UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
☒ Filed by the Registrant ☐ Filed by a party other than the Registrant
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Filed by the Registrant | Filed by a Party other than the Registrant |
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Preliminary Proxy Statement | |||
Confidential, for Use of the Commission Only (as permitted by Rule 14A-6(E)(2)) | |||
Definitive Proxy Statement | |||
Definitive Additional Materials | |||
Soliciting Material |
FLOWSERVE CORPORATION
Flowserve Corporation
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Invitation to 2023 Annual Meeting of Shareholders |
Dear Fellow Shareholder:
I am pleased to 2021invite you to join me, our Board of Directors, executive officers, associates and other shareholders at Flowserve’s 2023 Annual Meeting of Shareholders. The attached Notice of the 2023 Annual Meeting of Shareholders and Proxy Statement, which we are providing to shareholders beginning on April 13, 2023, contain details of the business to be conducted at the meeting.
Our Performance in 2022
Flowserve made progress on several fronts in 2022 despite the challenging business environment. We were able to deliver strong bookings and support a growing range of customers on their energy transition journey. During 2022, we saw a significant increase in bookings year-over-year and ended with a robust $2.7 billion backlog.
We were encouraged throughout the year to see the value of our Diversification, Decarbonization and Digitization (3D) Strategy to our customers. We also launched our new ESG Strategy – Climate, Culture and Corporate Responsibility – to highlight our efforts to focus on these important initiatives. We continued to support our core customers in the oil & gas, chemical and power markets, and we’ve strengthened our relationships with them through the energy transition. We also positioned ourselves in the marketplace as a key partner in emerging technologies like CCUS, hydrogen and other sustainable fuels; and our bookings growth demonstrates our leadership in flow control.
2022 Highlights include:
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Record safety performance
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We believe that through the commitment and dedication of 2021 Annual Meetingour associates, our strong backlog, and our growth strategy, we are well positioned to capitalize on the continued strength in our end markets and through the energy transition in 2023 and beyond.
During 2023, we will continue the focus on our 3D Strategy as we drive our technology and product development efforts to target new and attractive market growth opportunities, while supporting our existing customers’ efficiency and decarbonization efforts. We have a sharp focus on driving operational excellence and are confident in our plan to deliver results in an improving environment and create long-term value for our shareholders and other stakeholders.
Shareholder Feedback
Flowserve’s Board and senior leadership continue to be encouraged by the positive feedback we have received about the clarity of Shareholdersinformation we provide through our proxy statement. We are continually reviewing ways to enhance the information in our public disclosures and will continue to do so based on your feedback. Your vote is very important to us and to our business. Prior to the meeting, I encourage you to sign and return your proxy card, or use telephone or Internet voting, so that your shares will be represented and voted at the meeting. You can find instructions on how to vote beginning on page 85.
Thank you in advance for voting and for your continued support of Flowserve.
R. Scott Rowe, President and CEO
Noticeof 2023 Annual Meeting of Shareholders |
When: Thursday, May at 11:30 a.m. CDT | Where: Online at https://www.virtualshareholdermeeting.com/ |
We are pleased to invite you to join our Board of Directors and senior leadership at Flowserve’s 20212023 Annual Meeting of Shareholders. The Governor of2023 Annual Meeting will be held online only and will begin at 11:30 AM CDT on May 25, 2023. We will hold the State of New York has issued several temporary executive orders permitting New York corporations to hold virtual only shareholder meetings in light of the COVID-19 pandemic. In addition, on March 17, 2021, the New York State Legislature approved amendments to New York law that, if signed by the Governor, would permit New York corporations to hold virtual-only shareholder meetings this year.
As such, we intend to hold the2023 Annual Meeting solely by means of remote communications with no in-person location if permitted by New York law or executive order as of the date oflocation. You can attend the Annual Meeting. In the event a solely virtual meeting is not permitted as of such date, we may provide a venue for an in-person annual meeting, in addition to virtual participation. In that case, we will notify our shareholders in advance on our website (ir.flowserve.com)Meeting and by issuing a press release and filing it as additional proxy materials with the Securities and Exchange Commission and on www.proxyvote.com.vote online at https://www.virtualshareholdermeeting.com/FLS2023.
| Board Vote Recommendation | Page Reference (for more detail) | ||
1 | Elect the | For | ✔ | Page |
2 | Approve, on an advisory basis, the Company’s executive compensation | For | ✔ | Page |
3 | Vote, on an advisory basis, on the frequency of future advisory votes on the Company’s executive compensation | One Year | ✔ | Page 73 |
4 | Ratify the appointment of PricewaterhouseCoopers as our independent auditor for | For | ✔ | Page |
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Shareholders will also transact any other business that is properly brought before the Annual Meeting.
RecordDate: Shareholders of record of the Company’s common stock, par value $1.25 per share, at the close of business on March 26, 202128, 2023 are entitled to notice of and to vote at the Annual Meeting.
AttendingtheMeetingVirtually: To participate in the meeting, including to vote or to ask questions during the meeting, you must access the meeting website at https://www.virtualshareholdermeeting.com/FLS2021,FLS2023, and log in using the 16-digit control number provided on your proxy card, voting instruction form, or Notice of Internet Availability of Proxy Materials. If you do not receive a 16-digit control number, consultyour shares are held in street name and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the https://www.proxyvote.com website, then you may access, participate in, and vote at the annual meeting with the 16-digit access code indicated on that voting instruction form or Notice of Internet Availability. You may need to requestOtherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the annual meeting) and obtain a “legal proxy” from your broker in advance of the meeting in order to be able to attend, participate online. in or vote at the annual meeting.
For additional related information, please refer to the disclosure beginning on Page 7685 in the enclosed proxy statement. The proxy statement and 20202022 annual report to shareholders and any other proxy materials are available at www.proxyvote.comhttps://www.proxyvote.com.
Yourvoteisveryimportant. Whether or not you plan to attend the Annual Meeting online, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described to the right on this page. Brokers are not permitted to vote on certain proposals and may not vote on any of the proposals unless you provide voting instructions. Voting your shares will help to ensure that your interests are represented at the meeting. Returning a proxy card or otherwise submitting your proxy does not deprive you of your right to attend the Annual Meeting and vote online at https://www.virtualshareholdermeeting.com/FLS2021.FLS2023.
By order of the Board of Directors,
Lanesha T. Minnix
Susan C. Hudson
SeniorVicePresident,ChiefLegalOfficerandCorporateSecretary
YOU CAN VOTE BEFORE THE MEETING BY THE FOLLOWING METHODS:
INTERNET
www.proxyvote.com before May 25, 2023*
BY TELEPHONE
(1-800-690-6903) before May 25, 2023*
BY MAIL
Complete, sign and return your proxy or voting instruction card before May 25, 2023*
*Dates presented are for shareholders that hold shares in their own name as a holder of record. If you are a participant in the Flowserve Corporation Retirement Savings Plan, your votes must be cast before May 23, 2023.
Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to confirm which voting methods are available to you.
This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find additional information in the proxy statement.
| R. SCOTT ROWE | SUJEET CHAND | ||||
Independent Chairman Age: Director since Committees: *
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Other Public Company Boards: None |
Age: Director since Committees: None | ||||
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Other Public Company Boards: 1 | Independent Age: 65 Director since 2019 Committees: ●● Other Public Company Boards: 2 | |||||
RUBY R. CHANDY | GAYLA J. DELLY | JOHN R. FRIEDERY | ||||
Independent Age: Director since 2017 Committees: ★ ● | Independent Age: Director since 2008 Committees: ★ ● | Independent Age: Director since 2007 Committees: | ||||
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Other Public Company Boards: 2 | Other Public Company Boards: 2 | Other Public Company Boards: None | ||||
JOHN L. GARRISON | MICHAEL C. MCMURRAY |
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Independent Age: 62 Director since 2018 Committees: ★ ● | Independent Age: 58 Director since 2018 Committees: ★● | Independent Age: 60 Director since Committees: |
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Other Public Company Boards: 1 | Other Public Company Boards: None | Other Public Company Boards: None |
KENNETH I. SIEGEL | CARLYN R. TAYLOR | |||||
Independent Age: Director since 2022 Committees: ● ● | Independent Age: 54 Director since 2020 Committees: | |||||
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Other Public | Other Public | |||||
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As Chairman of the Board, Mr. Roberts rotates between committee meetings and serves as an alternate committee member for all committees, as needed.
2023 PROXY STATEMENT | 2 |
2021 PROXY STATEMENT 2
| Name and Position | Age | Since | Previous Position |
R.ScottRowe President, CEO and Director |
| April 2017 | President — Cameron Group, Schlumberger Ltd. | |
ElizabethL.Burger Senior VP and Chief Human Resources Officer |
| April 2018 | SVP and Chief Human Resources Officer, Hanesbrands, Inc. | |
President, |
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Senior VP, Chief Legal Officer and Corporate Secretary | 46 |
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AmyB.Schwetz Senior VP and Chief Financial Officer |
| February 2020 | EVP and Chief Financial Officer, Peabody | |
ScottK.Vopni Vice President, Chief Accounting Officer |
| June 2020 | SVP — Finance, Chief Accounting Officer, Dean Foods Co. | |
KirkR.Wilson
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| July 2019 | Flowserve President, Aftermarket Services & Solutions |
2021 PROXY STATEMENT 3
2023 PROXY STATEMENT | 3 |
34)
ATTRACT & RETAIN | Attract and retain high-quality | |
REINFORCE OUR STRATEGY | Align our incentive programs with our vision and | |
COMPETITIVE AND MARKET-BASED | Maintain a market-based | |
ALIGN PAY PERFORMANCE | Provide incentive programs that reward | |
ALIGN PAY WITH SHAREHOLDERS | Provide that a majority of total compensation is |
2023 PROXY STATEMENT | 4 |
2021 PROXY STATEMENT 4
2020
The majority of the total target compensation provided to our Named Executive Officers is ‘at risk’ and aligned with our compensation philosophy and principals to drive shareholder value creation.
This chart reflects total annual target compensation and therefore excludes any one-time special awards discussed below under the heading “Executive Compensation—Compensation Discussion and Analysis—Special Awards.” This chart does not include Mr. Roueche given his limited role as interim CFO, which ended on February 23, 2020.Including stock price performance for RSUs.
2021 PROXY STATEMENT 5
2023 PROXY STATEMENT | 5 |
2023 PROXY STATEMENT | 6 |
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Cautionary Note Regarding Forward-Looking Statements
This proxy statement contains forward-looking statements about future events and circumstances. Generally speaking, any statement not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking or conditional words such as “could,” “should,” “can,” “continue,” “estimate,” “intent,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “project,” “predict,” “seek,” “confident” and “commit” or similar expressions. In particular, statements regarding our financial position, plans, strategies, objectives, prospects and expectations regarding our business, future operations, industry and market conditions are forward-looking statements. They reflect our current expectations, are subject to materials risks, uncertainties and other factors, many of which are outside of our control, and are not guarantees of performance and we can give no assurance that they will prove to be correct or that any plan, initiative, projection, goal, commitment, or expectation can or will be achieved, and speak only as of the date of this proxy statement. You should not rely unduly on forward-looking statements. Our business results are subject to a variety of risks and uncertainties, including those that are described in our 2022 Annual Report on Form 10-K and elsewhere in our filings with the Securities and Exchange Commission, any of which could cause actual plans or results to differ materially from those included in any forward-looking statements. If any of these considerations or risks materialize or intensify, our expectations (or underlying assumptions) may change and our performance may be adversely affected. Except as required by law, we undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statement or disclose any facts, events or circumstances that after the date hereof that may affect the accuracy of any forward-looking statement, whether as a result of new information, future events, changes in our expectations or otherwise.
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2023 PROXY STATEMENT | 7 |
2021 PROXY STATEMENT 6
InAround the second quarterworld, Flowserve is striving to fulfill our purpose – to create extraordinary flow control solutions to make the world better for everyone. To help solve the biggest flow-control challenges, customers worldwide rely on the product lines, engineering, project management, and service expertise of 2018, we launched and committed resources to our Flowserve 2.0 Transformation,that dates back more than 230 years. We have developed a program designed to transform our business model to drive operational excellence, reduce complexity, accelerate growth, improve organizational health and better leverage our existing global platform. A significant launching point for our Flowserve 2.0 Transformation was to putstrategy on a foundation in place for our organization by establishing our purpose andof six core values. In 2019, we expanded this foundation to include our seven behaviors. Our purpose, values and behaviors were all created by a cross-functional, global group of employees.
2021 PROXY STATEMENT 7
FLOWSERVE 2.0TRANSFORMATION — Our Focus
We have approached the Flowserve 2.0 Transformation with a focus on fourseven key areasbehaviors that are integral to our success — People, Process & Technology, Customer, and Finance.at the root of everything we do as an organization in pursuit of this purpose.
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Our strategy of supporting energy transition through our efforts to Diversify, Decarbonize, and Digitize – our 3D Growth Strategy – supports and aligns directly with our purpose.
Today, Flowserve is meaningfully levered to oil and gas in each of our divisions. We have over 230 years of industry experience and expertise serving other infrastructure markets within flow control. Our goal now is to aggressively re-engage our offerings with market participants in areas like water, specialty chemical and other general industries where we maintain strong capabilities, and to support our customers’ energy transition efforts across industries. While we remain fully committed to supporting our existing customers today and into the future, our Diversify strategy is focused on creating a more balanced portfolio based on cleaner sources of energy and increasing our exposure to the end markets offering long-term outsized growth potential. One way we are advancing Diversification at Flowserve is deploying sustainable technology in seawater desalination applications. In 2022, Flowserve engaged with Collahuasi, operators of one of the largest copper mines in the world, to enable seawater desalination, water pumping and transport of supply water for their mining needs. Flowserve will supply 25 DMX pumps for the Water Impulse System from the Port Sector to the Cordillera Sector. Our pumps will be pivotal in helping preserve and care for the region’s natural resources. | |
As an example of our decarbonization strategy, Flowserve is supplying G4 sleeved plug valves to a leading China-based civil explosives company that traditionally develops products for industries like mining, water conservancy, and railway and highway construction. The customer will use the valves in the production of polybutylene adipate terephthalate (PBAT) – a chemical used in the manufacturing of biodegradable plastic products. In Flowserve’s support of this initiative, we |
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Our goal is to digitize as much of our |
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2021 PROXY STATEMENT 8
Guided by our values, we aim to create extraordinary flow control solutions to make the world better for everyone. One of the waysOur Purpose informs our Environmental, Social and Governance (ESG) vision as we strive to makeenable a clean energy future by advancing technologies that reduce climate impact, embed sustainability within our core operations and strengthen our purpose-driven culture. In 2022, we launched a more holistic approach to ESG at Flowserve that honors this vision and more closely aligns with our Diversification, Decarbonization and Digitization Strategy. Our ESG program is constructed around three key pillars: Climate, Culture and Core Responsibility. These pillars capture how we are committed to advancing ESG at Flowserve on our journey of making the world a better place is through our commitment to environmental, social and governance (ESG) issues, both in our own operations as well as in the operations of our customers who rely on our products to improve the world around us.
We operate through governance practices that are consistent with our high standards of ethics, integrity and transparency in all our stakeholder relationships, including attracting and retaining world-class leadership talent by investing in their professional development and providing them with challenging and rewarding opportunities for personal growth, obtaining high standards of corporate citizenship by protecting the health and safety of our employees, and safeguarding the environment and communities where we do business. With executive-level participation and Board oversight of the program, sustainability has top-down support and is a company-wide priority.everyone.
During 2020, in an effort to increase transparency for our stakeholders regarding our sustainability program, we published our 2019 Sustainability Report with the SASB Industrial Machinery and Goods Reporting Standard and the TCFD Reporting Format.
We are dedicated to promoting our customers’ sustainability through product development, stewardship and innovation that
For more information on our ESG programs and initiatives, please see our ESG Report accessible through our website at https://www.flowserve.com under the “ESG” caption, which is not incorporated by reference into this proxy statement. Statements regarding our ESG-related goals are not guarantees or promises that those goals will be met. |
2023 PROXY STATEMENT | 11 |
Culture Culture refers to At Flowserve, our people are at the heart of providing vital flow control products and services to make the world better for everyone. Keeping our associates safe |
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2021 PROXY STATEMENT 9
promoting their wellbeing. Our
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Our Global Community Impact Program
Developing, rewarding and engaging with our employees and communities around the globe is a critical focus in our Culture pillar. In 2021, we launched Leadership in Motion to provide critical leadership skills to over 2,000 Flowserve
Embracing differences is a core aspect of our People value at Flowserve. We seek to build a diverse and inclusive culture through our Diversity, Equity and Inclusion program. Each year, we celebrate the diversity of our associate population by recognizing Pride Month, Black History Month, Asian Pacific Islander American Heritage Month, International Women’s Day, Veterans’ Day and more. During these events celebrating recognition, associates participate both locally with team members where they work and live, as well as globally with feature speakers broadcast to our locations around the world. In addition, With these programs and educational opportunities, we hope to foster an employee culture that drives inclusion, combats bias and positively impacts our communities in and outside Flowserve. Additionally, we have focused on improving diversity across Flowserve from the board of directors and the executive leadership team to the general associate population. We are committed to promoting equity and inclusivity at all levels. We proudly support the empowerment of women and girls, especially women in STEM through the educational tenet of Flowserve Cares. |
2023 PROXY STATEMENT | 12 |
Core Responsibility Core Responsibility represents Governance and how we conduct business ethically and in accordance with laws and regulations around the world. Based on our Flowserve values, Core Responsibility addresses our duty to reinforce cybersecurity and data privacy, integrity and compliance and transparent reporting. Our governance practices are consistent with our high standards of ethics, integrity and transparency in all our stakeholder relationships, including attracting and retaining world-class talent by investing in their professional development and providing them with challenging and rewarding opportunities for personal growth, promoting high standards of corporate citizenship and working to safeguard the environment and communities where we do business. With executive-level participation and Board oversight of our programs and initiatives, ESG issues have top-down support and are a company-wide priority. During 2022, we launched our Human Rights Policy so that the protection of human rights remains a focus A critical component of core responsibility is the necessity to strengthen our cybersecurity practices to protect our data and help promote operational resilience. Through annual security awareness trainings and simulated attacks, we aim to empower our associates
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2023 PROXY STATEMENT | 13 |
Supporting our Community At Flowserve, we are inspired by our purpose of making the world better for everyone. We make a difference each day by delivering technologies and services to Our global community impact program, Flowserve Cares, has formalized these efforts since 2019 through monetary donations, in-kind contributions and volunteer opportunity. This program aligns our core support areas of at-risk youth, STEM programs and education, disaster recovery and other community-related issues. Through Flowserve Cares, associates are empowered to request company support for community programs and needs that make meaningful impact where they live and work. In 2022, Flowserve Cares approved over $500,000 in grants drive positive change, ranging from environmental clean-up efforts, to serving our veterans, to feeding the To encourage meaningful engagement with our local communities and active participation in our Flowserve Cares program, we grant up to 40 hours of |
2021 PROXY STATEMENT 10
2023 PROXY STATEMENT | 14 |
Flowserve routinely engages with our shareholders to better understand their views, carefully considering the feedback we receive and taking action when appropriate. We review the results of the annual advisory vote on executive compensation in making determinations about the structure of Flowserve’s pay program, orand whether any changes to the program should be considered.
In 2019, as a resultthe fall of the majority shareholder vote in favor of adopting written consent,2022, we proactively reached out to our top 25 shareholders, representing approximately 80% of our common shares outstanding, offering to meet with each of them. Seven of those shareholders, representing approximately 26% of our common shares to discussoutstanding, engaged with us and the vote and received feedback on the implementation of written consent. The feedback we received from those shareholders was positive and has been and continues to be carefully considered by management and incorporated into the changes proposedBoard as we further develop our ESG strategy and compensation practices. Our lead director participated in our 2020 proxy to implement the rightall of shareholders to act by less than unanimous written consent. Promptly following the approval of this proposal by almost 90% of the outstanding shares at our 2020 Annual Meeting, we amended our Certificate of Incorporation and By-Laws to implement this right forthese meetings with our shareholders.
As in other areas of We discuss our businessshareholder engagement efforts as well as the key messages shared by investors during 2020,those meetings under the “2022 ‘Say on Pay’ Vote and Shareholder Engagement” caption on page 36.
With the easing of the COVID-19 pandemic, had a significant impact onFlowserve was significantly able to substantially increase our shareholder outreach efforts. On the one hand, the principal negative impact was that we engaged in less in-person interactionmeetings with shareholders during 2022, even as work-from-home policies were implemented around the globe. On theseveral industry conferences and other hand, the COVID-19 pandemic had a positive impact on our abilityengagement continued to reach morebe conducted virtually. This combination of our shareholders as a result of the widespread adoption of virtual meetings. During 2020,meeting venues allowed members of management, were ableincluding our CEO and CFO, to participate and present in more electronic investor conferencesboth live and meetings thanvirtual events in past years due2022, which furthered our active engagement with Flowserve shareholders. We anticipate in 2023 that we will continue to the absence of travel. Fortunately, in February 2020 before the pandemic limitedhave both in-person and virtual opportunities to continue our ability to travel, our Chief Executive Officer was able to meet with five of our top shareholders in person. Thereafter, once the financial community adopted virtual conferences and meetings, we were able to provide our shareholders with even more access to our chief executive officer and chief financial officer.
As a result, members of our executiveshareholder outreach, which management team were able to interact with more of our shareholders than in previous years. Additionally,finds extremely valuable.
In total, our CEO and/or CFO participated in fiveseven investor conferences during the year. We value the views and perspectives that our shareholders and the financial community provide us during these interactions, and we formally communicate the information and feedback that we obtain to the Board and its Committees on a regular basis.
2023 PROXY STATEMENT | 15 |
2021 PROXY STATEMENT 11
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Company’s Board of Directors (the “Board”) currently consists of teneleven directors. All the director nominees listed below were previously elected by shareholders at the 20202022 Annual Meeting, other than Carlyn R. Taylor,Kenneth I. Siegel, who was appointed to the Board in August 2020. The2022 and Thomas B. Okray, who was appointed to the Board in April 2023. Both Mr. Siegel and Mr. Okray were recommended to the Corporate Governance and Nominating (“CG&N”) Committee by a third party search firm. Accordingly, the Board has nominated all ten existingeleven directors to serve a one-year term until the 2022 Annual Meeting2024 annual meeting of shareholders or until their successors have been elected and qualified. Biographical information for each nominee is provided below under the heading “Board of Directors—Biographical Information—Nominees to Serve an Annual Term Expiring at the 20222024 Annual Meeting of Shareholders.” In addition to the ten director nominees listed below, during 2020, two board members, Joe E. Harlan and Rick J. Mills, served on our Board until our 2020 Annual Meeting, when Mr. Mills retired from the Board and Mr. Harlan decided not to stand for re-election to the Board.
Our By-Laws mandate that each director be elected under a majority voting standard in uncontested elections. A majority voting standard requires that each director receive more votes “for” his or her election than votes “against” to be elected.
In an uncontested election, any incumbent nominee for director who does not receive an affirmative vote of a majority of the votes cast in favor of or against such nominee must promptly offer to resign. The resignation offer is reviewed by the Corporate Governance and Nominating (“CG&N”)&N Committee, who determines whether to accept or reject such resignation,it, giving due consideration to the best interests of the Company and its shareholders. Plurality voting will apply to contested elections.
The table below summarizes the key qualifications and areas of expertise that led our Board to nominate these individuals.
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| Rowe | Chand | Chandy | Delly | Friedery | Garrison | McMurray |
| Siegel | Taylor |
Manufacturing / Operations | ● | ● | ● | ● | ● | ● | ● |
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Product Innovation / R&D |
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Supply Chain |
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HR / Talent Development | ● | ● |
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Mergers & Acquisitions |
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Corporate Strategy / Governance | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
Manufacturing/Operations | Industry/Product Knowledge | Multinational | Financial/Accounting | Product | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent | Mergers & Acquisitions | Corporate Strategy/Governance |
20212023 PROXY STATEMENT 12 16
David E. Roberts | ||||||
Independent Chair
Director since: Nov. 2011
Age:
Board Committees: •
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History • Gavilan Resources, LLC, a private company formed in partnership with Blackstone focused on oil and natural gas development and production opportunities in South Texas | Chief Executive Officer (2017 – retirement in 2020). Gavilan filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in May 2020. •
• Marathon Oil Corporation, an independent upstream company with international operations in exploration and production, oil sands mining and integrated gas | Executive Vice President and Chief •
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Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr.
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opportunities and its end-markets and customer needs. | ||||
R. Scott Rowe | ||||
Director since: Apr. 2017
Age:
Board Committees: •
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History •
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• United States Army | Captain (O3) (1993 —1998)
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Other Current Public Company Directorships • Quanta Services Inc., a leading provider of specialty contracting services | Director (2022 – Present) Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr. Rowe is well qualified to serve as a director due to his position as the Company’s President and Chief Executive Officer, which enables him to provide the Board with intimate knowledge of the Company’s
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Manufacturing/Operations | Industry/Product Knowledge | Multinational | Financial/Accounting | Product | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent | Mergers & Acquisitions | Corporate Strategy/Governance |
20212023 PROXY STATEMENT 13 17
Sujeet Chand | ||||
Director since: Dec. 2019
Age:
Board Committees: •
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Current Public Company Directorships: •
• Veeco Instruments Inc.
Past Public Company Directorships: •
| Employment History •
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Other Current Public Company Directorships •
• Veeco Instruments Inc., manufacturer of semiconductor process equipment | Director (2021 – Present)
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr. Chand is well qualified to serve as a director due to his technology and innovation experience, including with respect to cybersecurity and information technology systems, as well as his electrical engineering background. Additionally, Mr. Chand has valuable multinational executive leadership and manufacturing experience from Rockwell Automation and XAP Corporation.
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Ruby R. Chandy | ||||
Director since: May 2017
Age:
Board Committees: •
•
Current Public Company Directorships: •
•
Past Public Company Directorships: •
• AMETEK, Inc. | Employment History •
•
| |||
Other Current Public Company Directorships • Thermo Fisher Scientific Inc., a multinational science and technology corporation | Director (2022 – Present) •
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Ms. Chandy is well qualified to serve as a director due to her executive management experience, marketing and strategy skills, relevant experience in industrial companies, extensive engineering and management education, broad international business and financial experience and enterprise risk oversight experience.
| ||||
Manufacturing/Operations | Industry/Product Knowledge | Multinational | Financial/Accounting | Product | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent | Mergers & Acquisitions | Corporate Strategy/Governance |
20212023 PROXY STATEMENT 14 18
Gayla J. Delly | ||||
Director since: Jan. 2008
Age:
Board Committees: •
•
Current Public Company Directorships: •
•
Past Public Company Directorships: •
| Employment History •
•
•
•
•
| |||
Other Current Public Company Directorships •
•
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Ms. Delly is well qualified to serve as a director due to her international manufacturing experience, with a specific focus on engineering and technology in emerging markets, including Asia and Latin America, which provides valuable insight into the Company’s operations and assists in identifying product portfolio opportunities. In addition to her board experience, Ms. Delly has valuable executive leadership experience and financial expertise gained from her time with Benchmark Electronics Inc.
|
| ||||
John R. Friedery | ||||
Director since: Aug. 2007
Age:
Board Committees: •
•
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History •
•
•
•
•
•
•
| |||
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr. Friedery is well qualified to serve as a director due to his extensive operational experience with an international industrial manufacturing focus, which provides a global business perspective and a deep understanding of the Company’s industry, end-markets and strategic focus. Mr. Friedery also has experience with renewables and sustainability expertise gained from his service with Ball Corporation.
| ||||
Manufacturing/Operations | Industry/Product Knowledge | Multinational | Financial/Accounting | Product | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent | Mergers & Acquisitions | Corporate Strategy/Governance |
20212023 PROXY STATEMENT 15 19
John L. Garrison | ||||
Director since: Oct. 2018
Age:
Board Committees: •
•
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History •
•
• United States Army | Captain (1982 —1992) | |||
Other Current Public Company Directorships •
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr. Garrison is well qualified to serve as a director due to his strong manufacturing, international operations and leadership experience gained through his various executive and board leadership
|
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Michael C. McMurray | ||||
Director since: Oct. 2018
Age:
Board Committees: •
•
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History •
•
•
•
•
| |||
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr. McMurray is well qualified to serve as a director due to his extensive knowledge of global industrial manufacturing, the Company’s end markets and the financial markets, which provides valuable insight into the strategic decisions to capitalize on the Company’s growth opportunities. Additionally, Mr. McMurray has valuable multinational executive leadership and financial expertise at LyondellBasell, Owens Corning, and Royal Dutch Shell.
| ||||
Manufacturing/Operations | Industry/Product Knowledge | Multinational | Financial/Accounting | Product | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent | Mergers & Acquisitions | Corporate Strategy/Governance |
20212023 PROXY STATEMENT 16 20
| ||||||
Director since:
Age: 60
•
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History •
•
• Advance Auto Parts, an aftermarket automobile parts supplier | Executive Vice President
| |||||
Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr.
|
| ||||
Kenneth I. Siegel | ||
Director since: Aug. 2022 Age: 66 Board Committees: • Audit • Finance & Risk Current Public Company Directorships: • Boardwalk Pipeline Partners, LP • CNA Financial Corporation Past Public Company Directorships: • Diamond Offshore Drilling | Employment History • Loews Corporation, a diversified company with businesses in the insurance, energy, hospitality and packaging industries | Senior Vice President (2009 – present) • Barclays Capital, a multinational universal bank | Managing Director of Mergers and Acquisitions (2008 – 2009) • Lehman Brothers, a global financial services firm | Managing Director of Mergers and Acquisitions (2000 – 2008) • Schroders, a multinational investment banking and asset management company | Head of U.S. Investment Banking (1982 – 2000) Other Current Public Company Directorships • Boardwalk Pipeline Partners, LP, a provider of transportation and storage of natural gas | Chairman of the Board (2009 – Present) • CNA Financial Corporation, a commercial property and casualty insurance company | Director (2019 – Present) Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Mr. Siegel is well qualified to serve as a director due to his extensive knowledge of strategic planning, corporate development and finance and accounting, which provide us valuable insight into our strategic decisions to capitalize on the Company’s growth opportunities. Additionally, Mr. Siegel has valuable executive leadership experience in the manufacturing and energy industries and has leveraged his development and M&A expertise from Loews Corporation and its subsidiaries. | |
Manufacturing/Operations | Industry/Product Knowledge | Multinational Operations | Financial/Accounting | Product Innovation/R&D | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent Development | Mergers & Acquisitions | Corporate Strategy/Governance |
2023 PROXY STATEMENT 21
Carlyn R. Taylor | ||||
Director since: Aug. 2020
Age:
Board Committees: •
•
Current Public Company Directorships: •
Past Public Company Directorships: •
| Employment History •
•
•
•
| |||
Other Current Public Company Directorships • The Hain Celestial Group, Inc., a leading organic and natural products company | Director (2022 – Present) Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve We believe that Ms. Taylor is well qualified to serve as a director due to her extensive background in corporate strategy, finance and accounting, most notably leveraging her expertise in capital allocation strategies and capital markets to help businesses spearhead transformative initiatives, as well as her experience serving on the board of directors of various privately-owned startups.
| ||||
Manufacturing/Operations | Industry/Product Knowledge | Multinational | Financial/Accounting | Product | |||||
Energy/Alternative Energy Markets | Supply Chain | HR/Talent | Mergers & Acquisitions | Corporate Strategy/Governance |
20212023 PROXY STATEMENT 17 22
The Board oversees the CEO and other senior management in the competent and ethical operation of the Company on a day-to-day basis and to help confirm that our shareholders’ best interests are served. In its efforts to satisfy this duty, our Board has adopted Corporate Governance Guidelines (“Guidelines”). Our Guidelines, as well as other corporate governance documents, such as the Company’s Code of Conduct for employees and directors and an additional Code of Ethics for directors, are available on the Company’s website at www.flowserve.comhttps://ir.flowserve.com under the “Investors—Corporate Governance”“Corporate Governance—Documents & Charters” caption. The table below highlights some of the Company’s investor friendly governance practices.
Director Elections | Board Operations | Shareholder Rights |
✓ Annual elections for full Board by majority vote (in uncontested elections) ✓ Resignation policy if a majority vote is not received (in uncontested elections) ✓ Director retirement age policy of 72 | ✓ Stock ownership requirements for directors (5x annual cash retainer) ✓ Independent board chair ✓ Annual Board and Committee evaluations ✓ Board committees composed of 100% independent directors | ✓ Right to call a special meeting ✓ Right to act by written consent ✓ Proxy access right ✓ No poison pill ✓ Annual “Say on Pay” vote ✓ No supermajority voting requirements |
The Board, through the CG&N Committee, regularly reviews developments in corporate governance and best practices and modifies the Guidelines, committee charters and key practices as necessary. For example, given the increasing importance of ESG matters to our long-term strategy and to our shareholders, we amended the charter of the CG&N Committee to specifically provide for oversight over our ESG programs and initiatives.
The Board also works with management to develop the Company’s long-term strategy. The Board dedicates one full meeting per year solely to our long-term strategy, in which the Board receives updates from management and discusses the progress made, challenges encountered and future plans to continue implementing our strategic priorities. At each quarterly meeting of the Board, management also provides additional updates on our strategic priorities based on particular focus areas, including our business platforms, culture and organizational health, regulatory and legal risk, operations, and climate change and sustainability.
Our approximately 16,000 associates around the globalglobe are a critical component of our ability to execute on our strategy. Accordingly, the Board continually monitors and assesses our human capital management, principally in the areas of workplace health and safety, employee engagement, compensation and benefits and training, development and ethics. Each year, our associates complete an annual ethics training on our Code of Conduct and participate in “Integrity & Compliance Week”Day” and “Safety Week”Day” to help further emphasize the ongoing training that our associates receive. We also conduct annual employee engagement surveys to solicit feedback and input directly from our associates and, based on the results of our surveys, management and the Board work together to create additional action plans as appropriate.
We have separated the positions of Chairman of the Board and CEO since 2005. Roger L. Fix, the Company’s current Non-Executive Chairman of the Board,David E. Roberts presides over the meetings of the Board, including executive sessions of the Board where only non-employee directors are present. HeAmong the wide range of other duties as Chairman of the Board, he reviews and approves the agendas for Board meetings, among his other duties as Chairmanpresides over meetings and executive sessions of the Board.Board of Directors, briefs the CEO on issues and concerns arising in the executive sessions of the Board, facilitates communication between the independent directors and management, coordinates periodic Board input and review of management’s strategic plan for the Community, and leads the Board’s review of the succession plan for the CEO and other key executives. He also serves as an alternate member for all Board committees. Mr. Fixcommittees, and strives to attend as many committee meetings as possible. More information on what is expected of our Non-Executive Chairman can be found on the investor relations portion of our website at https://ir.flowserve.com under the heading “Corporate Governance—Documents & Charters—Role and Responsibilities of Non-Executive Chairman of the Board.”
2023 PROXY STATEMENT 23
We believe that separating the positions of Chairman of the Board and CEO is appropriate for the Company at this time because it places an independent director in a position of leadership on the Board.Board and allows the Chairman to focus on oversight of corporate governance matters, while enabling our CEO to focus on leading the Company and managing the business on a day-to-day basis. We believe this independent leadership and the Non-Executive Chairman’s authority to call meetings of the non-employee directors adds value to our shareholders by facilitating a more efficient exercise of the Board’s fiduciary duties and best enables the Board to effectively manage our businesses, risks, opportunities and affairs in the best interests of our shareholders.
We also believe the Non-Executive Chairman further enhances independent oversight by being responsible for establishing the Board’s annual schedule and collaborating with the CEO on the agendas for all Board meetings. The separation of Chairman and CEO also allows the Non-Executive Chairman to provide support and advice to the CEO, reinforcing the reporting relationship and accountability of the CEO to the Board. The Non-Executive Chairman also reprsents the Board in communications with shareholders and other stakeholders of the Company and provides input on the design of the Board. In addition, each of the independent members of the Board actively participate in overseeing management including by actively participating in each Board and Committee meeting held throughout the year.
2021 PROXY STATEMENT 18
The Board and its Committees exercise their risk oversight function by carefully evaluating the reports they receive from management and by making inquiries of management with respect to areas of particular interest to the Board. The Board and its Committees oversee senior management’s policies and procedures in assessing and addressing risk areas that fall within the scope of the Board’s and the Committees’ respective areas of oversight responsibility, as further detailed in the Board Committees section below. The Board and management frequently discuss the long-term strategy of the Company. The Board is regularly informed through Committee reports of each Committee’s activities in overseeing risk management.
Boardmeetings.There were 13nine meetings of the Board during the year ended December 31, 2020.2022. Executive sessions of non-employee directors are normally held at each regular Board meeting and are presided over by our independent Chairman of the Board, or, in the Chairman’s absence, by the Chairman of the CG&N Committee. During the year ended December 31, 2020,2022, each Director nominee attended at least 92%100% of the total number of meetings of the Board and 100% of eachthe total number of meetings of the Board committees on which he or she served while he or she has been a director or committee member.
Shareholdermeetings. meetings
Board members are expected to attend the Company’s Annual Meetings of shareholders. All ten directors then-serving were in attendance at the 2020 Annual Meeting other than Joe E. Harlan, who did not stand for re-election at the 2020Company’s 2022 Annual Meeting.
Shareholders and other interested parties may communicate with the Board or the independent directors as a group directly by writing to: Non-Executive Chairman of the Board, c/o Flowserve’s Corporate Secretary, Flowserve Corporation, 5215 N. O’Connor Blvd., Suite 2300,700, Irving, Texas 75039. All such communications will be delivered to our chairman. These communications are reviewed by the Corporate Secretary to determine whether it isthey are appropriate for presentation to the Board or such director. The purpose of this screening is to avoid having the Board consider irrelevant or inappropriate communications (such as advertisements, solicitations, and product inquiries). All relevant communications are then delivered to our Chairman.
2023 PROXY STATEMENT 24
The identification and evaluation of director candidates begins with the Guidelines, which establish the criteria for Board membership. As a starting point under the Guidelines, all prospective Board members must, for example, adhere to the highest standards of integrity and ethics, exercise diligent and constructive oversight of the Company’s business, risk profile and strategy, demonstrate relevant and successful career experience, display a global business perspective, and possess the time to responsibly perform all director duties and effectively represent the interests of the shareholders. In addition, we believe that Board members should have varied professional expertise in areas relevant to the Company. In this regard, our director nominees bring a wide array of qualifications, skills and attributes to our Board of Directors that support its oversight role on behalf of the shareholders. The table on page 1216 summarizes the key qualifications and areas of experience that led our Board to nominate these individuals.
The Guidelines further articulate the Board’s firm belief that the Board’s members should also have a diversity of backgrounds, which we view holistically. In evaluating diversity of backgrounds, the Board considers individual qualities and attributes, such as educational background, professional skills, business experience and cultural viewpoint, as well as more categorical diversity metrics, such as race, age, gender and nationality. This consideration is implemented through the selection process for director nominees, and the Board assesses its effectiveness in promoting diversity through an annual self-assessment process that solicits feedback concerning the appropriateness of the Board’s diversity, among other critical performance factors.
The Board also periodically reviews the tenure of each Board member, at least on an annual basis. We strive to maintain an appropriate balance of age and tenure on the Board with a mix of directors who have a long and deep understanding of our business and directors who bring new and fresh skills, perspectives and experience to the Board. In line with this philosophy, since 2018 we have added six new directors to our Board.
The CG&N Committee considers various potential director candidates who may come to the attention of the CG&N Committee through current Board members, professional search firms, shareholders or other persons. The CG&N Committee generally retains a national executive-recruiting firm to research, screen and contact potential candidates regarding their interest in serving on the Board, although the CG&N Committee may also use less formal recruiting methods. Carlyn R. Taylor was recommended to the Board by a third-party search firm. All identified candidates, including shareholder-recommended candidates, are evaluated by the CG&N Committee using generally the same
2021 PROXY STATEMENT 19
methods and criteria, although those methods and criteria may vary from time to time depending on the CG&N Committee’s assessment of the Company’s needs and current situation.
We believe that a robust Board evaluation and feedback process helps to promote the effectiveness of our Board and Committees and encourages our Board members, individually and collectively, to continually improve in their roles and responsibilities. Our Board evaluation process is led by an independent member of the Board, the Chair of the CG&N Committee, who engages independent external advisors each year to assist in compiling the results of the evaluations submitted by the members of the Board and to provide additional perspective on effectively responding to the evaluations and feedback received.
Our annual evaluation process typically begins with a self-assessment in which each independent member of the Board provides a performance rating for a series of questions in several key categories, including the structure, process and resources of the Board, effectiveness of the Committees of the Board, and management of the Company. The self-evaluation concludes with several open-ended questions in order to encourage members of the Board to freely discuss their own performance, priorities for the upcoming year, and any other comments that the applicable member of the Board deems important.
Each independent member of the Board is also required to complete a peer evaluation of each other independent member of the Board every two to three years (other than the Chairman, who is evaluated separately), which solicits feedback on how the applicable director adds value to the Board and its Committees, what the applicable director could do to increase effectiveness, and any other commentary that the evaluating member of the Board deems pertinent. In 2020, due
2023 PROXY STATEMENT 25
Each member of the Board is also required to complete a Chairman evaluation to provide feedback on the performance and contributions of the Chairman of the Board.Board every year. The Chairman evaluation requires each member of the Board to rate the Chairman’s performance in a dozen key areas and also provides an opportunity to provide open feedback on the performance of the Chairman of the Board.
Each member of the Board is also required to complete an evaluation of our Chief Executive Officer’s performance.performance every year. While our Chief Executive Officer is a member of the Board, his evaluation is focused on his performance as a member of management and not as a member of the Board. These evaluations are utilized in assessing the CEO’s performance and setting his compensation on a yearly basis.
Once the evaluations arewere complete for 2022, the results arewere compiled by an independent external advisor, anonymized, (other than for the self-evaluation), and provided to the CG&N Chair, who then conducts individual interviews with members ofdiscussed the Board in advance of the Board’s February meetings. The results of the process are discussed bywith the CG&N Committee, and the full Board, at their February meeting and were considered by the CG&N Committee and the Board when setting CEO compensation and engaging in director recruitment, director development, strategy, and governance.
We believeThe Guidelines provide that all members of the Board (other than our CEO) should be independent under applicable law and the New York Stock Exchange (“NYSE”) listing standards, as well as under the independence standards further established by the Board within the Guidelines. Upon the recommendation of the CG&N Committee, the Board makes an affirmative determination regarding the independence of each director annually after reviewing pertinent facts and circumstances and taking into consideration all applicable laws, regulations, the NYSE listing standards and the categorical independence standards set forth in the Guidelines, which are consistent with the NYSE listing standards. Under theseIn doing so, the Board considers relationships involving directors and their immediate family members and relies on information derived from the Company’s records, questionnaires, and other inquiries. In addition to meeting the NYSE standards of independence and the categorical standards set forth in the Guidelines, a director qualifies as “independent” under the Guidelines only those directors who haveif the Board affirmatively determines that the director has no direct or indirect material relationship (whether commercial, industrial, banking, consulting, accounting, legal, charitable or familial, excluding their present directorship) with the Company or any of its consolidated subsidiaries, either director, or as a partner, shareholder or officer of an organization that has a relationship with the Company (except in his or her role as a director) are deemed independent. TheCompany.
Based on its review, the Board has determined that each of Roger L. Fix,David E. Roberts, Sujeet Chand, Ruby R. Chandy, Gayla J. Delly, John R. Friedery, John L. Garrison, Michael C. McMurray, David E. Roberts,Thomas B. Okray, Kenneth I. Siegel, and Carlyn R. Taylor (all of our current directors other than R. Scott Rowe, who is not independent because of his employment as the Company’s President and Chief Executive Officer) meet the independence standards set forth in the NYSE corporate governance listing standards. In addition, Joe E. Harlanstandards and Rick J. Mills, each of whomthe categorical standards set forth in the Guidelines. Roger L. Fix, who served as a director until our 2020the Company’s 2022 Annual Meeting were independentof Shareholders, met the independence standards set forth in the NYSE listing standards and the categorical standards set forth in the Guidelines during the period they servedhis service on the Board.
Our independence standards are included in the Guidelines, which are available on the Company’s website at https://ir.flowserve.com under the “Corporate Governance—Documents & Charters” caption.
A shareholder desiring to recommend a candidate for election to the Board should submit a written notice, as required by the Company’s By-Laws, including the candidate’s name and qualifications, to our Corporate Secretary, who will refer the recommendation to the CG&N Committee. The CG&N Committee may require any shareholder-recommended candidate to furnish such other information as may reasonably be required to determine the eligibility of such
2021 PROXY STATEMENT 20
recommended candidate or to assist in evaluating the recommended candidate, including a Director and Officer Questionnaire.
Under the proxy access provisions of our By-Laws, eligible shareholders and/or shareholder groups also are permitted to include shareholder-nominated director candidates in our proxy materials. Additional details about the requirements for including shareholder-nominated director candidates in our proxy materials are set forth under “General Voting and Meeting Information—Shareholder Proposals and Nominations” below.
2023 PROXY STATEMENT 26
The Board maintains an Audit Committee, a Finance and Risk Committee (“F&R Committee”), a Corporate Governance and Nominating Committee, and an Organization and Compensation Committee (“O&C Committee”). Only independent directors are eligible to serve on Board committees. Each committee has authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities and is governed by a written charter, which is available on the investor relations portion of the Company’s website at www.flowserve.comhttps://ir.flowserve.com under the “Investors—Corporate“Corporate Governance—Documents & Charters” caption.
Audit Committee | Primary Oversight Responsibilities |
CommitteeChair: Michael C. McMurray(1)
Sujeet Chand
Kenneth I. Siegel(5) Carlyn R. Taylor
| • Oversee financial reporting process, including the integrity of Company financial statements and compliance with legal and regulatory requirements • Oversee financial performance and reporting, the Company’s independent auditor and internal audit function, and regulatory activities • Oversee the Company’s integrity and compliance program • Review and discuss the process of Board and Board committees oversight of senior management’s risk management responsibilities • Appoint independent auditor • Prepares Audit Committee report for this proxy statement |
The Board has determined that all members of the Audit Committee meet the applicable independence standards under the SEC rules and NYSE listing standards, and that all members are financially literate within the meaning of the NYSE listing standards. (1) The Board has determined that Mr. McMurray qualifies as an audit committee financial expert under the SEC rules. (2) Roger L. Fix served on the Audit Committee until May 12, 2022. (3) The Board has determined that Mr. Chand qualifies as an audit committee financial expert under the SEC rules.
(5) Mr. Siegel joined the Audit Committee upon his appointment to the Board effective as of August (6) The Board has determined that Ms. Taylor qualifies as an audit committee financial expert under the SEC rules. |
Finance & Risk Committee | Primary Oversight Responsibilities |
CommitteeChair: Ruby R. Chandy
Sujeet Chand
4 Meetings in | • Oversee corporate capital structure and budgets and recommend approval of major capital projects, corporate development, and large sales orders • Review effectiveness of the Company’s IT infrastructure and cybersecurity programs and its practices for identifying and mitigating technology risks with Chief Information Officer at least twice per year • Review the Company’s enterprise risk management, including emerging risks • Review financial plans, liquidity, credit, key financial risks, treasury risk, and related matters
|
The Board has determined that all members of the F&R Committee meet the independence standards under the NYSE listing standards. (1) John R. Friedery served on the Finance & Risk Committee until August 16, 2022. (2) Mr. Siegel joined the Finance & Risk Committee upon his appointment to the Board effective as of August 16, 2022. |
20212023 PROXY STATEMENT 21 27
Corporate Governance & Nominating Committee | Primary Oversight Responsibilities |
Committee Chair(1)(2): Gayla J. Delly Members: Ruby R. Chandy John R. Friedery
John L. Garrison
4 Meetings in | • Recommend to the Board nominees for Chairman of the Board, President and Chief Executive Officer • Determine Board organization •
• Review and recommend director nominees • Manage risks associated with Board independence and potential conflicts of interest • Establish corporate governance principles and procedures, including overseeing the Company’s Code of Conduct • Prepare effective CEO and Board succession planning • Evaluate CEO performance • Oversee Board and committee • Oversight of |
The Board has determined that all members of the CG&N Committee meet the independence standards under the NYSE listing standards. (1)
(2) Gayla J. Delly was appointed as chair of the |
Organization & Compensation Committee | Primary Oversight Responsibilities |
CommitteeChair:
John L. Garrison
Members(1): Gayla J. Delly John R. Friedery Michael C. McMurray(2) 5 Meetings in | • Set compensation philosophy • Oversee risk management related to executive compensation plans and succession planning • Prepare the Compensation Committee Report included in this proxy statement • Approve executive officer compensation including incentives and other benefits • Retain and evaluate the advice of the independent compensation consultant, F.W. Cook, in adherence to the philosophies and principles stated under “Executive Compensation—Compensation Discussion and Analysis” • Review the Company’s processes to recruit, retain, and develop senior management, including its executive personnel appraisal, development, and selection processes, with a focus on the Company’s commitment to diversity |
The Board has determined that all members of the O&C Committee meet the applicable independence standards under the SEC rules and NYSE listing standards. (1) Roger L. Fix served on the O&C Committee until May 12, 2022. (2) Mr. Friedery joined the O&C Committee effective as of May 12, 2022. |
2023 PROXY STATEMENT 28
Our executive compensation program is administered by the O&C Committee. Consistent with the NYSE corporate governance listing standards, the O&C Committee is composed entirely of independent, non-employee members of the Board. In addition, the Non-Executive Chairman of the Board generally attends the meetings of the O&C Committee.
As reflected in its charter, the O&C Committee has overall responsibility for setting the compensation for our CEO, which is approved by the full Board, and for approving the compensation of our other executive officers, including the other Named Executive Officers. The O&C Committee is also charged with overseeing the organizational design of the Company, including the development and retention of management.
The O&C Committee is also responsible for reviewing the management succession plan and for recommending changes in director compensation to the CG&N Committee and to the Board. On matters pertaining to director compensation, the O&C Committee also receives data and advice from F.W. Cook. The O&C Committee periodically reviews the organizational design, management development plans and managerial capabilities of the Company. The O&C Committee also prepares and issues the Organization and Compensation Committee Report included in this proxystatement.
2021 PROXY STATEMENT 22
The O&C Committee’s process of reviewing the executive compensation program and setting compensation levels for our Named Executive Officers involves several components. During the first quarter of each year, the O&C Committee reviews each Named Executive Officer’s total compensation. The O&C Committee members also meet regularly with the Named Executive Officers at various times during the year, both formally within Board meetings and informally outside of Board meetings, which allows the O&C Committee to assess directly each Named Executive Officer’s performance. The O&C Committee also solicits input from all non-employee members of the Board as to the CEO’s performance during the year.
The O&C Committee generally considers the results of the CG&N Committee’s process for reviewing the CEO’s performance with all independent Board members. The CG&N Committee’s process includes the independent Board members individually and collectively presenting their assessment of the CEO’s performance, as well as the CEO presenting his self-assessment of his performance. The O&C Committee uses these results when determining the CEO’s recommended compensation, which is subject to the independent Board members’ approval.
In addition, the CEO annually presents an evaluation of each other Named Executive Officer’s performance to the O&C Committee, which includes a review of each officer’s contributions over the past year, and his or herthe officer’s strengths, weaknesses, development plans and succession potential. The CEO also presents compensation recommendations for each other Named Executive Officer for the O&C Committee’s consideration. Following this presentation and a benchmarking review for pay, the O&C Committee makes its own assessments and formulates compensation amounts for each Named Executive Officer with respect to each of the elements in the Company’s executive compensation program as described below.
The O&C Committee has the authority to retain outside advisors as it deems appropriate. The O&C Committee has engaged F.W. Cook as its compensation consultant to provide advice and information. F.W. Cook attends all regularly scheduled O&C Committee meetings and has assisted and advised the O&C Committee on all aspects of our executive and director compensation program,programs, and they provide no other services to the Company. The services they provide include:
providing and analyzing competitive market compensation data;
analyzing the effectiveness of executive compensation programs and making recommendations, as appropriate;
analyzing the appropriateness of the performance peer group (PPG) and compensation peer group (CPG); and
evaluating how well our compensation programs adhere to the philosophies and principles stated below under “Compensation Discussion & Analysis—Compensation Program Philosophy and Principles.”
2023 PROXY STATEMENT 29
ProgramOverview.Our director compensation program is established by the Board after review of data prepared by the O&C Committee’s independent consultant regarding competitive director compensation levels for peer companies and the Company’s compensation peer group, which is discussed under “Executive Compensation.” In 2020,2022, our non-employee director compensation program consisted of the following:following, which was unchanged from 2021:
2021 PROXY STATEMENT 23
Component | Annual Amounts ($) | Form of Payment | |
Retainer | $85,000 | Cash | |
Non-Executive | $125,000 | Cash | |
Committee service fee (per committee) | $7,500 | Cash | |
Committee |
|
| |
Audit Committee | $20,000 | Cash | |
O&C Committee | $15,000 | Cash | |
F&R Committee | $10,000 | Cash | |
CG&N Committee | $10,000 | Cash | |
Equity grant target value | $ |
| Restricted Shares |
In light of the unfolding COVID-19 pandemic, in May 2020 the Board approved a change to their equity compensation for 2020 by reducing the size of the annual grant to the number of shares that the Board would have received had the grant been made at the same stock price that equity grants were made to members of management on February 20, 2020. For additional information, see below under “—Equity Compensation.”
Additionally, non-employee directors are also eligible to receive special additional compensation when performing certain special services. The Board has set a compensatory rate of $3,500 per day for such services, though no compensation was paid for this purpose in 2020.2022.
CompensationDeferral.Directors may elect to defer all or a portion of their annual cash and equity compensation. The annual cash compensation may be deferred in the form of cash or in phantom shares, which reflect an equivalent value of Company common stock. Compensation deferred in the form of cash accrues interest at rates that do not exceed market rates or constitute preferential earnings. If a director elects to defer cash compensation in the form of phantom shares, the director receives a 15% premium on the amount deferred.
EquityCompensation.The equity portion of non-employee director compensation is granted on the date of the Annual Meeting of shareholders in the form of restricted stock. The restricted shares have voting rights and fully vest after the earlierearliest of one year from the date of grant, the termination of the director’s service due to death or disability or a change in control.
In May 2020, in recognition New non-employee directors receive a pro-rated grant of restricted stock at the time they join the Board. The pro-rated grant of restricted shares fully vests after the earliest of one year from the date of grants to the other incumbent non-employee directors, the termination of the unfolding COVID-19 pandemic, the Board approveddirector’s service due to death or disability or a change to their equity compensation for 2020 by reducing the size of the annual equity grant to a number of shares that the Board would have received had the grant been made at the same time that equity grants were made to members of management on February 20, 2020, prior to the date on which the COVID-19 pandemic began to have a material impact on the U.S. economy and the trading price of companies listed on the NYSE. On February 20, 2020, the date on which the Company made its annual equity grant to members of management, the price per share of the Company’s common stock was $47.56, and on May 22, 2020, the date on which the Company made its annual equity grant to the Board, the price per share of the Company’s common stock was $25.20. By approving the annual equity grant to members of the Board in an amount equal to the number of shares that would have been granted at the stock price on February 20, 2020, the dollar value of the annual equity grant to Board members was reduced from the target of $125,000 to $66,225.60.
2021 PROXY STATEMENT 24
Back to Contentscontrol.
StockOwnershipGuidelines.Under our stock ownership guidelines, all non-employee directors must own shares of Company common stock with a value of at least five times his or her annual cash retainer (currently $425,000) by his or her fifth anniversary of Board service. If the stock ownership requirement is not met, the director will receive all future Board compensation in the form of Company common stock until the requirement is satisfied. For 2020,2022, all non-employee directors met their stock ownership requirements.
2023 PROXY STATEMENT 30
The following table sets forth our non-employee director compensation for 2020.2022. Mr. Rowe did not receive any compensation for his service as a director. His compensation is set forth below under “Executive Compensation—Summary Compensation Table.”
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | |
Sujeet Chand | 115,000 | (7) | 66,226 | 181,226 |
Ruby R. Chandy | 113,300 | (7) | 66,226 | 179,526 |
Gayla J. Delly | 100,000 |
| 66,226 | 166,226 |
Roger L. Fix | 225,000 | (6) | 66,226 | 291,226 |
John R. Friedery | 110,000 |
| 66,226 | 176,226 |
John L. Garrison | 115,000 | (7) | 66,226 | 181,226 |
Joe E. Harlan(3) | 39,286 |
| — | 39,286 |
Michael C. McMurray | 120,000 |
| 66,226 | 186,226 |
Rick J. Mills(4) | 39,286 |
| — | 39,286 |
David E. Roberts | 115,000 |
| 66,226 | 181,226 |
Carlyn R. Taylor(5) | 37,772 |
| — | 37,772 |
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20212023 PROXY STATEMENT 25 31
R. Scott Rowe | |
President, CEO and Director since: Age: | • FlowserveCorporation | President, Chief Executive Officer, Director (2017 – Present) • CameronGroupofSchlumbergerLtd, anoilfieldservicescompany | President (2016 – 2017) • CameronInternationalCorporation, anoilfieldservicescompany | President, Chief Executive Officer (2015 – 2016) • CameronInternationalCorporation | President, Chief Operating Officer (2014 – 2015) • OneSubsea, ajointventureestablishedbyCameronandSchlumberger | Chief Executive Officer (2014 – 2014) • SubseaSystems, adivisionofCameron | President (2012 – 2014) • CameronInternationalCorporation | President of the Engineered and Process Valves division (2010 – 2012) • United States Army | Captain (O3) (1993 —1998) |
Elizabeth L. Burger | |
SVP, CHRO Age: | • FlowserveCorporation | Senior Vice President and Chief Human Resources Officer (2018 – Present) • HanesBrands,Inc., aglobalmanufacturerandmarketerofeverydaybasicapparel | Chief Human Resources Officer • MonsantoCompany, aglobalprovideroftechnologysolutionsandagriculturalproducts | Senior Vice President, Global Business Operations (2007 – 2013) • MonsantoCompany | Vice President, Corporate HR (2006 – 2007) • MonsantoCompany | Vice President, Compensation (2005 – 2006) • MonsantoCompany | Various leadership roles (1995 – 2005) |
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President, FPD since: Age: | • Flowserve Corporation | President, FPD (2023 – Present) • Flowserve Corporation •
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2021 PROXY STATEMENT 26
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2023 PROXY STATEMENT 32
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SVP,CLO Age: 46 | • FlowserveCorporation | Senior Vice President, •
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Amy B. Schwetz | |
SVP,CFO Age: | • FlowserveCorporation | Senior Vice President and Chief Financial Officer (2020 – Present) • PeabodyEnergy, aglobalpure-playcoalcompanyservingpowerandsteelcustomers | Executive Vice President and Chief Financial Officer (2015 – 2020). Peabody filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in April 2016. • PeabodyEnergy,Inc. | Senior Vice President, Finance & Administration – Australia (2013 – 2015) • PeabodyEnergy,Inc. | Senior Vice President, Finance & Administration – Americas (2012 – 2013) • PeabodyEnergy,Inc. | Vice President, Investor Relations (2011 – 2012) • PeabodyEnergy,Inc. | Vice President, Capital and Financial Planning (2009 – 2011) • PeabodyEnergy,Inc. | Various senior leadership roles (2005 – 2009) • Ernst &YoungLLP, aglobalaccountingfirm | Audit Manager (1997 – 2005) |
2021 PROXY STATEMENT 27
Scott K. Vopni | |
VP,CAO Age: | • FlowserveCorporation | Vice President, Chief Accounting Officer (2020 – Present) • DeanFoodsCo., afoodandbeveragecompany | Senior Vice President – Finance, Chief Accounting Officer (2010 – 2019). Dean Foods filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in November 2019. • DeanFoodsCo. | Interim Chief Financial Officer (2017 – 2018) • DeanFoodsCo. | Senior Vice President – Finance (2016 – 2017) • DeanFoodsCo. | Senior Vice President – Investor Relations (2015) • DeanFoodsCo. | Vice President – Controller (2008 – 2010) |
Kirk R. Wilson | |
President,FCD Age: | • FlowserveCorporation | President, Flow Control Division (2019 – Present) • FlowserveCorporation | President, Aftermarket Services & Solutions (2015 – 2019) • FlowserveCorporation | President, Services & Solutions Operations (2012 – 2015) • FlowserveCorporation | Vice President and General Manager, Integrated Solutions Group (2008 – 2011) • FlowserveCorporation | Vice President, Marketing for Pump Division (2004 – 2008) |
20212023 PROXY STATEMENT 28 33
Organization and Compensation Committee
John L. Garrison | Gayla J. Delly | John R. Friedery | Michael C. McMurray |
ThisDear Fellow Shareholders:
As members of the Organization and Compensation Committee, we are committed to maintaining a compensation program that supports our talent strategy, rewards performance and aligns with priorities of our shareholders.
In response to the low level of support for the last year’s say-on-pay vote, in the Fall of 2022, we undertook an extensive shareholder engagement effort. We would like to thank all of you who met with us to share your viewpoints. The major themes we heard from shareholders that engaged were twofold:
Our executive compensation program structure is sound, and aligns pay with performance; and,
Low support for the last year’s say-on-pay proposal was attributable to special, one-time, non-performance-based equity awards granted to our CEO and certain other senior leaders in 2021.
Our shareholders understood the purpose of these special one-time awards to retain and motivate executives who recently joined our Company and to drive business stability and continued focus on long-term shareholder value during the most challenging period of the pandemic but expressed a strong preference for special awards to include a performance-based vesting component.
In response to shareholder feedback disfavoring the use of special awards, we commit that we will not make additional special awards to executive officers absent compelling circumstances where our compensation objectives cannot be achieved through our annual compensation programs.
Additionally, any such future special awards will include a performance-based component, unless the Committee determines that inclusion of performance component would defeat the purpose of the special award.
Our executive officers’ compensation for fiscal year 2022 did not include any special awards and no such awards are contemplated for 2023.
At the same time, based on our discussions with shareholders, we believe that a substantial majority of our shareholders support our core annual compensation programs, which are heavily weighted toward performance-based pay, and which received high support in years prior to 2022.
We encourage you to review the following Compensation Discussion and Analysis, which includes additional detail about our shareholder engagement effort and our response, and considerations related to fiscal 2022 compensation program and its outcomes.
We thank you for your continued investment in Flowserve and respectfully request your support for this year’s advisory vote on executive compensation.
Respectfully,
THE ORGANIZATION AND COMPENSATION COMMITTEE
John L. Garrison, Chairman | Gayla J. Delly | ||
John R. Friedery | Michael C. McMurray |
2023 PROXY STATEMENT 34
This CD&A describes the decisions made concerning the compensation of the Company’s Named Executive Officers (“CD&A”NEOs”), as shown below. It also describes our executive compensation guiding principles, and the pay program we provided2022 executive compensation outcomes as well as other attributes related to our Named Executive Officers (“NEOs”) for 2020.executive compensation governance policies.
Contents
Executive Summary | Page 37 | |||
Compensation Program Philosophy and Principles | Page | |||
2022 Executive Compensation Decisions | Page 45 | |||
Compensation Governance Policies | Page | |||
Summary Compensation Table | Page |
During 2020,2022, our NEOs were:
R. Scott Rowe President and Chief Executive Officer (“CEO”)
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Senior Vice President, Chief Financial Officer (“CFO”)
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| ElizabethL.Burger Senior Vice President, Chief Human Resources Officer (“CHRO”) |
Two of our 2022 NEOs, Keith E. Gillespie, our former Senior Vice President and Chief Sales Officer, and Tamara M. Morytko, our former President of the Flowserve Pumps Division, left the business in early 2023 as part of a reorganization and restructuring plan to align with our 3D strategy and in an effort to optimize operational execution. Mr. Gillespie transitioned from his position on April 7, 2023, and Ms. Morytko transitioned from her position on February 24, 2023.
For more information on the Named Executive Officers currently serving as executive officers, see “Executive Officers” on page 26.32.
2023 PROXY STATEMENT 35
2022 “Say-on-Pay” Vote and Shareholder Engagement | |
Our 2022 say-on-pay proposal failed to receive the support of a majority of votes cast. The O&C Committee, the full Board of Directors, and Management were disappointed with this vote and took the outcome seriously. We undertook an extensive shareholder engagement campaign to better understand our shareholders’ perspectives related to our executive compensation program. Our engagement team included our independent Chairman of the Board and members of our management team representing investor relations, legal and human resources functions. | |
We contacted our top 25 shareholders, representing approximately 80% of our common shares outstanding, offering to meet with each of them. We held meetings with 7 shareholders who accepted our invitation, representing approximately 26% of our common shares outstanding. Our independent Chairman of the Board participated in all meetings with our shareholders. Topics discussed included executive compensation, corporate strategy, corporate governance and our environmental and social priorities and programs. | |
Extensive Shareholder Engagement Provided Important Feedback for the O&C Committee | |
Reached out to Shareholders Met with Shareholders Percentages shown above | • We heard valuable perspectives from our shareholders, which were conveyed to the full Board and relevant committees of the Board and informed many meeting agenda items. • Shareholders expressed strong support of our overall executive compensation program structure. • Low support of the 2022 say-on-pay proposal was attributable to special, one-time, non-performance-based equity awards. • Below is a summary of the additional feedback we received during our 2022 engagement and the response of the O&C Committee to the shareholder perspectives shared with us. |
What we heard from shareholders | |
• Shareholders expressed concern with respect to the one-time enhancement to the 2021 equity awards. • Had the enhancements been performance-based, shareholders would have perceived them more favorably. • Some shareholders shared that they would prefer enhanced disclosure of operational performance targets. • Some shareholders encouraged continued development of our ESG strategy and roadmaps. | |
How we responded to shareholders | |
• The O&C Committee will not make future special awards without a performance-based component to executive officers absent compelling circumstances where the objectives of the O&C Committee cannot be achieved through the regular compensation program. • No off-cycle awards were issued in 2022 or contemplated for 2023. • In response to shareholder preferences, this year’s proxy statement includes: • Robust disclosure for the 2022 AIP strategic goals payout modifier (p. 49) • Enhanced year-over year ROIC disclosure (p. 51-53) • The O&C Committee supports transparent disclosure of performance targets; however, details pertaining to our operational targets pose a risk of putting Flowserve at a competitive disadvantage when bidding contracts. Operational performance targets are set at a level intended to be challenging, as demonstrated by the On-time Delivery metric for which no payout occurred under our annual incentive program for two consecutive years. • The O&C Committee is fully supportive of furthering our commitment to ESG as evidenced by the 2022 and 2023 AIP payout modifiers for the Executive Leadership Team (ELT) tied to strategic goals, including ESG metrics. |
2023 PROXY STATEMENT 36
We are a world leading manufacturer and Performance
Flowserve is oneaftermarket service provider of comprehensive flow control systems. We develop and manufacture precision-engineered flow control equipment integral to the movement, control and protection of the world’s leading providersflow of fluid motion and control products and services with a significant global presencematerials in the manufacturingour customers’ critical processes. Our product portfolio of pumps, valves, seals, automation and seals. We have approximately 16,000 employees in more than 50 countries who are focused on our purposeaftermarket services supports global infrastructure industries, including oil and strong company values.
While Flowserve continued to make substantial progress on our transformation initiatives, 2020 was a challenging year for Flowserverenewable energy) and its customers given the COVID-19 pandemic andwater management, as well as other general economic challenges around the globe. In the first quarter of 2020 the onset of the pandemic coupled with extreme volatility in globalindustrial markets and commodity prices led to unexpectedly reduced capital budgets by our customers and resulting declines in demand for our products and new bookings. In addition, these impacts also caused our customers to defer spending in their repair and maintenance budgets, which led to reduced levels of activity in our aftermarket business.
2021 PROXY STATEMENT 29
Data from Industrial Info Research (IIR) for $2.3 trillion projects/opportunities data for Flowserve end markets
Water data sourced from Global Water Intelligence
Power data sourced from IEA
These global challenges disrupted the meaningful progress our management team and the Company made through our significant efforts in the Flowserve 2.0 Transformation and resulted in declining revenue, profitability, and share price performance. Despite these unprecedented challenges, the process improvements made as part of our Flowserve 2.0 Transformation allowed management and the O&C Committee to swiftly respond to the market disruption by:
Shifting our strategic priorities to strengthen the Company during the pandemic and position us for success post-pandemic;
Protecting our employees and contractors by imposing global restrictions on non-essential travel in March 2020 and a work-from-home policy for all non-essential employees who are able to do so, and providing face coverings and other personal protective equipment and enhanced cleaning of sites and implementing social distancing protocols for employees who are going to work in our facilities;
Assisting our customers by continuing safe operations that allowed our employees to deliverwhere our products and services to other essential businesses;add value. Through our manufacturing platform and global network of Quick Response Centers (“QRCs”), we offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting.
Reprioritizing certainIn 2022, Flowserve experienced strong bookings despite the disruptions in our business environment and unexpected operational challenges. Tension on supply chain was a headwind throughout 2022 but we saw incremental improvements as the year progressed; however, labor availability in the early part of 2022, primarily due the COVID pandemic, significantly affected production. These challenges, coupled with escalating inflation, impacted our performance against our targets, which are reflected in our financial and stock price performance.
Despite these challenges, we remain encouraged by the strong demand that we see across many of our end markets, as evidenced by our significant Bookings growth. We are also optimistic about the opportunities available to Flowserve 2.0 Transformation initiativesand have positioned ourselves well in the marketplace as a key partner to accelerate cost actions enablingour customers through the Company to help mitigateenergy transition. We believe our strategic investments into diversification, decarbonization, and digitization (“3Ds”) present significant long-term opportunities for Flowserve, our shareholders, and stakeholders around the impact to operating marginsworld.
While 2022 had a series of obstacles, we have several highlights from the year. We hit an important milestone this year as we celebrated our 25th anniversary as a publicly traded company on the New York Stock Exchange. While our history spans more than 230 years, we’ve made significant progress during the second halfpast 25 years in becoming the flow control leader we are today. We made great progress in advancing our 3D strategy while continuing to support our core customers in oil & gas, chemical and power generation. We are positioned as a key partner in emerging technologies, and our record backlog demonstrates our leadership in the industry. We also launched more than 20 new products that support our 3D strategy and enable our customers’ sustainability efforts with a broad variety of applications around the world. We expect to elevate our financial performance in 2023 as we live our Purpose to create extraordinary flow control solutions to make the world better.
2023 PROXY STATEMENT 37
Program Enhancements | |
• We made several changes to the structure for our 2022 target awards under our Annual Incentive Plan (AIP) to align with our strategic initiatives: • Increased the weighting of Bookings since it’s a funnel for revenue, • Implemented performance metrics for each of our 3Ds (Diversification, Decarbonization and Digitization) to drive a focus on energy transition and long-term sustainability, • Implemented a strategic goals payout modifier for each member of the ELT to drive progress against ESG and other strategic priorities, and • Returned to a more traditional payout table structure (i.e., no stretch target that provides a larger payout for such performance attainment) in anticipation of 2022 being a rebound year. • We changed our performance peer group applicable to our 2022 PSUs to the group of companies that comprise the S&P 500 Industrials Index in recognition of the broader market with which we compete. • To further enhance the alignment of our CEO and our shareholders’ interests, we increased our stock ownership guidelines for our CEO from 5x to 6x base salary. | |
• We simplified our 2023 AIP design to promote immediate actioning in our new organizational structure by focusing on three performance metrics: • Adjusted Operating Income (50% weighting) to incentivize strong execution, • Total Customer Bookings (30% weighting) to incentivize growth (See Note 1); and, • Adjusted Primary Working Capital as a % of Sales (20% weighting) to incentivize efficiency. • We also retained our strategic goals AIP payout modifier for members of the ELT to incentivize continued progress against critical ESG and growth initiatives. • Our 2023 PSU awards retain a +/- 15% relative TSR modifier, but the 2023 grant terms provide that no positive payout modifier will apply if our three-year absolute TSR is negative, regardless of our relative performance. | |
Note 1: In 2022, “total customer” Bookings represented 28% of performance metrics and “3D” Bookings tied specifically to Diversification and Decarbonization (with the goal to raise employee-awareness of the strategic importance of these products and services) represented an 8% weighting. As a result, the total weighting tied to Bookings metrics was 36%. The 30% weighting on “total customer” Bookings for 2023 incorporates the Bookings on our “3D” products and services to continue to incentivize Bookings in these strategic areas. |
Our annual incentive program paid out below target for 2022 and each of the year;
Cancelingtwo prior fiscal years. Although 2022 Bookings continued to be strong in core products and services and Bookings in our strategic “3D” growth areas were particularly strong, Adjusted Operating Income did not meet the threshold performance level. Adjusted Primary Working Capital (PWC) as a % of Sales and On-time Delivery goals also did not meet threshold performance levels because of higher inventory levels we chose to maintain due to continued supply chain disruptions and our executional challenges, respectively. See pages 46 to 48 for further details on our 2022 annual merit increases in base salary levels across the organization, including for certain of our executive officers;
Aligning our incentive plan with the Company’s urgent priorities by adopting a first halfpayout based on financial and second half measurement approachoperational performance metrics.
2023 PROXY STATEMENT 38
PSUs have paid out below target for the Annual Incentive Plan (“AIP”); and
Mainiting in-flightpast three performance share units with no changes.
2021 PROXY STATEMENT 30cycles.
Back 2020 Performance Stock Units (PSUs) tied to Contents
The O&C Committee took additional compensation actions in the first quarter2020-2022 performance paid out at 16% of 2021 revising our incentive programs to address the continued uncertainty facing the Company, and to strengthen the retentive value of our compensation system, as well as motivate our key employees to continue to execute on our strategic transformation during this critical juncture for the Company. These additional actions include:
Reverting to an annual measurement approach under the AIP;
Adopting changes to the 2021 Performance Share Unit (PSU) program that align the metrics with the Company’s key financial priorities oftarget, reflecting pandemic-disrupted progress toward Return on Invested Capital (ROIC)(“ROIC”) goals and Free Cash Flow as a % of Net Income, including maintaining a focus on total shareholder return; and
Providing for a one-time enhanced 2021 LTI opportunity, ranging in value from 29%Total Shareholder Return (“rTSR”) performance relative to 73% of annual long-term incentive target, delivered in Restricted Stock Units with back-loaded vesting 1/3 onpeers over the second anniversary of the grant date and 2/3 on the third anniversary of the grant date.
Company Strategy and Continued Organizational Transformation
In addition to executing on the short-term imperatives in 2020,applicable three-year period influenced by our associates continued to drivemore significant transformation for Flowserve. We accelerated certain of our Flowserve 2.0 initiatives, improved upon our previous progress, and drove solid results given the disruption caused in the market. Referexposure to the “Flowserve 2.0 Transformation” beginning on page 7 for additional information about the transformationoil and accomplishments during 2020.gas markets.
FLOWSERVE2.0—ImplementingourTransformativeBusinessStrategyPAYOUTS FOR 2018, 2019, AND 2020 PSU GRANTS
Alignment Of Our Compensation Programs With Our Strategy
Our compensation programs areRealized pay for our executives is directionally aligned with our company strategyshareholders’ experience. Our CEO’s realizable pay for 2020-2022 was 24% less than target while our total shareholder return was down 33%. Lower realizable compensation is attributable to the impact of the decline in our stock price on outstanding equity grants as well as below target payouts for the annual incentive and performance share unit grants.
“Target Pay” includes base salary, target annual incentive opportunity and grant date fair value of equity awards.
“Realizable Pay” includes actual base salary, actual bonuses paid, and the goalvalue of outstanding RSU and PSUs based on our December 31, 2022 share price, with 2020 PSUs shown at actual payout and 2021 and 2022 PSUs shown at target.
2023 PROXY STATEMENT 39
Back to create long-term shareholder value. Quantitative measurements forContents
Our executive compensation governance supports our key strategies are established and embedded inpay-for-performance philosophy, aligns our annual and long-term incentive plan designs as shown in the table below. The measurement of the improvement of organizational health is included in the yearly performance assessmentexecutives’ interests with those of our NEO’s.shareholders, and reflects best practices without encouraging unnecessary risk taking.
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✔ Balance compensation programs and cap incentive plan payouts ✔ Maintain a clawback policy that covers both cash and equity incentive compensation ✔ Provide a meaningful percentage of long-term incentives in the form of performance-based compensation |
✔ O&C Committee engages an independent compensation consultant ✔ Change in control severance plan payments only made in event of a “double-trigger” when executive’s employment is terminated |
Bookings and Revenue Growth
On-time Delivery (OTD) Improvement
Total Shareholder Return (TSR) Growth
What We Don’t Do | ||
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✘ | No excise tax or income tax gross ups for Executive Officers | |
✘ | No employment agreements with Executive Officers | |
✘ | No excessive perquisites | |
✘ | No stock option repricing without shareholder approval | |
✘ | No dividend payments on unvested awards | |
20212023 PROXY STATEMENT 31 40
The alignment of pay and performance is one of the key components of our compensation philosophy as shown on the following page. The Company is committed to a rigorous target setting process, the careful selection of key performance measures aligned with our strategy and the creation of shareholder value.
The following charts illustrate the performance payouts under our various incentive plan components: The Company’s annual incentive plan (“AIP”) and contingent performance share units (“PSUs”).
Compensation Program Philosophy and Principles
The O&C Committee maintains a thoughtful approach to corporate governance practices for executive compensation. Below is a summary of those practices.Executive Compensation Philosophy
Our Compensation Philosophycompensation philosophy is aligned with building long-term shareholder value and is designed to achieve the following objectives:
2021 PROXY STATEMENT 32
ATTRACT & RETAIN | Attract and retain high-quality | |
REINFORCE OUR STRATEGY | Align our incentive programs with our vision and | |
COMPETITIVE AND MARKET-BASED | Maintain a market-based | |
ALIGN PAY WITH PERFORMANCE | Provide incentive programs that reward | |
ALIGN PAY WITH SHAREHOLDERS |
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2023 PROXY STATEMENT 41
Our core executive compensation elements are aligned with our executive compensation philosophy. These elements provide competitive market-based compensation that emphasize pay for performance and alignment with shareholders through heavy weighting of short- and long-term incentive compensation.program is structured to incorporate the following components:
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• Reviewed annually for adjustments | •
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| Motivates executives to achieve/exceed annual Company goals that ultimately drive long-term shareholder value | •
• Target award determined as a % of base salary • Payout range is 0% to 200% of target award • Strategic goals payout modifier applies which may increase or decrease the payout by +/-15% | •
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• Any earned payout is subject to review and approval by the O&C Committee |
| Encourages executives to increase shareholder value over a long-term time horizon | •
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| • Settled in stock • Vests ratably | • Focus on stock price and shareholder returns | ||
Performance Stock Units (PSUs) |
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• Payout range is 0% to 200% of units granted • Payout modifier applies, which may increase or decrease the payout of units by +/- 15% | •
• Underlying payouts driven by financial performance with the final payout adjusted based on rTSR •
• Any earned payout is subject to review and approval by the O&C Committee |
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ATTRACT & RETAIN | REINFORCE OUR STRATEGY | COMPETITIVE AND MARKET-BASED | ALIGN PAY AND PERFORMANCE | ALIGN WITH SHAREHOLDERS |
2023 PROXY STATEMENT 42
Our executive compensation program emphasizes performance-based compensation that is determined each year by the O&C Committee. As shown below, for 2020, the significant majoritymost of our 20202022 total target total executive compensation (i.e.,was delivered in the form of short- and long-term incentives for which payouts are at risk.
Including stock price performance for RSUs.
The O&C Committee oversees our executive compensation program working closely with its independent consultant to promote the effectiveness of our program. The O&C Committee’s charter, which documents its authority and responsibilities, is available on the investor relations portion of the Company’s website at https://ir.flowserve.com under the “Corporate Governance—Documents & Charters” caption.
The O&C Committee is responsible for determining the compensation of our Executive Officers and designing our executive compensation program. Determining compensation for our Executive Officers includes, among other things, determining each component of executive compensation and any related performance metrics, goals, attainment and payouts as described above in “Components of Executive Compensation.”
Each year, Mr. Rowe presents compensation recommendations to the O&C Committee regarding the compensation for each Executive Officer, other than himself. Mr. Rowe makes his recommendations based upon an assessment of each executive’s performance, as well as the performance of the executive’s business unit or function, and his assessment of the retention risk for each executive. The O&C Committee annually reviews Mr. Rowe’s performance, including feedback directly from the Board, and holds executive session discussions without Mr. Rowe or any other Executive Officers present to discuss Mr. Rowe’s performance and establish Mr. Rowe’s compensation.
2023 PROXY STATEMENT 43
The O&C Committee has retained F.W. Cook as its independent compensation consultant to provide advice regarding executive compensation matters. The services provided by F.W. Cook generally include providing:
Input on the design of our executive compensation program, evolving market practices and the competitiveness of our program,
Market data, and
Input on proposed compensation decisions.
F.W. Cook attends all regularly scheduled O&C Committee meetings and calls. The O&C Committee assessed F.W. Cook under the factors set forth in the SEC’s rules and concluded that F.W. Cook was independent and that the consultant’s work in 2022 did not raise any conflicts of interest.
Annually, the O&C Committee reviews the base salary,salaries, target annual incentive,bonuses, and the grant date value of RSUs and PSUs at target) was at-risk (86.3%long-term incentive awards for our President and CEO and an averageeach of 68.9% for other Namedour Executive Officers as compared to the compensation levels for similar positions at our CPG companies, while considering other than Mr. Roueche,factors described below. The O&C Committee reviews publicly available financial and compensation information reported by the CPG companies and general survey data. The 2021 general survey data used to inform the O&C Committee’s 2022 compensation decisions was collected from Willis Towers Watson (WTW).
The O&C Committee reviews the CPG and survey data to determine the median compensation for each executive’s position and then considers this as noted below). See “Elementsone factor when setting each executive’s target compensation for the year. Median compensation is used as a reference point for pay recommendations. Target pay varies from the median based on the executive’s industry experience; experience and performance in his or her role and at the Company; value of the Executiverole to the Company; internal pay parity among our executives; and any other factors the O&C Committee deems relevant. The CPG is also used more generally when the O&C Committee reviews our compensation program design, including the types of compensation awarded and the terms and conditions of compensation components.
The O&C Committee conducts an annual review of the CPG to determine if any changes are appropriate. In choosing our peers, the O&C Committee involves Management and uses research and advice from its independent compensation consultant. The O&C Committee generally seeks to include companies in similar industries, with applicable revenue and market cap scope, with similar business characteristics (such as margins and asset intensity) and adequate disclosure of executive compensation practices to ensure no pay anomalies exist which are inconsistent with Flowserve’s pay practices. The O&C Committee determined to make no changes to the Compensation Program”Peer Group for additional details.
2021 PROXY STATEMENT 33
Back to Contents2022:
This chart reflects total annual target compensation and therefore excludes any one-time special awards discussed below under the heading “Special Awards.” This chart does not include Mr. Roueche given his limited role as interim CFO, which ended on February 23, 2020.
CompensationGovernancePractices
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Crane Co.
Fortive Corporation
Nordson Corporation |
Rockwell Automation, Inc.
Trinity Industries
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2023 PROXY STATEMENT 44
After reviewing Company performance, the positioning of 2020 Say-On-Pay Vote
At our 2020 Annual Meetingeach executive versus the market data provided by F.W. Cook, the performance of Shareholders,the executive over 95%the prior year, and the past history of our shareholders votedchanges to approve our Named Executive Officer compensation. Although ourthe executive’s compensation, the O&C Committee believes this affirms our shareholders’ overall supportapproved the following total target compensation levels and pay components for each NEO for 2022. Following these adjustments, the executive team’s target direct compensation continued to be positioned near the median of ourF.W. Cook’s market data. With a majority of compensation performance based, should the Company fail to meet performance objectives, realized executive compensation program, we are constantly seeking to improve our program.could be significantly below median.
Name/Title | Annual Salary | 2022 AIP Target as a % of Salary | LTI Target Grant Value | ||||
1/1/22 | Effective 4/4/22 | ||||||
R. Scott Rowe, CEO | $ | 1,133,000 | $ | 1,200,000 | 125% | $ | 5,750,000 |
Amy Schwetz, CFO | $ | 669,500 | $ | 702,975 | 80% | $ | 1,650,000 |
Elizabeth Burger, CHRO | $ | 493,319 | $ | 513,051 | 70% | $ | 700,000 |
Keith Gillespie, Former CSO | $ | 494,700 | $ | 509,541 | 65% | $ | 600,000 |
Tamara Morytko, Former President-Pumps | $ | 535,000 | $ | 561,750 | 65% | $ | 700,000 |
Rationale for Total Target Compensation Alignment with Strategic Objectives
To achieve our program objectives and support the implementation of our strategy, we assess our compensation programs on an annual basis. The following compensation program design features were adopted in recent years:
2021 PROXY STATEMENT 34
Back to ContentsIncreases
| Rationale for Increase |
| To reward Mr. Rowe’s keen strategic vision and his criticality to execution of our strategic plan. The last salary increase for Mr. Rowe was in 2018. This target bonus as a percentage of salary increase is his first since assuming the CEO role in 2017. |
Amy Schwetz, CFO | Market-based merit increases |
Elizabeth Burger, CHRO | |
Keith Gillespie, Former CSO | |
Tamara Morytko, Former President-Pumps |
The Company’s AIP rewards participants to the extent they achieve the Company’s annual objectives. Under this short-term incentive program, the O&C Committee establishes performance metrics and target performance levels. It also establishes a target incentive award for each executive as a percentage of salary.
2022 Award Structure
Working with its consultant and Management, the O&C Committee selects performance metrics that support key strategies to drive sustainable and profitable growth.
2023 PROXY STATEMENT 45
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In light of the unprecedented challenges of the world-wide COVID-19 pandemic and the volatility of commodity prices as a result of the pandemic and disputes between the members of the Organization of Petroleum Exporting Companies, the O&C Committee approved certain changes to AIP in July 2020, including bifurcating the 2020 program for the first and second halves of the year, in order to provide focus on and reward the achievement of the Company’s evolving strategic priorities during an unprecedented period of global economic uncertainty and to help drive operational improvement. Additional discussion of the changes approved by the O&C Committee and the rationale for such changes is included below in “Elements of the Executive Compensation Program—Annual Incentive Opportunity.”
Elements of the Executive Compensation Program
Consistent with our philosophy, the primary elements of the Company’s executive compensation program in 2020 are discussed below:
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Competitive Market-Based Compensation Approach
Aligned with our competitive and market-based executive compensation philosophy, the O&C Committee establishes a benchmark “compensation peer group” (“CPG”) on an annual basis. In addition, AON and Willis Towers Watson (“WTW”) Executive Compensation Survey Data is utilized to set compensation elements for positions that are not adequately covered by the CPG data. The CPG, AON Survey and WTW Survey are each considered in setting target executive compensation levels.
For 2020, our CPG consisted of the following companies, which includes one addition over 2019:
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Elements of Compensation in Detail
The O&C Committee reviews and approves base salaries annually during the first quarter with a general goal to approximate the market median of companies within the CPG and the broader market as reflected in the AON Survey and WTW Survey. The base salaries paid to the Named Executive Officers during 2020 are shown below. In response to the onset of the COVID-19 pandemic and the downturn in markets generally, including the oil and gas markets, the Board elected not to implement any increases to base salary during 2020 other than a performance increase in base salary of 15% for Ms. Minnix in recognition of her high performance and the peer benchmark data for her position.
2021 PROXY STATEMENT 36
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| Leading financial indicators of growth in energy transition, which is a critical part of Flowserve’s strategy as the world plans to reduce its dependency on fossil fuels |
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| Key financial measure that promotes focus on efficient use of capital |
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| Key customer satisfaction metric that supports growth |
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During the first quarter of each year, the O&C Committee also establishes each Named Executive Officers’ annual cash incentive opportunity under our Annual Incentive Plan (the “AIP”). When setting annual incentive opportunities, the O&C Committee approves: (i) the Company performance measures under the AIP; and (ii) an AIP target opportunity for each Named Executive Officer. Each NEO’s overall annual AIP target opportunity for 2020 remained unchanged from 2019 levels as a percentage of base salaries.
In response to the unfolding COVID-19 pandemic, the O&C Committee re-convened in July 2020 to review the 2020 AIP program and determined that it would be appropriate to measure the 2020 AIP as two separate performance periods: H1 (measured from January 1 through June 30, 2020) and H2 (measured from July 1 through December 31, 2020), which we refer to in this proxy statement as the H1 Plan and the H2 Plan respectively. The H1 Plan was determined based on the performance measures established in February 2020, and the H2 Plan was determined based on new performance measures established in July 2020 that aligned more closely to the Company’s evolving priorities and objectives. The final payout was determined by adding the overall attainment for each performance period, weighted 50% each.
In doing so, the O&C Committee considered the economic environment, the unanticipated impact that the reduction in our customers’ capital budgets had on our business, and the motivational aspect of the original 2020 AIP program. Using a set of guiding principles, the O&C Committee balanced our internal needs with external shareholder expectations. The O&C Committee consideredimplemented a designnew strategic payout modifier in 2022 for Mr. Rowe and his direct reports, including each of the NEOs, to incentivize progress in key strategic areas that are pivotal for the H2 plan that:
Motivated associates during an extremely challenged time;
Set realistic goals in light of the rapidly evolving business environment;
Provided line of sight to metrics that aligned with the Company’s focus on successfully navigating the downturn;
Provided opportunity for reasonable AIP payouts;long-term growth and
Utilized metrics that could be focused on by all levels within the Company.
In establishing this bifurcated approach, the O&C Committee sought to balance pay for performance considerations with retention and motivation factors, transformation strategy. A payout modifier was applied in an effort to maintain an AIP program that provided focus on and rewarded the achievement of the Company’s evolving strategic priorities during an unprecedented period of global economic uncertainty and to continue to drive operational improvement.
2021 PROXY STATEMENT 37
The following table illustrates the 2020 AIP target opportunities and payouts for each NEO:
Named Executive Officer | 2020 Salary | Target AIP (% of Salary) | Target AIP ($ Amount) | H1 Plan Payout Percentage (weighted 50%) | H2 Plan Payout Percentage (weighted 50%) | Overall Payout Percentage | 2020 AIP Payout | |
R. Scott Rowe | $1,133,000 | 120% | $1,359,601 | 7.8% |
| 123.7% | 65.8% | $ 894,260 |
Amy Schwetz(1) | $566,530 | 75% | $ 424,898 | 7.8% |
| 123.7% | 65.8% | $ 279,471 |
John E. (Jay) Roueche, III | $343,757 | 50% | $ 171,879 | 7.8% |
| 123.7% | 65.8% | $ 113,051 |
Lanesha T. Minnix | $525,000(2) | 65% | $ 341,250 | 7.8% |
| 123.7% | 65.8% | $ 224,453 |
Keith E. Gillespie | $485,000 | 65% | $ 315,250 | 0.0% |
| 105.7% | 52.9% | $ 166,625 |
Elizabeth L. Burger | $478,950 | 65% | $ 311,318 | 7.8% |
| 123.7% | 65.8% | $ 204,765 |
(1) This reflects Ms. Schwetz’s annual bonus opportunity based on the period from February 17, 2020, the first date of her employment, through December 31, 2020. Ms. Schwetz assumed the role of Senior Vice President and Chief Financial Officer on February 24, 2020. | ||||||||
(2) This reflects Ms. Minnix’s 2020 base salary in effect as of December 31, 2020, which is used for determining her 2020 AIP payout. |
The O&C Committee, working with its compensation consultant and members of management, evaluates and approves the Company’s AIP performance measures. The O&C Committee also sets the weighting of each executive’s individual performance measures to be consistent with our business strategy and to tie to the achievement of important strategic objectives within each executive’s area of control.
The O&C Committee selects performance measures, with input from management, that support key strategies that we believe drive sustainable and profitable Company growth. The performance metrics were reviewed for the H1 Plan and the H2 Plan to ensure their importance in remaining successful during the downturn, our current strategic operational focus and alignment across the organization at all levels.
The H1 performance metrics were aligned with the Company’s historical focus on margin expansion through operating income, growth through revenue and bookings, capital efficiency through a focus on primary working capital as a percentage of sales and customer satisfaction through on-time delivery. We believe these metrics align our associate’s actions with outcomes that drive the success of the Company and align with shareholders’ interests.
Because our business outlook was impacted by the unanticipated reduction in our customers’ capital spending during 2020, we narrowed the focus of the H2 plan to metrics that were critical to managing the Company through the downturn. The O&C Committee approved performance measures that focused associates on maintaining the Company’s margin through the downturn with an increased focus on operating income, preserving liquidity and generating cash flow through primary working capital reduction and focusing on delivering on our past-due backlog to our customers in the back half of the year, except for Keith Gillespie, our Chief Sales Officer, who continued to focus on bookings insteadfundamental quantitative financial and operational goals, while still incentivizing performance against our key strategic goals. The modifier allows for adjustment of delivery of past-due backlog underotherwise earned payouts by up to +/- 15% based on accomplishments relative to key objectives in the H2 plan.
The Company’s 2020 AIP performance measures for the H1 Plan as weighted for each executive were as follows:
2021 PROXY STATEMENT 38
Back to Contentsfollowing strategic categories:
H1 2020 Performance Measures & Weighting | Consolidated Adjusted Operating Income | Consolidated Revenue or Bookings | Adjusted PWC as % of Sales | Customer On-time Delivery | Total |
R. Scott Rowe | 50% | 15% | 20% | 15% | 100% |
Amy Schwetz | 50% | 15% | 20% | 15% | 100% |
John E. (Jay) Roueche, III | 50% | 15% | 20% | 15% | 100% |
Lanesha T. Minnix | 50% | 15% | 20% | 15% | 100% |
Keith E. Gillespie (1) | 30% | 50% | 20% | — | 100% |
Elizabeth L. Burger | 50% | 15% | 20% | 15% | 100% |
(1) Only Mr. Gillespie had a Consolidated Bookings target. The other Named Executive Officers had a Consolidated Revenue target. |
The Company’s 2020 AIP performance measures for the H2 Plan as weighted for each executive were as follows:
H2 2020 Performance Measures & Weighting | Consolidated Adjusted Operating Income | Consolidated Bookings | PWC Reduction | Past Due Backlog | Total |
R. Scott Rowe | 55% | — | 25% | 20% | 100% |
Amy Schwetz | 55% | — | 25% | 20% | 100% |
John E. (Jay) Roueche, III | 55% | — | 25% | 20% | 100% |
Lanesha T. Minnix | 55% | — | 25% | 20% | 100% |
Keith E. Gillespie | 30% | 50% | 20% | — | 100% |
Elizabeth L. Burger | 55% | — | 25% | 20% | 100% |
Achievement of the metrics was evaluated using pre-defined internal criteria, as adjusted by the O&C Committee within parameters it established at the beginning of each performance period, to exclude the effect of certain specified developments that occurred during the year and described further below.
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2021 PROXY STATEMENT 39
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In Q1 2020, the O&C Committee had set performance targets for financial metrics used in our AIP at definitive, challenging and objective levels that required significant effort and achievement by our Named Executive Officers for any payout to occur. The 2020 payout range under the AIP was 0% to 200% of each executive’s respective target award opportunity for both the H1 Plan and the H2 Plan for the respective time periods.
For fiscal 2020, the O&C Committee established an additional “stretch” opportunity for consolidated adjusted operating income, consolidated bookings, consolidated adjusted primary working capital as % of sales (H1 Plan only), primary working capital reduction (H2 Plan only), and past due backlog (H2 Plan only), which would result in a 115% payout. This provided the opportunity to achieve challenging goals and reward attainment accordingly.
For consolidated revenue and consolidated customer on-time delivery for the H1 Plan, no stretch goal was established for the 115% payout level.
The actual payout percentage was determined using a matrix that compares the Company’s actual performance against the established performance targets for the year (referred to as “plan”). The following tables show the percentage of target award that is paid at different levels of Company performance against plan, as well as actual performance and payout percentages for 2020.
The following sets forth the H1 Plan and H2 Plan performance metrics applicable to Mr. Rowe, Ms. Schwetz, Mr. Roueche, Ms. Minnix and Ms. Burger:
2021 PROXY STATEMENT 40
2020 H1 Plan Performance Measures & Weighting | Threshold (50% Payout) | Target (100% Payout) | Stretch (115% Payout) | Maximum (200% Payout) | Measured Performance | Weighted Payout Percentage |
Consolidated Adjusted Operating Income (50%) | $ 180.9 | $202.2 | $212.8 | $234.1 | $180.6 | 0.0% |
Consolidated Revenue (15%) | $1,910.1 | $2,010.6 | — | $2,060.9 | $1,819.4 | 0.0% |
Consolidated Adjusted PWC as % of Sales (20%) | 29.1% | 28.1% | 27.6% | 26.5% | 29.5% | 0.0% |
Consolidated Customer On-Time Delivery (15%) | * | * | — | * | * (97.8% of Target) | 7.8% |
Total Payout | 7.8% | |||||
* Not disclosed for competitive reasons as discussed below. |
2020 H2 Plan Performance Measures & Weighting | Threshold (50% Payout) | Target (100% Payout) | Stretch (115% Payout) | Maximum (200% Payout) | Measured Performance | Weighted Payout Percentage |
Consolidated Adjusted Operating Income (55%) | $140.2 | $157.7 | $175.2 | $192.7 | $186.1 | 92.2% |
Consolidated PWC Reduction (25%) | $1,094.8 | $1,086.3 | $1,082.0 | $1,073.5 | $1,113.6 | 0.0% |
Consolidated Past Due Backlog (20%) | * | * | * | * | * (107.5% of Target) | 31.5% |
Total Payout | 123.7% | |||||
* Not disclosed for competitive reasons as discussed below. |
The following sets forthchart provides an overview of our performance on the H1 Plan2022 financial and H2 Planoperational performance metrics. All targets were set in line with our internal business plans and external market guidance and required the same or greater level of effort as in prior years to achieve the targets. Targets for all metrics applicableexcluding on-time delivery represented growth over 2021 actual results. The target for on-time delivery was set lower than 2021 actual results because of continued supply chain disruptions and market conditions due to Mr. Gillespie:the COVID-19 pandemic.
2020 H1 Plan Performance Measures & Weighting | Threshold (50% Payout) | Target (100% Payout) | Stretch (115% Payout) | Maximum (200% Payout) | Measured Performance | Weighted Payout Percentage |
Consolidated Adjusted Operating Income (30%) | $180.9 | $202.2 | $212.8 | $234.1 | $180.6 | 0.0% |
Consolidated Bookings (50%) | $2,024.8 | $2,134.3 | $2.189.0 | $2,243.7 | $1,783.5 | 0.0% |
Consolidated Adjusted PWC as % of Sales (20%) | 29.1% | 28.1% | 27.6% | 26.5% | 29.5% | 0.0% |
Total Payout | 0.0% | |||||
* Not disclosed for competitive reasons as discussed below. |
2020 H2 Plan Performance Measures & Weighting | Threshold (50% Payout) | Target (100% Payout) | Stretch (115% Payout) | Maximum (200% Payout) | Measured Performance | Weighted Payout Percentage |
Consolidated Adjusted Operating Income (30%) | $140.2 | $157.7 | $175.2 | $192.7 | $186.1 | 50.3% |
Consolidated Bookings (50%) | $1,426.9 | $1,510.8 | $1,678.7 | $1,762.6 | $1,631.5 | 55.4% |
Consolidated PWC Reduction (20%) | $1,094.8 | $1,086.3 | $1,082.0 | $1,073.5 | $1,113.6 | 0.0% |
Total Payout | 105.7% | |||||
* Not disclosed for competitive reasons as discussed below. |
20212023 PROXY STATEMENT 41 46
The Company has chosen not
2023 PROXY STATEMENT 47
Back to disclose the Threshold, Target, Stretch, Maximum and MeasuredContents
2023 PROXY STATEMENT 48
Individual Personal Performance Adjustment
The O&C Committee may exercise judgment in assessing theeach NEO’s personal performance factor for ourwhen determining the annual incentive awards to determine annual cash incentive compensation payments.award amounts. The O&C Committee considered the individual performance of our executive officersNEOs in 2022 and determined not to make any adjustments to their final annual incentive plan payouts for 2020.individual adjustments.
Long-Term IncentivesBelow are the 2022 strategic categories, key objectives, and accomplishments:
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• ESG roadmaps completed for eight priority issues which identifies short- and long-term goals and targets. • ESG project review board has been established to encourage investment in ESG projects. • Adopted Human Rights Policy and implemented throughout the • New ESG strategic vision and pillars created to |
Expand the Flowserve Core | Key objective: Create an M&A scorecard to measure the progress and quality of opportunities considered |
• Developed a tracking methodology to identify, evaluate, and close on target opportunities with greater rigor and speed. • Comparison of the opportunities in the funnel across a spectrum of dates shows how the opportunities are evaluated over time to determine if they are a fit with Flowserve. • During 2022, Flowserve evaluated numerous opportunities and closed three transactions, which position us to grow our business: • Made an investment in Clark Valve whose technology helps companies sharply reduce methane leaks, a vital near-term element of the world’s push to curb greenhouse gas (GHG) emissions. This investment allows us to better support our customers with Clark’s innovative valve technologies, • Formed a strategic relationship to license and acquire technology for a future business opportunity, and • Formed a strategic relationship with Chart Industries whereby Flowserve acquired in-process R&D and technology related to Chart’s liquid hydrogen fueling systems and Flowserve can become the sole supplier of the pumps used in Chart’s liquid hydrogen fueling systems. • Signed a letter of intent, and substantially completed the due diligence process, for the acquisition of Velan. |
Reimagine the Flowserve Core | Key objective: Make meaningful progress on FLS’ energy transition strategy |
• Established a dedicated, global leadership team to target and drive growth in key energy transition offerings and end-markets. • Resourced teams and working groups to pursue the development of tailored technology and service offerings for LNG (liquefied natural gas), hydrogen, concentrated solar power, biofuels, and carbon capture utilization and storage. • Strengthened the marketing of our current core products in the energy transition marketplace (e.g., using our vacuum seals for greenhouse gas emission reduction, dry gas seals for hydrogen applications, and mechanical seals for mining end markets). • 3D bookings of $1.15B for 2022, which represented a 16.2%, 75.1% and 38.8% year-over-year increase in diversification, decarbonization, and digitization bookings, respectively. Energy Transition represented $137.5M of decarbonization bookings; a 22.4% year-over-year increase. |
2023 PROXY STATEMENT 49
The Committee discussed the Target Opportunity
Each year,above accomplishments and determined that the O&C2022 key objectives for each strategic category had been exceeded. As a result, the Committee establishes a target dollar valueexercised its judgement and determined the payout modifier to be 1.15x the earned payout on financial and operational performance metrics for each member of the long-term incentive package for each Named Executive Officer. In doing so,ELT.
Our alignment of pay and performance is one of the committee considers individualkey components of our compensation philosophy. Although Bookings continued to be strong in core products and services and Bookings in our strategic “3D” growth areas were particularly strong, Adjusted Operating Income did not meet the threshold performance level. Adjusted Primary Working Capital (PWC) as well as data froma % of Sales and On-time Delivery goals also did not meet threshold performance levels because of higher inventory levels we chose to maintain due to continued supply chain disruptions.
Named Executive Officer | Target Award | Quantitative Performance Goals Payout % (Note 1) | Strategic Goals Payout Modifier | Total Payout as a % of Target Award (Note 1) | Final Award (Note 2) |
Mr. Rowe | $1,500,000 | 68.4% | 1.15 | 78.6% | $1,179,210 |
Ms. Schwetz | $562,380 | 68.4% | 78.6% | $442,109 | |
Ms. Burger | $359,136 | 68.4% | 78.6% | $282,331 | |
Mr. Gillespie | $331,202 | 106.5% | 122.5% | $405,792 | |
Ms. Morytko | $365,138 | 79.0% | 90.8% | $331,601 | |
Note 1: Percentages shown are rounded to the nearest tenth of one decimal. Note 2: No rounding applies to the payout percentages shown in determining the final award value. |
The Company’s LTI program is structured to:
Incentivize participants to achieve the Company’s CPGlong-term objectives,
Retain participants to provide continuity of leadership for the benefit of our shareholders, and for positions that are not adequately covered by the CPG data, the AON Survey and WTW Survey. For 2020, these target values were set at levels that approximate the market median
Create alignment with long-term interests of both the CPG and the broader market taken from the AON Survey and WTW Survey.
In addition, the O&C Committee considers the package’s potential dilutive effect on the Company’s outstanding shares in determining aggregate award values.shareholders.
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The share amount isnumber of units granted in 2022 was determined by dividing each executive’s total long-term incentivethe target LTI grant value by the average closing price of the Company’s common stock reported on the NYSE during the last twenty trading days of prior to the grant date of February 20, 2020. Until vesting, holders15, 2022, which was $32.71. The stock units were awarded as follows:
50% of RSU and PSU awards do not have voting rights on the stock units butwere granted in the form of PSUs
50% of the stock units are entitled to receive dividend equivalent accruals, if any, that payout only if and towere granted in the extent the underlying units vest.form of RSUs
20212023 PROXY STATEMENT 42 50
Aligned with our compensation objectives, these performance-based awards provide a strong incentive for our executives to achieve specific performance goals over the relevantassociated performance periods thatperiod to advance our business strategies,strategy, build long-term shareholder value and encourage executive retention. Contingent
Working with its independent consultant and Management, the O&C Committee selected performance share units, ormeasures that support our strategic focus on growth, margin expansion, and capital efficiency as well as shareholder value creation.
Weighting | Performance Metric | Measurement |
50% | ROIC | Absolute ROIC attainment for each single year 2022, 2023, and 2024 during the 2022 to 2024 performance period with goals established at the beginning of each year. This approach helps address difficulty in goal setting in an industry with volatile end markets and drives strong performance against pre-set goals annually. Earned payout percentages for each year are averaged to determine the payout percentage at the end of the 3-year performance cycle, if any, for the 2022 PSUs tied to this performance metric. |
50% | FCF as a % of Adjusted | Attainment of a 3-year goal approved by the O&C Committee at the beginning of 2022 for the 3-year, 2022-2024 performance period. |
Applies to all PSUs | rTSR Payout Modifier +/-15% Potential Adjustment | Relative 3-year TSR compared to Performance Peer Group (“PPG”). |
The O&C Committee sets the ROIC goal for each fiscal year at the beginning of the applicable fiscal year. Following the conclusion of the third year, the payout attributable to the ROIC metric for the PSUs then-vesting is then determined by averaging the earned payout for each of the three fiscal years in the applicable performance period. In February 2022, the O&C Committee approved the below 2022 ROIC goal and payout levels to cover one-third of each of the 2020, 2021 and 2022 PSU grants:
Payout Level | Threshold | Target | Maximum |
Performance Goal | 10.5% | 11.5% | 12.5% |
% Attainment | 91% | 100% | 109% |
Payout % | 50% | 100% | 200% |
Note: Interpolation is used to calculate the payout % for attainment that falls between payout levels shown above. |
Due to the proprietary and competitive nature of the Company’s business strategy and internal budgets that inform the 3-year performance program targets, the Company has chosen not to disclose the specific performance target applicable to this metric at this time. The FCF as a % of Adjusted Net Income performance target was set at a level intended to be challenging but attainable. We intend to disclose the performance goals and achievement results following the completion of the performance cycle.
The FCF as a % of Adjusted Net Income payout table for the 3-year performance goal is structured as follows:
Payout Level | Threshold | Target | Maximum |
% Attainment | 94% | 100% | 106% |
Payout % | 50% | 100% | 200% |
Note: Interpolation is used to calculate the payout % for attainment that falls between payout levels shown above. |
2023 PROXY STATEMENT 51
Any earned PSUs under both performance metrics shown above are RSUs that vest, if at all,subject to adjustment based on the Company’s achievement3-year (2022 - 2024) TSR performance relative to the PPG. If the Company’s 3-year TSR performance:
Falls at or below the 25th percentile of pre-determined financial metrics, measured over a three-yearthe PPG, the otherwise earned payout is multiplied by 85%.
Falls at or above the 75th percentile of the PPG, the otherwise earned payout is multiplied by 115%.
Falls between the 25th percentile and the 75th percentile, then no adjustment is made to the otherwise earned payout.
For the 2022-2024 performance period.
Rigorous Performance Measures and Targets
During the first quarter of each year,cycle, the O&C Committee workingrevised the PPG to be each of the companies in the S&P 500 Industrials Index as of January 1, 2022. The use of these 72 companies (see Appendix II) as a PPG was determined to better reflect the universe of industry peers against which we compete for investor funds.
The 2022 RSUs vest ratably over three years on the first, second and third anniversaries of the grant. RSUs not only provide a retention incentive, but they also align the interests of grant recipients with its compensation consultant and membersthose of management, evaluates and approves the Company’s LTI performance measures consistentshareholders with our business strategy. The O&C determines performance goals at definitive, challenging and objective levels that require significant effort and achievement by our Named Executive Officers for payout to occur.
The O&C Committee believes that ROIC and TSR measures reward the progress towards Flowserve’s strategica focus on Growth, Margin Expansionstock price and Capital Efficiency. ROIC and TSR are further directly correlated to Flowserve’s shareholder value creation.TSR.
The following table shows the performance measuresPSUs granted in 2020 for the 2018, 20192020 to 2022 performance period were structured and paid out as follows:
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| ROIC | Absolute ROIC attainment. Threshold, target and maximum payout levels for each of 2020, 2021, and 2022 were established at the beginning of the respective year. Earned payout percentages for each year are averaged to determine the overall payout percentage for this metric. | |
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The payout ranges for PSUs shown above are 0% below threshold performance, 50% at threshold, 100% at target and 200% at maximum, in each case of the NEO’s respective target award opportunity.
PerformancePeerGroup(PPG): The O&C Committee believes that the use of absolute performance measures alone yields an incomplete picture of Company performance and has determined to assess attainment of our PSU TSR metric against a performance peer group. During 2020, the performance peer group was reviewed to ensure continued alignment with Flowserve’s aspiration to become the leading company within the Flow Control Industry. The performance peer group was identified based, generally, on publicly traded companies that are: (1) industrial equipment manufacturers; (2) direct business peers of the Company; and (3) financially comparative to the Company. No changes were made to the performance peer group for 2020.
2021 PROXY STATEMENT 43
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CIRCOR International, Inc. Colfax Corporation Crane Co. Dover Corporation
Ingersoll Rand
SPX Flow, Inc. Xylem Inc. | International Peer Companies (7) Ebara Corporation IMI |
KSB Aktiengesellschaft Neles Rotork
Sulzer The Weir Group PLC
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2023 PROXY STATEMENT 52
2018 PSU PayoutBack to Contents
TSRPerformanceShareScore: For the 2018-2020 performance period, the Company’s TSR was (6.3)% representing the 26.9th percentileThe O&C Committee approved a payout of 32% of the 2020 PSUs granted that were tied to the ROIC performance peer group resulting in a 53.8% payout for this component of the award.metric:
Year | ROIC Performance Goal (Note 1) | Performance Achieved | Payout % in Accordance with Pre-established Payout Table | |
Attainment | % Attainment of Goal | |||
2020 | 13.6% | 11.4% | 83.8% | 0% |
2021 (Note 2) | 9.75% | 9.9% | 101.5% | 95% |
2022 (Note 3) | 11.5% | 7.3% | 63.4% | 0% |
3-Year Average ROIC Payout % | 32% | |||
Note 1: As disclosed in the 2022 proxy statement, the goals for 2019, 2020, and 2021, for purposes of the 2019 PSUs, were set as year-over-year ROIC improvement targets. Thus, they are not comparable to those for the 2020 PSU and later grants, which were set as absolute attainment goals. Note 2: The 2021 goal was set below the 2020 goal and attainment as a result of continued disruptions of market conditions due to the COVID-19 pandemic. The target aligned with our internal business plan and budget and maintained the same level of rigor as performance expectations set for 2020. Note 3: In determining ROIC performance achievement, the O&C Committee determined Net Operating Profit After Taxes by adjusting the following financial statement items consistent with the methodology for determining all adjusted financials, so that ROIC attainment reflects 2022 business results excluding the following one-time events: • Consolidated Operating Income - See Annex I: Reconciliation of Reported Results to Non-GAAP Financial Results; and • Certain one-time tax expenses. |
ROICPerformanceScore: For
No portion of the 2018-20202020 PSUs granted tied to the relative 3-year TSR performance metric were earned as our rTSR performance for the three-year period ROIC targets were set as year-over-year (YoY) incremental ROIC improvement targets overfell below the prior year’s actual ROIC as shown in the chart below. Actual ROIC in 2017 was 7.6%, thus setting the 2018 ROIC Target as 8.6% (+1.0% improvement).25th percentile threshold performance level.
TheAs a result of our strong pay-for-performance culture, our final 2020 PSU payout was determined by calculatingas follows:
Metric | Weighting | Payout % | Weighted Payout |
ROIC | 50% | 32% | 16% |
Relative 3-Year TSR | 50% | 0% | 0% |
Total Payout % (Sum of Weighed Payouts for Each Metric) | 16% |
No discretionary adjustment was considered or made to the average of the payout over the three-year performance period, which resulted in a three-year average ROIC payout of 133.3% for this component of the award.formulaic payouts shown above.
| Threshold 50% Payout | Target 100% Payout | Maximum 200% Payout | Result | Payout |
2018 YoY Improvement | 8.4% +0.8% | 8.6% +1.0% | 8.8% +1.2% | 10.7% | 200.0% |
2019 YoY Improvement | 11.5% +0.8% | 11.7% +1.0% | 11.9% +1.2% | 12.9% | 200.0% |
2020 YoY Improvement | 13.7% +0.8% | 13.9% +1.0% | 14.1% +1.2% | 11.4% | 0.0% |
| 3-Year average ROIC Payout | 133.3% |
20212023 PROXY STATEMENT 44 53
The following table illustrates the 2020 PSU Payout for each NEO(1):
NEO | Target PSUs |
| Payout Percentage |
| 2020 LTIP Payout(2) |
R. Scott Rowe | 65,990 | × | 93.6% | = | 61,767 |
John E. (Jay) Roueche, III | 3,910 | × | 93.6% | = | 3,660 |
Keith E. Gillespie | 11,640 | × | 93.6% | = | 10,895 |
Elizabeth L. Burger | 8,400 | × | 93.6% | = | 7,862 |
(1) Given their start dates with the Company, Ms. Minnix and Ms. Schwetz did not receive any PSUs that vested in 2020. (2) The number of shares reported in this column does not include dividend equivalent units that accrued during the performance period. |
In 2020, we provided special compensation awards to certain executives in the following amounts:
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Other benefits provided to the Named Executive Officers are generally consistent with those provided to other employees of the Company, including health and retirement benefits. These elements of our compensation program are outlined in the chart below and discussed in more detail below:in the narrative following the chart.
2021 PROXY STATEMENT 45
Plan | Description | Eligible Employees | |
Retirement Benefits | Qualified Pension | Tax-qualified pension plan | All salaried U.S. employees |
Senior Management Pension Plan | Non-qualified defined benefit | Executive Officers and | |
Supplemental Executive
| Non-qualified supplemental defined benefit plan | U.S. Executives | |
401(k) Plan | Tax-qualified | All U.S. Employees | |
Other Benefits | Executive Officer Severance Plan |
| Executive Officers |
Change in Control Severance Plan |
| Senior Executives including Executive Officers | |
Limited |
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Flowserve Corporation Executive Officer Severance Plan
Each of the Named Executive Officers participates in the Company’s Amended and Restated Executive Officer Severance Plan (the “Officer Severance Plan”). Under this plan, the Company’s officers are provided benefits upon a termination as a result of a reduction in force or by the Company without cause. No benefits are payable under the Officer Severance Plan to any officer who receives benefits under the Company’s Change in Control Severance Plan (the “CIC Plan”). The Officer Severance Plan does not provide for any additional payments or benefits upon a termination of employment by the Company for cause, upon the executive’s resignation for any reason (including “good reason” or “constructive termination”) or upon the executive’s death or disability.
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For purposes of the Officer Severance Plan and CIC Plan, the term “cause” generally means the covered executive’s:
willful and continued failure to perform basic job duties after written demand for substantial performance is delivered to the executive by the Board; or
willful engagement in conduct materially and demonstrably injurious to the Company, monetarily or otherwise.
Flowserve Corporation Executive Change in Control Plan
Each of the Named Executive Officers participates in the Company’s Change in Control Plan (“CIC Plan”). Benefits under the CIC Plan are triggered if, within two years following a change in control the Named Executive Officer is terminated without cause (and not on account of death or disability), or resigns for reasons constituting a “constructive
2021 PROXY STATEMENT 46
termination.” Benefits are also triggered if a Named Executive Officer is terminated within the 90-day period immediately prior to a change in control if such termination (i) occurs after the initiation of discussions leading to such change in control and (ii) can be demonstrated to have occurred at the request or initiation of parties to such change in control. The severance benefits provided upon a termination of employment covered under the CIC Plan include:
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For purposes of the CIC Plan, the term “constructive termination” generally means the occurrence of any one of the following events within two years after the effective date of a change in control without the express written consent of the covered executive:
a material reduction in the authority, duties or responsibilities held by the covered executive immediately prior to the change in control;
a material reduction of the covered executive’s base salary;
the relocation (without the covered executive’s consent) of the covered executive’s principal place of employment by more than 35 miles from its location immediately prior to a change in control; or
any other material failure of the Company to honor all the terms and provisions of the CIC Plan or any agreement with the covered executive.
Participation in the CIC Plan is contingent upon the covered executive executing a confidentiality and non-competition agreement at the time the executive is notified that he or she has been chosen to participate in the CIC Plan and a release in favor of the Company at the time of separation from service. The CIC Plan also includes a “best-after-tax” 280G provision, which provides that each executive will receive either (1) all payments and benefits otherwise due in
20212023 PROXY STATEMENT 47 54
connection with the change in control or (2) $1.00 less than the amount that would trigger the excise tax under Section 4999 of the Internal Revenue Code, whichever results in the largest after tax amount to the executive.
The Company’s supplemental pension and incentive plans for senior management contain provisions that serve to implement the provisions of the CIC Plan. Our Qualified Plan (as defined below) also confers competitive post-employment benefits to all participating employees, including to executives, upon a change in control.
Consistent with its philosophy, the Company generally does not enter into employment agreements with its Named Executive Officers, who are considered to serve at the will of the Company. No current Named Executive Officer has an employment agreement.
Restrictive Covenant Agreements
To protect the Company’s competitive position, each executive is required to sign an agreement with the Company that requires the executive to forfeit the proceeds from a portion of the executive’s long-term incentive awards if the executive engages in conduct that is detrimental to the Company. Detrimental conduct includes working for certain competitors, soliciting customers or employees after employment ends and disclosing confidential information in a manner that may result in competitive harm to the Company.
We provide pension benefits to all U.S. salaried employees, including the Named Executive Officers,NEOs, under the Flowserve Corporation Pension Plan (the “Qualified Plan”), which is a tax-qualified defined benefit pension plan. Because the Internal Revenue Code (the “Code”)IRC limits the pension benefits that can be accrued under a tax-qualified pension plan (based on an annual compensation limit), we also maintain a separate non-qualified defined benefit restoration pension plan, the Senior Management Retirement Plan (the “SMRP”). The SMRP compensates participants, including the Named Executive Officers, for the reduction in their pension benefit resulting from this CodeIRC limitation. The SMRP is designed to provide a comparable level of retirement benefits to those provided to other U.S. employees under the Qualified Plan based on a comparable benefit formula. In addition, we also maintain a second non-qualified supplemental defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), for our eligible U.S. executives, including the Named Executive Officers, in order to remain competitive with general industry companies similar in size.attract and incentivize the retention of senior leaders. These three programs are designed to provide eligible U.S. executives with income following retirement and to help ensure that we are able tocan attract and retain executive talent by providing comprehensive retirement benefits.
Participants in the Qualified Plan and the SMRP accrue contribution credits based on age and years of service at the rate of 3% to 7% for eligible earnings up to the Social Security wage base, and at the rate of 6% to 12% for eligible earnings in excess of the Social Security wage base. Participants in the SERP accrue contribution credits at the rate of 5% of all eligible earnings. Eligible earnings generally include base salary and annual incentive awards. SERP participants also earn interest on the accrued contributions based on the rate of return on 10-year Treasury bills.
their eligible compensation for wealth accumulation. The Company’s long-term incentive program allows RSUs and PSUs to continue to vest over the original vesting period for employees who retire atCompany provides a minimum age of 55 years with 10 years of continuous service with the Company. The O&C Committee believes that this encourages the participants to continue to focus75% match on the first 6% of eligible compensation that an employee contributes to the plan.
Each of the Named Executive Officers participates in the Company’s performance as they approachAmended and through retirement.Restated Executive Officer Severance Plan (the “Officer Severance Plan”). Under this plan, the Company’s officers are provided benefits upon a termination due to a reduction in force or by the Company without cause. No benefits are payable under the Officer Severance Plan to any officer who receives benefits under the Company’s Change in Control Severance Plan (the “CIC Plan”). The Officer Severance Plan does not provide for any additional payments or benefits upon a termination of employment by the Company for cause, upon the executive’s resignation for any reason (including “good reason” or “constructive termination”) or upon the executive’s death or disability.
Plan Provision | Treatment Under Plan |
Cash Severance | • 24 months’ base salary continuation • Payment equivalent to target AIP award, provided the Company actually achieves at least threshold performance under the terms of the program for the award year in which termination occurs |
PSUs | A pro-rated payout of the PSUs, if any, that have a performance cycle that would otherwise end in the year that contains the termination date based on the number of months the executive was employed during the performance period |
RSUs | For RSUs granted prior to February 15, 2022, a cash payment in lieu of any RSUs that would otherwise vest within 90 calendar days following the termination date based on the Company’s average closing stock price over the twenty trading days in the month preceding the officer’s termination date. Note: For RSUs granted on or after February 15, 2022, award agreements govern and generally provide for continued vesting of those RSUs that would have otherwise vested within 90 calendar days following termination. |
2023 PROXY STATEMENT 55
Each of the Named Executive Officers participates in the Company’s Change in Control Severance Plan (“CIC Plan”). Benefits under the CIC Plan are triggered if, within two years following a change in control the Named Executive Officer is terminated without cause (and not on account of death or disability) or resigns for reasons constituting a “constructive termination.” Benefits are also triggered if a Named Executive Officer is terminated within the 90-day period immediately prior to a change in control if such termination (i) occurs after the initiation of discussions leading to such change in control and (ii) can be demonstrated to have occurred at the request or initiation of parties to such change in control. The severance benefits provided upon a termination of employment covered under the CIC Plan include:
Plan Provision | CEO | Other Participants Including Other NEOs |
Cash Severance(1) | A lump sum payment equal to 3x the sum of the executive’s annual base salary and target annual incentive | A lump sum payment equal to a multiple of the executive’s annual base salary and target annual incentive as follows: • 2.5x for executive vice presidents(2); • 2.0x for senior vice presidents and presidents; and • 1.5x for vice presidents |
Annual Incentive Plan Award | Payment of pro-rata annual incentive plan target award. | |
Long-Term Incentive Awards | Full vesting at target of each cash (if any) or stock-based long-term incentive award. Named Executive Officers have 90 days following the date of employment termination to exercise any vested stock options | |
Life, Medical, Health and Accident Benefits | Company provided coverage for the executive and his or her dependents for a number of months following termination equal to annual severance multiplier used to calculate the cash payment, multiplied by 12 months | |
Supplemental Pension Benefits | Supplemental pension benefits equal to the difference between the amounts the executive would have been entitled to had he or she remained employed through the end of the benefits continuation period and the amounts actually received | |
(1) For purposes of this calculation, the base salary is the highest of: (i) the highest-annualized monthly base salary during the twelve months preceding the termination; (ii) the base salary in effect on the date of termination; and (iii) the base salary in effect on the date of the change in control. (2) The Company does not currently have any Executive Vice Presidents. |
The O&C Committee strives to make our executive compensation program primarily performance-based and, as such, doesonly provides limited benefits to Executive Officers that are not provide perquisites for our executive officers,provided to other thanemployees. These benefits are prevalent in the following:marketplace and increase the overall effectiveness of the Executive Officers in the performance of their roles:
ExecutivePhysicals. All Named Executive Officers were eligible toPhysical – other employees receive an annuala standard physical examination. The O&C Committee believes this is a competitive benefit within the market and contributes to executive effectiveness.
2021 PROXY STATEMENT 48
EnhancedVacation. All Named Executive Officers are eligible to receive an enhanced vacation benefit. Each officer is eligible for Vacation – a minimum of four weeks’ vacation and may receive additional vacation, if the officer’s years of service so qualify under the Company’s regular employee vacation award schedule.4 weeks compared to 3 weeks for other employees
RelocationBenefits. All Named Executive Officers are eligibleFinancial Counseling – a dedicated financial counselor compared to receive standard, market competitive relocation benefits pursuanta financial wellness benefit for other employees (same service provider for both employee populations)
2023 PROXY STATEMENT 56
The aggregate incremental cost of these benefits to the Named Executive Officers is included in the “Summary Compensation Table” under the “All Other Compensation” column and related footnotes.
To further align executive and shareholder interests, each of our Named Executive Officers are required to own a minimum amount of Company common stock equal in value to a specified multiple of their annual base salary.
| Ownership Requirement |
ChiefExecutiveOfficer |
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Presidents and Senior Vice Presidents | 3x Annual Base Salary |
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Our guidelines are administered as follows:
Shares held directly by an executive or shares held in the Flowserve Corporation Non-Qualified Deferred Compensation Plan and unvested RSUs count toward satisfying the stock ownership requirements. Unvested PSUs do not count toward satisfying the stock ownership requirements.
The required stock ownership levels are expected to be achieved within five years from the date the guidelines were first applicable or within five years of the executive joining the Company.
Executives who do not meet the ownership requirement must show that they have retained at least 60% of the net shares received from vested RSUs and PSUs from the time the ownership guidelines became applicable.
As of December 31, 2020,2022, all Named Executive Officers met their stock ownership requirements under these tests.requirement.
Under the Company’s Insider Trading Policy all directors and employees (including the Named Executive Officers) are prohibited from pledging stock and engaging in any transactions (such as trading in options) that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s common stock.
Our Clawback and Forfeiture Policy (the “Clawback Policy”) reinforces our commitment to integrity and the highest standards of ethical conduct through our compensation program. Under the Clawback Policy, the O&C Committee has the ability to recoup previously paid and/or cancel outstanding incentive compensation from any current or former executive officer,Executive Officer, or any other designated officer of the Company, if:
(1) the committeeO&C Committee determines that a financial metric used to determine the amount, vesting or payment of the incentive compensation was calculated incorrectly, regardless of whether due to fraud or intentional misconduct or whether such error requires a financial restatement; or
(2) the covered officer engages in egregious conduct, which generally includes among other things conduct that constitutes “cause” for termination under applicable Company plans or agreements or a material breach of a written Company policy (including our Code of Conduct) and certain other egregious misconduct..
With respect to incorrect calculations, the Company may cancel any outstanding incentive compensation and recoup incentive compensation received by the executive during the three-year period preceding the date the Company discovers the error or is required to prepare an accounting restatement. With respect to egregious conduct, the
2021 PROXY STATEMENT 49
Company may cancel any outstanding incentive compensation and recoup incentive compensation received by the executive during the one-year period preceding the date the Company discovers the conduct.
Section 162(m) of the Code limits to $1.0 million per year the U.S. federal income tax deduction available to public corporations for compensation paid for any fiscal year to certain covered employees, including to the Company’s CEO, CFO, and the three other most highly-compensated executive officers as of the end of the fiscal year.
The O&C Committee retains discretion to establish executive compensation arrangements that it believes are consistent with its principles described earlier and in the best interests of the Company and our shareholders, even if those arrangements are not fully deductible under Section 162(m).
The Company recognizes compensation expense in our financial statements for all equity-based awards pursuant to the principles set forth in FASB ASC 718, “Compensation—Stock Compensation”.Compensation.” The O&C Committee considered the GAAP accounting implications of the awards in setting the long-term incentive mix and further determined that the mix of RSUs and PSUs was appropriate for 2020.2022.
2023 PROXY STATEMENT 57
The O&C Committee regularly monitors and annually reviews our executive compensation programprograms to determine, in consultation with its compensation consultant, whether the elements of the program are consistent with our executive compensation objectives and principles. As part of this, the O&C Committee evaluates whether the Company’s risk management objectives are being met with respect to the executive compensation program and our compensation programs as a whole.in aggregate. If the elements of the program are determined to be inconsistent with our objectives and principles, or if any incentives are determined to encourage risks that are reasonably likely to have a material adverse effect on us, the elements are adjusted as necessary.
Following theThe O&C Committee’s annual review in 2020, the O&C Committee has concluded that no risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, the O&C Committee considered the following:
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Emphasis on long-term, equity-based compensation subject to our rigorous |
| Discourages risk-taking that produces short-term results at the expense of building long-term shareholder value |
Long vesting requirements: •
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Robust stock ownership guidelines |
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Independent compensation consultant used by the O&C Committee |
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2021 PROXY STATEMENT 50
The Organization and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above in this proxy statement with management. Based on this review and discussion, the Organization and Compensation Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2020.2022.
David E. Roberts,John L. Garrison, ChairmanRuby R. Chandy
Gayla J. Delly
Michael C. McMurray
John L. GarrisonR. Friedery
20212023 PROXY STATEMENT 51 58
The following table sets forth compensation information for 2020, 20192022, 2021 and 20182020 for our Named Executive Officers.
Ms. Morytko was first a Named Executive Officer for 2021.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(3) | Option Awards ($) | Non-Equity Incentive Plan Compen- sation ($)(4) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(5) | All Other Compen- sation ($)(6) | Total ($) | ||
R. Scott Rowe President and Chief Executive Officer | 2020 | 1,133,000 | — |
| 5,981,225 | (10) | — | 894,260 | 305,060 | 18,909 | 8,332,454 |
2019 | 1,133,000 | — |
| 6,188,041 |
| — | 1,018,340 | 323,757 | 18,728 | 8,681,868 | |
2018 | 1,126,654 | — |
| 5,944,049 |
| — | 1,250,832 | 227,180 | 153,754 | 8,702,469 | |
Amy B. Schwetz(1) VP and Chief | 2020 | 562,500 | 750,000 | (7) | 2,342,754 | (11) | — | 279,471 | 68,663 | 100,042 | 4,103,430 |
John E. (Jay) Roueche, III(2) Vice President, Treasurer | 2020 | 343,757 | 50,000 | (8) | 416,743 | (12) | — | 113,051 | 80,798 | 13,319 | 1,017,668 |
2019 | 341,898 | — |
| 386,825 |
| — | 128,737 | 81,572 | 14,861 | 953,892 | |
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Lanesha T. Minnix Senior Vice President, | 2020 | 463,785 | 350,000 | (9) | 675,794 | (13) | — | 224,453 | 91,531 | 12,872 | 1,818,434 |
Keith E. Gillespie Senior VP and | 2020 | 485,000 | — |
| 624,343 | (14) | — | 166,625 | 122,721 | 18,803 | 1,417,492 |
2019 | 485,000 | — |
| 691,654 |
| — | 265,125 | 139,255 | 14,250 | 1,595,285 | |
2018 | 485,000 | — |
| 1,077,752 |
| — | 406,042 | 84,258 | 44,976 | 2,098,028 | |
Elizabeth L. Burger Senior VP and Chief Human Resources Officer | 2020 | 478,950 | — |
| 779,687 | (15) | — | 204,765 | 93,540 | 14,517 | 1,571,459 |
2019 | 475,731 | — |
| 806,447 |
| — | 233,177 | 85,352 | 85,065 | 1,685,772 | |
2018 | 330,865 | 100,000 |
| 935,972 |
| — | 198,077 | 38,347 | 65,371 | 1,668,632 | |
(1) Ms. Schwetz commenced employment with Flowserve on February 17, 2020 and assumed the position of Chief Financial Officer effective February 24, 2020. (2) Mr. Roueche was appointed as Interim Chief Financial Officer from December 3, 2019 through February 23, 2020, following which he returned to his former position as Vice President, Treasurer and Investor Relations. (3) Represents the grant date fair value of long-term equity incentive awards under the Company’s long-term incentive program computed in accordance with FASB ASC 718 “Compensation—Stock Compensation”, excluding the impact of forfeitures. The incentive awards are granted in the form of restricted stock units, which generally vest ratably over a three-year period, and contingent performance share units. The performance criteria for these awards are described in further detail under “—Elements of the Executive Compensation Program—Long-Term Incentives—Contingent Performance Share Units” above. The reported value of the contingent performance awards is computed based on the grant date estimate of compensation cost to be recognized over the three-year period, which was 100%, or “target”. Payout for the contingent performance awards can range from 0 shares to a maximum of 200% of target. Assumptions used in the valuations are discussed in Note 8 to the Company’s audited consolidated financial statements for the year ended December 31, 2020 in the Annual Report. (4) The amounts in this column represent an annual cash incentive bonus under the Company’s Annual Incentive Plan for the applicable year. (5) There were no above-market or preferential earnings with respect to any deferred compensation balances. |
2021 PROXY STATEMENT 52
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Name | Defined Contribution Retirement Plan Contributions | Insurance Premiums(A) | Other | Total | |
R. Scott Rowe | $12,825 | $2,355 | $ 3,729 | (B) | $ 18,909 |
Amy B. Schwetz | 12,375 | 1,361 | 86,306 | (C) | 100,042 |
John E. (Jay) Roueche, III | 12,104 | 1,215 | — | 13,319 | |
Lanesha T. Minnix | 11,798 | 1,074 | — | 12,872 | |
Keith E. Gillespie | 12,825 | 3,291 | 2,687 | (D) | 18,803 |
Elizabeth L. Burger | 12,825 | 1,692 |
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| 14,517 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compen- sation ($)(2) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) | All Other Compen- sation ($)(4) | Total ($) | ||
R. Scott Rowe President and Chief Executive Officer | 2022 | 1,181,962 | — |
| 5,942,446 | (5) | — | 1,179,210 | 377,658 | 21,617 | 8,702,893 |
2021 | 1,133,000 | — |
| 10,007,824 |
| — | 1,016,981 | 300,060 | 20,240 | 12,478,105 | |
2020 | 1,133,000 | — |
| 5,981,225 |
| — | 894,260 | 305,060 | 18,909 | 8,332,454 | |
Amy B. Schwetz VP and Chief | 2022 | 693,963 | — |
| 1,705,192 | (6) | — | 442,109 | 143,165 | 30,244 | 3,014,673 |
2021 | 664,250 | — |
| 2,427,731 |
| — | 375,590 | 121,896 | 26,524 | 3,615,991 | |
2020 | 562,500 | 750,000 |
| 2,342,754 |
| — | 279,471 | 68,663 | 100,042 | 4,103,430 | |
Elizabeth L. Burger Senior VP and Chief Human Resources Officer | 2022 | 507,739 | — |
| 723,427 | (7) | — | 282,331 | 105,104 | 15,406 | 1,634,007 |
2021 | 489,450 | — |
| 1,264,048 |
| — | 239,852 | 94,529 | 14,680 | 2,102,559 | |
2020 | 478,950 | — |
| 779,687 |
| — | 204,765 | 93,540 | 14,517 | 1,571,459 | |
Keith E. Gillespie Former Senior VP and | 2022 | 505,545 | — |
| 620,051 | (8) | — | 405,792 | 157,903 | 20,439 | 1,709,730 |
2021 | 492,088 | — |
| 949,469 |
| — | 417,700 | 113,128 | 16,219 | 1,988,604 | |
2020 | 485,000 | — |
| 624,343 |
| — | 166,625 | 122,721 | 18,803 | 1,417,492 | |
Tamara M. Morytko Former President, | 2022 | 554,548 | — |
| 723,427 | (9) | — | 331,600 | 116,930 | 30,545 | 1,757,050 |
2021 | 525,577 | — |
| 1,004,284 |
| — | 347,402 | 72,551 | 26,279 | 1,976,093 | |
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(1) Represents the grant date fair value of long-term equity incentive awards under the Company’s long-term incentive program computed in accordance with FASB ASC 718 “Compensation—Stock Compensation”, excluding the impact of forfeitures. Stock awards include the annual incentive awards granted in the form of restricted stock units that generally vest ratably over a three-year period and contingent performance share units. The performance criteria for the performance share units are described in further detail under the caption “2022 Executive Compensation Decisions—Long Term Incentives” above. The reported value of the performance share units is computed based on the grant date estimate of compensation cost to be recognized over the three-year period, which was 100%, or “target”. Payout for the contingent performance awards can range from 0 shares to a maximum of 230% of target. Assumptions used in the valuations are discussed in Note 7 to the Company’s audited consolidated financial statements for the year ended December 31, 2022 in the Annual Report. (2) The amounts in this column represent an annual cash incentive award under the Company’s Annual Incentive Plan for the applicable year. (3) This column excludes the employer-paid portion of certain health and welfare benefits received by Named Executive Officers that are available generally to all salaried U.S. employees, which includes medical, dental and vision insurance, and short-term and long-term disability insurance. The following table shows the components of this column for the Named Executive Officers for 2022, calculated at the aggregate incremental cost to the Company: |
Name | Defined Retirement Plan Contributions ($) | Insurance Premiums(A) ($) | Other ($) |
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| Total ($) | ||||
R. Scott Rowe |
| 13,725 |
| 3,402 |
| 4,490 | (B) |
| 21,617 |
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Amy B. Schwetz |
| 13,725 |
| 1,519 |
| 15,000 | (C) |
| 30,244 |
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Elizabeth L. Burger |
| 13,725 |
| 1,681 |
| — |
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| 15,406 |
|
Keith E. Gillespie |
| 13,725 |
| 3,234 |
| 3,480 | (B) |
| 20,439 |
|
Tamara M. Morytko |
| 13,725 |
| 1,820 |
| 15,000 | (C) |
| 30,545 |
|
(A)
(B) Reflects amounts attributable to an annual physical exam. (C)
Reflects amounts attributable to |
2023 PROXY STATEMENT 59
Calculated using a price per share of Calculated using a price per share of Calculated using a price per share of |
Calculated using a price per share of |
Calculated using a price per share of
|
20212023 PROXY STATEMENT 53 60
The following table sets forth certain information with respect to 20202022 plan-based awards granted to the Named Executive Officers for the year ended December 31, 2020.2022.
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(3) | ||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) |
Maximum (#) | ||||||
R. Scott Rowe |
| 679,800 | 1,359,600 | 2,719,200 | — | — | — | — |
| — |
|
2/20/2020 | — | — | — | 15,113 | 30,225 | 60,450 | — |
| 1,400,929 | (5) | |
2/20/2020 | — | — | — | 15,113 | 30,225 | 60,450 |
|
| 1,778,439 | (5) | |
2/20/2020 | — | — | — | — | — | — | 60,450 | (4) | 2,801,858 |
| |
Amy B. Schwetz |
| 212,449 | 424,898 | 849,796 | — | — | — | — |
| — |
|
2/20/2020 | — | — | — | 4,073 | 8,145 | 16,290 | — |
| 377,521 | (5) | |
2/20/2020 | — | — | — | 4,073 | 8,145 | 16,290 | — |
| 479,252 | (5) | |
2/20/2020 | — | — | — | — | — | — | 32,060 | (4) | 1,485,981 |
| |
John E. (Jay) Roueche |
| 85,940 | 171,879 | 343,758 | — | — | — | — |
| — |
|
2/20/2020 |
|
|
| 930 | 1,860 | 3,720 |
|
| 86,211 | (5) | |
2/20/2020 |
|
|
| 930 | 1,860 | 3,720 |
|
| 109,442 | (5) | |
2/20/2020 |
|
|
|
|
|
| 4,770 | (4) | 221,090 |
| |
Lanesha T. Minnix |
| 170,625 | 341,250 | 682,500 | — | — | — | — |
| — |
|
2/20/2020 | — | — | — | 1,708 | 3,415 | 6,830 | — |
| 158,285 | (5) | |
2/20/2020 | — | — | — | 1,708 | 3,415 | 6,830 | — |
| 200,939 | (5) | |
2/20/2020 | — | — | — | — | — | — | 6,830 | (4) | 316,571 |
| |
Keith E. Gillespie |
| 157,625 | 315,250 | 630,500 | — | — | — | — |
| — |
|
2/20/2020 | — | — | — | 1,578 | 3,155 | 6,310 | — |
| 146,234 | (5) | |
2/20/2020 | — | — | — | 1,578 | 3,155 | 6,310 | — |
| 185,640 | (5) | |
2/20/2020 | — | — | — | — | — | — | 6,310 | (4) | 292,469 |
| |
Elizabeth L. Burger |
| 155,659 | 311,318 | 622,635 | — | — | — | — |
|
|
|
2/20/2020 | — | — | — | 1,970 | 3,940 | 7,880 | — |
| 182,619 | (5) | |
2/20/2020 | — | — | — | 1,970 | 3,940 | 7,880 | — |
| 231,830 | (5) | |
2/20/2020 | — | — | — | — | — | — | 7,880 | (4) | 365,238 |
|
2021 PROXY STATEMENT 54
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(3) | ||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||
R. Scott Rowe
|
| 637,500 | 1,500,000 | 3,450,000 | — | — | — | — |
| — |
|
2/15/2022 | — | — | — | 37,355 | 87,893 | 202,154 | — |
| 3,075,376 | (4) | |
2/15/2022 | — | — | — | — | — | — | 87,893 | (5) | 2,867,070 |
| |
Amy B. Schwetz
|
| 239,012 | 562,380 | 1,293,474 | — | — | — | — |
| — |
|
2/15/2022 | — | — | — | 10,719 | 25,221 | 58,008 |
|
| 882,483 | (4) | |
2/15/2022 | — | — | — | — | — | — | 25,221 | (5) | 822,709 |
| |
Elizabeth L. Burger
|
| 152,633 | 359,136 | 826,012 | — | — | — | — |
| — |
|
2/15/2022 | — | — | — | 4,548 | 10,700 | 24,610 | — |
| 374,393 | (4) | |
2/15/2022 | — | — | — | — | — | — | 10,700 | (5) | 349,034 |
| |
Keith E. Gillespie
|
| 140,761 | 331,202 | 761,764 | — | — | — | — |
| — |
|
2/15/2022 | — | — | — | 3,898 | 9,171 | 21,093 | — |
| 320,893 | (4) | |
2/15/2022 | — | — | — | — | — | — | 9,171 | (5) | 299,158 |
| |
Tamara M. Morytko
|
| 155,183 | 365,138 | 839,816 | — | — | — | — |
| — |
|
2/15/2022 | — | — | — | 4,548 | 10,700 | 24,610 | — |
| 374,393 | (4) | |
2/15/2022 | — | — | — | — | — | — | 10,700 | (5) | 349,034 |
|
(1) Under the Annual Incentive Plan, the primary performance measures are internally defined metrics set by the O&C Committee. In February (2) The number of shares listed represents long-term equity incentive awards in the form of PSUs under the Company’s long-term incentive program. The performance criteria for these awards are discussed in (3) These amounts represent the fair value, as determined under FASB ASC Topic 718, of the stock awards based on the grant date fair value estimated by the Company for financial reporting purposes. (4)
Represents the fair value on the date of grant, as described in footnote (2), of the “target” award for the contingent performance share units. During the performance period, as described in footnote (1), earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance targets. As of December 31, (5) The amounts shown reflect the number of annual RSUs granted to each Named Executive Officer under the Company’s long-term incentive plan. |
20212023 PROXY STATEMENT 55 61
The following table sets forth certain information with respect to outstanding equity awards held as of December 31, 2020 with respect to2022, by the Named Executive Officers.
Name | Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||
Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested(1) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested(1) ($) | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested(1) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested(1) ($) | |||||||
R. Scott Rowe | 114,943 | (2) | 48.63 | 5/4/2027 | 131,395 | (3) | 4,841,903 | — |
| — | 114,943 | (2) | 48.63 | 5/4/2027 | 274,779 | (3) | 8,430,220 | — |
| — |
— |
| — | — | — |
| — | 70,190 | (4) | 5,172,997 | — |
| — | — |
| — | 32,679 | (4) | 1,002,592 | ||
— |
| — | — | — |
| — | 68,674 | (5) | 5,061,259 | — |
| — | — |
| — | 32,592 | (5) | 999,909 | ||
— |
| — | — | — |
| — | 62,216 | (6) | 4,585,343 | — |
| — | — |
| — | 38,384 | (6) | 1,177,630 | ||
Amy B. Schwetz | — |
| — | — | 32,997 | (7) | 1,215,931 | — |
| — | — |
| — | 72,792 | (7) | 2,233,259 | — |
| — | |
— |
| — | — | — |
| — | 16,766 | (6) | 1,235,653 | — |
| — | — |
| — | 8,807 | (4) | 270,183 | ||
John E. (Jay) Roueche | — |
| — | — | 9,091 | (8) | 334,987 | — |
| — | ||||||||||
— |
| — | — | — |
| — | 4,159 | (4) | 306,507 | |||||||||||
— |
| — | — | — |
| — | 4,193 | (5) | 309,008 | |||||||||||
— |
| — | — | — |
| — | 3,829 | (6) | 282,174 | |||||||||||
Lanesha T. Minnix | — |
| — | — | 14,852 | (9) | 547,291 | — |
| — | ||||||||||
— |
| — | — | — |
| — | 7,497 | (5) | 552,517 | |||||||||||
— |
| — | — | — |
| — | 7,030 | (6) | 518,080 | |||||||||||
Amy B. Schwetz | — |
| — | — |
| — | 9,184 | (5) | 281,760 | |||||||||||
— |
| — | — |
| — | 11,014 | (6) | 337,919 | ||||||||||||
— |
| — | 34,282 | (8) | 1,051,742 | — |
| — | ||||||||||||
|
|
|
|
|
| 4,260 | (4) | 130,697 | ||||||||||||
Elizabeth L. Burger | — |
| — | — |
| — | 4,148 | (5) | 127,248 | |||||||||||
— |
| — | — |
| — | 4,673 | (6) | 143,364 | ||||||||||||
— |
| — | — | 15,619 | (10) | 575,560 | — |
| — | — |
| — | 25,634 | (9) | 786,451 | — |
| — | ||
— |
| — | — | — |
| — | 12,381 | (4) | 912,466 | — |
| — | — |
| — | 3,411 | (4) | 104,649 | ||
Keith E. Gillespie | — |
| — | — | — |
| — | 7,497 | (5) | 552,517 | — |
| — | — |
| — | 3,554 | (5) | 109,032 | |
— |
| — | — | — |
| — | 6,494 | (6) | 478,634 | — |
| — | — |
| — | 4,005 | (6) | 122,880 | ||
— |
| — | — | 17,609 | (11) | 648,895 | — |
| — | |||||||||||
— |
| — | — | — |
| — | 8,896 | (4) | 655,607 | |||||||||||
Elizabeth L. Burger | — |
| — | — | — |
| — | 8,741 | (5) | 644,216 | ||||||||||
— |
| — | — | — |
| — | 8,110 | (6) | 597,726 | |||||||||||
(1) Calculated using a price per share of $36.85 the closing market price of the Company’s common stock as reported by the NYSE on December 31, 2020, the end of the Company’s last completed fiscal year. The restricted share unit and contingent performance share unit amounts include regularly declared dividends accrued on the “target” award, which will vest only to the same extent as the underlying award, if at all. Concerning all contingent performance awards, the amounts of units used in calculating the payout values assumes the maximum level of performance target achievement, which would result in the target unit amounts presented in the table vesting at 200%. (2) All stock options vest on April 1, 2020. (3) 20,739 RSUs vested on February 20, 2021, 22,891 RSUs vested on February 28, 2021; and 23,397 RSUs vested on March 1, 2021, in each case including accrued dividend equivalents. Mr. Rowe’s remaining RSUs vest as follows: 20,739 shares of RSUs on February 20, 2022; 22,891 RSUs on February 28, 2022; and 20,738 RSUs on February 20, 2023. (4) These shares represent long-term equity incentive awards in the form of contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2018 plan are based on: 1) ROIC improvement goals which closely correlate to the compounded annual share price growth rate of the S&P Industrial Machinery Index over a 10-year period and 2) relative TSR compared to that of the PPG for the same period. Payouts can range from 0 shares to a maximum of 200% of the target. As of December 31, 2020, the Company estimated vesting of 133% and 54%, respectively, and therefore expensed the awards at the same percentage of the target shares presented for the ROIC award and 100% for TSR award, respectively, based on achievement of performance target and US GAAP. (5) These shares represent long-term equity incentive awards in the form of contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2019 plan are based on: 1) ROIC improvement goals compared to the Company’s long-term ROIC targets and 2) relative TSR compared to that of the PPG for the same period. Payouts can range from 0 shares to a maximum of 200% of the target. As of December 31, 2020, the Company estimated vesting of 100% and therefore expensed, these awards at 100% of the target shares presented based on expected achievement of performance target. | ||||||||||||||||||||
— |
| — | 24,476 | (10) | 750,924 | — |
| — | ||||||||||||
Tamara M. Morytko | — |
| — | — |
| — | 4,148 | (5) | 127,248 | |||||||||||
— |
| — | — |
| — | 4,673 | (6) | 143,364 |
20212023 PROXY STATEMENT 56 62
Calculated using a price per share of $30.68 the closing market price of the Company’s common stock as reported by the NYSE on December 30, 2022, the last trading date of the Company’s last completed fiscal year. The RSU and contingent performance share unit amounts include regularly declared dividends accrued on the “target” award, which will vest only to the same extent as the underlying award, if at all. Concerning all contingent performance awards, the amounts of units used in calculating the payout values assumes the threshold level of performance target achievement, which would result in the target unit amounts presented in the table vesting at 42.5% for the 2021 and 2022 plans, and at 50% for the 2020 plan. (2) All stock options vested on April 1, 2020. (3) 30,106 RSUs vested on February 15, 2023, 62,746 RSUs vested on February 16, 2023; and 21,787 RSUs vested on February 20, 2023, in each case including accrued dividend equivalents. Mr. Rowe’s remaining RSUs vest as follows: 30,105 shares of RSUs on February 15, 2024; 99,930 RSUs on February 16, 2024; and 30,105 RSUs on February 15, 2025. (4) These (5) These represent contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2021 plan are based on: 1) ROIC improvement goals compared to the Company’s long-term ROIC targets and 2) Free Cash Flow as a percent of net income, including a secondary measure of relative TSR which can increase or decrease the award 15% compared to that of the PPG for the same period. Payouts can range from 0 shares to a maximum of 230% of the target. As of December 31, 2022, the Company estimated vesting of 28% for this award including a negative 15% relative TSR award and therefore expensed these awards at the |
(6) These represent contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2022 plan are based on: 1) ROIC improvement goals compared to the Company’s long-term ROIC targets and 2) Free Cash Flow as a percent of net income, including a secondary measure of relative TSR which can increase or decrease the award 15% compared to that of the PPG for the same period. Payouts can range from 0 shares to a maximum of 230% of the target. As of December 31, 2022, the Company estimated vesting of 33% for this award including a negative 15% relative TSR award; however, these awards were expensed at 100%. The reversal of expense has been deferred until actual performance results are known. In accordance with SEC requirements, these contingent performance share units are shown at threshold in this table. Mr. Gillespie and Ms. Morytko forfeited their remaining contingent performance share units in connection with their transition from the Company. (7)
(8)
|
2023 PROXY STATEMENT 63
The following table sets forth certain information with respect to restricted stock unit vesting during the fiscal year ended December 31, 20202022, with respect to the Named Executive Officers. No Named Executive Officers exercised any stock options during 2020.2022.
Name | Stock Awards | Stock Awards | |||
Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($) | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($) | ||
R. Scott Rowe | 79,995 | 2,615,757 | 92,893 | 2,984,051 | |
Amy B. Schwetz | — | — | 18,254 | 594,336 | |
John E. (Jay) Roueche, III | 8,532 | 296,357 | |||
Lanesha T. Minnix | 5,197 | 172,878 | |||
Elizabeth L. Burger | 11,889 | 380,363 | |||
Keith E. Gillespie | 12,544 | 481,151 | 10,037 | 321,098 | |
Elizabeth L. Burger | 6,404 | 246,173 | |||
(1) The number of shares reported includes shares that were surrendered during the fiscal year ended December 31, 2020 to pay for taxes upon the vesting of restricted stock units and performance share units. | |||||
Tamara M. Morytko | 3,166 | 105,618 | |||
(1) The number of shares reported includes shares that were surrendered during the fiscal year ended December 31, 2022, to pay for taxes upon the vesting of restricted stock units and performance share units. | (1) The number of shares reported includes shares that were surrendered during the fiscal year ended December 31, 2022, to pay for taxes upon the vesting of restricted stock units and performance share units. |
20212023 PROXY STATEMENT 57 64
The following table sets forth certain information as of December 31, 20202022, with respect to potential payments under our pension plans for each Named Executive Officer. Please refer to “—Elements of the Executive Compensation Program—Retirement Benefits (Pension, 401k, SERP and SMRP and End of Service)”“Executive Compensation—Other Benefits” above for a narrative description of the material factors necessary to an understanding of our pension plans.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) |
R. Scott Rowe | Qualified—Cash Balance(1) | 3.8 | 73,903 | — | Qualified—Cash Balance(1) | 5.8 | 122,236 | — |
Non-Qualified—SMRP | 3.8 | 507,737 | — | Non-Qualified—SMRP | 5.8 | 887,674 | — | |
Non-Qualified—SERP | 3.8 | 377,873 | — | Non-Qualified—SERP | 5.8 | 627,232 | — | |
Amy B. Schwetz | Qualified—Cash Balance(1) | 0.8 | 17,692 | — | Qualified—Cash Balance(1) | 2.8 | 56,671 | — |
Non-Qualified—SMRP | 0.8 | 22,383 | — | Non-Qualified—SMRP | 2.8 | 141,563 | — | |
Non-Qualified—SERP | 0.8 | 28,587 | — | Non-Qualified—SERP | 2.8 | 135,399 | — | |
John E. (Jay) Roueche, III | Qualified—Cash Balance(1) | 8.2 | 171,953 | — | ||||
Non-Qualified—SMRP | 8.2 | 117,795 | — | |||||
Non-Qualified—SERP | 8.2 | 196,456 | — | |||||
Lanesha T. Minnix | Qualified—Cash Balance(1) | 2.5 | 42,861 | — | ||||
Non-Qualified—SMRP | 2.5 | 54,154 | — | |||||
Non-Qualified—SERP | 2.5 | 80,614 | — | |||||
Elizabeth L. Burger | Qualified—Cash Balance(1) | 4.7 | 96,290 | — | ||||
Non-Qualified—SMRP | 4.7 | 148,495 | — | |||||
Non-Qualified—SERP | 4.7 | 172,086 | — | |||||
Keith E. Gillespie | Qualified—Cash Balance(1) | 5.7 | 122,467 | — | Qualified—Cash Balance(1) | 7.7 | 179,120 | — |
Non-Qualified—SMRP | 5.7 | 191,853 | — | Non-Qualified—SMRP | 7.7 | 308,655 | — | |
Non-Qualified—SERP | 5.7 | 198,426 | — | Non-Qualified—SERP | 7.7 | 296,001 | — | |
Elizabeth L. Burger | Qualified—Cash Balance(1) | 2.7 | 54,384 | — | ||||
Non-Qualified—SMRP | 2.7 | 72,749 | — | |||||
Non-Qualified—SERP | 2.7 | 90,105 | — | |||||
(1) The Company sponsors cash balance designed pension plans for eligible employees. Each executive accumulates a notional amount derived from the plan provisions; each Named Executive Officer’s account balances as of December 31, 2020 are presented above. We believe that this is the best estimate of the present value of accumulated benefits. | ||||||||
Tamara M. Morytko | Qualified—Cash Balance(1) | 2.3 | 44,188 | — | ||||
Non-Qualified—SMRP | 2.3 | 73,623 | — | |||||
Non-Qualified—SERP | 2.3 | 84,982 | — | |||||
(1) The Company sponsors cash balance designed pension plans for eligible employees. Each executive accumulates a notional amount derived from the plan provisions; each Named Executive Officer’s account balances as of December 31, 2022, are presented above. We believe that this is the best estimate of the present value of accumulated benefits. | (1) The Company sponsors cash balance designed pension plans for eligible employees. Each executive accumulates a notional amount derived from the plan provisions; each Named Executive Officer’s account balances as of December 31, 2022, are presented above. We believe that this is the best estimate of the present value of accumulated benefits. |
20212023 PROXY STATEMENT 58 65
The following table sets forth the estimated value of the potential payments to each of the Named Executive Officers, who were employed as of December 31, 2020, assuming the executive’s employment had terminated on December 31, 20202022, under the scenarios outlined below.
For the events of termination involving a change in control, we assumed that the change in control also occurred on December 31, 2020.2022. In addition to the payments set forth in the following tables, the Named Executive Officers may receive certain payments upon their termination or a change in control pursuant to our Flowserve Corporation Deferred Compensation Plan, Qualified Pension Plan, SERP and SMRP. Previously vested amounts and contributions made to such plans by each Named Executive Officer are disclosed in the “2020“2022 Pension Benefits” table.
Triggering Event | Compensation Component | Payout($) | Compensation Component | Payout ($) | |||||||||||
R. Scott Rowe |
| Amy B. Schwetz | John E. (Jay) Roueche | Lanesha T. Minnix | Keith E. Gillespie | Elizabeth Burger | R. Scott Rowe |
| Amy B. Schwetz | Elizabeth L. Burger | Keith E. Gillespie(3) | Tamara M. Morytko(4) | |||
Death | Life Insurance (1.5x base salary; third party payment, max td.5) | 1,500,000 |
| 975,000 | 515,636 | 787,500 | 727,500 | 718,425 | Life Insurance (1.5x base salary; third party payment, max td.5) | 1,500,000 |
| 1,054,463 | 769,577 | — | |
Immediate vesting of outstanding equity awards | 9,665,204 |
| 1,833,758 | 737,309 | 1,082,590 | 1,091,136 | 1,396,758 | Immediate vesting of outstanding equity awards(2) | 13,553,843 |
| 3,691,314 | 1,688,476 | — | ||
Total | 11,165,204 |
| 2,808,758 | 1,252,945 | 1,870,090 | 1,818,636 | 2,114,183 | Total | 15,053,843 |
| 4,745,777 | 2,458,053 | — | ||
Disability | Short-term and long-term disability benefit to age 65 | 4,087,697 |
| 4,719,795 | 2,901,363 | 4,830,780 | 2,580,037 | 3,746,570 | Short-term and long-term disability benefit to age 65 | 3,514,497 |
| 4,140,985 | 3,160,210 | — | |
Immediate vesting of outstanding equity awards(1) | 9,665,204 |
| 1,833,758 | 737,309 | 1,082,590 | 1,091,136 | 1,395,758 | Immediate vesting of outstanding equity awards(2) | 13,553,843 |
| 3,691,314 | 1,688,476 | — | ||
Total | 13,752,901 |
| 6,553,552 | 3,638,672 | 5,913,370 | 3,671,172 | 5,142,327 | Total | 17,068,340 |
| 7,832,299 | 4,848,686 | — | ||
Retirement | Vesting of outstanding equity awards | — |
| — | — | Vesting of outstanding equity awards | — |
| — | — | |||||
Total | — |
| — | — | Total | — |
| — | — | ||||||
Termination Without Cause by the Company Not in Connection with Change in Control | Termination payment (2x base salary) | 2,266,000 |
| 1,300,000 | 687,514 | 1,050,000 | 970,000 | 957,900 | Termination payment (2x base salary) | 2,400,000 |
| 1,405,950 | 1,026,102 | — | |
Target annual incentive award | 1,359,601 |
| 487,500 | 171,879 | 341,250 | 315,250 | 311,318 | Target annual incentive award | 1,500,000 |
| 562,380 | 359,136 | — | ||
Vesting of outstanding equity | — |
| — | — | — | Vesting of outstanding equity | 923,637 |
| 265,039 | 112,443 | — | ||||
Cash payment in lieu of vesting of RSU | 2,469,924 |
| 1,215,931 | 162,880 | 178,432 | 323,929 | 140,361 | Cash payment in lieu of vesting of RSU | 2,593,444 |
| 789,363 | 329,492 | — | ||
Total | 6,095,524 |
| 2,940,829 | 1,022,273 | 1,569,682 | 1,609,179 | 1,409,579 | Total | 7,417,081 |
| 3,022,732 | 1,827,173 | — | ||
Change in Control—Termination Without Cause by the Company or Constructive Termination | Termination payment (base salary times applicable multiplier) | 3,399,000 |
| 1,300,000 | 515,636 | 1,050,000 | 970,000 | 957,900 | Termination payment (base salary times applicable multiplier) | 3,600,000 |
| 1,405,950 | 1,026,102 | — | |
Termination payment (target annual incentive award times applicable multiplier) | 4,078,800 |
| 975,000 | 257,818 | 682,500 | 630,500 | 622,635 | Termination payment (target annual incentive award times applicable multiplier) | 4,500,000 |
| 1,124,760 | 718,271 | — | ||
Immediate vesting of outstanding equity awards | 9,665,204 |
| 1,833,758 | 737,309 | 1,082,590 | 1,091,136 | 1,395,758 | Immediate vesting of outstanding equity awards | 13,553,843 |
| 3,691,314 | 1,688,476 | — | ||
Supplemental pension benefit | 1,143,155 |
| 468,408 | 285,215 | 240,260 | 426,381 | 340,002 | Supplemental pension benefit | 1,478,980 |
| 361,270 | 259,584 | — | ||
Health & welfare benefit | 92,352 |
| 48,955 | 34,430 | 47,420 | 52,603 | 49,425 | Health & welfare benefit | 95,456 |
| 73,850 | 74,366 | — | ||
Total | 18,378,511 |
| 4,626,120 | 1,830,408 | 3,102,770 | 3,170,620 | 3,365,720 | Total | 23,228,279 |
| 6,657,144 | 3,766,799 | — | ||
(1) For restricted stock units, these amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 31, 2020 ($36.85).
| |||||||||||||||
(1) None of the Named Executive Officers were eligible to retire on December 31, 2022. (2) For equity awards, these amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2022 ($30.68). (3) Mr. Gillespie’s employment was involuntarily terminated not for cause on April 7, 2023, with eligibility for benefits under the Executive Officer Severance Plan. His benefits included a termination payment of 2x salary equal to $1,019,082 and a $331,202 payment in lieu of his 2023 AIP target award (payable in 2024) provided that no less than threshold performance is attained for each performance target applicable to his forfeited 2023 AIP target award. (4) Ms. Morytko’s employment was involuntarily terminated not for cause on February 24, 2023 with eligibility for benefits under the Executive Officer Severance Plan. Her benefits included a termination payment of 2x salary equal to $1,123,500 and a $365,138 payment in lieu of her 2023 AIP target award (payable in 2024) provided that no less than threshold performance is attained for each performance target applicable to her forfeited 2023 AIP target award. | (1) None of the Named Executive Officers were eligible to retire on December 31, 2022. (2) For equity awards, these amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 30, 2022 ($30.68). (3) Mr. Gillespie’s employment was involuntarily terminated not for cause on April 7, 2023, with eligibility for benefits under the Executive Officer Severance Plan. His benefits included a termination payment of 2x salary equal to $1,019,082 and a $331,202 payment in lieu of his 2023 AIP target award (payable in 2024) provided that no less than threshold performance is attained for each performance target applicable to his forfeited 2023 AIP target award. (4) Ms. Morytko’s employment was involuntarily terminated not for cause on February 24, 2023 with eligibility for benefits under the Executive Officer Severance Plan. Her benefits included a termination payment of 2x salary equal to $1,123,500 and a $365,138 payment in lieu of her 2023 AIP target award (payable in 2024) provided that no less than threshold performance is attained for each performance target applicable to her forfeited 2023 AIP target award. |
20212023 PROXY STATEMENT 59 66
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” (as calculated under SEC regulations) and certain financial performance of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with Company performance, refer to “Executive Compensation – Compensation Discussion and Analysis.”
PEO = Principal Executive Officer NEO = Named Executive Officer | Value of Initial Fixed $100 Investment Based on: |
| ||||||
Year | Summary Compensation Table (SCT) Total for PEO1 | Compensation Actually Paid (CAP) to PEO2 | Average SCT Total for Non- PEO NEOs3 | Average CAP to Non-PEO NEOs4 | Total Shareholder Return (TSR)5 | Peer Group TSR6 | Net Income ($M)7 | Adjusted Operating Income ($M)8 |
2022 | $ 8,702,893 | $ 8,719,503 | $ 2,028,865 | $ 1,998,603 | $66.62 | $127.07 | $ 189 | $ 200 |
2021 | $12,478,105 | $ 8,468,743 | $ 2,420,811 | $ 1,933,079 | $64.63 | $134.48 | $ 126 | $ 284 |
2020 | $ 8,332,454 | $ 691,730 | $ 1,782,163 | $ 1,322,337 | $76.13 | $111.05 | $ 130 | $ 367 |
(1) The dollar amounts reported are the amounts in the “Total” column of the Summary Compensation Table in each applicable year. (2) The dollar amounts reported represent the amount of “compensation actually paid”, as computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to the Summary Compensation total compensation to determine the compensation actually paid:
|
| Year | Reported SCT Total for PEO | Reported Value of Equity Awards(a) | Equity Award Adjustments(b) | Reported Value of Change in Pension(c) | Change in Pension Adjustments(d) | CAP to PEO | ||||||
| 2022 | $ | 8,702,893 | $ | (5,942,446) | $ | 6,015,795 | $ | (377,658) | $ | 320,919 | $ | 8,719,503 |
| 2021 | $ | 12,478,105 | $ | (10,007,824) | $ | 6,045,813 | $ | (300,060) | $ | 252,709 | $ | 8,468,743 |
| 2020 | $ | 8,332,454 | $ | (5,981,225) | $ | (1,567,834) | $ | (305,060) | $ | 213,395 | $ | 691,730 |
| (a) The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” column in the Summary Compensation Table for the applicable year. (b) The valuation assumptions used to determine fair values as of each applicable year-end or vesting date did not materially differ from those used to determine fair value at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows:
|
|
|
| Year | Year End Fair Value of Equity Awards Granted in the Year | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Total Equity Award Adjustments |
|
| 2022 | $ 5,671,960 | $ 188,725 | $ 155,110 | $ - | $ 6,015,795 |
|
| 2021 | $ 8,158,171 | $ (1,530,137) | $ (17,377) | $ (564,844) | $ 6,045,813 |
|
| 2020 | $ 4,005,575 | $ (3,159,844) | $ (2,413,565) | $ - | $(1,567,834) |
| (c) The value shown represents the aggregate change in the actuarial present value of accumulated benefits under defined benefit pension plans as reported in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column in the Summary Compensation Table for the applicable year. (d) The change in pension adjustments for each applicable year reflects the service cost attributable to services rendered during the applicable year. |
2023 PROXY STATEMENT 67
(3) The dollar amounts reported represent the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding our CEO) in the “Total” column of the Summary Compensation Table in each applicable year. The NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2022 and 2021, Amy Schwetz, Elizabeth Burger, Keith Gillespie, and Tamara Morytko; and (ii) for 2020, Amy Schwetz, Elizabeth Burger, Keith Gillespie, Lanesha Minnix and John Roueche. (4) The dollar amounts reported represent the average amount of “compensation actually paid” to the applicable non-PEO NEOs as a group (as described in footnote 3), as computed in accordance with SEC rules. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group during the applicable year. In accordance with the SEC rules, the following adjustments were made to average total compensation for the NEOs as a group for each year to determine the compensation actually paid: |
| Year | Average Reported SCT Total for non- PEO NEOs | Average Reported Value of Equity Awards(a) | Average Equity Award Adjustments(b) | Average Reported Value of Change in Pension(c) | Average Change in Pension Adjustments(d) | Average CAP to Non-PEO NEOs |
| 2022 | $ 2,028,865 | $ (943,024) | $ 946,072 | $ (130,776) | $ 97,466 | $ 1,998,603 |
| 2021 | $ 2,420,811 | $ (1,411,383) | $ 933,782 | $ (100,526) | $ 90,395 | $ 1,933,079 |
| 2020 | $ 1,985,697 | $ (967,864) | $ 333,945 | $ (91,450) | $ 62,009 | $ 1,322,337 |
| (a) The grant date fair value of equity awards represents the average total of the amounts reported in the “Stock Awards” columns in the Summary Compensation Table for the applicable year for non-PEO NEOs. (b) The valuation assumptions used to determine fair values as of each applicable year-end or vesting date did not materially differ from those used to determine fair value at the time of grant. The amounts deducted or added in calculating the total average equity award adjustments for non-PEO NEOs are as follows:
|
|
| Year | Average Year End Fair Value of Equity Awards Granted in the Year | Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Total Average Equity Award Adjustments |
|
| 2022 | $ 900,110 | $ 25,008 | $ 20,954 | $ - | $ 946,072 |
|
| 2021 | $ 1,154,995 | $ (190,808) | $ 2,984 | $ (33,389) | $ 933,782 |
|
| 2020 | $ 671,329 | $ (253,603) | $ (83,781) | $ - | $ 333,945 |
| (c) The value shown represents the average aggregate change in the actuarial present value of accumulated benefits under defined benefit pension plans as reported in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column in the Summary Compensation Table for the applicable year for non-PEO NEOs. (d) The average change in pension adjustments for each applicable year reflects the service cost attributable to services rendered during the applicable year for non-PEO NEOs. |
(5) Cumulative TSR is calculated by dividing (a) the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by (b) the Company’s share price at the beginning of the measurement period. The beginning of the measurement period for all rows in the table is December 31, 2019. (6) The peer group used for this purpose is the S&P 500 Industrials Index. (7) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. (8) Represents the Company’s Adjusted Operating Income as used in determining incentive compensation payouts under the Company’s Annual Incentive Plan. The O&C Committee determined performance achievement for Adjusted Operating Income by adjusting Operating Income in the same manner as the Company adjusts Operating Income in our annual earnings release. See Annex I: Reconciliation of Reported Results to Non-GAAP Financial Results. This amount is then further adjusted for the difference between actual and target AIP expense. |
2023 PROXY STATEMENT 68
As described in greater detail in the “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected with an objective to incentivize our NEOs to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive “compensation actually paid” to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows:
Relative Total Shareholder Return
Adjusted Operating Income
Return on Invested Capital
Free Cash Flow as a % of Adjusted Net Income
As described in more detail in the section “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, all such Company measures are not presented in the Pay versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with “compensation actually paid” (as computed in accordance with SEC rules) for a particular year. In accordance with SEC rules, the Company is providing the following graphical presentations of the relationships between information presented in the Pay versus Performance table.
2023 PROXY STATEMENT 69
2023 PROXY STATEMENT 70
Our CEO to median-compensated employee pay ratio has been calculated in accordance with the applicable rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act and is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. Mr. Rowe had 20202022 total compensation of $8,362,067,$8,731,309, which reflects the total compensation reported in the “Summary Compensation Table” in this proxy statement, plus the employer-paid portion of health, vision and dental benefits and disability insurance premiums available to U.S. full-time employees. Our median employee’s annual total compensation for 20202022 was $85,523,$79,777, calculated using the same methodology as used in the calculation of theour CEO’s compensation of the Named Executive Officers under the “Summary Compensation Table,” except that such calculation also includes the employer-paid portion of disability insurance premiums, and health, vision and dental benefits, as applicable.discussed above. As a result, the annual total compensation for our CEO in 20202022 was approximately 98109 times that of our median employee’s annual total compensation.
For purposes of calculatingWe identified the 2020 pay ratio, the Company examinedmedian employee by examining the 2020 total target cash compensation for all employees who were employed by the Company or its consolidated subsidiaries on October 1, 2020, excluding our CEO, and selected a newCEO. For purposes of calculating the 2022 pay ratio, the Company determined that there had been no change in its workforce composition or compensation arrangements that would significantly impact the pay ratio disclosure since the Company determined its median employee for 2020. Accordingly, the Company again utilized the same median employee for purposes of calculating its 20202022 pay ratio.
Total target cash compensation was calculated by totaling an employee’s annual base salary and target incentive compensation. We did not make any assumptions, adjustments, or estimates with respect to total target cash compensation. We used total target cash compensation and excluded annual equity awards for our calculations because we do not widely distribute annual equity awards to employees.
After identifying the median employee based on total target cash compensation, we calculated annual total compensation for such employee using the same methodology we use for our named executive officersNamed Executive Officers as set forth in the “Summary Compensation Table” in this proxy statement, except that for purposes of determining our CEO to median compensation employee pay ratio, we included the employer-paid portion of health, vision and dental benefits and disability insurance premiums.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
20212023 PROXY STATEMENT 60 71
PROPOSAL TWO:
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
At each Annual Meeting, the Board provides shareholders the opportunity to cast an advisory vote on the compensation of our Named Executive Officers, pursuant to Schedule 14A of the Securities Exchange Act. This proposal, commonly known as a “Say on Pay” proposal, gives our shareholders the opportunity to endorse or not endorse our executive compensation programs and policies and the compensation paid to our Named Executive Officers. OurWe currently hold Say on Pay votes every year. Following consideration of the outcome of the advisory vote on Proposal 3, we expect that our next Say on Pay vote following the 20212023 Annual Meeting will be held at our 20222024 Annual Meeting of Shareholders provided our Board does not change our annual say on pay voting frequency.
The Board values the opinions of the Company’s shareholders as expressed through their votes and other communications. This Say on Pay vote is advisory, meaning that it is not binding on the O&C Committee or Board. This vote will not affect any compensation already paid or awarded to any Named Executive Officer, nor will it overrule any decisions the Board has made. Nonetheless, the O&C Committee and the Board will review and carefully consider the outcome of the advisory vote on executive compensation when making future decisions regarding our executive compensation programs and policies.
We generally design our executive compensation programs to implement our core objectives of attracting and retaining key leaders, rewarding current performance, driving future performance and aligning the long-term interests of our executives with those of our shareholders. In light of the unique challenges presented by the COVID-19 pandemic and the volatility in commodity prices during 2020, we also implemented certain changes to our compensation program in an effort to balance pay for performance considerations with retention and motivation factors, in an effort to maintain a compensation program that provided focus on and rewarded the achievement of the Company’s evolving strategic priorities during an unprecedented period of global economic uncertainty and to help drive operational improvement.
Shareholders are encouraged to read the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement. In the CD&A, we have provided shareholders with a description of our compensation programs, including the philosophy and strategy underpinning the programs, the individual elements of the compensation programs and how our compensation plans are administered.
The Board believes that the Company’s executive compensation programs use appropriate structures and sound pay practices that are effective in achieving our core objectives. Accordingly, the Board recommends that you vote in favor of the following resolution:
“RESOLVED,thattheFlowserveCorporationshareholdersapprove,onanadvisorybasis,thecompensationoftheCompany’snamedexecutiveofficersasdescribedinthesectionofthisProxyStatemententitled‘Executive ‘Executive Compensation’.”
20212023 PROXY STATEMENT 61 72
PROPOSAL THREE:
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION
As discussed under “Proposal Two: Advisory Vote to Approve Executive Compensation”, the Board currently provides shareholders the opportunity to cast an advisory vote to approve the compensation of our Named Executive Officers, pursuant to Schedule 14A of the Securities Exchange Act, on an annual basis. This Proposal Three gives our shareholders the opportunity to advise our Board how often we should conduct the advisory Say on Pay vote and is being submitted to shareholders as required by Schedule 14A of the Exchange Act. SEC rules require us to submit this vote to shareholders at least once every six years. Accordingly, we are requesting your advisory vote to determine whether a Say on Pay vote will occur every one, two or three years.
The Board values the opinions of the Company’s shareholders as expressed through their votes and other communications. The frequency of the Say on Pay vote is advisory, meaning that it is not binding on the O&C Committee or Board. Nonetheless, the O&C Committee and the Board will review and carefully consider the outcome of this advisory vote when considering how frequently we should conduct an advisory Say on Pay vote to approve the compensation of our Named Executive Officers.
The Board continues to believe that providing shareholders with the opportunity to cast an advisory vote to approve executive compensation to shareholders on an annual basis is appropriate for the Company and its shareholders, based upon a number of considerations, including the following:
We make compensation decisions annually;
An annual vote allows our shareholders the opportunity to provide us with regular, timely and comprehensive feedback on important issues such as our executive compensation programs and policies as disclosed in the Company’s proxy statement each year;
An annual advisory vote gives us more frequent feedback on our compensation disclosures and the compensation of our named executive officers; and
An annual vote is consistent with market practice.
The enclosed proxy card gives you four choices for voting on this item. You can choose whether the Say on Pay vote should be conducted every one year, every two years or every three years. You may also abstain from voting on this proposal. Shareholders are not voting to approve or disapprove the Board’s recommendation. Notwithstanding the advisory nature of the vote, the frequency option that receives the highest number of votes cast at the Annual Meeting will be considered approved.
✔ | The Board recommends that you vote to conduct future advisory votes to approve Executive Compensation every “ONE YEAR.” | |||
2023 PROXY STATEMENT 73
RelatedPartyTransactionPolicy.The Company has adopted a written policy for approval of transactions between the Company and its directors, director nominees, executive officers, greater-than-5% beneficial owners and their respective immediate family members, where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year.
The policy provides that the CG&N Committee reviews transactions subject to the policy and determines whether or not to approve or ratify (in certain limited circumstances where pre-approval was not feasible) those transactions. In doing so, the CG&N Committee takes into account, among other factors it deems appropriate, whether the transaction is on terms that are no less favorable to the Company than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. In addition, the Board has delegated authority to the Chairman of the CG&N Committee to pre-approve or ratify transactions (in certain limited circumstances where pre-approval was not feasible) where the aggregate amount involved is expected to be less than $1 million. A summary of any new transactions pre-approved by the Chairman is provided to the full CG&N Committee for its review in connection with each regularly scheduled CG&N Committee meeting.
The CG&N Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include:
business transactions with other companies in which a related person’s only relationship is as an employee, director or less-than-10% beneficial owner if the amount of business falls below the thresholds in the NYSE’s listing standards and the Company’s director independence standards; and
charitable contributions, grants or endowments to a charitable organization where a related person is an employee if the aggregate amount involved does not exceed the greater of $1 million or 2% of the organization’s total annual receipts.
Since January 1, 2022, there were no reportable related person transactions, and there are currently no proposed transactions in excess of $120,000 in which the Company was or is to be a participant and in which any related person had or will have a direct or indirect material interest.
20212023 PROXY STATEMENT 62 74
The following table sets forth as of March 16, 202128, 2023, ownership of Company common stock by director nominees, members of the Board, each executive officer individually and all members of the Board and all executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder identified possesses sole voting and investment power with respect to his or her shares.
Name of Beneficial Owner | Amount and nature of beneficial ownership(1) | Total | Percent of class | Amount and Nature of Beneficial Ownership(1) | Total | Percent of Class | ||||
Directors |
|
|
|
|
|
|
|
|
|
|
Sujeet Chand | 1,000 |
| 7,353 | (2) | * | 1,000 |
| 16,091 | (2) | * |
Ruby R. Chandy | 2,574 |
| 14,125 | (3) | * | 2,574 |
| 23,546 | (3) | * |
Gayla J. Delly | 5,196 |
| 51,177 | (4) | * | 13,934 |
| 59,915 | (4) | * |
Roger L. Fix | 17,308 |
| 60,764 | (5) | * | |||||
John R. Friedery | 10,664 |
| 53,789 | (6) | * | 19,402 |
| 62,527 | (5) | * |
John L. Garrison | — |
| 12,174 | (7) | * | — |
| 23,402 | (8) | * |
Michael C. McMurray | — |
| 5,196 | (7) | * | — |
| 13,934 | (8) | * |
Thomas B. Okray | — |
| — | (6) | * | |||||
David E. Roberts | — |
| 34,882 | (7) | * | — |
| 43,620 | (7) | * |
R. Scott Rowe | 311,030 | (8) | 311,030 |
| * | 443,373 | (9) | 443,373 |
| * |
Carlyn R. Taylor(9) | — |
| 760 | (7) | * | |||||
Kenneth I. Siegel | 3,229 |
| 4,071 | (7) | * | |||||
Carlyn R. Taylor | — |
| 16,230 | (8) | * | |||||
Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
Elizabeth L. Burger | 18,441 | (10) | 18,441 |
| * | 35,091 |
| 35,091 |
| * |
Keith E. Gillespie | 63,974 |
| 63,974 |
| * | 80,493 |
| 80,493 |
| * |
Lanesha T. Minnix | 8,018 |
| 8,018 |
| * | |||||
John E. (Jay) Roueche III(11) | 21,719 |
| 21,719 |
|
| |||||
Amy B. Schwetz(12) | 6,753 |
| 6,753 |
| * | |||||
All members of the Board and executive officers as a group (19 individuals) | 509,248 | (13) | 712,726 | (14) | * | |||||
* Less than 1%. (1) Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and, unless otherwise indicated, represents securities for which the beneficial owner has sole voting and investment power. For each person or group, also includes any securities that person or group has the right to acquire within 60 days pursuant to stock options under certain Company stock option and incentive plans. (2) Includes 6,353 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Chand does not possess any voting or investment power over these deferred shares. (3) Includes 11,551 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Chandy does not possess any voting or investment power over these deferred shares. (4) Includes 45,981 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Delly does not possess any voting or investment power over these deferred shares. (5) Includes 43,456 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Fix does not possess any voting or investment power over these deferred shares. (6) Includes 43,125 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Friedery does not possess any voting or investment power over these deferred shares. | ||||||||||
Amy B. Schwetz | 40,722 |
| 40,722 |
| * | |||||
All members of the Board and executive officers as a group (14 individuals) | 639,818 | (10) | 863,015 | (11) | * | |||||
* Less than 1%. (1) Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and, unless otherwise indicated, represents securities for which the beneficial owner has sole voting and investment power. For each person or group, also includes any securities that person or group has the right to acquire within 60 days pursuant to stock options under certain Company stock option and incentive plans. (2) Includes 15,091 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Chand does not possess any voting or investment power over these deferred shares. (3) Includes 20,972 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Chandy does not possess any voting or investment power over these deferred shares. (4) Includes 45,981 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Delly does not possess any voting or investment power over these deferred shares. (5) Includes 43,125 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Friedery does not possess any voting or investment power over these deferred shares. (6) Mr. Okray was appointed to the Board effective April 12, 2023, and did not have any beneficial ownership in the Company as of March 28, 2023. (7) Includes 842 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Siegel does not possess any voting or investment power over these deferred shares. (8) Represents shares that have been deferred under the director stock deferral plan and/or a Company stock plan. The holder does not possess any voting or investment power over these deferred shares. (9) Includes 114,943 shares of common stock that Mr. Rowe has the right to acquire within 60 days pursuant to the exercise of stock options. (10) Includes 114,943 shares of common stock that members of this group have the right to acquire within 60 days pursuant to the exercise of stock options, in each case under certain Company stock incentive plans. (11) Includes 114,943 shares of common stock that members of this group have the right to acquire within 60 days pursuant to the exercise of stock options, in each case under certain Company stock incentive plans. Also includes 221,327 shares that have been deferred under various Company plans for which no member of the group possesses voting or investment power. | * Less than 1%. (1) Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and, unless otherwise indicated, represents securities for which the beneficial owner has sole voting and investment power. For each person or group, also includes any securities that person or group has the right to acquire within 60 days pursuant to stock options under certain Company stock option and incentive plans. (2) Includes 15,091 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Chand does not possess any voting or investment power over these deferred shares. (3) Includes 20,972 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Chandy does not possess any voting or investment power over these deferred shares. (4) Includes 45,981 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Ms. Delly does not possess any voting or investment power over these deferred shares. (5) Includes 43,125 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Friedery does not possess any voting or investment power over these deferred shares. (6) Mr. Okray was appointed to the Board effective April 12, 2023, and did not have any beneficial ownership in the Company as of March 28, 2023. (7) Includes 842 shares that have been deferred under the director stock deferral plan and/or a Company stock plan. Mr. Siegel does not possess any voting or investment power over these deferred shares. (8) Represents shares that have been deferred under the director stock deferral plan and/or a Company stock plan. The holder does not possess any voting or investment power over these deferred shares. (9) Includes 114,943 shares of common stock that Mr. Rowe has the right to acquire within 60 days pursuant to the exercise of stock options. (10) Includes 114,943 shares of common stock that members of this group have the right to acquire within 60 days pursuant to the exercise of stock options, in each case under certain Company stock incentive plans. (11) Includes 114,943 shares of common stock that members of this group have the right to acquire within 60 days pursuant to the exercise of stock options, in each case under certain Company stock incentive plans. Also includes 221,327 shares that have been deferred under various Company plans for which no member of the group possesses voting or investment power. |
20212023 PROXY STATEMENT 63 75
|
2021 PROXY STATEMENT 64
The following shareholders reported to the SEC that they beneficially own more than 5% of the Company’s outstanding common stock. The information is presented as of December 31, 2020,2022, except as noted, and is based on stock ownership reports on Schedule 13G filed with the SEC and subsequently provided to us. We know of no other shareholder holding more than 5% of the Company’s common stock.
Name and Address of Beneficial Owner | Amount and nature of beneficial ownership(1) | Percent of class(2) | |
EdgePoint Investment Group Inc. 150 Bloor Street West, Suite 500 | 19,717,032 | (3) | 15.1% |
Invesco Ltd. 1555 Peachtree Street NE, Suite 1800 | 14,068,661 | (4) | 10.8% |
The Vanguard Group, Inc. 100 Vanguard Blvd. | 13,834,683 | (5) | 10.6% |
First Eagle Investment Management, LLC 1345 Avenue of the Americas | 11,140,003 | (6) | 8.5% |
BlackRock, Inc. 55 East 52nd Street | 7,203,452 | (7) | 5.5% |
Caisse de dépôt et placement du Québec 1000 Place Jean-Paul-Riopelle | 7,019,180 | (8) | 5.4% |
|
20212023 PROXY STATEMENT 65 76
The following table provides certain information about our common stock that may be issued upon the exercise of options or vesting of restricted stock units and performance share units granted under the Flowserve Corporation 2010 Equity and Incentive Compensation Plan (the “2010 Plan”) and the Flowserve Corporation 2020 Long-Term Incentive Plan (the “2020 Plan”) as of December 31, 2020.2022.
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Option, Warrants and Rights(1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)(2) | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Option, Warrants and Rights(1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)(2) |
Equity compensation plans approved by securities holders | 114,943 | 48.63 | 13,606,725 | 2,612,438 | 48.63 | 9,756,068 |
Equity compensation plans not approved by securities holders | — | — | — | — | — | |
TOTAL | 114,943 | 48.63 | 13,606,725 | 2,612,438 | 48.63 | 9,756,068 |
(1) These amounts represent the weighted average exercise price for the total number of outstanding options. No such value is included for RSUs. (2) The shares of common stock reflected in this column include shares available for issuance under the 2020 Plan, including 1,611,332 shares that remained available for issuance under the Flowserve Corporation 2010 Equity and Incentive Compensation Plan as of December 31, 2019, and which remain available for issuance under the terms of our 2020 Plan. | ||||||
(1) These amounts represent the weighted average exercise price for the total number of outstanding options. No such value is included for RSUs or PSUs. (2) The shares of common stock reflected in this column include shares available for issuance under the 2020 Plan. | (1) These amounts represent the weighted average exercise price for the total number of outstanding options. No such value is included for RSUs or PSUs. (2) The shares of common stock reflected in this column include shares available for issuance under the 2020 Plan. |
20212023 PROXY STATEMENT 66 77
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and any person beneficially owning more than 10% of the Company’s common stock to file reports of ownership and any changes in ownership with the SEC. Based solely on the Company’s review of such reports filed with the SEC and representations provided to the Company by persons required to file reports under Section 16 of the Exchange Act, the Company’s directors, executive officers and greater than 10% beneficial owners timely complied with their Section 16(a) filing requirements during 2020, except that due to an administrative error one Form 4 reporting an equity grant related to their compensation as members of our Board was inadvertently filed one day late for Sujeet Chand, Ruby R. Chandy and John L. Garrison.
2021 PROXY STATEMENT 67
The Audit Committee has approvedappointed PricewaterhouseCoopers LLP (“PwC”) to serve as our independent registered public accounting firm for 2021.2023.
We are asking our shareholders to ratify the appointment of PwC as our independent registered public accounting firm.firm for 2023. Although shareholder ratification is not required by our By-Laws or otherwise, the Board is submitting this proposal for ratification because we value our shareholders’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. In the event that our shareholders fail to ratify the selection, it will be considered as a direction to the Audit Committee to consider the selection of a different firm, though the Company may nonetheless determine to retain PwC. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.
20212023 PROXY STATEMENT 68 78
PwC has served as the Company’s independent registered public accounting firm since 2000. In this role, PwC audits the financial statements of the Company. Representatives from PwC are expected to be present at the Annual Meeting and available to respond to appropriate questions from shareholders. They will have the opportunity to make a statement if they desire to do so.
The following table summarizes the aggregate fees (excluding value added taxes) for professional services incurred by the Company for the audits of its 20202022 and 20192021 financial statements and other fees billed to the Company by PwC in 20202022 and 2019.2021. In general, the Company retains PwC for services that are logically related to or natural extensions of services performed by independent auditors.
| 2020 | 2019 |
Audit Fees(1) | $8,190,000 | $7,622,000 |
Audit-Related Fees(2) | 108,000 | 59,000 |
Total Audit Related Fees | 8,298,000 | 7,681,000 |
Tax Compliance | 93,000 | 295,000 |
Tax Consulting/Advisory | 39,000 | 250,000 |
Total Tax Fees(3) | 132,000 | 545,000 |
All Other Fees(4) | 3,000 | 61,000 |
TOTAL FEES(5) | $8,433,000 | $8,287,000 |
(1) Fees for the years ended December 31, 2020 and 2019 consist of the audit of the Company’s consolidated financial statements, including effectiveness of internal controls over financial reporting, reviews of the Company’s quarterly financial statements, and subsidiary statutory audits. (2) Audit-related fees consist of other attestation services and review of supplementary filings. (3) Tax fees consist of compliance, consulting and transfer pricing services. (4) All other fees consist of accounting research and disclosure software licenses, and agreed upon procedures related to a pension audit (5) 2020 Total Fees includes $168,000 of fees related to the 2019 audit that were billed, approved and paid in 2020. |
The Audit Committee pre-approved all of the audit and non-audit fees described above for the years ended December 31, 2020 and December 31, 2019 in accordance with its approval policy discussed below.
| 2022 | 2021 | ||
Audit Fees(1) | $ 8,379,000 |
| $ 7,557,000 |
|
Audit-Related Fees(2) | 103,000 |
| 244,000 |
|
Total Audit Related Fees | 8,481,000 |
| 7,801,000 |
|
Tax Compliance | 317,000 |
| 255,000 |
|
Tax Consulting/Advisory | — |
| 164,000 |
|
Total Tax Fees(3) | 317,000 |
| 419,000 |
|
All Other Fees(4) | 6,000 |
| 69,000 |
|
TOTAL FEES | $ 8,804,000 |
| $ 8,289,000 |
|
(1) Fees for the years ended December 31, 2022 and 2021 consist of the audit of the Company’s consolidated financial statements, including effectiveness of internal controls over financial reporting, reviews of the Company’s quarterly financial statements, and subsidiary statutory audits. (2) Audit-related fees consist of other attestation services and review of supplementary filings. (3) Tax fees consist of compliance, consulting and transfer pricing services. (4) All other fees consist of accounting research and disclosure software licenses, pension plan audit procedures and compilation services.
|
The Audit Committee approves all proposed services and related fees to be rendered by the Company’s independent registered public accounting firm prior to their engagement. Services to be provided by the Company’s independent registered public accounting firm generally include audit services, audit-related services and certain tax services. All fees forEach year, the annualAudit Committee discusses the scope of the audit or audit-related services to be performed by the Company’splan with its independent registered public accounting firm are itemizedand all audit and audit-related services, tax services, and other services for the purposesupcoming fiscal year are provided to the Audit Committee for pre-approval. The services, which may be provided in the upcoming twelve-month period, are grouped into significant categories substantially in the format shown above. The Audit Committee is updated on the status of approval. all services and related fees on a periodic basis or more frequently as matters warrant. All of the fees described above were pre-approved by the Audit Committee.
The Audit Committee approves the scope and timing of the external audit plan for the Company and focuses on any matters that may affect the scope of the audit or the independence of the Company’s independent registered public accounting firm. In that regard, the Audit Committee receives certain representations from the Company’s independent registered public accounting firm regarding their independence and permissibility under the applicable laws and regulations of any services provided to the Company outside the scope of those otherwise allowed. The Audit Committee also approves the internal audit plan for the Company.
The Audit Committee may delegate its approval authority to the Chairman of the Audit Committee to the extent allowed by law. In the case of any delegation, the Chairman must disclose all approval determinations to the full Audit Committee as soon as possible after such determinations have been made.
20212023 PROXY STATEMENT 69 79
The Audit Committee of the Board of Directors of the Company is composed of fourfive independent directors: Michael C. McMurray (Chairman), Sujeet Chand, John R. FriederyThomas B. Okray, Kenneth I. Siegel and Carlyn R. Taylor. Rick J. MillsRoger L. Fix served on the AuditCommittee until his retirement from the Board athe retired in May 2020 at our 2020 Annual Meeting. Joe E. Harlan also served on2022. Mr. Okray joined the Audit Committee until May 2020 when he elected not to stand for re-election at our 2020 Annual Meeting.in April 2023. The Audit Committee operates under a written charter adopted by the Board. The Audit Committee met 127 times in 20202022 and discussed matters, explained in more detail below, with the independent auditors, internal auditors and members of management.
RolesandResponsibilities.Management has primary responsibility for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and issuing a report on this audit. In addition, the independent auditors are responsible for auditing the Company’s internal control over financial reporting and issuing a report on the effectiveness of internal control over financial reporting. The Audit Committee’s responsibility is to proactively monitor and oversee this process, including the engagement of the independent auditors, the pre-approval of their annual audit plan and the review of their annual audit report. In addition, the Audit Committee reviews, monitors and evaluates how the Company and management implement new accounting principalsprinciples generally accepted in the United States (“GAAP”) and use non-GAAP measures.
CommitteeOversightofFinancialStatements.In this context, the Audit Committee has met and held detailed discussions with management on the Company’s consolidated financial statements. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with GAAP and that these statements fairly present the financial condition and results of operations of the Company for the period described. The Audit Committee has relied upon this representation without any independent verification, except for thework of PwC, the Company’s independent registered public accounting firm. The Audit Committee also discussed these statements with PwC, both with and without management present, and has relied upon their reported opinion on these financial statements.
RequiredCommunicationswithPwC.The Audit Committee further discussed with PwC matters required to be discussed by standards, including applicable rquirements of the PCAOB standards,and the Commission, and critical audit matters. In addition, the Audit Committee received from PwC the written disclosures and letter required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning its independence and has discussed with PwC its independence from the Company and its management.
Recommendation.Based on these reviews and discussions, including the Audit Committee’s specific review with management of the Company’s Annual Report and based upon the representations of management and the report of the independent auditors to the Audit Committee, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report filed with the SEC.
Michael C. McMurray, Chairman
Sujeet ChandJohn R. Friedery
Thomas B. Okray
Kenneth I. Siegel
Carlyn R. Taylor
20212023 PROXY STATEMENT 70 80
PROPOSAL FOUR:AMENDMENTFIVE:
ELIMINATE OWNERSHIP REQUIREMENTS TO THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO DELETE ARTICLE TENTH REGARDING SUPERMAJORITY APPROVAL OF BUSINESS COMBINATIONS WITH CERTAIN INTERESTED PARTIESCALL A SPECIAL SHAREHOLDER MEETING
The Board is submitting for shareholder approval a proposal to amend our Restated CertificateJohn Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278, the owner of Incorporation (the “Certificate”) to delete Article Tenth, which requires a supermajority vote to approve certain business combination transactions with certain interested shareholders.
The Company received a shareholder proposal asking that, among other things, the Board act to eliminate “each voting requirement in our charter and bylaws” that contains a supermajority voting requirement. The Board considered the shareholder proposal and the fact that Article Tenth (which is described below) is the only provision in the Company’s Certificate or By-Laws applicable to the Company’s shareholders that requires a supermajority vote. The Board also considered both the existing provisions in the New York Business Corporation Law (“NYBCL”) (which apply to the Company as a result of its incorporation in the State of York) and that deleting Article Tenth would simplify the voting standards currently applicable to certain business combinations with certain interested shareholders, as discussed below. As a result, the Board is proposing an amendment to our Certificate (attached as Appendix A) to delete Article Tenth and make certain conforming changes to our Certificate (the “Amendment”).
Article Tenth of our Certificate requires a vote of at least two-thirdsno fewer than 100 shares of the Company’s outstanding sharescommon stock, has stated that he intends to approvepresent the following transactions with any Related Corporation or affiliate of a Related Corporation (a “Related Corporation” being generally defined as any corporation which, together with its affiliates and associated persons owns, of record or beneficially, directly or indirectly, 10% or moreproposal at the Annual Meeting. The Company is not responsible for the content of the shares of capital stockproposal. If properly presented at the Annual Meeting, the Board unanimously recommends a vote “AGAINST” the following proposal.
Shareholders ask our board to take the steps necessary to amend the appropriate company governing documents to give the owners of the Company entitledcurrent combined 25% of our outstanding common stock the power to vote on such transaction):
any plancall a special shareholder meeting regardless of merger or consolidation;
any sale, lease, exchange or other dispositionlength of all or substantially allstock ownership and give an equal right to street name and record holder shareholders to formally participate in calling for a special to the assetsfullest extent possible.
One of the Company;main purposes of this proposal is to give all shareholders an equal right to formally participate in calling for a special shareholder meeting to the fullest extent possible and
to clear up any issuanceambiguity on shareholder rights to call a special shareholder meeting based on length of stock ownership and based on whether stock is held in street name or deliverynon street name.
Currently it appears that only non street name shareholder can participate in calling a special shareholder meeting. Thus if one makes the reasonable estimate that 50% of capitalFlowserve stock oris non street name stock, it means that our current requirement that 25% of shares are needed to call for a special shareholder meeting translates into 50% of this one category of stock and all other securitiesshares are 100% excluded.
Plus all shares not held for one continuous full year are excluded from such participation and thus pushing the requirement higher to perhaps beyond 60%.
Thus what seems to be a somewhat favorable 25% right to call special shareholder meeting turns into an unfavorable 60% right to call for a special shareholder meeting plus we have no right to act by written consent. A 60% stock ownership threshold to call for a special shareholder meeting means that any fleeting shareholder thought of calling for a special shareholder meeting is quickly killed in the crib.
Plus many companies allow for both a right to call a shareholder meeting and a shareholder right to act by written consent and we have no right to act by written consent.
Calling for a special shareholder meeting is hardly ever used by shareholders but the main point of the Company in exchange or paymentright to call for all or substantially all the assets of a Related Corporation.
Article Tenth also requires a vote ofspecial shareholder meeting is that it gives shareholders at least two-thirdssignificant standing to engage effectively with management.
Management will have an incentive to genuinely engage with shareholders, instead of stonewalling, if shareholders have a realistic Plan B option of calling a special shareholder meeting. Management likes to claim that shareholders have multiple means to communicate with management but in most cases there are low impact means that are as effective as mailing a post card to the CEO. A reasonable shareholder right to call a special shareholder meeting is an important step for effective shareholder engagement with management.
Please vote yes:
Adopt a Shareholder Right to Call a Special Shareholder Meeting – Proposal 5
2023 PROXY STATEMENT 81
The Board has considered this proposal and recommends that shareholders vote AGAINST the advisory proposal requesting that the Board take steps to approve any amendment or deletionmodify our shareholders’ existing ability to call special meetings because the proposal is not in the best interest of Article Tenth.
Article Tenth was intended to protect minority shareholders where a Related Corporation or its affiliates seek to acquire the Company or its assets (together, “Related M&A Transactions”)shareholders. The Board believes that shareholders’ existing special meeting right, together with the Company’s strong corporate governance policies and practices (including the ability to act by written consent), or wherealready provide shareholders with the Company seeksmeaningful ability to issue securitiestake action between annual meetings, as well as meaningful opportunities to acquire a Related Corporation or its affiliates (“Related Stock Issuances”). Article Tenth was last amended in 2011, wheninteract with the Board proposed and senior management. Moreover, the removal of the nominal one-year holding and record holder requirements would empower short-term activists at the expense of long-term shareholders, approved loweringwould not appropriately balance competing shareholder interests, and could result in unnecessary expenditure of Company time and resources. The Board also believes that this proposal is unnecessary in light of our robust corporate governance practices and record of Board accountability. Accordingly, the supermajority voting threshold from 80%Board recommends that you vote “AGAINST” Proposal 5 for the following reasons:
Our governing documents currently provide our shareholders with two meaningful and balanced rights: the ability to call special meetings and the right to act by written consent. Currently, shareholders of record holding in the aggregate at least 25% of the outstanding shares of the Company’s common stock for at least one year on a “net long” basis may request a special meeting. The Board continues to believe that the nominal one-year holding and record holder requirements strike an appropriate balance between providing shareholders holding a meaningful minority of our outstanding shares.shares a mechanism to call a special meeting when particularly urgent or strategic matters of importance arise, while also protecting shareholders against the imprudent use of Company resources to address special interests.
Approval
In addition to applyhaving the right to certain transactions with a Related Corporation.
2021 PROXY STATEMENT 71
For example, the Company will continue to be subject to Section 912act by written consent, shareholders of the NYBCL, which generally provides that a New York corporation may not engage in a business combination with an “interested shareholder” (generally defined as persons that directly or indirectly beneficially own 20%record holding 25% or more of our outstanding shares, insteadcommon stock continuously for at least one year have the ability to call special meetings. The Company carefully tailored our special meeting right to provide shareholders with the meaningful ability to call a special meeting when extraordinary matters arise, without enabling a minority of shareholders that have not held a financial stake in the Company for a reasonable period of time to call unnecessary or duplicative meetings for less significant matters. And the requirement that only holders of record may participate in calling a special meeting is intended to further protect the interests of our long-term shareholders. Under our special meeting right, street name shareholders are required to take the interim step of working through their securities intermediaries to become record holders in order to participate. This requirement eliminates any uncertainty as to proof of ownership and discourages any short-term, activist investors from attempting to obscure their ownership through intermediaries. If the nominal one-year holding requirement and the record holder requirement are eliminated as requested by the proposal, the Company could be subject to regular disruptions by special-interest, short-term shareholder groups with agendas that are not in the best interests of the 10% threshold in Article Tenth) for a periodCompany or our shareholders, and such disruptions would unnecessarily divert our Board’s and management’s attention from their primary focus of five years following the interested shareholder’s becoming such.leading and operating our business. Such a business combination would be permitted where it is approved bydiversion could potentially operate against the boardbest interests of directors beforeour shareholders overall, in order to serve the interested shareholder’s becoming such. Covered business combinations include certain mergers and consolidations, dispositions of assets or stock, plans for liquidation or dissolution, reclassifications of securities, recapitalizations and similar transactions. Furthermore, New York corporations may not engage at any time with any interested shareholder in a business combination other than: (i) a business combination approved by the board of directors before the stock acquisition, or where the acquisitionnarrow interests of the stock had been approved byshort-term, activist shareholders requesting a special meeting to advance their own special interests.
2023 PROXY STATEMENT 82
Convening a special meeting of shareholders requires a significant commitment of Company time and resources and would divert Board and management time away from overseeing the board of directors before the stock acquisition; (ii) a business combination approved by the affirmative voteday-to-day operations of the holdersCompany. Accordingly, given the substantial burdens and costs, special meetings should be limited to extraordinary events and circumstances. By eliminating the ownership requirements as requested, a minority of short-term, activist shareholders, including in some cases shareholders that have only been owners of our outstanding common stock for one day, could use the special meeting mechanism to advance their own narrower agenda, without regard to the broader interests of the Company and its other shareholders. The Board continues to believe that our existing nominal one-year holding and record holder requirements, which afford shareholders a full and meaningful opportunity to call a special meeting, effectively balance these concerns.
The Board believes that shareholders should evaluate this proposal in the context of the Company’s robust shareholder engagement efforts, along with our strong corporate governance policies that reflect the Company’s ongoing commitment to effective governance practices and accountability to our shareholders. We encourage and facilitate regular communication with large and small shareholders about important issues relating to our business and governance and regularly incorporate feedback from those engagements into our governing documents, policies, and practices. For example, in fiscal year 2022, we solicited feedback from shareholders representing approximately 80% of our outstanding shares, seeking input on a range of compensation and governance matters. Notably, during our recent engagement during our fall shareholder outreach, no other shareholders identified the Company’s existing special meeting right or the one-year holding and record holder requirements as a concern.
Further, we have implemented numerous corporate governance measures, including through Board-adopted By-law amendments, that provide shareholders with the opportunity to have a meaningful voice in the Company’s governance. For example:
All directors are elected annually by a majority of the outstanding voting stock not beneficially ownedvotes cast in uncontested elections, and our director resignation policy requires directors to offer to resign if they fail to receive a majority of the votes cast in an uncontested election;
10 of our 11 directors standing for election at the 2023 Annual meeting are independent, and our Board is led by an independent Chairman with clearly defined, robust responsibilities;
Shareholders have a meaningful, market-standard proxy access right that permits them to include their director nominees in the interested shareholder at a meeting called for that purpose no earlier than five years after the stock acquisition; or (iii) a business combination in which the interested shareholder pays a formula price designed to ensure that all other shareholders receive at least the highest price per share that is paid by the interested shareholder and that meets certain other requirements. The Company also will continue to beCompany’s proxy statement, subject to compliance with the NYBCL provision that generally requires that Related M&A Transactions with an interested shareholder be approved by a vote of at least two-thirds of the Company’s outstanding shares.applicable By-law requirements;
As a result of the foregoing, we believe the main impact of deleting Article Tenth is to remove the restrictions (including the supermajority voting requirement) imposed by the Certificate on Related Stock Issuances with a shareholder that owns between 10% and 19.9% of the Company’s outstanding shares.
Required Vote and Recommendation
Pursuant to Article Tenth of the Certificate, approval of this proposal requires the affirmative vote of two-thirds of all outstanding shares of common stock entitled to vote on this proposal. Abstentions will not count as votes cast on this proposal. Therefore, abstentions willShareholders have the same effect asright to recommend a vote “against”candidate for election to the proposal. Additionally, broker non-votes will not be considered to have voted on this proposalBoard, and will therefore havethe Corporate Governance and Nominating Committee evaluates such recommendations using generally the same effectmethods and criteria as recommendations received from other sources; and
Shareholders have a vote “against”meaningful right to act by written consent, subject to compliance with the proposal. The individuals named as proxiesapplicable Restated Certificate of Incorporation and By-law requirements.
For these reasons, the Board continues to believe that it is not necessary or in our shareholders’ best interest to modify our existing special meeting threshold, which provides appropriate and reasonable limitations on the enclosed proxy card will vote your proxy “FOR” this proposal unless you instruct otherwise on the proxy.
If this proposal is approved by the Company’s shareholders, we will restate the Certificateright to incorporate the approved Amendment as set forth in Appendix A following the annual meeting, which amendment will become effective upon acceptance of the filing by the Secretary of State of the State of New York. If the proposal does not receive the requisite vote, the Amendment will not be implemented and Article Tenth will continue to apply.call a special meeting.
| The Board recommends that you vote “ | |||
20212023 PROXY STATEMENT 72 83
The Company knows of no other matters to be submitted to the shareholders at the Annual Meeting. If any other matters are properly brought before the shareholders at the Annual Meeting, it is the intention of the persons named on the enclosed proxy card to vote the shares represented thereby on such matters in accordance with their best judgment.
20212023 PROXY STATEMENT 73 84
We are providing these proxy materials to shareholders beginning on April 9, 202113, 2023, in connection with the solicitation by the Board of proxies to be voted at the Annual Meeting, which will be held on May 20, 2021,25, 2023, and at any adjournments or postponements of this scheduled meeting.
We may furnish proxy materials, including this proxy statement and the Company’s annual report for the year ending December 31, 2020,2022, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), which was mailed to most of our shareholders, will explain how you may access and review the proxy materials and how you may submit your proxy on the Internet. If you would like to receive a paper or electronic copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability. Shareholders who requested paper copies of proxy materials or previously elected to receive proxy materials electronically did not receive the Notice of Internet Availability and are receiving the proxy materials in the format requested.
This proxy statement and the Company’s annual report for the year ending December 31, 20202022, are available electronically on our hosted website at www.proxyvote.com.https://www.proxyvote.com.
To access and review the materials made available electronically:
Go tohttps://www.proxyvote.com and input the 16-digit control number from the Notice of Internet Availability or proxycard.
Click the “2021“2023 Proxy Statement” in the right column.
Have your proxy card or voting instructions available.
We encourage you to review all of the important information contained in the proxy materials before voting.
The Company bears the full cost of soliciting proxies, which will be conducted primarily by mail. The Company has also retained Alliance Advisors to aid in the solicitation of proxies by mail, telephone, facsimile, e-mail and personal solicitation and will request brokerage houses and other nominees, fiduciaries and custodians to forward soliciting materials to beneficial owners of the Company’s common stock. For these services, the Company will pay Alliance Advisors a fee of $9,500$12,500 plus reimbursement for reasonable out-of-pocket expenses. Brokerage firms and other custodians, nominees and fiduciaries are reimbursed by the Company for reasonable out-of-pocket expenses that they incur to send proxy materials to shareholders and solicit their votes. In addition to this mailing, proxies may be solicited, without extra compensation, by our officers and employees, by mail, telephone, facsimile, electronic mail and other methods of communication.
To reduce the expenses of delivering duplicate proxy materials, we deliver one Notice of Internet Availability and, if applicable, annual report and proxy statement, to multiple shareholders sharing the same mailing address unless otherwise requested. We will promptly send a separate annual report and proxy statement to a shareholder at a shared address upon request at no cost. Shareholders with a shared address may also request that we send a single copy in the future if we are currently sending multiple copies to the same address.
20212023 PROXY STATEMENT 74 85
Requests related to delivery of proxy materials may be made by calling Investor Relations at (972) 443-6500 or writing to our principal executive offices at Flowserve Corporation, Attention: Investor Relations, 5215 N. O’Connor Blvd., Suite 2300,700, Irving, Texas 75039. Shareholders who hold shares in “street name” (as described below) may contact their brokerage firm, bank, broker-dealer or similar organization to request information about this “householding” procedure.
Shareholders of record at the close of business on March 26, 202128, 2023 (the “Record Date”) are entitled to vote at the Annual Meeting. As of the Record Date, 131,147,426 shares of common stock were issued and outstanding (excluding treasury shares). Each shareholder is entitled to one vote for each share owned.
The following table sets forth the voting standards for each proposal being voted on at the Annual Meeting and the Board’s recommendations.
Proposal | Board
| Required | Effect of... | |||
Abstentions | Broker
any | |||||
1. Election of directors | For each nominee | Majority of the votes cast | No effect | No effect | ||
2. Advisory vote to approve executive compensation | For | Majority of the votes cast | No effect | No effect | ||
3. Advisory vote on the frequency of future advisory votes to approve executive compensation | 1 Year | Majority of the votes cast | No effect | No effect | ||
4. Ratification of auditors | For | Majority of the votes cast | No effect |
| ||
|
|
| Against |
| No effect | No effect |
Shares that are properly voted via the Internet or by telephone or for which proxy cards are properly executed and returned will be voted at the Annual Meeting in accordance with the directions given or, in the absence of directions, will be voted in accordance with the Board’s recommendations above. Although the Board expects that the nominees will be available to serve as directors, if any of them should be unable or for good cause unwilling to serve, the Board may decrease the size of the Board or may designate substitute nominees, and the proxies will be voted in favor of any such substitute nominees.
The Company knows of no other matters to be submitted to the shareholders at the Annual Meeting. If any other matters properly come before the shareholders at the Annual Meeting, it is the intention of the persons named on the enclosed proxy card to vote the shares represented thereby on such matters in accordance with their best judgment.
If your shares are held through a broker, your vote instructs the broker how you want your shares to be voted. If you vote on each proposal, your shares will be voted in accordance with your instructions. Under the rules of the NYSE,If brokers do not receive specific instructions, brokers may in some cases vote shares they hold in “street name” on behalf of beneficial owners who have not voted with respect to certain discretionary matters. The proposal to ratify the appointment of PricewaterhouseCoopers LLP (Proposal Three) is considered a discretionary matter, so brokers may vote shares on this matter in their discretion, if no voting instructionsbut are received. However, the other proposals are NOT considered discretionary matters, so brokers have no discretionnot permitted to vote shares for which noon certain proposals and may elect to not vote on any of the proposals unless you provide voting instructions are received, and no vote will be cast ifinstructions. If you do not provide voting instructions and the broker elects to vote your shares on those items (this is commonly referred to assome but not all matters, it will result in a “broker non-vote”). for the matters on which the broker does not vote. Abstentions occur when you provide voting instructions but instruct the broker to abstain from voting on a particular matter instead of voting for or against the matter. Abstentions and broker non-votes are not considered as votes cast and will not be counted in determining the outcome of the vote on the election of directors or on any of the other proposals. WethereforeurgeyoutovoteonALLvotingitems.
20212023 PROXY STATEMENT 75 86
A quorum is necessary to conduct business at the Annual Meeting. The presence, in person or by proxy, of at least a majority of the total number of outstanding shares of common stock constitutes a quorum. Abstentions, withheld votes, and broker non-votes are counted as present at the meeting for purposes of determining a quorum.
If your shares are held by a broker, bank or other nominee (i.e., in “street name”), you will receive instructions from your nominee, which you must follow in order to have your shares voted. “Street name” shareholders who wish to vote online during the Annual Meeting and whose voting instruction form or Notice of Internet Availability indicates that they may vote those shares through https://www.proxyvote.com may attend and vote at the Annual Meeting at https://www.virtualshareholdermeeting.com/FLS2021 FLS2023by entering the 16-digit control number indicated on that voting instruction form or Notice of Internet Availability and other information requested on the log-in page. “Street name” shareholders who did not receive a 16-digit control number should contact their bank, broker or other nominee at least five days before the Annual Meeting and obtain a “legal proxy” to be able to participate in or vote online at the meeting.
Ifyouholdyoursharesinyourownnameasaholderofrecord,, you may vote your shares using one of the methods described below:
Vote by InternetinAdvanceoftheAnnualMeeting. You can vote via the Internet by going tohttps://www.proxyvote.com and following the on-screen instructions. Internet voting is available 24 hours a day, 7 days a week, until 11:59 p.m., Eastern Time, on May 19, 2021.24, 2023. Have your proxy card available when you access the Internet website.
Vote by TelephoneinAdvanceoftheAnnualMeeting. If you received paper copies of the proxy materials, you can vote by telephone by calling toll-free to 1-800-690-6903 from the United States and Canada and following the voice instructions. Have your proxy card available when you place your telephone call. Telephone voting is available 24 hours a day, 7 days a week, until 11:59 p.m., Eastern Time, on May 19, 2021.24, 2023.
Vote by MailinAdvanceoftheAnnualMeeting. If you received paper copies of the proxy materials, you may mark the enclosed proxy card, sign and date it and return it to Broadridge in the enclosed envelope as soon as possible before the Annual Meeting. Your signed proxy card must be received by Broadridge prior to May 25, 2023, the date of the Annual Meeting for your vote to be counted at the Annual Meeting. Please note that if you vote by Internet or telephone, you do not need to return a proxy card.
VoteOnlineDuringtheAnnualMeeting. You may attend the Annual Meeting virtually and vote online at https://www.virtualshareholdermeeting.com/FLS2021FLS2023 by entering the 16-digit control number provided on your proxy card, voting instruction form or Notice of Internet Availability and other information requested on the log-in page.
The Governor of the State of New York has issued several temporary executive orders permitting New York corporations to hold virtual only shareholder meetings in light of the COVID-19 pandemic. In addition, on March 17, 2021, the New York State Legislature approved amendments to New York law that, if signed by the Governor, would permit New York corporations to hold virtual-only shareholder meetings this year. As such, we intend to hold the Annual Meeting solely by means of remote communications with no in-person location if permitted by New York law or executive order as of the date of the Annual Meeting. In the event a solely virtual meeting is not permitted as of such date, we may provide a venue for an in-person annual meeting, in addition to virtual participation. In that case, we will notify our shareholders in advance on our website (ir.flowserve.com) and by issuing a press release and filing it as additional proxy materials with the Securities and Exchange Commission and on www.proxyvote.com. Such additional materials will also note any additional safety precautions implemented for attendance at an in-person meeting in light of the COVID-19 pandemic.
How do I vote if I participate in the Flowserve Corporation Retirement Savings Plan?
If you are a participant in the Flowserve Corporation Retirement Savings Plan, your vote serves as a voting instruction to the trustee for this plan.
2021 PROXY STATEMENT 76
To be timely, your vote by telephone or Internet must be received by 11:59 p.m., Eastern Time, on May 19, 2021.22, 2023. If you do not vote by telephone or Internet, please return your proxy card as soon as possible.
If you vote in a timely manner, the trustee will vote the shares as you have directed.
If you do not vote in a timely manner, the trustee will vote your shares in the same proportion as the shares voted by participants who timely return their cards to the trustee.
You may revoke your proxy at any time before it has been exercised at the Annual Meeting by:
timely mailing in a revised proxy dated later than the prior submitted proxy;
timely notifying the Corporate Secretary in writing that you are revoking your proxy;
2023 PROXY STATEMENT 87
timely casting a new vote by telephone or the Internet; or
attending the Annual Meeting virtually and voting online (and by following the instructions under “How do I vote?”), including by entering your 16-digit control number).
Broadridge, our independent inspector of elections for the Annual Meeting, will tabulate voted proxies.
Shareholders as of the record date will be able to participate in the Annual Meeting virtually. Shareholders attending the Annual Meeting will have the opportunity to cast their votes online during the meeting, by following the instructions provided under “How do I vote?”, and ask questions of management and our directors during the question and answer portion of the Annual Meeting, as described under “May I ask questions prior to or during the Annual Meeting?”. Online check-in will be available approximately 15 minutes before the meeting starts. We encourage you to allow ample time for check-in procedures.
A guest log-in option will be available in listen-only mode. Anyone wishing to do so may go to https://www.virtualshareholdermeeting.com/FLS2021FLS2023 and enter as a guest. Shareholders who attend the Annual Meeting online as a guest will not be able to participate in, vote or ask questions during the Annual Meeting.
We will also broadcast the Annual Meeting as a live audio webcast at www.flowserve.comir.flowserve.com under the “Investors—Events“Events & Presentations” section.
Shareholders as of the record date that receive a 16-digit code on their proxy card, voting instruction form or Notice of Internet Availability (including “street name” shareholders who subsequently obtain a legal proxy and 16-digit control number) may submit questions in advance of the meeting, beginning on May 6, 2021,11, 2023, by following the instructions at https://www.proxyvote.com.
Shareholders as of the record date who attend and participate in the virtual Annual Meeting at https://www.virtualshareholdermeeting.com/FLS2021FLS2023 using their 16-digit control number (as described above) will have an opportunity to submit questions online during the meeting. Shareholders attending the meeting online who do not log-in to the virtual meeting portal with their 16-digit control number and other information requested on the log-in page may not ask questions or vote their shares during the meeting.
Beginning on May 11, 2023, we will post meeting rules of conduct at https://www.proxyvote.com, which will set out the rules that will govern shareholders’ participation in the Annual Meeting. The rules of conduct will provide that each shareholder will be limited to a total of three questions of no more than one minute each in order to allow sufficient time to address as many relevant questions that are submitted as possible. We will answer questions relevant to meeting matters that comply with the meeting rules of conduct during the Annual Meeting, subject to time constraints.
Questions related to personal matters, that are not pertinent to Annual Meeting matters, or that contain derogatory references to individuals, use offensive language, or are otherwise out of order or not suitable for the conduct of the Annual Meeting will not be addressed during the meeting. If we receive substantially
2021 PROXY STATEMENT 77
similar questions, we will group such questions together and provide a single response to avoid repetition. If there are questions pertinent to Annual Meeting matters that cannot be answered during the Annual Meeting due to time constraints, management will post answers to such questions at https://ir.flowserve.com following the meeting.
If you encounter any technical difficulties with the virtual meeting website on the meeting day, please call the technical support number that will be posted on the virtual meeting log-in page. Technical support will be available starting at 11:00 a.m. central daylight time and until the meeting has finished.
2023 PROXY STATEMENT 88
A replay of the meeting will be made available on our website at www.flowserve.comhttps://ir.flowserve.com under the “Investors—Events“Events & Presentations” section after the meeting.
We intend to announce the preliminary voting results of the proposals at the Annual Meeting and to disclose final voting results in a Form 8-K to be filed with the SEC no later thanwithin four business days following the Annual Meeting (or, if final results are not available at the time, within four business days of the date on which final results become available).
You may order a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2022, free of charge, or request other information by mail addressed to:
Flowserve Corporation
5215 N. O’Connor Blvd.,
Suite 2300
700
Irving, Texas 75039
Attention: Investor Relations
This information is also available free of charge on the SEC’s website, https://www.sec.gov, and our website, www.flowserve.comhttps://ir.flowserve.com.
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), certain shareholder proposals may be eligible for inclusion in our 20222024 proxy statement. These shareholder proposals must comply with the requirements of Rule 14a-8, including a requirement that shareholder proposals be received no later than 6:00 p.m. CDT on December 10, 2021.15, 2023. All proposals should be addressed to the Corporate Secretary at the address below. We strongly encourage any shareholder interested in submitting a proposal to contact the Corporate Secretary in advance of this deadline to discuss the proposal. Submitting a shareholder proposal does not guarantee that we will include it in our proxystatement.
In order for an eligible shareholder or group of shareholders to nominate a director nominee for election at our 20222024 Annual Meeting of shareholders pursuant to the proxy access provision of our By-Laws, the shareholder must submit notice of such nomination and other required information in writing between November 10, 202115, 2023 and December 10, 2021.15, 2023. If, however, the 20222024 Annual Meeting is held more than 30 days before or more than 60 days after the anniversary of the 20212023 Annual Meeting, the shareholder must submit any such notice and other required information between (i) 150 calendar days prior to the 20222024 Annual Meeting and (ii) the later of 120 calendar days prior to the 20222024 Annual Meeting or 10 days following the date on which the date of the 20222024 Annual Meeting is first publicly announced. The nomination and supporting materials must also comply with the requirements set forth in our By-Laws for inclusion of director nominees in the proxy statement.
2021 PROXY STATEMENT 78
Alternatively, under the Company’s By-Laws, if a shareholder does not want to submit a proposal for inclusion in our proxy statement but wants to introduce it at our 20222024 Annual Meeting, or intends to nominate a person for election to the Board directly (rather than by inclusion in our proxy statement or by recommending such person as a candidate to our CG&N Committee) the shareholder’s notice must be delivered to the Corporate Secretary at the address below no earlier than January 20, 202226, 2024 and no later than February 19, 2022.25, 2024. If, however, the 20222024 Annual Meeting is held more than 30 days before or more than 60 days after the anniversary of the 20212023 Annual Meeting, the shareholder must submit any such notice between (i) 120 calendar days prior to the 20222024 Annual Meeting and (ii) the later of 90 calendar days prior to the 20222024 Annual Meeting or 10 days following the date on which the date of the 20222024 Annual Meeting is publicly announced.
2023 PROXY STATEMENT 89
The shareholder’s submission must be made by a registered shareholder on his or her behalf or on behalf of a beneficial owner of the shares and must include detailed information specified in our By-Laws concerning the proposal or nominee, as the case may be, and detailed information as to the shareholder’s interests in Company securities. In addition, the deadline for providing notice to the Company under Rule 14a-19, the SEC’s universal proxy rule, of a shareholder’s intent to solicit proxies in support of nominees submitted under the Company’s advance notice bylaws is March 26, 2024 (or, if the 2024 Annual Meeting is called for a date that is more than 30 days before or more than 30 days after such anniversary date, then notice must be provided not later than the close of business on the later of 60 calendar days prior to the 2024 Annual Meeting or the 10th calendar day following the day on which public announcement of the 2024 Annual Meeting is first made by the Company). The notice requirement under Rule 14a-19 is in addition to the applicable advance notice requirements under our By-Laws as described above.
At the 20222024 Annual Meeting, we will not entertain any proposals or nominations that do not meet these requirements other than shareholder nominations eligible to be included in our 20222024 proxy statement as described above.
If the shareholder does not comply with the requirements of Rule 14a-4(c)(1) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such shareholder proposal or nomination. The Company’s By-Laws are posted on the investor relations portion of our website at www.flowserve.comhttps://ir.flowserve.com under the “Investors—Corporate Governance”“Corporate Governance—Documents & Charters” caption. To make a submission or to request a copy of the Company’s By-Laws, shareholders should contact our Corporate Secretary at our principal executive offices at the following address:
Flowserve Corporation
5215 N. O’Connor Blvd.,
Suite 2300
700
Irving, Texas 75039
Attention: Corporate Secretary
We strongly encourage shareholders to seek advice from knowledgeable legal counsel and contact the Corporate Secretary before submitting a proposal or a nomination.
Standards of measurement and performance made in reference to our environmental, social, governance and other sustainability plans and goals may be based on evolving protocols and assumptions which may change or be refined. Additionally, website links included in this proxy statement are for convenience only. Information contained on or accessible through such website links is not incorporated by reference herein and does not constitute a part of this proxy statement.
20212023 PROXY STATEMENT 79 90
Under Section 807 of the Business Corporation Law
Pursuant to the provisions of Section 807 of the Business Corporation Law, I, the undersigned officer of FLOWSERVE CORPORATION, a New York corporation (the “Corporation”), do hereby certify:
(Amounts in thousands, except per share data) | Year Ended December 31, 2022 | ||||||||||
As Reported | Realignment(1) | Other Items | As Adjusted |
| |||||||
Sales | $ | 3,615,120 | $ | — |
| $ | — |
| $ | 3,615,120 |
|
Gross profit |
| 994,295 |
| (355) |
|
| (13,490) | (3) |
| 1,008,140 |
|
Gross margin |
| 27.5% |
| — |
|
| — |
|
| 27.9% |
|
Selling, general and administrative expense |
| (815,545) |
| 520 |
|
| (13,591) | (4) |
| (802,474) |
|
Net earnings from affiliates |
| 18,469 |
| — |
|
| — |
|
| 18,469 |
|
Operating income |
| 197,219 |
| 165 |
|
| (27,081) |
|
| 224,135 |
|
Operating income as a percentage of sales |
| 5.5% |
| — |
|
| — |
|
| 6.2% |
|
Interest and other expense, net |
| (42,843) |
| — |
|
| 9,694 | (5) |
| (52,537) |
|
Earnings before income taxes |
| 154,376 |
| 165 |
|
| (17,387) |
|
| 171,598 |
|
(Provision for) benefit from income taxes |
| 43,639 |
| 1,799 | (2) |
| 59,689 | (6) |
| (17,849) |
|
Tax Rate |
| -28.3% |
| -1090.3% |
|
| 343,3% |
|
| 10.4% |
|
Net earnings attributable to | $ | 188,689 | $ | 1,964 |
| $ | 42,302 |
| $ | 144,423 | (a) |
Operating cash flow |
|
|
|
|
|
|
|
| $ | (40,010) |
|
Less: Capital expenditures |
|
|
|
|
|
|
|
|
| (76,287) |
|
Free cash flow |
|
|
|
|
|
|
|
| $ | (116,297) | (b) |
As adjusted free cash flow |
|
|
|
|
|
|
|
|
| -81% |
|
Notes: (1) Represents realignment expense incurred as a result of realignment programs. (2) Includes tax impact of items above and reversal of $2.1 million realignment exit tax. (3) Represents the $18.2 million reserve of Russia related financial exposures and reversals of $4.7 million of expenses that were adjusted for Non-GAAP measures in previous periods. (4) Represents the $15.7 million reserve of Russia related financial exposures, a $3.0 million discrete asset write-down, and reversals of $5.1 million of expenses that were adjusted for Non-GAAP measures in previous periods. (5) Represents below-the-line foreign exchange impacts. (6) Includes tax impact of items above and release of $59.3 million of tax valuation allowance. |
The name of the Corporation is Flowserve Corporation. The name under which the Corporation was formed is Duriron Castings Company.
The Certificate of Incorporation of the Corporation was filed by the Department of State on May 1, 1912.
The amendments to the Certificate of Incorporation effected by this Certificate are as follows:
Article TENTH is hereby deleted from the Certificate of Incorporation, which removes the requirement for an affirmative vote of the holders of at least two thirds of all outstanding shares of capital stock entitled to vote thereon to authorize, adopt or approve certain actions.
Prior Articles ELEVENTH, TWELFTH, THIRTEENTH, and FOURTEENTH of the Certificate of Incorporation are hereby renumbered as TENTH, ELEVENTH, TWELFTH, and THIRTEENTH, respectively, as a result of the amendments noted above and corresponding renumbering and clarifying changes in the Certificate of Incorporation are also hereby made.
To accomplish the foregoing amendments, the text of the Certificate of Incorporation is hereby restated as amended in its entirety to read as set forth in the Certificate of Incorporation of the Corporation as hereinafter restated.
In accordance with Section 803(a) of the Business Corporation Law, this amendment to the Certificate of Incorporation was duly authorized by the board of directors and by a vote of a two thirds of all outstanding shares entitled to vote thereon at a meeting of shareholders held on May 20, 2021.
The restatement of the Certificate of Incorporation herein provided for was authorized by the vote of holders of outstanding shares of the Corporation entitled to vote on the said restatement of the Certificate of Incorporation, having not less than the minimum requisite proportion of votes.
The text of the Certificate of Incorporation is hereby restated in its entirety to read as follows:
FIRST: The name of the corporation is Flowserve Corporation.
SECOND: The purposes for which the corporation is formed are as follows:
To manufacture, fabricate, cast, machine, mold, develop, process, assemble, purchase or otherwise acquire, sell, lease or otherwise dispose of, and in all ways handle and deal in any or all of the following, and to carry on any trade or business incident thereto, connected therewith or in furtherance thereof:
Pumps, valves, pipe and fittings, filters, anodes, fans, heat exchangers, castings, motors and chemical and other process equipment of all kinds;
All kinds of equipment, castings, molded products, articles and supplies used or useful in the manufacturing, transferring, handling or disposal of corrosive or erosive compounds, liquids, or gases or in controlling corrosive or erosive environments of any kind;
All kinds of equipment, components, parts, articles and supplies used or useful in controlling friction or any other mechanical property, function, action or performance or to seal, lubricate or otherwise control or promote movement or flow of solids, liquids and gases of every kind or nature;
Metals, metallurgical alloys and any article in the manufacture or composition of which any alloy or metallurgical compound is a factor;
20212023 PROXY STATEMENT A-1 91
(Amounts in thousands, except per share data) | Year Ended December 31, 2021 | ||||||||||
As Reported | Realignment(1) |
| Other Items |
| As Adjusted |
| |||||
Sales | $ | 3,541,060 | $ | — |
| $ | — |
| $ | 3,541,060 |
|
Gross profit |
| 1,049,725 |
| (16,844) |
|
| — |
|
| 1,066,568 |
|
Gross margin |
| 29.6% |
| — |
|
| — |
|
| 30.1% |
|
Selling, general and administrative expense |
| (797,076) |
| (5,646) |
|
| — |
|
| (791,431) |
|
Gain on sale of business |
| 1,806 |
| — |
|
| 1,806 | (3) |
| — |
|
Net earnings from affiliates |
| 16,304 |
| — |
|
| — |
|
| 16,304 |
|
Operating income |
| 270,759 |
| (22,490) |
|
| 1,806 |
|
| 291,441 |
|
Operating income as a percentage of sales |
| 7.6% |
| — |
|
| — |
|
| 8.2% |
|
Interest and other expense, net |
| (137,171) |
| — |
|
| (75,188) | (4) |
| (61,982) |
|
Earnings before income taxes |
| 133,588 |
| (22,490) |
|
| (73,382) |
|
| 229,459 |
|
(Provision for) benefit from income taxes |
| 2,594 |
| 7,070 | (2) |
| 33,522 | (5) |
| (37,997) |
|
Tax Rate |
| -1.9% |
| 31.4% |
|
| 45.7% |
|
| 16.6% |
|
Net earnings attributable to Flowserve Corporation | $ | 125,949 | $ | (15,420) |
| $ | (39,860) |
| $ | 181,229 | (a) |
Operating cash flow |
|
|
|
|
|
|
|
| $ | 250,119 |
|
Less: Capital expenditures |
|
|
|
|
|
|
|
|
| (54,936) |
|
Free cash flow |
|
|
|
|
|
|
|
| $ | 195,183 | (b) |
As adjusted free cash flow |
|
|
|
|
|
|
|
|
| 108% |
|
Notes: (1) Represents realignment expense incurred as a result of realignment programs. (2) Includes tax impact of items above and realignment related tax release. (3) Represents final settlement gain on sale of business in 2018. (4) Represents below-the-line foreign exchange impacts and $47.7 million of expense as a result of early extinguishment of debt and duplicate interest expense. (5) Includes tax impact of items above and $17.9 million benefit related to legal entity restructuring of foreign holding companies.
|
Non-metallic molded and machined products of all compositions and types and chemicals, chemical compounds and related products of all kinds, including any article in the manufacture or composition of which chemicals, chemical compounds or related products are a factor.
To purchase or otherwise acquire, hold, own, sell or otherwise dispose of real property, improved or unimproved, and personal property, tangible or intangible, including, without limitation, goods, wares and merchandise of every description and the securities and obligations of any issuer.
In addition to the foregoing, the purpose for which the corporation is formed is to engage in any lawful act or activity; provided, however, the corporation is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency or other body without such consent or approval first being obtained.
THIRD: The aggregate number of shares which the corporation shall have authority to issue is 306,000,000 of which 1,000,000 shares, of the par value of $1.00 each, shall be Preferred Stock and 305,000,000 shares, of the par value of $1.25 each, shall be Common Stock. The Preferred Stock may be issued from time to time in one or more series with such distinctive designations as shall distinguish the shares thereof from the shares of all other series and (i) may have such number of shares to constitute each series, which number may be from time to time increased or decreased, but not below the number of shares thereof then outstanding; (ii) may have such voting powers, full or limited, or may be without voting powers; (iii) may be subject to redemption at such time or times and at such prices and on such terms; (iv) may have the benefit of a sinking fund to be applied to the purchase or redemption of such shares, in such amount and applied in such manner; (v) may be entitled to receive dividends (which may be cumulative or noncumulative) at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends on any other class or classes or series of stock of the corporation; (vi) may have such rights upon the dissolution of, or upon any distribution of assets of, the corporation; (vii) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the corporation at such price or prices or at such rates of exchange, and with such adjustments; and (viii) shall have such other relative rights, preferences and limitations, all as shall hereafter be fixed by the resolution or resolutions providing for the issue of such shares of Preferred Stock from time to time adopted by the Board of Directors of the corporation pursuant to authority so to do which is hereby expressly vested in said Board of Directors.
FOURTH: No holder of shares of any class of the corporation shall have any preemptive rights with respect to, or any preemptive rights to purchase or subscribe for, any shares of any class or other securities of any kind of the corporation.
FIFTH: The office of the corporation is to be located in New York County, State of New York.
SIXTH: The corporation hereby designates the Secretary of State of New York as its agent upon whom process in any action or proceeding against it may be served within the State of New York and the address to which the Secretary of State shall mail a copy of any process against the corporation which may be served upon him pursuant to law is:
c/o CT Corporation System28 Liberty StreetNew York, New York 10005
SEVENTH: Its duration is to be perpetual.
EIGHTH: The number of Directors of the corporation shall be such as from time to time shall be fixed by the By-Laws of the corporation, but shall not be less than three. Any of the following actions may be taken by the shareholders of the corporation only by vote of the holders of a majority of all outstanding shares entitled to vote thereon: (a) adoption, amendment or repeal of any by-law, or any provision of this Certificate of Incorporation, relating to (i) the number, classification and terms of office of Directors, (ii) the filling of newly created directorships and vacancies occurring in the Board of Directors, (iii) the removal of Directors, (iv) the power of the Board of Directors to adopt amend or repeal by-laws of the corporation or the vote of the Board of Directors required for any such adoption, amendment or repeal; or (b) any amendment or repeal of this Article EIGHTH. Nothing contained in this Article EIGHTH shall in any way limit the power of the Board of Directors to adopt, amend or repeal by-laws of the corporation.
20212023 PROXY STATEMENT A-2 92
NINTH: Beginning at the 2013 annual meeting of shareholders, the directors elected to succeed those directors whose terms expire at that meeting shall be elected to a term of office to expire at the 2014 annual meeting of shareholders. At the 2014 annual meeting of shareholders, the directors elected to succeed those directors whose terms expire at that meeting shall be elected to a term of office to expire at the 2015 annual meeting of shareholders. At the 2015 annual meeting of shareholders, and at each annual meeting of shareholders thereafter, each director shall be elected for a term expiring at the next annual meeting of shareholders and until such director’s successor shall have been elected and qualified, except in the case of the director’s prior death, resignation, retirement, disqualification or removal from office.
TENTH: Subject to the rights of the holders of any series of preferred stock, special meetings of the shareholders of the corporation, for any purpose or purposes, unless otherwise prescribed by statute, may be called only by (i) the Board of Directors, (ii) the Corporate Governance & Nominating Committee of the Board of Directors, (iii) the Chairman of the Board of Directors, the President or the
Chief Executive Officer, or (iv) the Secretary at the written request in proper form of one or more record holders having an aggregate “net long position” (defined below for purposes of this Article TENTH) of at least twenty-five percent (25%) of the outstanding Common Stock of the corporation, and having held such net long position continuously for at least one year prior to the date such request is delivered to the corporation (the “Requisite Special Meeting Percent”).
For purposes of this Article TENTH and determining the Requisite Special Meeting Percent, “net long position” shall be determined with respect to each requesting holder in accordance with the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934 (the “Exchange Act”) as in effect on June 4, 2012, provided that:
for purposes of such definition, in determining such holder’s “short position,” the reference in such Rule to (A) “the date that a tender offer is first publicly announced or otherwise made known by the bidder to the holders of the security to be acquired” shall be the date of the relevant special meeting request and all dates in the one year period prior thereto, and (B) the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Common Stock of the corporation on the New York Stock Exchange on such corresponding date (or, if such date is not a trading day, the next succeeding trading day), (C) the “person whose securities are the subject of the offer” shall refer to the corporation, and (D) a “subject security” shall refer to the issued and outstanding Common Stock of the corporation; and
the net long position of such holder shall be reduced by the number of shares as to which such holder does not, or will not, have the right to vote or direct the vote at such special meeting or as to which such holder has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares.
Whether the requesting holders have complied with the requirements of this Article TENTH shall be determined in good faith by the Board of Directors, which determination shall be conclusive and binding on the corporation and the shareholders. The procedures for calling a special meeting of the shareholders of the corporation shall be established by the Board of Directors in the By-Laws of the corporation.
ELEVENTH: Subject to the rights of the holders of any series of preferred stock, all actions required or permitted to be taken by the shareholders of the corporation at an annual or special meeting of the shareholders may be effected without a meeting by the written consent of the holders of Common Stock of the corporation entitled to vote thereon pursuant to Section 615 of the New York Business Corporation Law (a “Consent”); provided that no such action may be taken except in accordance with the provisions of this Article ELEVENTH, the By-Laws of the corporation and applicable law.
RecordDate. The record date for determining such shareholders entitled to consent to corporate action in writing without a meeting shall be as fixed by the Board of Directors or as otherwise established under this Article ELEVENTH. Any holder of Common Stock of the corporation seeking to have the shareholders authorize or take corporate action by Consent shall, by written request addressed to the Secretary and delivered to the corporation’s principal executive offices and signed by holders of record at the time such request is delivered representing an aggregate “net long position” (defined below for purposes of this Article ELEVENTH) of at least twenty-five percent (25%) of the outstanding Common Stock of the corporation, provided that such “net long position” has been held
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continuously for at least one year prior to the date such request is delivered to the corporation (the “Requisite Consent Percent”), request that a record date be fixed for such purpose. The written request must contain the information set forth in paragraph (b) of this Article ELEVENTH. Following delivery of the request, the Board of Directors shall, by the later of (i) 20 days after delivery of a valid request to set a record date and (ii) 5 days after delivery of all information required by the corporation to determine the validity of the request for a record date or to determine whether the action to which the request relates may be taken by Consent under paragraph (c) of this Article ELEVENTH, determine the validity of the request and whether the request relates to an action that may be taken by Consent and, if appropriate, adopt a resolution fixing the record date for such purpose. The record date for such purpose shall be no more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date such resolution is adopted. If a request complying with the second and third sentences of this paragraph (a) has been delivered to the Secretary but no record date has been fixed by the Board of Directors by the date required by the preceding sentence, the record date shall be the first date on which a signed Consent relating to the action taken or proposed to be taken by Consent is delivered to the corporation in the manner described in paragraph (f) of this Article ELEVENTH; provided that, if prior action by the Board of Directors is required under the provisions of New York law, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
For purposes of this Article ELEVENTH and determining the Requisite Consent Percent, “net long position” shall be determined with respect to each requesting holder in accordance with the definition thereof set forth in Rule 14e-4 under the Exchange Act as in effect on June 4, 2012, provided that:
for purposes of such definition, in determining such holder’s “short position,” the reference in such Rule to (A) “the date that a tender offer is first publicly announced or otherwise made known by the bidder to the holders of the security to be acquired” shall be the date of the written request for a record date described in this paragraph (a) of Article ELEVENTH and all dates in the one year period prior thereto, and (B) the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Common Stock of the corporation on the New York Stock Exchange on such corresponding date (or, if such date is not a trading day, the next succeeding trading day), (C) the “person whose securities are the subject of the offer” shall refer to the corporation, and (D) a “subject security” shall refer to the issued and outstanding Common Stock of the corporation; and
the net long position of such holder shall be reduced by the number of shares as to which such holder does not, or will not, have the right to consent or direct the granting of a Consent on the effective date, if any, of the relevant Consent as determined in accordance with this Article ELEVENTH or as to which such holder has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares.
RequestRequirements. Any request required by paragraph (a) of this Article ELEVENTH (i) must be delivered by the holders of record of at least the Requisite Consent Percent, who shall not revoke such request and who shall continue to own not less than the Requisite Consent Percent through the date of delivery of Consents signed by a sufficient number of shareholders to authorize or take such action; (ii) must contain an agreement to solicit Consents in accordance with paragraph (d) of this Article ELEVENTH; (iii) must describe the action proposed to be taken by Consent of shareholders; and (iv) must contain (1) such information and representations, to the extent applicable, then required by the By-Laws of the corporation as though each such shareholder was intending to make a nomination of persons for election to the Board of Directors or to bring any other matter before a meeting of shareholders and (2) the text of the proposed action to be taken (including the text of any resolutions to be adopted by Consent); and (v) must include documentary evidence that the requesting shareholders own in the aggregate not less than the Requisite Consent Percent as of the date of such written request to the Secretary, and have held the Requisite Consent Percent continuously for one year prior to the date of such request; provided, however, that if the shareholder(s) making the request are not the beneficial owners of the shares representing at least the Requisite Consent Percent, then to be valid, the request must also include documentary evidence (or, if not simultaneously provided with the request, such documentary evidence must be delivered to the Secretary within 10 business days after the date on which the request is delivered to the Secretary) that the beneficial owners on whose behalf the request is made beneficially own at least the Requisite Consent Percent as of the date on which such request is delivered to the Secretary and have held the Requisite Consent Percent continuously for one year prior to the date
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of such request. The corporation may require the shareholder(s) submitting such request to furnish such other information as may be reasonably requested by the corporation. Any requesting shareholder may revoke its request at any time by written revocation delivered to the Secretary at the principal executive offices of the corporation. Any disposition by a requesting shareholder of any shares of Common Stock of the corporation (or of beneficial ownership of such shares by the beneficial owner on whose behalf the request was made) after the date of the request, shall be deemed a revocation of the request with respect to such shares, and each requesting shareholder and the applicable beneficial owner shall certify to the Secretary on the day prior to the record date set for the action by written consent as to whether any such disposition has occurred. If the unrevoked requests represent in the aggregate less than the Requisite Consent Percent, the Board of Directors, in its discretion, may cancel the action by written consent.
ActionsWhichMayNotBeTakenbyWrittenConsent. Shareholders are not entitled to act by Consent if (i) the record date request does not comply with this Article ELEVENTH and the By-Laws of the corporation; (ii) the action relates to an item of business that is not a proper subject for shareholder action under applicable law; (iii) the request for a record date for such action is received by the Secretary during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting; (iv) an identical or substantially similar item (a “Similar Item”), other than the election or removal of directors, was presented at a meeting of shareholders held not more than 12 months before the request for a record date is received by the Secretary; (v) a Similar Item consisting of the election or removal of directors was presented at a meeting of shareholders held not more than 90 days before the request is received by the Secretary (and, for purposes of this clause, the election or removal of directors shall be deemed a “Similar Item” with respect to all items of business involving the election or removal of directors); (vi) a Similar Item is included in the corporation’s notice of meeting as an item of business to be brought before an annual or special shareholders meeting that has been called but not yet held or that is called to be held within 60 days after the request is received by the Secretary; or (vii) such record date request was made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law.
MannerofConsentSolicitation. Holders of Common Stock of the corporation may take action by written consent only if Consents are solicited from all holders of Common Stock of the corporation entitled to vote on the matter and in accordance with applicable law.
DateofConsent. Every Consent purporting to take or authorize the taking of corporate action must bear the date of signature of each shareholder who manually signs the Consent, and no Consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated Consent delivered in the manner required by paragraph (f) of this Article ELEVENTH and not later than 120 days after the record date for determining the shareholders entitled to consent to such action, Consents signed by a sufficient number of shareholders to take such action are so delivered to the Secretary.
DeliveryofConsent. No Consents may be dated or delivered to the corporation or its registered office in the State of New York until 60 days after the delivery of a valid request to set a record date. Consents must be delivered to the corporation by delivery to its registered office in the State of New York or its principal place of business. Delivery must be made by hand or by certified or registered mail, return receipt requested. The Secretary shall provide for the safe-keeping of such Consents and any related revocations and shall promptly designate one or more persons, who shall not be members of the Board of Directors, to serve as inspector(s) (“Inspector(s)”) with respect to such Consents. The Inspector(s) shall promptly conduct a ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the action to be taken by written consent as the Secretary deems necessary or appropriate, including, without limitation, whether the shareholders of a number of shares having the requisite voting power to authorize or take the action specified in Consents have given consent. If after such investigation the Inspector(s) shall determine that the action purported to have been taken is duly authorized by the Consents, that fact shall be certified on the records of the corporation kept for the purpose of recording the proceedings of meetings of shareholders and the Consents shall be filed in such records. In conducting the investigation required by this paragraph (f), the Inspector(s) may, at the expense of the corporation, retain special legal counsel and any other necessary or appropriate professional advisors as such person or persons may deem necessary or appropriate and, to the fullest extent permitted by law, shall be fully protected in relying in good faith upon the opinion of such counsel or advisors.
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EffectivenessofConsent. Notwithstanding anything in this Certificate of Incorporation to the contrary, no action may be taken by Consent except in accordance with this Article ELEVENTH. If the Board of Directors shall determine that any request to fix a record date was not properly made in accordance with, or relates to an action that may not be effected by Consent pursuant to, this Article ELEVENTH, or the shareholder or shareholders seeking to take such action do not otherwise comply with this Article ELEVENTH, then the Board of Directors shall not be required to fix a record date and any such purported action by Consent shall be null and void to the fullest extent permitted by applicable law. No Consent shall be effective until such date as the Inspector(s) certify to the corporation that the Consents delivered to the corporation in accordance with paragraph (f) of this Article ELEVENTH, represent at least the minimum number of votes that would be necessary to take the corporate action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with New York law and this Certificate of Incorporation.ANNEX II:
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ChallengetoValidityofConsent. Nothing contained in this Article ELEVENTH shall in any way be construed to suggest or imply that the Board of Directors of the corporation or any shareholder shall not be entitled to contest the validity of any Consent or related revocations, whether before or after such certification by the Inspector(s), as the case may be, or to prosecute or defend any litigation with respect thereto.
Board-SolicitedShareholderActionbyWrittenConsent. Notwithstanding anything to the contrary set forth above, (i) none of the foregoing provisions of this Article ELEVENTH shall apply to any solicitation of shareholder action by written consent by or at the direction of the Board of Directors and (ii) the Board of Directors shall be entitled to solicit shareholder action by written consent in accordance with applicable law.
TWELFTH: The corporation hereby designates CT Corporation System, having an office at 28 Liberty Street, New York, New York 10005, as its registered agent upon whom process against it may be served.
THIRTEENTH: No director of this corporation shall be personally liable to this corporation or its shareholders for damages for any breach of duty as a director; provided, however, that, to the extent required by applicable law, the foregoing clause shall not apply to any liability of a director if a judgment or other final adjudication adverse to him establishes (i) that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law, (ii) that he personally gained in fact a financial profit or other advantage to which he was not legally entitled, or (iii) that his acts violated Section 719 of the New York Business Corporation Law. Any repeal or modification of this Article THIRTEENTH shall not adversely affect any right or protection of a director of the corporation existing hereunder with respect to any act or omission occurring prior to or at the time of such repeal or modification.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the statements made herein are true under penalties of perjury, this [__]th day of May, 2021.
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