will be converted into shares or similar securities assuming target performance has been achieved. If at least half of the performance period has lapsed, those performance-based awards will be converted into shares or similar securities based upon actual performance-to-date. We quantify the benefits that each named executive officer would receive upon a change in control in the table under the heading "Potential Payments upon Termination, Death, Disability, Retirement or Change in Control."
|
| | | | |
| Long-Term Incentive Vehicle | CIC with a Qualifying Termination | Termination Upon Death and Disability | Qualified Retirement | Termination Without Cause Unrelated to CIC |
| Stock Options | Unvested stock options vest in full. | Unvested stock options are forfeited. Exercise period for vested options will be five years from the date of the event or the remaining life of the option, if less. If Executive dies while on disability, the exercise period is the longer of the five-year exercise period or one year after the date of death, not to exceed the remaining life of the option. | Unvested stock options continue to vest. If an Executive retires in the first year after the Award Date, unvested stock options will be prorated as defined by the award agreement. | Unvested stock options are forfeited. Vested options must be exercised within three months following termination or they are forfeited. |
| RSUs | Unvested RSUs vest in full. | Unvested RSUs vest in full. | Unvested RSUs vest in full. If an Executive retires in the first year, unvested RSUs will be prorated as defined by the award agreement. | Unvested RSUs subject to vesting will be prorated as defined by the award agreement. |
| PSUs | Unvested PSUs earned are based on actual performance through the CIC date. | Vesting is not accelerated. Target PSUs are prorated for time worked during the performance period with continued vesting. PSUs earned are based on actual performance over the performance period. | Vesting is not accelerated. If an Executive retires in the first year, the target PSUs will be prorated as defined by the award agreement. | Vesting is not accelerated. Target PSUs are prorated for time worked during the performance period with continued vesting. PSUs earned are based on actual performance over the performance period. |
Death, DisabilityHerman Miller, Inc., and Retirement
Options granted under the LTI Plan to the extent vested at the date of death or disability remain exercisable for the balance of their original term but not more than 60 months following the date of termination of employment. If an employee retires, the options granted prior to fiscal 2013 to the extent vested remain exercisable for the balance of their original term but not more than 60 months following the date of termination of employment. For options granted beginning in fiscal 2013, the grant will be prorated over 12 months if retiring within one year of the grant; after the initial 12 months, they will vest in full. They remain exercisable for the balance of their original term but not more than 60 months following the date of termination of employment. In all other cases, the vested options terminate three months after the termination of employment.
In the case of restricted stock units, if an employee dies or becomes disabled, units vest immediately. All vest ratably if the employee is terminated for reasons other than cause. Vesting is determined by comparing the number of months the employee has been with the company between the date of grant and the date of termination to the original vesting period. If an employee retires, units will be prorated over 12 months if retiring within one year of the grant; after the initial 12 months, they will vest in full.
Performance shares, as explained earlier, are granted at a target value and the actual number of units converted into shares is determined at the end of a 3-year measurement period. The percentage of the performance share target grant that is eligible to vest if an employee dies, becomes disabled, or is terminated for reasons other than cause is determined by comparing the number of months between the date of grant and the date of termination to the original vesting period. If an employee retires in the first year, the target performance share grant subject to vesting will be prorated over 12 months. If the employee retires after the first year, 100 percent of the target performance share grant is subject to vesting.
The Executive Incentive Cash Bonus Plan
SubsidiariesThe Executive Incentive Cash Bonus Plan requires that an employee be employed by the company on the last day of a fiscal year to be eligible to receive the incentive bonus, with certain exceptions noted below. The plan provides that in the events of death, disability or retirement an employee does not need to be employed on the last day of the fiscal year to receive a bonus. The employee's bonus will be reduced to reflect the portion of the year that he or she was employed by the company. In the event of a change in control, the incentive bonus is immediately vested (based upon EBITDA results achieved through the date of the change in control) and payable and is not reduced by virtue of the fact that it is calculated upon a partial year. The same provisions governing payment in the event of death, disability, retirement or change in control are also found in the bonus plan applicable to all other employees.53
Pay Ratio
Pursuant to the SEC’s guidance under Item 402(u) of Regulation S-K, we are required to disclose the annual total compensation for both our Chief Executive Officer and median employee and the ratio of those two amounts. For 2018:fiscal 2020:
The annual total compensation of our Chief Executive Officer was $4,728,041.$4,658,464.
The annual total compensation of our identified median employee was $47,721.$52,819.
The ratio of the annual total compensation of our Chief Executive Officer to that of our identified median employee was 9988 to 1.
During fiscal 2020, we acquired the remaining shares of naughtone and acquired a majority ownership in HAY, bringing the total ownership in HAY to a 67% interest. As allowed under Item 402(u) of Regulation S-K, the employees (approximately 50 and 190 employees, respectively) of these two acquisitions were excluded from the fiscal 2020 pay ratio calculation as we believe these acquisitions resulted in no significant changes to our employee population that would reasonably result in a significant change in the pay ratio.
In addition, the median employee used for fiscal 2018 and fiscal 2019 is no longer employed by the Company. Therefore, for fiscal 2020, we selected another employee whose compensation is substantially similar to the original median employee based on the compensation measures taken to select the original median employee, which is also allowed under Item 402(u) of Regulation S-K.
The methodology we used to identify our median employee for the 2018 pay ratio analysis is summarized in the following table:
|
| |
| Item | Description |
| Determination Date | March 31, 2018 |
| Employee Population | Total employee population (excluding the CEO) as of the determination date was 7,6267,626. |
| Consistently Applied Compensation Measure (CACM) | Gross wages, measured over the twelve-months ending on the determination date. For new hires, we annualized gross wages for any employees hired during the twelve-month period ending on March 31, 2018. For non-U.S.non-US employees, values were converted into U.S. DollarsUSD using the exchange rates in effect on the determination datedate. |
Director Compensation
The following Director Compensation table provides information on the compensation of each director for fiscal 2018.2020. The standard annual compensation of each director is $175,000.$200,000. The Audit Committee Chair receives an additional $20,000, the Executive Compensation Committee Chair receives an additional $15,000, and the NominatingGovernance and GovernanceCorporate Responsibility Committee Chair receives an additional $10,000. Non-chair members of the Audit Committee receive an additional $8,000 per year, non-chair members of the Executive Compensation Committee receive an additional $6,000 per year, and non-chair members of the Nominating and Governance Committee receive an additional $4,000 per year due to the increased workload of these committees. The Chairman of the Board of Directors receives additional annual compensation of $75,000$100,000 and is eligible to participate in the company'sCompany's health insurance plan. Brian Walker,Ms. Owen, the company'sCompany's President and CEO, does not receive any additional compensation for serving on the Board of Directors.
The annual retainercompensation and any chairperson or additional fees (collectively, the "Annual Fee") is payable by one or more of the following means, as selected by each director: (1) in cash; (2) in shares of our stock valued as of January 15 of each year; (3) credit under the Director Deferred Compensation Plan described below; (4) stock options valued as of January 15 of each year under the Black-Scholes Valuation Model; or (5) as a contribution to our companyCompany employee scholarship fund. Any director who does not meet the stock ownership guidelines, described below, must take at least 50 percent50% of his or her Annual Feeannual fee in one of the permissible forms of equity.
Stock Compensation Plan
Under our 2011 Long-Term Incentive Plan, nonemployeenon-employee directors may be granted options to purchase shares of our stock if they elect to receive their compensation in stock options. Subject to certain exceptions, options are not exercisable prior to the first anniversary of the award date and expire 10 years after the date of the grant. The option price is payable upon exercise in cash or, subject to certain limitations, in shares of our stock already owned by the optionee, or a combination of shares and cash.
Deferred Compensation Plan
We also maintain a NonemployeeNon-employee Officer and Director Deferred Compensation Stock Purchase Plan. The Plan permits a participant to defer receipt of all or a portion of his or her Annual Fee to his or her deferred account. Each account is credited with a number of units equal to a number of shares of the investment selected by the director, including companyCompany stock and other investment alternatives. The initial value of the deferral is equal to the dollar amount of the deferral, divided by the per share fair market value of the selected investment at the time of the deferral. The units are credited with any dividends paid on the investment. The companyCompany maintains a Rabbi-Trust"Rabbi-Trust" relating to obligations under this plan.
Director Compensation (continued)
Stock Ownership Guidelines
Director stock ownership guidelines have been in effect since 1997. These guidelines, like those applicable to the management team, are intended to reinforce the importance of linking shareholder and director interests. Under these guidelines beginning in 2000, each director is encouraged to reach a minimum level of share ownership having a value of at least threetwo times the annual director retainercompensation over a five-year period after first becoming a director.
Other
Directors are reimbursed for travel and other necessary business expenses incurred in the performance of their services for the company,Company, and they are covered under the company'sour business travel insurance policies and under the Director and Officer Liability Insurance Policy.
Perquisites
Some directors' spouses accompany them to Board meetings. The companyCompany pays for their expenses and for some amenities for the Directorsdirectors and their spouses, including some meals and social events. The total of these perquisites is less than $10,000 per Director.director. Directors are approved to purchase companyCompany products under employee discount pricing. The value of this perquisite was less than $10,000 for all but two Directorsone director as to whom the value has been included in All Other Compensation in the Director Compensation Table.
Herman Miller, Inc., and Subsidiaries55
Director Compensation Table
| | | Name | Fees Earned or Paid in Cash ($)(1) |
| Stock Awards ($)(2) |
| Option Awards ($)(2) | All Other Compensation ($)(3) |
| Total ($) |
| Fees Earned or Paid in Cash ($)(1) |
| Stock Awards ($)(2) |
| All Other Compensation ($)(3) |
| Total ($) |
|
| Mary Vermeer Andringa | 85,000 |
| 100,000 |
| | | 185,000 |
| 90,000 |
| 120,000 |
| — |
| 210,000 |
|
| David A. Brandon | 181,000 |
| | | 25,907 |
| 206,907 |
| 215,000 |
| — |
| — |
| 215,000 |
|
| Brenda Freeman | 179,000 |
| | | | 179,000 |
| |
| Douglas D. French | 183,000 |
| | | | 183,000 |
| 215,000 |
| — |
| 22,280 |
| 237,280 |
|
| J. Barry Griswell | 75,000 |
| 115,000 |
| | | 190,000 |
| |
| John R. Hoke III | 181,000 |
| | | 13,203 |
| 194,203 |
| 200,000 |
| — |
| — |
| 200,000 |
|
| Lisa A. Kro | 145,000 |
| 50,000 |
| | | 195,000 |
| 240,000 |
| — |
| — |
| 240,000 |
|
| Heidi Manheimer | 90,000 |
| 93,000 |
| | | 183,000 |
| |
| Heidi J. Manheimer | | 102,500 |
| 97,500 |
| — |
| 200,000 |
|
Candace S. Matthews(4) | | — |
| — |
| — |
| — |
|
| Michael C. Smith | | 100,000 |
| 100,000 |
| — |
| 200,000 |
|
| Michael A. Volkema | 250,000 |
| | | | 250,000 |
| 300,000 |
| — |
| — |
| 300,000 |
|
| |
| (1) | The amounts shown in the “Fees Earned or Paid in Cash” column include amounts that may be deferred under the Non-employee Officer and Director Deferred Compensation Plan. Amounts deferred are retained as units associated with hypothetical investments under the plan. The plan permits non-employee directors to elect to defer amounts that they would otherwise receive as director fees. Directors at the time of deferral elect the deferral period. These amounts may also reflect contributions to the Michael Volkema Scholarship fund which awards college scholarships to children of employees. During fiscal 2018, seven2020, nine of the directors who received fees contributed a portion to the fund. |
| |
| (2) | Amounts represent the aggregate grant date fair value of stock awards and option awards computed in accordance with FASB ASC Topic 718. The assumptions used in calculating these amounts are set forth in Note 9, in the company'sCompany's consolidated financial statements for the fiscal year ended June 2, 2018May 30, 2020, included in our Annual Report on Form 10-K. |
| |
| (3) | Represents value received on product purchases under employee discount program. |
As of June 2, 2018, each Director had the following aggregate number of outstanding options:
|
| | |
Name(4) | Aggregate Number of Outstanding Options |
|
Mary Vermeer Andringa | — |
|
David A. Brandon | — |
|
Douglas D. French | — |
|
J. Barry Griswell | — |
|
John R. Hoke III | — |
|
Lisa A. Kro | — |
|
Heidi Manheimer | — |
|
Michael A. Volkema | — |
Ms. Matthews was appointed to the Board on August 21, 2020, and did not receive any compensation in fiscal 2020. |
As of May 30, 2020, no member of the Board of Directors had outstanding stock options.
Equity Compensation Plan Information
As noted in the Compensation Discussion and Analysis, we maintain certain equity compensation plans under which common stock is authorized for issuance to employees and directors in exchange for services. We maintain our 2011 Long-Term Incentive Plan (LTI Plan) and Employees' Stock Purchase Plan.
The following table sets forth certain information regarding the above referenced equity compensation plans as of June 2, 2018.May 30, 2020.
| | | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights |
| Weighted-average exercise price of outstanding options, warrants and rights |
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
| Weighted-average exercise price of outstanding options, warrants and rights |
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(1) |
|
| | (a) |
| | | (a) |
| | |
| Equity compensation plans approved by security holders | 1,922,049 |
| $ | 30.6345 |
| 3,689,364 |
| 1,006,860 |
| $ | 33.5147 |
| 2,458,201 |
|
| Equity compensation plans not approved by security holders | | | | — |
| | — |
|
| Total | 1,922,049 |
| $ | 30.6345 |
| 3,689,364 |
| 1,006,860 |
| $ | 33.5147 |
| 2,458,201 |
|
| |
| (1) | The number of shares that remain available for future issuance under our plans is 3,689,3642,458,201 which includes 2,697,6251,867,287 under the 2011 Long-Term Incentive Plan and 991,739590,914 under the Employees' Stock Purchase Plan. |
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Our directors and officers, as well as any person holding more than 10 percent10% of our common stock, are required to report initial statements of ownership of our securities and changes in such ownership to the SEC. Based upon written representations by each director and officer, all the reports were timely filed by such persons during the last fiscal year except for Andrew LockMary Vermeer Andringa who had one delinquent filing representing three same-day-sale stock option exercises and H. Timothy Lopez who had one delinquent filing representing one award vest.shares gifted.
Certain Relationships and Related Party Transactions
The Board of Directors has adopted a written policy on Related Party Transactions. Under that policy, with certain limited exceptions, all proposed transactions between the companyCompany and any directors or officers or their respective affiliates are required to be reported to the NominatingGovernance and GovernanceCorporate Responsibility Committee prior to entering such a transaction. Management is obligated to provide the NominatingGovernance and GovernanceCorporate Responsibility Committee with information relating to the terms and conditions of the proposed transaction, how it complies with the policy, and if the proposed transaction is with a director, advise the NominatingGovernance and GovernanceCorporate Responsibility Committee if the transaction would impact that director's status as an independent director. The NominatingGovernance and GovernanceCorporate Responsibility Committee has the authority to determine whether the proposed transaction is exempt from approval or, if not, whether to approve the transaction as compliant with the policy or refer the matter to the Board of Directors. All approved or exempted transactions must be reported by the NominatingGovernance and GovernanceCorporate Responsibility Committee to the full Board of Directors.
To approve a transaction under the policy, the NominatingGovernance and GovernanceCorporate Responsibility Committee must determine that either (1) the dollar amount of the transaction and other transactions with the director during that year is less than $100,000 and, for any director that is a member of the Audit Committee, does not constitute a proscribed consulting, advisory, or other compensated fee,fee; or (2) if the proposed transaction is for the acquisition of products or services and is less than $100,000 or is subject to a bid process involving three or more competing parties, and the transaction is in the best interest of the companyCompany and its shareholders, provided that (a) management determined that the proposed transaction will provide the best value for the company,Company, (b) the compensation is consistent with the proposals submitted by the other bidders, and (c) the director did not directly participate in the proposal process.
Reconciliation of Non-GAAP Financial Measures
This reportpresentation contains references tocertain non-GAAP financial measures such as Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), and Organic Growth (Decline). Adjusted Earnings per Share represents reported diluted earnings per share ("EPS"), Organic net sales and Adjusted operating earnings and Adjusted EBITDA, all of which are non-GAAP financial measures (referred to collectively asexcluding the "Adjusted financial measures"). Adjusted diluted EPS and Adjusted operating earnings are calculated by excludingimpact from Earnings per share - diluted and Operating earnings items that we believe are not indicative of our ongoing operating performance, such as non-recurring gains; expenses associated with restructuring actions taken to adjust our cost structureadjustments related to the current business climate;adoption of the US Tax Cuts and Jobs Act, purchase accounting adjustments related to the HAY and naughtone investments, impairment charges, restructuring expenses, and other special charges not indicativeor gains, including related taxes. Adjusted Operating Earnings (Loss) represents reported operating earnings plus impairment charges, restructuring expenses, and other special charges. Impairment charges include non-cash, pre-tax charges for the impairment of ongoing performance such asgoodwill, intangible assets, and right of use assets. Restructuring expenses include actions involving facilities consolidation and optimization, targeted workforce reductions, and costs associated with thean early retirement program. Special charges include costs related to CEO transition, plan announced in fiscal 2018;third party consulting costs related to the Company's profit enhancement initiatives, acquisition-related costs, and non-cash impairment expenses.certain costs arising as a direct result of COVID-19. Organic net salesGrowth represents the change in sales and orders, excluding currency translation effects the divestiture of owned dealers, the impact of the change in DWR shipping terms in fiscal 2018 and the impact of an extra week of operations in fiscal 2017acquisitions. We believe these non-GAAP measures are useful for investors as compared to fiscal 2018. they provide financial information on a more comparative basis for the periods presented.
Adjusted EBITDA is calculated by excluding depreciation and amortization fromEarnings per Share, Adjusted Operating Earnings (Loss), and including equity income and other income and expenses. These adjustments are made to provide enhanced comparability of the company's current results with historical results.
The company presents the Adjusted financial measures because we consider them to be important supplemental measures of our performance and believe them to be useful in analyzing ongoing results from operations. The adjusted financial measuresOrganic Growth (Decline) are not measurements of our financial performance under GAAP and should not be considered an alternative to Earnings per share - diluted, Operating earnings or the company's reported Net sales under GAAP. The Adjusted financialrelated GAAP measurement. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the company'sour results as reported under GAAP. The company'sOur presentation of the Adjusted financialnon-GAAP measures should not be construed as an indication that itsour future results will be unaffected by unusual or infrequent items. The company compensatesWe compensate for these limitations by providing equal prominence of our GAAP results.
Certain tables below summarize select financial information, for the GAAP resultsperiods indicated related to each of our reportable segments. The North America Contract segment includes the operations associated with the design, manufacture, and usingsale of furniture products for work-related settings, including office, education, and healthcare environments, throughout the Adjusted financial measures onlyUnited States and Canada. The business associated with our owned contract furniture dealer is also included in the North America Contract segment. North America Contract also includes the operations associated with the design, manufacture, and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles, Nemschoff healthcare, and Herman Miller Collection products. The International Contract segment includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings, in the EMEA, Latin America and Asia-Pacific geographic regions. The Retail segment includes
Herman Miller, Inc., and Subsidiaries57
operations associated with the sale of modern design furnishings and accessories to third party retail distributors, as a supplement.well as direct to consumer sales through ecommerce and Design Within Reach and HAY retail stores, and studios. Corporate costs represent unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative, and acquisition-related costs.
The following table reconciles EPS to Adjusted EPS for the fiscal years indicated:
|
| | | | | | |
| | June 2, 2018 |
| June 3, 2017 |
|
| Earnings per Share - Diluted | $ | 2.12 |
| $ | 2.05 |
|
| | | |
| Less: One-time impact of adopting U.S. Tax Cuts and Job Acts | (0.05 | ) | — |
|
| Add: Other special charges | 0.16 |
| — |
|
| Less: Gain on sale of dealer | — |
| (0.02 | ) |
| Add: Impairment charges | — |
| 0.07 |
|
| Add: Restructuring expenses | 0.07 |
| 0.06 |
|
| Adjusted Earnings Per Share - Diluted | $ | 2.30 |
| $ | 2.16 |
|
| Weighted average shares outstanding (used for calculating Adjusted Earnings per share) | 60,311,305 |
| 60,554,589 |
|
|
| | | | | | |
| | May 30, 2020 | June 1, 2019 |
| (Loss) Earnings per Share - Diluted | $ | (0.15 | ) | $ | 2.70 |
|
| | | |
| Less: Adjustments Related to Adoption of US Tax Cuts and Jobs Act | — |
| (0.02 | ) |
| Less: Investment fair value adjustments, after tax | — |
| (0.03 | ) |
| Add: Inventory step up on HAY equity method investment, after tax | — |
| 0.01 |
|
| Less: Gain on consolidation of equity method investments | (0.63 | ) | — |
|
| Add: Special charges, after tax | 0.15 |
| 0.18 |
|
| Add: Impairment charges, after tax | 2.90 |
| — |
|
| Add: Restructuring expenses, after tax | 0.34 |
| 0.13 |
|
| Adjusted Earnings Per Share - Diluted | $ | — |
| $ | — |
|
| | | |
| Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted | 58,920,653 |
| 59,381,791 |
|
The following table reconciles Net Sales to Organic net salesNet Sales by segment for the fiscal years ended:
| | | | June 2, 2018 | June 3, 2017 | May 30, 2020 | June 1, 2019 |
| | North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | North America | International | Retail | Total | North America | International | Retail | Total |
| Net Sales, as reported | $ | 1,284.4 |
| $ | 434.5 |
| $ | 305.4 |
| $ | 356.9 |
| $ | 2,381.2 |
| $ | 1,276.6 |
| $ | 385.5 |
| $ | 298.0 |
| $ | 318.1 |
| $ | 2,278.2 |
| $ | 1,598.2 |
| $ | 502.8 |
| $ | 385.6 |
| $ | 2,486.6 |
| $ | 1,686.5 |
| $ | 492.2 |
| $ | 388.5 |
| $ | 2,567.2 |
|
| % change from PY | 0.6 | % | 12.7 | % | 2.5 | % | 12.2 | % | 4.5 | % | | | | (5.2 | )% | 2.2 | % | (0.7 | )% | (3.1 | )% | | |
| | | | | | | |
| Proforma Adjustments | | | | | | | | | | | |
| Dealer divestitures | — |
| — |
| — |
| — |
| — |
| (25.8 | ) | — |
| — |
| — |
| (25.8 | ) | |
Currency translation effects (1) | (3.9 | ) | (12.6 | ) | (0.1 | ) | (0.2 | ) | (16.8 | ) | — |
| — |
| — |
| — |
| — |
| |
| Impact of extra week in FY17 | — |
| — |
| — |
| — |
| — |
| (21.7 | ) | (6.3 | ) | (4.3 | ) | (4.7 | ) | (37.0 | ) | |
| Impact of Change in DWR Shipping Terms | — |
| — |
| — |
| (5.0 | ) | (5.0 | ) | | | | |
| Acquisitions | | (11.8 | ) | (83.8 | ) | — |
| (95.6 | ) | — |
| — |
| — |
| — |
|
Currency Translation Effects (1) | | 0.7 |
| 7.0 |
| — |
| 7.7 |
| — |
| — |
| — |
| — |
|
| Organic net sales | $ | 1,280.5 |
| $ | 421.9 |
| $ | 305.3 |
| $ | 351.7 |
| $ | 2,359.4 |
| $ | 1,229.1 |
| $ | 379.2 |
| $ | 293.7 |
| $ | 313.4 |
| $ | 2,215.4 |
| $ | 1,587.1 |
| $ | 426.0 |
| $ | 385.6 |
| $ | 2,398.7 |
| $ | 1,686.5 |
| $ | 492.2 |
| $ | 388.5 |
| $ | 2,567.2 |
|
| % change from PY | 4.2 | % | 11.3 | % | 3.9 | % | 12.2 | % | 6.5 | % | | (5.9 | )% | (13.4 | )% | (0.7 | )% | (6.6 | )% | |
(1) Currency translation effects represent the estimated net impact of translating current period sales using the average exchange rates applicable to the comparable prior year period.
The following table reconciles Net Sales to Organic Net Sales by segment for the periods ended as indicated below:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended February 29, 2020 | Nine Months Ended March 2, 2019 |
| | North America | International | Retail | Total | North America | International | Retail | Total |
| Net Sales, as reported | $ | 1,322.5 |
| $ | 388.1 |
| $ | 300.2 |
| $ | 2,010.8 |
| $ | 1,252.8 |
| $ | 359.9 |
| $ | 283.5 |
| $ | 1,896.2 |
|
| % change from PY | 5.6 | % | 7.8 | % | 5.9 | % | 6.0 | % | | | | |
| | | | | | | | | |
| Proforma Adjustments | | | | | | | | |
| Acquisitions | (8.9 | ) | (45.0 | ) | — |
| (53.9 | ) | — |
| — |
| — |
| — |
|
Currency Translation Effects (1) | 0.3 |
| 4.2 |
| 0.1 |
| 4.6 |
| — |
| — |
| — |
| — |
|
| Organic Net Sales | $ | 1,313.9 |
| $ | 347.3 |
| $ | 300.3 |
| $ | 1,961.5 |
| $ | 1,252.8 |
| $ | 359.9 |
| $ | 283.5 |
| $ | 1,896.2 |
|
| % change from PY | 4.9 | % | (3.5 | )% | 5.9 | % | 3.4 | % | | | | |
Reconciliation(1) Currency translation effects represent the estimated net impact of Non-GAAP Financial Measures translating current period sales using the average exchange rates applicable to the comparable prior year period.(continued)
The following table reconciles Operating earningsEarnings to Adjusted operating earningsOperating Earnings by segment for the fiscal years ended:
| | | | June 2, 2018 | June 3, 2017 | May 30, 2020 | June 1, 2019 |
| | North America | ELA | Specialty | Consumer | Corporate | Total | North America | ELA | Specialty | Consumer | Corporate | Total | North America | International | Retail | Corporate | Total | North America | International | Retail | Corporate | Total |
| Operating earnings (loss) | $ | 166.3 |
| $ | 35.5 |
| $ | 8.9 |
| $ | 13.9 |
| $ | (47.1 | ) | $ | 177.5 |
| $ | 176.0 |
| $ | 35.9 |
| $ | 8.1 |
| $ | 4.8 |
| $ | (34.0 | ) | $ | 190.8 |
| |
| Operating Earnings (loss) | | $ | 130.9 |
| $ | 18.2 |
| $ | (148.3 | ) | $ | (39.2 | ) | $ | (38.4 | ) | $ | 189.7 |
| $ | 57.8 |
| $ | 5.3 |
| $ | (49.3 | ) | $ | 203.5 |
|
| % Net sales | 12.9% | 8.2% | 2.9% | 3.9% | n/a | 7.5% | 13.8% | 9.3% | 2.7% | 1.5% | n/a | 8.4% | 8.2% | 3.6% | (38.5)% | | (1.5)% | 11.2% | 11.7% | 1.4% | | 7.9% |
| | | | | | |
|
| | | | |
| Add: Special charges | — |
| 2.5 |
| — |
| | 11.3 |
| 13.8 |
| — |
| — |
| — |
| — |
| — |
| — |
| 7.5 |
| 2.9 |
| — |
| 1.9 |
| 12.3 |
| 0.6 |
| 0.2 |
| 0.8 |
| 11.5 |
| 13.1 |
|
| Add: Impairment charges | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 7.1 |
| — |
| — |
| 7.1 |
| 43.2 |
| 23.2 |
| 139 |
| — |
| 205.4 |
| — |
| — |
| — |
| — |
| — |
|
| Less: Gain on sale of dealer | — |
| — |
| — |
| — |
| — |
| 5.7 |
| (0.7 | ) | — |
| — |
| — |
| — |
| (0.7 | ) | |
| Add: Restructuring expenses | 1.8 |
| 3.9 |
| — |
| — |
| — |
| | 2.9 |
| 1.0 |
| 0.9 |
| 0.6 |
| — |
| 5.4 |
| 18.7 |
| 4.8 |
| 2.9 |
| — |
| 26.4 |
| 7.7 |
| 2.5 |
| — |
| — |
| 10.2 |
|
| Adjusted operating earnings (loss) | $ | 168.1 |
| $ | 41.9 |
| $ | 8.9 |
| $ | 13.9 |
| $ | (35.8 | ) | $ | 197.0 |
| $ | 178.2 |
| $ | 36.9 |
| $ | 16.1 |
| $ | 5.4 |
| $ | (34.0 | ) | $ | 202.6 |
| |
| Adjusted Operating Earnings (loss) | | $ | 200.3 |
| $ | 49.1 |
| $ | (6.4 | ) | $ | (37.3 | ) | $ | 205.7 |
| $ | 198.0 |
| $ | 60.5 |
| $ | 6.1 |
| $ | (37.8 | ) | $ | 226.8 |
|
| % Net Sales | |
|
|
|
|
|
| | 8.3 | % | | 8.8 | % |
The following table reconciles Current Year Net IncomeOperating Earnings to Adjusted EBITDA usedOperating Earnings for the Annual Executive Incentive Cash Bonus Plan:periods ended as indicated below:
|
| | | |
| | Fiscal Year Ended |
| (Dollars In millions) | June 2, 2018 |
| Current Year Net Income | $ | 128.1 |
|
| Standard Add Backs: | |
| Interest Expense | 13.5 |
|
| Income Taxes | 42.4 |
|
| Depreciation and Amortization | 66.9 |
|
| EBITDA | $ | 250.9 |
|
| Standard Adjustments per Guidelines | |
| Amortization of Previously Excluded Restructuring | (1.9 | ) |
| Non-Standard Adjustments Requiring Approval | |
| Restructuring expense | 8.2 |
|
| Third party consulting costs, net of amortization | 4.8 |
|
| Costs associated with the CEO transition plan | 4.4 |
|
| Adjusted EBITDA | 266.4 |
|
|
| | | | | | | | | | |
| | Nine Months Ended February 29, 2020 | Nine Months Ended March 2, 2019 |
| Net Sales | $ | 2,010.8 |
| 100.0 | % | $ | 1,896.2 |
| 100.0 | % |
| Gross Margin | 744.9 |
| 37.0 | % | 681.7 |
| 36.0 | % |
| Total Operating Expenses | 571.9 |
| 28.4 | % | 534.8 |
| 28.2 | % |
| Operating Earnings | 173.0 |
| 8.6 | % | 146.9 |
| 7.7 | % |
| | | | | |
| Adjustments | | | | |
| Special Charges | 7.6 |
| 0.4 | % | 11.3 |
| 0.6 | % |
| Restructuring | 9.6 |
| 0.5 | % | 1.7 |
| 0.1 | % |
| Adjusted Operating Earnings | $ | 190.2 |
| 9.5 | % | $ | 159.9 |
| 8.4 | % |
| % change from PY | 18.9 | % |
|
| | |
Herman Miller, Inc., and Subsidiaries59
Submission of Shareholder Proposals for the 2021 Annual Meeting
Shareholders wishing to submit proposals on matters appropriate for shareholder action to be presented at our 2021 Annual Meeting of Shareholders and to be included in our proxy materials for that meeting may do so in accordance with Rule 14a-8 promulgated under the Exchange Act, whereby (1) all applicable requirements of Rule 14a-8 must be satisfied, (2) the notice must include various stock ownership and related information detailed in our Bylaws, and (3) such proposals must be received by us at our principal executive offices at 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302, not earlier than the close of business on the one hundred twentieth (120th) day and not later than the close of business on the ninetieth (90th) day, prior to the first anniversary of the preceding year’s annual meeting.
Our Bylaws, which are available on our website at www.hermanmiller.com/bylaws, contain certain procedural requirements that shareholders must follow to nominate a person for election as a director at an annual meeting or to bring an item of business before the annual meeting. These procedures require that notice of an intention to nominate a person for election to the Board and/or to bring an item of business before our 2021 annual meeting must be received in writing by our Corporate Secretary at 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302 no earlier than June 14, 2021 and no later than July 14, 2021. The notice must contain certain information about the shareholder making the proposal for nomination, including a representation that the shareholder intends to appear in person or by proxy at the annual meeting to nominate the person named in the notice or bring the item of business before the meeting, and about the nominee and/or the item of business and, in the case of a nomination, must be accompanied by a written consent of the proposed nominee to be named as a nominee and to serve as a director, if elected. We did not receive any proposals to be presented at the 2020 Annual Meeting.
Miscellaneous
The cost of the solicitation of proxies will be borne by us. In addition to the use of the mails,mail, proxies may be solicited personally or by telephone or electronic means by a few of our regular employees. We may reimburse brokers and other people holding stock in their names or in the names of nominees for their expenses in sending proxy materials to the principals and obtaining their proxies.
Our mailing for the fiscal year ended June 2, 2018,May 30, 2020, includes the Notice Regarding the Availability of Proxy Materials. A copy of the Notice of 20182020 Annual Meeting of Shareholders and the 20182020 Form 10-K (Annual Report) as well as the Proxy Statement, both filed with the SEC, are available, without charge, upon written request from the Secretary of the Company, 855 East Main Avenue, PO Box 302, Zeeland, Michigan 49464-0302.
Shareholders are urged to vote promptly. Questions related to your registered holdings can be directed as follows:
Computershare Investor Services, LLC, 250 Royall Street, Canton, Massachusetts 02021 Phone: 1-866-768-5723 inside the United States Phone: 1-781-575-2723 outside the United States http://www.computershare.comwww.computershare.com.
By Order of the Board of Directors
Jacqueline H. Timothy Lopez,Rice, General Counsel and Corporate Secretary
August 28, 2018September 1, 2020
Appendix I - Herman Miller, Inc. 2020 Long-Term Incentive Plan
ARTICLE 1
ESTABLISHMENT AND PURPOSE OF THE PLAN
1.1Establishment of the Plan. Herman Miller, Inc., a Michigan corporation (the “Company”), hereby establishes an incentive compensation plan known as the “2020 Herman Miller, Inc. Long-Term Incentive Plan” (the “Plan”), as set forth in this document. The Plan permits the granting of stock-based awards to Employees as well as Directors. The Plan was approved by the Company’s shareholders on October 12, 2020 (the “Effective Date”).
1.2Purpose of the Plan. The purpose of the Plan is to promote the long-term success of the Company for the benefit of the Company’s shareholders, through stock-based compensation, by aligning the personal interests of the Plan Participants with those of its shareholders. The Plan is also designed to allow Plan Participants to participate in the Company’s future, as well as to enable the Company to attract, retain and award individuals that qualify as Participants in the Plan.
1.3Term of Plan. The Plan shall terminate automatically on the tenth (10th) anniversary of the Effective Date and may be terminated earlier by the Board as provided in Article 11.
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings set forth below:
2.1“Award” shall mean any award under this Plan of any Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares or other Performance-Based Awards or Other Stock-Based Awards.
2.2“Award Agreement” shall mean an agreement evidencing the grant of an Award under this Plan. Awards under the Plan shall be evidenced by Award Agreements that set forth the details, conditions and limitations for each Award, as established by the Committee and shall be subject to the terms and conditions of the Plan.
2.3“Award Date” shall mean the date that an Award is made, as specified in an Award Agreement.
2.4“Board” shall mean the Board of Directors of the Company.
2.5“Cause” shall mean:
a.A material breach by the Participant of those duties and responsibilities of the Participant which (i) do not differ in any material respect from the duties and responsibilities of the Participant during the 90-day period immediately prior to such breach (other than due to Disability), (ii) is demonstrably willful and deliberate on the Participant’s part, (iii) is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company, and (iv) is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach; or
b.The commission by the Participant of a felony involving moral turpitude.
2.6“Change in Control” shall mean:
a.the acquisition by any individual, entity, or group (including any “person” within the meaning of Section 13(d)(3) of the Exchange Act, hereinafter “Person”) of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 35 percent or more of either (i) the then outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable
Herman Miller, Inc., and Subsidiaries61
securities were acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Company, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 2.6 shall be satisfied; and provided further that, for purposes of clause (B), (i) a Change in Control shall not occur solely because any Person becomes the beneficial owner of 35 percent or more of the Outstanding Company Common Stock or 35 percent or more of the Outstanding Company Voting Securities by reason of an acquisition by the Company of Outstanding Company Common Stock or Outstanding Company Voting Securities that reduces the number of outstanding shares of Outstanding Company Common Stock or Outstanding Company Voting Securities and (ii) if, after such acquisition by the Company, such Person becomes the beneficial owner of any additional shares of Outstanding Company Common Stock or any additional Outstanding Company Voting Securities, such additional beneficial ownership shall constitute a Change in Control;
b.individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason within any 24-month period to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;
c.consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (i) more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation (the “Surviving Corporation”) (or, if applicable, the ultimate parent corporation that beneficially owns all or substantially all of the outstanding voting securities entitled to vote generally in the election of directors of the Surviving Corporation) and more than 60 percent of the combined voting power of the then outstanding securities of the Surviving Corporation (or such ultimate parent corporation) entitled to vote generally in the election of directors is represented by the shares of Outstanding Company Common Stock and the Outstanding Company Voting Securities, respectively, that were outstanding immediately prior to such reorganization, merger or consolidation (or, if applicable, is represented by shares into which such Outstanding Company Common Stock and Outstanding Company Voting Securities were converted pursuant to such reorganization, merger or consolidation) and such ownership of common stock and voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan [or related trust] sponsored or maintained by the Company or the corporation resulting from such reorganization, merger or consolidation [or any corporation controlled by the Company] and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 35 percent or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35 percent or more of the then outstanding shares of common stock of such corporation or 35 percent or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or
d.consummation of (i) a plan of complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, immediately after such sale or other disposition, (A) more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation (the “Surviving Corporation”) (or, if applicable, the ultimate parent corporation that beneficially owns all or substantially all of the outstanding voting securities entitled to vote generally in the election of directors of the Surviving Corporation) and more than 60 percent of the combined voting power of the then outstanding securities of the Surviving Corporation (or
such ultimate parent corporation) entitled to vote generally in the election of directors is represented by the shares of Outstanding Company Common Stock and the Outstanding Company Voting Securities, respectively, that were outstanding immediately prior to such reorganization, merger or consolidation (or, if applicable, is represented by shares into which such Outstanding Company Common Stock and Outstanding Company Voting Securities were converted pursuant to such reorganization, merger or consolidation) and such ownership of common stock and voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan [or related trust] sponsored or maintained by the Company or such corporation [or any corporation controlled by the Company] and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, 35 percent or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 35 percent or more of the then outstanding shares of common stock thereof or 35 percent or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale of other disposition.
2.7“Code” shall mean the Internal Revenue Code of 1986, as amended.
2.8“Committee” shall mean the Committee, as specified in Article 3, appointed by the Board to administer the Plan.
2.9“Common Stock” shall mean the Common Stock, $.20 par value per share, of the Company.
2.10“Director” means a member of the Board.
2.11“Disability” shall mean:
a.The inability of a Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or
b.The receipt of income replacement benefits by a Participant who is an Employee for a period of not less than 3 months under an accident and health plan covering Employees by reason of any medically determinable physical or mental impairment of the Participant which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
2.12“Employee” means any common law employee of the Company or a Subsidiary.
2.13“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, as now in effect or as hereafter amended.
2.14“Fair Market Value” on a date shall mean the closing sales price per share of the Common Stock for such date on the National Association of Securities Dealers Automated Quotation System or any successor system then in use (“NASDAQ”). If no sale of shares of Common Stock is reflected on the NASDAQ on such date, “Fair Market Value” shall be determined on the next preceding day on which there was a sale of shares of Common Stock reflected on NASDAQ. If shares of Common Stock are not traded on a national securities exchange or through any other nationally recognized quotation service, “Fair Market Values” shall be determined by the Board of Directors for the Committee acting in good faith, in either case pursuant to any method consistent with the Code.
2.15“Full Value Award” shall mean any Award under the Plan other than an Option or Stock Appreciation Right.
58 2018Herman Miller, Inc., and Subsidiaries63
2.16“Good Reason” shall mean without the Participant’s express written consent, the occurrence of any of the following events with respect to a Participant that is an Employee after a Change in Control:
a.any of (i) the assignment to the Participant of any duties inconsistent in any material adverse respect with the Participant’s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control, (ii) a change in any material adverse respect in the Participant’s reporting responsibilities, titles or offices with the Company as in effect immediately prior to such Change in Control or (iii) any removal or involuntary termination of the Participant from any position held by the Participant with the Company immediately prior to such Change in Control or any failure to re-elect the Participant to any position with the Company held by the Participant immediately prior to such Change in Control;
b.a reduction by the Company in the Participant’s rate of annual base salary or annual target bonus as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
c.any requirement of the Company that the Participant be based at a location in excess of 50 miles from the facility which is the Participant’s principal business office at the time of the Change in Control; or
d.a reduction of at least 5% in the aggregate benefits provided to the Participant and the Participant’s dependents under the Company’s employee benefit plans (including, without limitation, retirement, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel, accident insurance plans and programs) in which the Participant is participating immediately prior to such Change in Control.
2.17“Incentive Stock Option” or “ISO” shall mean an option to purchase shares of Common Stock granted under Article 6, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.
2.18“Insider” shall mean an employee who is an officer (as defined in Rule 16a-1(f) of the Exchange Act) or director of the Company, or holder of more than ten percent (10%) of its outstanding shares of Common Stock.
2.19“Nonemployee Director” shall have the meaning set forth in Rule 16b-3(b)(3), as promulgated by the Securities and Exchange Commission (the “SEC”) under the Exchange Act.
2.20“Nonqualified Stock Option” or “NQSO” shall mean an option to purchase shares of Common Stock, granted under Article 6, which is not an Incentive Stock Option.
2.21“Option” means an Incentive Stock Option or a Nonqualified Stock Option.
2.22“Other Stock-Based Award” shall mean an Award under Article 10 of this Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock.
2.23“Participant” means a Director or an Employee who holds an outstanding Award under the Plan. The term also includes an individual who is a former Director or Employee to the extent the context would so require.
2.24“Performance-Based Award” shall mean an Award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares or Other Stock-Based Awards made subject to the achievement of performance goals specified by the Committee under the terms of Article 9.
2.25“Performance Shares” shall mean an Award granted under Article 9 of this Plan evidencing the right to receive Common Stock or cash of an equivalent value at the end of a specified performance period.
2.26“Permitted Transferee” shall mean (i) the spouse, children or grandchildren of a Participant (each an “Immediate Family Member”), (ii) a trust or trusts for the exclusive benefit of the Participant and/or one or more
Immediate Family Members, or (iii) a partnership or limited liability company whose only partners or members are the Participant and/or one or more Immediate Family Members.
2.27“Prior Plan” shall mean the Herman Miller, Inc. Long-Term Incentive Plan, as amended.
2.28“Retirement” shall mean the termination of employment with the Company or a Subsidiary of a Participant that is an Employee in the manner set forth in the Participant’s Award Agreement.
2.29“Restricted Stock” shall mean an Award granted to a Participant under Article 8 of this Plan.
2.30“Restricted Stock Unit” shall mean a bookkeeping entry representing the equivalent of one (1) share of Common Stock awarded to a Participant under Article 8 of this Plan.
2.31“Stock Appreciation Right” or “SAR” shall mean a right granted to a Participant under Article 7 of this Plan.
2.32“Subsidiary” shall mean any corporation in which the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least fifty percent (50%) of the combined equity thereof.
2.33“Termination of Service” shall mean the termination of a Participant’s employment with the Company or a Subsidiary, and with respect to a Participant that is not an Employee, the termination of that person’s service as a Director. A Participant employed by a Subsidiary shall also be deemed to incur a Termination of Service if the Subsidiary ceases to be a Subsidiary and the Participant does not immediately thereafter become an Employee of the Company or another Subsidiary.
ARTICLE 3
ADMINISTRATION
3.1Committee Composition. The Plan shall be administered by a Committee designated by the Board consisting of not less than three (3) directors who shall be appointed from time to time by the Board, each of whom shall qualify as a Nonemployee Director. Without limiting the generality of the foregoing, the Committee may be the Compensation Committee of the Board or a subcommittee thereof if the Compensation Committee of the Board or such subcommittee satisfies the foregoing requirements.
3.2Committee Authority. Subject to the Company’s Articles of Incorporation, Bylaws, and the provisions of this Plan, the Committee shall have full authority to grant Awards, including the following:
a.To select those Employees to whom Awards may be granted under the Plan and, based upon recommendations of the Board or a committee of the Board, those non-Employee Directors to whom Awards may be granted under the Plan;
b.To determine whether and to what extent Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares or other Performance-Based Awards, and Other Stock-Based Awards, or any combination thereof are to be granted under the Plan;
c.To determine the number of shares of Common Stock to be covered by each Award;
d.To determine the terms and conditions of any Award Agreement, including, but not limited to, the Option Price, SAR Price, any vesting restriction or limitation, any vesting schedule or acceleration thereof, any performance conditions or any forfeiture restrictions or waiver thereof, regarding any Award and the shares Common Stock relating thereto, based on such factors as the Committee shall determine in its sole discretion;
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e.To determine whether, to what extent and under what circumstances grants of Awards are to operate on a tandem basis and/or in conjunction with or apart from other cash compensation arrangement made by Company other than under the terms of this Plan;
f.To determine under what circumstances an Award may be settled in cash, Common Stock, or a combination thereof; and
g.To determine to what extent and under what circumstances shares of Common Stock and other amounts payable with respect to an Award shall be deferred, provided that any such deferrals shall be made in a manner that complies with Section 409A of the Code.
The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (including any Award Agreement) and to otherwise supervise the administration of the Plan. A majority of the Committee shall constitute a quorum, and the acts of a majority of a quorum at any meeting, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The interpretation and construction by the Committee of any provisions of the Plan or any Award granted under the Plan shall be final and binding upon the Company, the Board and Participants, including their respective heirs, executors and assigns. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or an Award granted hereunder.
3.3Forfeiture. The Committee may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Participant with respect to an Award on an account of actions taken by, or failed to be taken by, that Participant in violation or breach of or in conflict with any (a) agreement between the Company and each Participant, or (b) any Company policy or procedure (including the Code of Business Conduct and Ethics and the Code of Ethics for Senior Financial Officers), or (c) any other obligation of such Participant to the Company as and to the extent specified in such Award Agreement. The Committee may terminate an outstanding Award if the Participant is terminated for Cause as defined in the Plan or the applicable Award Agreement or for “cause” as defined in any other agreement between the Company and such Participant, as applicable.
3.4Recoupment. Any Award granted pursuant to the Plan shall be subject to mandatory repayment by the Participant to the Company to the extent the Participant is, or in the future becomes, subject to (a) any Company “clawback,” recoupment or compensation recovery policy that is adopted to comply with the requirements of any applicable law, rule or regulation, or otherwise, or (b) any law, rule or regulation which imposes mandatory recoupment under circumstances set forth in such law, rule or regulation.
3.5No Repricing. Subject to any adjustments that may be made under Article 13 of the Plan, the Company may not, without obtaining shareholder approval; (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities.
ARTICLE 4
COMMON STOCK SUBJECT TO THE PLAN
4.1General. Subject to adjustment as provided in Section 4.2 and Article 14, the maximum aggregate number of shares of Common Stock which may be issued under this Plan shall not exceed 7,535,670 shares, which may be either unauthorized and unissued Common Stock or issued Common Stock reacquired by the Company (“Plan Shares”). Determinations as to the number of Plan Shares that remain available for issuance under the Plan shall be made in accordance with this Article 4 and Article 14 and with such rules and procedures as the Committee shall determine from time to time.
4.2Share Usage.
a.General. Shares of Common Stock subject to an Award shall be counted as used as of the Award Date.
b.Counting of Shares Subject to Awards. Any shares of Common Stock that are subject to Awards shall be counted against the share issuance limit set forth in Section 4.1 as (i) two (2) shares of Common Stock for everyone (1) share of Common Stock subject to a Full Value Award, and (ii) one (1) share of Common Stock for everyone (1) share of Common Stock subject to any Award that is not a Full Value Award. If the number of shares of Common Stock subject to an Award is variable as of the Award Date, the number of shares of Common Stock to be counted against the share issuance limit set forth in Section 4.1, prior to the settlement of the Award, shall be the maximum number of shares of Common Stock that can be received under that Award.
c.Conditions Under Which Shares Subject to Awards Become Available for Future Awards. Any shares of Common Stock subject to an Award under the Plan which thereafter terminate by expiration, forfeiture, cancellation, or otherwise, without the issuance of such shares, including Awards that are settled in cash in lieu of shares of Common Stock, shall be available again for issuance under the Plan. Each share of Common Stock that again becomes available for issuance under the Plan under the preceding sentence shall increase the total number of shares available for grant by (i) two (2) shares if such share is subject to a Full Value Award and (ii) one (1) share if such share was subject to any Award that is not a Full Value Award.
d.Conditions Under Which Shares Subject to Awards Are Not Available for Future Awards. The number of shares of stock available for issuance under the Plan shall not be increased by the number of shares of Common Stock (i) tendered by the Participant or withheld by the Company in payment of the purchase price of an Option, (ii) tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award, (iii) purchased by the Company with proceeds received from the exercise of an Option, (iv) subject to an SAR that are not issued in connection with the stock settlement of that SAR upon its exercise, (v) subject to the cancellation of an SAR granted in tandem with an Option upon the exercise of the Option and (vi) subject to the cancellation of an Option granted in tandem with an SAR upon the exercise of the SAR.
4.3Award Limits. Notwithstanding any provision in the Plan to the contrary,
i.the maximum number of shares of Common Stock that may be subject to any Full Value Award granted under the Plan to any one Participant during any fiscal year of the Company may not exceed 250,000 shares (as adjusted from time to time in accordance with the provisions of the Plan);
ii.the maximum number of shares of Common Stock that may be subject to any Award granted under the Plan that is not a Full Value Award to any one Participant during any fiscal year of the Company may not exceed 500,000 shares (as adjusted from time to time in accordance with the provisions of the Plan); and
iii.the maximum number of shares of Common Stock that may be subject to any Award granted under the Plan to any individual non-Employee Director during any fiscal year of the Company may not exceed 40,000 shares (as adjusted from time to time in accordance with the provisions of the Plan).
ARTICLE 5
ELIGIBILITY
The persons who shall be eligible to receive Awards under the Plan shall be such Employees and non-Employee Directors as the Committee shall select from time to time. In making such selections as to Employees, the Committee shall consider the nature of the services rendered by such employees, their present and potential contribution to the Company’s success and the success of the particular Subsidiary or division of the Company by which they are employed, and such other factors as the Committee in its discretion shall deem relevant. In making such selections as to non-Employee Directors, the Committee shall consider such factors as the Committee in its discretion shall deem relevant. Participants may hold more than one Award, but only on the terms and subject to the restrictions set forth in the Plan and their respective Award Agreements. The Committee may delegate its power to one or more of the Company’s Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer or General Counsel to determine the participation eligibility of new Participants who are not officers under Section 16 of the
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Securities and Exchange Act of 1934 and whose fiscal year total direct compensation (consisting of base salary, annual incentive and long-term incentive) is less than $500,000 (“Designated Participants”) and the performance criteria for each such Designated Participant, in which case such Company executives shall exercise the delegated power in accordance with this Article 5.
ARTICLE 6
STOCK OPTIONS
6.1Options. Options may be granted alone or in addition to other Awards granted under this Plan. Each Option granted under this Plan shall be either an Incentive Stock Option (ISO) or a Nonqualified Stock Option (NQSO).
6.2Grants. The Committee shall have the authority to grant to any Participant one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Options, provided that Incentive Stock Options shall not be granted to any non-Employee Director. To the extent that any Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Option or the portion thereof which does not qualify shall constitute a separate Nonqualified Stock Option.
6.3Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under such Section 422. An Incentive Stock Option shall not be granted to an individual who, on the date of grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company. The aggregate Fair Market Value, determined on the Award Date of the shares of Common Stock with respect to which one or more Incentive Stock Options (or other incentive stock options within the meaning of Section 422 of the Code, under all other option plans of the Company) that are exercisable for the first time by a Participant during any calendar year shall not exceed the $100,000 limitation imposed by Section 422(d) of the Code.
6.4Terms of Options. Options granted under the Plan shall be evidenced by Award Agreements in such form as the Committee shall, from time to time approve, which Agreement shall comply with and be subject to the following terms and conditions:
a.Participant’s Agreement. Each Participant who is an employee, shall agree to remain in the continuous employ of the Company for a period of at least twelve (12) months from the Award Date or until Retirement, if Retirement occurs prior to twelve (12) months from the date of the Option.
b.Option Price. The Option Price per share of Common Stock purchasable under an Option shall be determined by the Committee at the time of grant but shall be not less than one hundred percent (100%) of the Fair Market Value of one (1) share of Common Stock on the Award Date.
c.Option Term. The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than ten (10) years after the date the Option is granted.
d.Exercisability. Except as provided in Article 11 and Article 14, no Option shall be exercisable either in whole or in part prior to the first anniversary of the Award Date. Thereafter, an Option shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and set forth in the Award Agreement.
e.Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under subsection (d) above, Options may be exercised in whole or in part at any time during the term of the Option, by giving notice of exercise specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price in such form as the Committee may accept. If and to the extent determined by the Committee in its sole discretion at or after grant, payment in full or in part may also be made in the form of Common Stock owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances) or Restricted Stock, or by reduction in the number of shares issuable upon such exercise based, in
each case, on the Fair Market Value of the Common Stock on the last trading date preceding payment as determined by the Committee (without regard to any forfeiture restrictions applicable to Restricted Stock). No shares of stock shall be issued until payment has been made. A Participant shall generally have the rights to dividends or other rights of a shareholder with respect to shares subject to the Option when the person exercising such option has given written notice of exercise, has paid for such shares as provided herein, and, if requested, has given the representation described in Section 15.1 of the Plan. No dividends or dividend equivalents shall be accrued on unexercised Options. Notwithstanding anything to the contrary in this Section 6.4(e), but subject to the other terms and conditions of the Plan, the Committee may, but shall not be required to, provide that an Option (other than an Incentive Stock Option) shall be deemed exercised automatically prior to the expiration or termination of the Option without any notice to or from the Participant. Upon any such automatic exercise, the exercise price and applicable withholding taxes shall, unless the Committee provides otherwise, be paid in the form of a reduction in the number of shares issuable upon such exercise.
f.Transferability of Options. No Option may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, provided, however, the Committee may, in its discretion, authorize all or a portion of a Nonqualified Stock Option to be granted to an optionee to be on terms which permit transfer by such optionee to a Permitted Transferee, provided that (i) there may be no consideration for any such transfer (other than the receipt of or interest in a family partnership or limited liability company), (ii) the stock option agreement pursuant to which such options are granted must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this Section 6.4(f), and (iii) subsequent transfers of transferred options shall be prohibited except those in accordance with Section 6.4(i). Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of service of Sections 6.4(g), (h) and (i) hereof, and the tax withholding obligations of Section 15.3 shall continue to be applied with respect to the original optionee, following which the options shall be exercisable by the Permitted Transferee only to the extent, and for the periods specified in Sections 6(g), (h), and (i). The Company shall not be obligated to notify Permitted Transferee(s) of the expiration or termination of any option. Further, all Options shall be exercisable during the Participant’s lifetime only by such Participant and, in the case of a Nonqualified Stock Option, by a Permitted Transferee. The designation of a person entitled to exercise an Option after a person’s death will not be deemed a transfer.
g.Termination of Options. Any Option that is not exercised within whichever of the exercise periods specified in Article 11 is applicable shall terminate upon expiration of such exercise period.
h.Purchase and Settlement Provisions. The Committee may at any time offer to purchase an Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time that such offer is made. In addition, if an Award Agreement so provides at the Award Date or is thereafter amended to so provide, the Committee may require that all or part of the shares of Common Stock to be issued with respect to the exercise of an Option, in an amount not greater than the Fair Market Value of the shares that is in excess of the aggregate Option Price, take the form of Performance Shares or Restricted Stock, which shall be valued on the date of exercise on the basis of the Fair Market Value of such Performance Shares or Restricted Stock determined without regard to the deferral limitations and/or forfeiture restrictions involved.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1Awards of Stock Appreciation Rights or “SARs.” A SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (a) the Fair Market Value of one (1) share of Common Stock on the date of exercise over (b) the per-share exercise price of such SAR (the “SAR Price”) as determined by the Committee. No dividends or dividend equivalents shall be paid or credited on SARs. SARs may be granted in tandem with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in combination with all or any part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Award Date of a related Option must have a SAR Price that is no less than the Fair Market Value of one (1) share of Common Stock on the Award Date of such SAR.
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7.2Terms of SARs. Stock Appreciation Rights granted under the Plan shall be evidenced by an Award Agreement in such form as the Committee shall, from time to time approve, which Agreement shall comply with and be subject to the following terms and conditions:
a.Participant’s Agreement. Each Participant who is an employee, shall agree to remain in the continuous employ of the Company for a period of at least twelve (12) months from the Award Date or until Retirement, if Retirement occurs prior to twelve (12) months from the date of the Award.
b.SAR Price. The SAR Price per share of Common Stock shall be determined by the Committee at the time of grant but shall not be less than one hundred percent (100%) of the Fair Market Value of one (1) share of Common Stock on the Award Date.
c.Term. The term of each SAR shall be fixed by the Committee, but no SAR shall be exercisable more than ten (10) years after the date the SAR is granted.
d.Exercisability and Settlement. The Committee shall determine, on the Award Date, the time or times at which and the circumstances under which a SAR may be exercised, in whole or in part (including based on the achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following Termination of Employment or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which shares of Common Stock shall be delivered or deemed to be delivered to a Participant, regardless of whether a SAR shall be granted in tandem or in combination with any other Award, and any and all other terms and conditions of any SAR. Notwithstanding the foregoing, except as provided in Article 11 and Article 14, no SAR shall be exercisable either in whole or in part prior to the first anniversary of the Award Date.
7.3Transferability. SARs shall be subject to the transfer conditions of Options set forth in Section 6.4(f) above.
ARTICLE 8
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1Awards of Restricted Stock and Restricted Stock Units. Shares of Restricted Stock and Restricted Stock Units may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the time or times at which, grants of Restricted Stock or Restricted Stock Units will be made, the number of shares to be awarded, the price (if any) to be paid by the Participant, the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof (a “Restriction Period”), and all other terms and conditions of the Awards. The Committee may condition the grant of Restricted Stock or Restricted Stock Units upon the achievement of specific business objectives, measurements of individual or business unit or Company performances, or such other factors as the Committee may determine. The provisions of Restricted Stock or Restricted Stock Unit Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years. Notwithstanding the foregoing, and except for Awards of Restricted Stock or Restricted Stock Units granted to non-Employee Directors or as provided in Article 11 and Article 14, Restricted Stock and Restricted Stock Units that vest upon the achievement of performance goals shall not vest, in full, in less than one (1) year from the Award Date.
8.2Awards and Certificates. A prospective Participant selected to receive a Restricted Stock shall not have any rights with respect to such Award, unless and until such Participant has executed an Award Agreement evidencing the Award and has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such Award. Further, such Award shall be subject to the following conditions:
a.Acceptance. Awards under this Article 8 must be accepted within a period of thirty (30) days (or such shorter period as the Committee may specify at grant) after the Award Date, by executing an Award Agreement and by paying whatever price (if any) the Committee has designated for such shares of Restricted Stock or Restricted Stock Units.
b.Legend for Restricted Stock Awards. To the extent that ownership of Restricted Stock is evidenced by a book-entry registration or a similar registration, such registration shall be notated to evidence that restrictions imposed on such Award of Restricted Stock under this Plan and the applicable Award Agreement. If the Company issues, in the name of the Participant to whom the Restricted Stock has been granted, a stock certificate in respect of such shares of Restricted Stock such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the 2020 Herman Miller, Inc. Long-Term Incentive Plan and related Award Agreement entered into between the registered owner and the Company, dated _______. Copies of such Plan and Agreement are on file in the offices of the Company, 855 East Main Avenue, Zeeland, Michigan 49464.”
c.Custody. The Committee may require that the stock certificates evidencing shares of Restricted Stock be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Award.
8.3Rights of Holders of Restricted Stock. Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such shares of Restricted Stock and the right to receive any dividends declared or paid with respect to such shares of Restricted Stock. Unless the Committee otherwise provides in an Award Agreement, dividends paid on Restricted Stock which vest or are earned based upon the passage of time or the achievement of performance goals shall not vest unless such Restricted Stock becomes vested. All stock distributions, if any, received by a Participant with respect to Restricted Stock as a result of any stock split, stock dividend, combination of stock, or other similar transaction shall be subject to the vesting conditions and restrictions applicable to such Restricted Stock.
8.4Rights of Holders of Restricted Stock Units. Holders of Restricted Stock Units shall have no rights as shareholders of the Company, including the right to receive cash or dividend payments or distributions attributable to the shares of Common Stock subject to such Restricted Stock Units, or to direct the voting of the shares of Common Stock subject to such Restricted Stock Units. The Committee may provide in an Award Agreement evidencing a grant of Restricted Stock Units that the holder of such Restricted Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding shares of Common Stock, credit for the dividend for each such Restricted Stock Unit which is equal to the per-share dividend paid on such shares of Common Stock, in the form of additional Restricted Stock Units at a price per unit equal to the Fair Market Value of a share of Common Stock on the date that such cash dividend is paid. Such dividend accruals credited in connection with Restricted Stock Units which vest or are earned based upon the passage of time or the achievement of performance goals shall not vest unless such Restricted Stock Units become vested. A holder of Restricted Stock Units shall have no rights other than those of a general unsecured creditor of the Company. Restricted Stock Units shall represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.
8.5Delivery of Shares. Upon the expiration or termination of the Restriction Period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to Restricted Stock or Restricted Stock Units settled in shares of Common Stock shall lapse, and, unless otherwise provided in the applicable Award Agreement, a book entry or direct registration or a share certificate evidencing ownership of such shares of Common Stock shall be issued, free of all such restrictions, to the Participant or such Participant’s beneficiary or estate, as the case may be.
ARTICLE 9
PERFORMANCE-BASED AWARDS
9.1Performance-Based Awards. The Committee, at any time, and from time to time, may grant Performance-Based Awards to a Participant in such amounts and upon such terms as the Committee shall determine.
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Each grant of a Performance-Based Award shall have an initial value or target number of shares of Common Stock that is established by the Committee. The Committee shall establish (a) performance goals in its discretion which, depending on the extent to which they are achieved, shall determine the value and/or number of shares subject to a Performance-Based Award that will be paid out to the Participant, and (b) the Performance Period, which shall mean the period of time during which the performance goals must be achieved in order to determine the degree of payout after vesting with respect to any such Performance-Based Award.
9.2Form of Payment and Timing of Performance-Based Awards. Payment of earned Performance-Based Awards shall be as determined by the Committee and as evidenced in the applicable Award Agreement. Earned Performance-Based Awards may be paid in shares of Common Stock and shall be payable, to the extent earned, at the close of the applicable Performance Period, or as soon as reasonably practicable after the Committee has determined that the performance goal or goals have been achieved. Any shares of Common Stock paid out under such Awards may be granted subject to any restrictions deemed appropriate by the Committee. No dividend payments or distributions shall be paid or accrued on Performance-Based Awards that are not yet earned or vested. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement.
9.3Performance-Based Awards. The grant, exercise and/or settlement of Performance-Based Awards shall be contingent upon the achievement of pre-established performance goals and other terms set forth in this Section 9.3.
a.Performance Goals Generally. The performance goals for Performance-Based Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each such criteria, as specified by the Committee, consistent with this Section 9.3. The Committee may determine that such Awards shall be granted, exercised and/or settled upon the achievement of any single performance goal or that two (2) or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Awards. Performance goals may differ for Awards granted among Participants. The Committee also shall have the authority to provide for accelerated vesting of any Performance-Based Award based on the achievement of the Performance Measures specified in this Article 9.
b.Evaluation of Performance. The Committee may provide in any Performance-Based Award that any evaluation of performance may include or exclude any of the following events that occur during a Performance Period: (a) a Change in Control; (b) a declaration and distribution of stock dividends or stock splits; (c) mergers, consolidations or reorganizations; (d) acquisitions or dispositions of material business units; (e) extraordinary, non-core, non-operating or non-recurring items; (f) infrequently occurring or extraordinary gains or losses; and (g) any restructuring.
c.Adjustment of Awards. The Committee shall have the sole discretion to adjust Awards, either on a formula or discretionary basis, or on any combination thereof. In the event that applicable laws or regulations change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval.
ARTICLE 10
OTHER STOCK-BASED AWARDS
10.1Other Awards. Other Awards of Common Stock and other Awards that are valued in whole or in part by reference to, or are payable in or otherwise based on, Common Stock (“Other Stock-Based Awards”), may be granted either alone or in addition to other Awards under this Plan. Subject to the provisions of this Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such awards, and all other conditions of the Awards. The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified performance period. The provisions of Other Stock-Based Awards need not be the same with respect to each Participant and such Awards to individual Participants need not be the same in subsequent years.
10.2Terms and Conditions. Other Stock-Based Awards made pursuant to this Article shall be set forth in an Award Agreement and shall be subject to the following terms and conditions:
a.Nontransferability. Subject to the provisions of this Plan and the Award Agreement, shares of Common Stock subject to Awards made under this Article 10 may not be sold, assigned, transferred, pledged, or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.
b.Dividends. Unless otherwise determined by the Committee at the time of Award, subject to the provisions of this Plan and the Award Agreement, the recipient of an Award under this Article 10 shall be entitled to receive on a deferred stock basis, dividends or other distributions with respect to the number of shares of Common Stock covered by the Award, subject to the vesting conditions of the Award.
c.Vesting. Any Award under this Article 10 and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Committee, in its sole discretion.
d.Waiver of Limitation. In the event of the Participant’s Disability or death, the Committee may, in its sole discretion, waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to any or all of an Award under this Article 10.
e.Price. Common Stock issued or sold under this Article 10 may be issued or sold for no cash consideration or such consideration as the Committee shall determine and specify in the Award Agreement.
ARTICLE 11
TREATMENT OF AWARDS UPON AND SUBSEQUENT TO TERMINATION OF SERVICE
11.1Termination of Service for Reasons other than Retirement, Disability or Death. Except as otherwise provided by the Committee and as set forth in the Award Agreement, upon Termination of Service for any reason other than Retirement or on account of Disability or death, Awards under this Plan shall be treated as follows:
a.Options and SAR’s. Each Option and SAR held by the Participant shall, to the extent rights to purchase shares under such Option and/or SAR have vested at the date of such Termination of Service shall not have been fully exercised, be exercisable, in whole or in part, at any time and within a period of three (3) months following Termination of Service, subject to prior expiration of the term of such Option and/or SAR.
b.Restricted Stock and Restricted Stock Units. Any shares of Restricted Stock or Restricted Stock Units held by the Participant that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.
c.Performance-Based Awards. Any Performance-Based Awards held by the Participant that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.
11.2Termination of Service for Disability. Except as otherwise provided by the Committee and as set forth in the Award Agreement, upon Termination of Service by reason of Disability, Awards under this Plan shall be treated as follows:
a.Options and SAR’s. Any Options or SARs held by a Participant as of the date of his or her Disability shall become immediately vested as of such date. Each Option and SAR held by the Participant shall, to the extent rights to purchase shares under such Option and/or SAR have not been fully exercised, be exercisable in whole or in part, for a period of five (5) years following such Termination of Service, subject, however, to prior expiration according to its terms and other limitations imposed by the Plan. If the Participant dies after Disability, the Participant’s Options and/or SAR’s shall be exercisable in accordance with Section 11.4 below.
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b.Restricted Stock and Restricted Stock Units. Any shares of Restricted Stock or Restricted Stock Units held by a Participant as of the date of his or her Disability shall become immediately vested as of such date.
c.Performance Shares. The number of shares subject to a Participant’s Performance-Based Award shall be determined by multiplying the number of shares subject to that Award by a fraction, the numerator of which shall be the number of full calendar months that the Participant was employed by the Company or a Subsidiary, beginning on the Award Date and ending on the date of the Participant’s Termination of Service, and the denominator of which shall be the number of full calendar months during the Performance Period. The Participant’s actual number of shares subject to the Award shall vest, in full, at the end of the Performance Period.
11.3Termination of Service for Retirement. Except as otherwise provided by the Committee and as set forth in the Award Agreement, upon Termination of Service by reason of Retirement, Awards under this Plan shall be treated as follows:
a.Options and SAR’s. Each Option and SAR held by the Participant for a period of less than twelve (12) consecutive months after the Award Date shall be deemed vested by multiplying the number of shares subject to the Award by a fraction, the numerator of which is the number of full calendar months of employment or service subsequent to the date of the Award, and the denominator of which is twelve (12). Conditioned upon Participant’s compliance with the noncompete covenant set forth in the Award Agreement, each Option and SAR held by the Participant for a period of twelve (12) consecutive months or greater after the Award Date shall continue to vest in accordance with the stated vesting period, provided that such period not exceed five (5) years from the Participant’s Termination of Service. Conditioned upon Participant’s compliance with the noncompete covenant set forth in the Award Agreement, the Participant shall have the right to exercise such Option and/or SAR, to the extent vested, following the expiration of the noncompete covenant and prior to the fifth (5th) anniversary of the Participant’s Termination of Service, subject, however, to prior expiration according to its terms and other limitations imposed by the Plan. If the Participant dies after such Retirement, the Participant’s Options and/or SAR’s shall be exercisable in accordance with Section 11.4 below.
b.Restricted Stock and Restricted Stock Units. Any shares of Restricted Stock or Restricted Stock Units held by the Participant for a period of less than twelve (12) consecutive months after the Award Date shall be deemed vested by multiplying the number of shares subject to the Award by a fraction, the numerator of which is the number of full calendar months of employment or service subsequent to the date of the Award, and the denominator of which is twelve (12). Any shares of Restricted Stock or Restricted Stock Units held by the Participant for a period of twelve (12) consecutive months or greater after the Award Date shall be deemed vested in full. Conditioned upon Participant’s compliance with the noncompete covenant set forth in the Award Agreement, the shares subject to the Restricted Stock or Restricted Stock Units shall be distributable to the Participant following the expiration of the noncompete covenant.
c.Performance-Based Awards. The number of shares subject to a Participant’s Performance-Based Award shall be determined by multiplying the number of shares subject to that Award by a fraction, the numerator of which shall be the number of full calendar months of employment or service that the Participant was employed by the Company or a Subsidiary, beginning on the Award Date and ending on the date of the Participant’s Termination of Service, and the denominator of which is twelve (12). Any Performance-Based Awards held by the Participant for a period of twelve (12) consecutive months or greater after the Award Date shall be deemed vested in full. If the Award is conditioned upon Participant’s compliance with a noncompete covenant set forth in the Award Agreement, the Participant’s actual number of shares subject to the Award shall vest, in full, at the end of the later of the Performance Period or the expiration of the noncompete covenant.
11.4Termination of Service for Death. Except as otherwise provided by the Committee and as set forth in the Award Agreement, upon Termination of Service due to death, Awards under this Plan, shall be treated as follows:
a.Options and SAR’s. Any Options or SARs held by a Participant at the date of death while employed by or in the service of the Company shall become immediately vested as of such date. Each Option and SAR held by the Participant shall, to the extent rights to purchase shares under such Option and/or SAR have not been fully
exercised, be exercisable, in whole or in part, by the personal representative or the estate of the Participant, or Permitted Transferee or by any person or persons who shall have acquired the Option directly from the Participant or Permitted Transferee by bequest or inheritance, only under the following circumstances and during the following periods: (i) if the Participant dies while employed by or in the service of the Company, at any time within five (5) years after the date of death, or (ii) if the Participant dies during the extended exercise period following Termination of Service specified in Sections 11.2 and 11.3, at any time within the longer of such extended period or one (1) year after death, subject, however, in any case, to the prior expiration of the term of the Option and/or SAR and any other limitation on the exercise of such Option and/or SAR in effect at the date of exercise.
b.Restricted Stock and Restricted Stock Units. Any shares of Restricted Stock or Restricted Stock Units held by the Participant at the date of death while employed by or in the service of the Company shall become immediately vested as of the date of death.
c.Performance-Based Awards. The number of shares subject to a Participant’s Performance-Based Award shall be determined by multiplying the number of shares subject to that Award by a fraction, the numerator of which shall be the number of full calendar months of employment or service subsequent to the Award Date, and the denominator of which shall be the number of full calendar months during the Performance Period. The Participant’s actual number of shares subject to the Award shall vest, in full, at the end of the Performance Period.
ARTICLE 12
TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time amend, discontinue or terminate this Plan or any part thereof (including any amendment deemed necessary to ensure that the Company may comply with any applicable regulatory requirement); provided, however, that, unless otherwise required by law, the rights of a Participant with respect to Awards granted prior to such amendment, discontinuance or termination, may not be impaired without the consent of such Participant and, provided further, without the approval of the Company’s shareholders, no amendment may be made which would (i) increase the aggregate number of shares of Common Stock that may be issued under this Plan (except by operation of Article 14); (ii) change the definition of employees eligible to receive Awards under this Plan; or (iii) otherwise materially increase the benefits to Participants under the Plan. The Committee may amend the terms of any Award previously granted, prospectively or retroactively, but, subject to Article 14, no such amendment or other action by the Committee shall impair the rights of any Participant without the Participant’s consent. Awards may not be granted under the Plan after the Termination Date, but Awards granted prior to such date shall remain in effect or become exercisable pursuant to their respective terms and the terms of this Plan.
ARTICLE 13
UNFUNDED PLAN
This Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payment not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
ARTICLE 14
ADJUSTMENT PROVISIONS
14.1Antidilution. If the number of outstanding shares of Common Stock is increased or decreased or the shares of Common Stock are changed into or exchanged for a different number of shares or kind of capital stock or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse stock split, spin-off, combination of stock, exchange of stock, stock dividend or other distribution payable in capital stock, or other increase or decrease in shares of Common Stock effected without receipt of consideration by the Company, the number and kinds of shares of stock for which grants of Awards may be made under the Plan, including the share limits set forth in Article 4, shall be adjusted proportionately and accordingly by the Committee so that the proportionate interest of the Participant in such Award immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR Price payable with respect to shares that are subject to the unexercised portion of such outstanding Options or SARs, as applicable, but shall include a corresponding proportionate adjustment in the per
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share Option Price or SAR Price, as the case may be. Notwithstanding the foregoing, in the event of any distribution to the Company’s shareholders of securities of any other entity or other asset (including an extraordinary dividend, but excluding a non-extraordinary dividend, declared and paid by the Company) without receipt of consideration by the Company, the Board or the Committee shall, in such manner as the Board or the Committee deems appropriate, adjust (a) the number and kind of shares of stock subject to outstanding Awards and/or (b) the aggregate and per share Option Price of outstanding Options and the aggregate and per share SAR Price of outstanding Stock Appreciation Rights as required to reflect such distribution.
14.2Reorganization in Which the Company is the Surviving Entity Which Does Not Constitute a Change in Control. If the Company is the surviving entity in any reorganization, merger or consolidation of the Company with one or more entities which does not constitute a Change in Control, any Option, SAR, Restricted Stock or Restricted Stock Unit granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to such Option, SAR, Restricted Stock or Restricted Stock Unit would have been entitled immediately following such transaction, with a corresponding, proportionate adjustment of the per share Option Price or SAR Price so that the aggregate Option Price or SAR Price thereafter shall be the same as the aggregate Option Price or SAR Price of the shares of Common Stock remaining subject to the Option or SAR as in effect immediately prior to such transaction. Subject to the contrary language in an Award Agreement, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Participant as a result of such transaction. In the event of any transaction referred to in this Section 14.2, Performance-Based Awards shall be adjusted (including any adjustment to the performance goals or Performance Measures applicable to such Awards deemed appropriate by the Committee) so as to apply to the securities that a holder of the number of shares of Common Stock subject to the Performance-Based Awards would have been entitled to receive immediately following such transaction.
In connection with a transaction under this Section 14.2 or transaction involving the acquisition by the Company of the equity interests of another enterprise, the Committee shall have the right to cause the Company to assume awards previously granted under a compensatory plan by another business entity that is a party to such transaction and to substitute Awards under the Plan for such awards. The number of shares of Common Stock available for issuance under the Plan pursuant to Section 4.1 shall be increased by the number of shares of Common Stock subject to any such assumed awards and substitute awards. Shares available for issuance under a shareholder-approved plan of a business entity that is a party to such transaction (as appropriately adjusted, if necessary, to reflect such transaction) may be used for Awards under the Plan and shall not reduce the number of Plan Shares otherwise available for issuance under the Plan, subject to applicable rules of NASDAQ or of any stock exchange on which the Common Stock is listed.
14.3Change in Control in Which Awards Are Not Assumed. Except as otherwise provided in the applicable Award Agreement, upon the occurrence of a Change in Control in which outstanding Awards are not being assumed or continued, the following provisions shall apply to such Awards:
a.for Awards other than Performance-Based Awards,
i.all outstanding Restricted Stock and Restricted Stock Units shall be deemed to have vested and the shares of Common Stock subject thereto shall be delivered immediately prior to the occurrence of such Change in Control, and fifteen (15) days prior to the scheduled consummation of such Change in Control, all outstanding Options and SARs shall become immediately exercisable and shall remain exercisable for a period of fifteen (15) days; or
ii.the Committee may cancel any outstanding awards of Options, SARs, Restricted Stock and Restricted Stock Units and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Committee acting in good faith), in the case of Restricted Stock and Restricted Stock Units (for shares of Common Stock subject thereto) equal to the formula or fixed price per share paid or payable to holders of shares of Common Stock pursuant to such Change in Control and, in the case of Options or SARs, equal to the product of the number of shares of Common Stock subject to such Options or SARs (the “Award Stock”) multiplied by the amount, if any, by which (x) the formula or fixed price per share paid or payable to holders of
shares of Common Stock pursuant to such transaction exceeds (y) the Option Price or SAR Price applicable to such Award Stock.
b.For Performance-Based Awards, if less than half of the Performance Period has lapsed, such Performance-Based Awards shall be converted into Restricted Stock or Performance Shares assuming target performance has been achieved (or into Unrestricted Stock if no further restrictions apply). If at least half the Performance Period has lapsed, such Performance-Based Awards shall be converted into Restricted Stock or Performance Shares based on actual performance to date (or into Unrestricted Stock if no further restrictions apply). If actual performance is not determinable, such Performance-Based Awards shall be converted into Restricted Stock or Performance Shares assuming target performance has been achieved, based on the discretion of the Committee (or into Unrestricted Stock if no further restrictions apply).
c.Other Stock-Based Awards shall be deemed to have vested in full and pay according to the terms of the applicable Award Agreement.
With respect to the Company’s establishment of an exercise window, (a) any exercise of an Option or SAR during the fifteen (15)-day period referred above shall be conditioned upon the consummation of the applicable Change in Control and shall be effective only immediately before the consummation thereof, and (B) upon consummation of any Change in Control, the Plan and all outstanding but unexercised Options and SARs shall terminate. The Committee shall send notice of an event that shall result in such termination to all Participants or Permitted Transferees who hold Options and SARs not later than the time at which the Company gives notice thereof to its shareholders.
14.4Change in Control in which Awards are Assumed or the Company is the Surviving Entity. If a Change in Control occurs and the Company is the surviving entity and any adjustments necessary to preserve the intrinsic value of the Participant’s outstanding Awards have been made, or the Company’s successor at the time of the Change in Control irrevocably assumes the Company’s obligations under this Plan or replaces the Participants’ outstanding Awards having substantially the same intrinsic value and having terms and conditions no less favorable to the Participant than those applicable to the Participants’ Awards immediately prior to the Change in Control, then such Awards or their replacement awards shall become immediately exercisable, in full, only if within two years after the Change in Control the Participant’s employment:
a.is terminated without Cause;
b.terminates with “Good Reason”; or
c.terminates under circumstances that entitle the Participant to accelerated exercisability under any individual employment agreement between the Participant and the Company, a Subsidiary, or any successor thereof.
14.5Adjustments by Committee. Any adjustments pursuant to this Article 14 will be made by the Committee, whose determination as to what adjustments will be made and the extent thereof will be final, binding, and conclusive. No fractional interest will be issued under the Plan on account of any such adjustments. Only cash payments will be made in lieu of fractional shares.
ARTICLE 15
GENERAL PROVISIONS
15.1Legend. The Committee may require each person purchasing shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other
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requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
15.2No Right to Employment. Neither this Plan nor the grant of any Award hereunder shall give any Participant that is an Employee or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time.
15.3Withholding of Taxes. The Company shall have the right to take such action as it deems appropriate to ensure taxes are withheld and collected, including but not limited to, deducting from any payment to be made pursuant to this Plan, or otherwise requiring, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld. Unless otherwise prohibited by the Committee, each Participant may satisfy any such withholding tax obligation by any of the following means or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold from the shares otherwise issuable to the Participant a number of shares having a Fair Market Value as of the “Tax Date” up to the amount of the withholding tax obligation; or (c) delivering to the Company unencumbered shares owned by the Participant having a Fair Market Value, as of the Tax Date, up to the amount of the withholding tax obligation. The “Tax Date” shall be the date that the amount of tax to be withheld is determined.
15.4No Assignment of Benefits. No Option, Award or other benefit payable under this Plan shall, except as otherwise specifically transfer, provided by law, be subject in any manner to anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach, sell, transfer, assign, pledge, encumber or charge, any such benefits shall be void, and any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person.
15.5Governing Law. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws and in the courts of the state of Michigan.
15.6Application of Funds. The proceeds received by the Company from the sale of shares of Common Stock pursuant to Awards granted under this Plan will be used for general corporate purposes.
15.7Rights as a Shareholder. Except as otherwise provided in an Award Agreement, a Participant shall have no rights as a shareholder of the Company until he or she becomes the holder of record of Common Stock.
15.8Section 409A of the Code. The Company intends to administer this Plan in order to comply with Section 409A of the Code, or an exemption to Section 409A of the Code, with regard to Awards that constitute nonqualified deferred compensation within the meaning of Section 409A of the Code. To the extent that the Company determines that a Participant would be subject to the additional twenty percent (20%) tax imposed on certain nonqualified deferred compensation plans pursuant to Section 409A of the Code as a result of any provision of any Award granted under the Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Committee.
