UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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| ☐ | Soliciting Material Pursuant to §240.14a-12 | |
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Parker-Hannifin Corporation is a Fortune 250 global leader in motion and control technologies. For more than a century, the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.
| The Win Strategy™ - | The Win Strategy is Parker’s business system that defines the goals and initiatives that drive growth, transformation and success. |
| Our Values - | Our values shape our culture and our interactions with stakeholders and the communities in which we operate and live. |
| Our Purpose - | Our purpose provides inspiration and direction for our team members and highlights how we can have a positive impact on the world. |
ENABLING ENGINEERING BREAKTHROUGHS THAT
LEAD TO A BETTER TOMORROW.
Parker-Hannifin Corporation
6035 Parkland Boulevard, Cleveland, Ohio, 44124-4141
| Notice of Annual Meeting of Shareholders |
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DATE AND TIME October 25, 2023 (Wednesday) 9:00 AM EDT |
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ADDRESS Parker-Hannifin Corporation 6035 Parkland Boulevard Cleveland Ohio, 44124 |
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RECORD DATE September 1, 2023 |
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of Parker-Hannifin Corporation. The meeting will be held at our headquarters located at 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, on Wednesday, October 25, 2023, at 9:00 a.m., Eastern Time, for the following purposes:
| Voting Items | |||||
| 1 | Election of Directors |
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FOR each director nominee | ||
| 2 | Approval of the Compensation of Our Named Executive Officers on a Non-Binding, Advisory Basis |
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FOR | ||
| 3 | Ratify the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm |
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FOR | ||
| 4 | Approval of the Parker-Hannifin Corporation 2023 Omnibus Stock Incentive Plan |
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FOR | ||
| 5 | Approval of the Amended and Restated Parker-Hannifin Corporation Global Employee Stock Purchase Plan |
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FOR | ||
| 6 | Approval to advise, on a non-binding basis, on the frequency of future advisory shareholder votes to approve the compensation of our Named Executive Officers |
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FOR "every year" | ||
and to transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on September 1, 2023 are entitled to vote at the meeting. On September 1, 2023, 128,509,607 shares were outstanding and entitled to vote at the meeting. Each share is entitled to one vote. This Proxy Statement and the form of proxy are being mailed to shareholders on or about September 22, 2023. Your vote is important, so if you do not expect to attend the meeting, or if you do plan to attend but wish to vote by proxy, please mark, date, sign and return the enclosed proxy card promptly in the envelope provided or vote electronically via the internet or by telephone in accordance with the instructions on the proxy card. Please refer to the section “General Information About the Annual Meeting” for more information.
Thank you for your support of Parker-Hannifin Corporation.
By Order of the Board of Directors
Joseph R. Leonti
Secretary
September 22, 2023
| How to Vote | ||||||||||
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VOTE VIA INTERNET www.proxyvote.com |
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VOTE BY PHONE 800-690-6903 |
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VOTE BY MAIL Vote Processing c/o Broadridge 51 Mercedes Way, Edgewood, NY 11717 |
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VOTE AT THE MEETING Parker-Hannifin Corporation 6035 Parkland Boulevard Cleveland Ohio, 44124 | |||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on October 25, 2023.
This Proxy Statement, along with our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, is available free of charge on our investor relations website (www.phstock.com). |
| 2023 Proxy Statement | 1 |
| Table of Contents |
| 2 |
 |
| Our Company |
Parker-Hannifin Corporation is a Fortune 250 global leader in motion and control technologies. For more than a century, the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.
The following sections provide highlights from our fiscal year 2023 across matters of importance to our shareholders, including business and financial performance, executive compensation, our environment, social and governance ("ESG") program and shareholder engagement.
Business and Performance Highlights
Fiscal 2023 was a transformational year for us. We completed the largest acquisition in our history, closing the purchase of Meggitt PLC in September 2022. We also successfully managed the planned transition of our Chief Executive Officer, with Jennifer Parmentier becoming Parker’s Chief Executive Officer in January 2023 and Thomas Williams transitioning from the Chief Executive Officer role to Executive Chairman of the Board until December 31, 2023. We also delivered record financial performance, including record revenue and cash flow from operations all while substantially reducing the debt we took on to fund the Meggitt PLC acquisition. Against a macroeconomic backdrop of continued challenges, including inflation, supply chain constraints, and ongoing international conflict and geopolitical tensions, our unwavering commitment to The Win Strategy drove sustained profitable growth and strong financial performance as compared to our diversified industrial proxy peers. The Win Strategy continues to be the foundation of our success, helping us to further strengthen our portfolio, improve our performance and create value for our shareholders. As a result, we believe our business is better equipped than ever before to be resilient across macroeconomic cycles. Our Purpose Statement: Enabling Engineering Breakthroughs that Lead to a Better Tomorrow continued to provide inspiration and direction for our team members and represents how we can strengthen our communities and have a positive impact on the world.
Our fiscal year 2023 performance highlights include:
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| $19.1B | $3.0B | 67th YEAR | COMPLETED ACQUISITION OF MEGGITT PLC ON SEPTEMBER 12, 2022 |
| TOTAL NET SALES WERE A RECORD AT $19.1 BILLION |
CASH FLOW FROM OPERATING ACTIVITIES (CFOA) WAS 15.7% of sales AT $3.0 BILLION |
INCREASED ANNUAL DIVIDEND PER SHARE FOR THE 67TH YEAR IN A ROW |
| 2023 Proxy Statement | 3 |
Our Company
Executive Compensation Highlights
The tables below highlight the performance-based nature of our compensation program and how our program aligns with what we view as executive compensation best practices.
Elements of Executive Compensation
| Elements of Compensation | Purpose | |||||
| Fixed | Base Salary | Attracts, retains and motivates the highly-talented and values-driven individuals we need to advance the goals of The Win Strategy | ||||
| Variable/ At-Risk |
Officer Annual Cash Incentive |
Officer ACIP | The Parker Hannifin Corporation Officer Annual Cash Incentive Plan ("Officer ACIP") incentivizes executive officers to maximize segment operating income, sales revenue and cash flow margin, metrics we believe align closely with total shareholder return and overall shareholder value by focusing on key business strategies, such as profitable and sustainable sales growth, value pricing and strategic supply chain, market-driven innovation, system solutions, strong distribution channels, continuous improvement in net income, lean initiatives, inventory control, strong receivable and payable controls, and ESG-related initiatives. | |||
| Long- Term Equity Incentive |
Long Term Incentive Performance ("LTIP") Awards |
Incentivizes executive officers to maximize long-term revenue growth, earnings per share ("EPS") growth, and growth in average return on invested capital ("ROIC") by focusing on various key business strategies, such as market-driven innovation, on-time delivery of quality products, value-added services and systems, strategic supply chain, lean enterprise, value pricing and profitable growth | ||||
| Stock Incentives/ Stock Appreciation Rights ("SARs") |
Incentivizes executive officers to maximize our stock price by focusing on various key business strategies, such as sustained profitable growth and financial and operational performance that contribute to appreciation of our stock price | |||||
Executive Compensation Practices
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What We Do |
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What We Don’t Do | |
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✓Executive compensation program with pay-for-performance structure aligned with The Win Strategy
✓The target total direct compensation package for our Chief Executive Officer is a mix of 12% fixed and 88% at-risk, and for our other Named Executive Officers is an average mix of 17% fixed and 83% at-risk
✓Annual advisory vote on executive compensation with consistent high degree of approval
✓One-year minimum vesting or performance period requirements for equity incentives under our Amended and Restated 2016 Omnibus Stock Incentive Plan
✓“Claw back” policy to recover or withhold incentive-based compensation to executive officers in certain circumstances
✓Anti-hedging and anti-pledging policy for Directors and executive officers
✓Robust Stock Ownership Guidelines for executive officers and Directors |
✕Offer employment agreements to our executives
✕Offer above-market earnings on contributions to deferred compensation accounts
✕Grant stock options or SARs with an exercise price less than the fair market value of Parker’s common stock on the date of grant
✕Re-price stock options or SARs
✕Cash out underwater stock options or SARs
✕Include reload provisions in any stock option or SAR grant
✕Permit directors or employees, or their respective related persons, to engage in short sales of Parker’s stock or to trade in instruments designed to hedge against price declines in Parker’s stock
✕Permit directors or officers to hold Parker securities in margin accounts or to pledge Parker securities as collateral for loans or other obligations | |||
| 4 |
| |
Our Company
Environment, Social and Governance Highlights
Our ESG program includes a range of initiatives around corporate social responsibility and sustainability, taking into account the interests of our key stakeholders, including our shareholders, team members, customers and communities. Issues that we focus on include, among others, workplace health and safety, climate risk, water conservation, human capital management, diversity, equity and inclusion, cyber security, and business ethics and compliance. For information on Board and Committee ESG oversight responsibilities, see "Board's Role in Risk Oversight" on page 32 of this Proxy Statement.
We publish our Sustainability Report in line with Sustainability Accounting Standards Board ("SASB") and expect future reporting to be aligned with Task Force on Climate-Related Financial Disclosures ("TCFD") standards, addressing the many ways in which we apply our core technologies to make a positive impact on the world, including through our team members, social responsibility, environmental initiatives, product stewardship, and governance, ethics and compliance. Selected aspects of our most recent Sustainability Report are highlighted below.
We are proud of our corporate social responsibility and sustainability accomplishments, but recognize that best practices in ESG integration and reporting frameworks continue to evolve. While there is more work to be done, we are confident in our strategy of achieving business success through social responsibility and sustainable business practices:
Environment
| Environmental Stewardship |
We are committed to driving sustainable, long-term growth and doing so in a way that makes the world a better place.
●We have committed to achieve carbon neutral operations by 2040. To ensure continued progress in minimizing our carbon footprint, we established a series of emissions targets, which include:
●Reducing absolute emissions directly from our operations by 50% by 2030; and
●Reducing indirect absolute emissions related to materials sourcing, logistics and services by 15% by 2030, and by 25% by 2040.
●We have reported energy and emissions data to the Carbon Disclosure Project ("CDP") since 2008. | |
| Water Conservation |
●We recognize that water is becoming a critical resource and is in short supply in certain parts of the world. As a result, Parker has launched a new water conservation initiative that targets high risk and high volume facilities.
●Our goal is to implement water management best practices at 100% of sites in water-scarce locations by 2030 based on the definition by the World Resources Institute. | |
| Waste and Materials Management |
●We manage materials and waste responsibly and in accordance with applicable laws in the communities in which we operate. We have steadily reduced our hazardous waste production through the years and we have systematically upgraded our hazardous materials storage to minimize potential for releases to the environment.
●Our Simple by Design innovation methods as well as our focus on kaizen process improvements promote the reduction of waste in all aspects of our manufacturing process. |
| 2023 Proxy Statement | 5 |
Our Company
| Supplier Partnerships |
●We have implemented several supply chain initiatives to reduce our environmental footprint. This includes leveraging sustainable transport methods to reduce emissions associated with air freight, as well as transitioning to electronic documentation to reduce paper waste. Through kaizen initiatives, our team members continue to develop innovations to help achieve our environmental stewardship goals.
●Since 2013, we have been a member of the U.S. Environmental Protection Agency SmartWay® Transport Partnership aimed at identifying technologies and strategies to reduce carbon emissions and set goals and track progress towards reducing fuel consumption and improve the efficiency of freight transport.
●Our global supply chain team employs dual sourcing and other risk management strategies to ensure the availability of materials needed for production. We also require our suppliers to comply with all laws and regulations related to human rights, resource conservation and other environmental and legal requirements. | |
| Technologies Enabling a Better Tomorrow |
●Our interconnected portfolio of technologies features a broad range of highly efficient solutions engineered to improve performance and efficiency and to help end users reduce resource consumption and greenhouse gas emissions.
●We deliver components and systems that enable the adoption of cleaner and more efficient energy, electrification, light weighting and other innovations to provide a more positive, global environmental impact to companies across the industrial, mobile and aerospace markets, including:
●A comprehensive suite of engineered materials such as thermal management, coatings, adhesives and vibration control that enable more electric applications.
●A broad range of motion and control technologies to support the use of various clean energy sources such as batteries, fuel cells, hydrogen, sustainable fuels and renewable energy.
●A strong motion technology offering with electro-hydraulic, electromechanical, and pneumatic actuators, valves, pumps, motors, controllers, software and conveyance for more electric aerospace, mobile and industrial applications.
●A broad platform of filtration technologies to accelerate a cleaner and more sustainable world. |
| 6 |
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Our Company
Social
| Safety | Safety is a core value that all team members share, and our goal is to achieve a zero-incident workplace. To measure our safety progress, we have established long-term safety targets. Our goal is to have zero recordable incidents by 2030. Over the last five years, we have reduced our Incident Rate by 45% from fiscal year 2019 through fiscal year 2023. | |
| Diversity, Equity and Inclusion |
An inclusive environment is a core tenet of our values and one of our key measures of success within The Win Strategy. Our Vice President of Diversity, Equity and Inclusion ("DEI") leads an ongoing commitment to an inclusive and welcoming workplace. We also established four global DEI High Performance Teams ("HPTs") focused on Talent Attraction, Talent Development, Governance and Knowledge. Each team is led by a senior executive and tasked with improving the way we attract and develop diverse team members, design education and awareness opportunities, and define sustainable progress measures in fostering an inclusive culture.
A component of our DEI program focus is to support the development and deployment of Business Resource Groups ("BRGs"). Our first BRG, Peer W, was established in 2015 to support the attraction, development and retention of women at Parker. Peer W has grown into a well-developed global network of over 30 chapters and established a Mentoring Circles program in 2020. In 2021, we introduced and launched two additional BRGs which are the Nia Network, supporting the attraction, development and retention of Black team members, and Parker Next, dedicated to our team members' professional growth and personal development. The goal of our focus on DEI is to promote a strong, cohesive work environment that will provide us the best talent and further strengthen our organization for future success. | |
| Social Responsibility |
Our social responsibility strategy, with the support of the Parker-Hannifin Foundation, empowers team members to make a difference in the communities we call home. The Parker Foundation has three areas of focus:
●STEM EDUCATION: Supporting schools, universities and community agencies to promote access to science, technology, engineering and mathematics education, and the resources and support needed to thrive in the classroom.
●COMMUNITY NEEDS: Supporting our team members, families and neighbors by contributing to the advancement and well-being of our communities.
●SUSTAINABILITY: Supporting long-term efforts to build sustainable communities, address key societal issues and create a better tomorrow.
For nearly 70 years, the Parker-Hannifin Foundation has extended the goodwill of our team members with donations that benefit the communities where we operate. Through our Parker Foundation programs, we have donated over $80 million since 2010, including $9 million in 2023. |
| 2023 Proxy Statement | 7 |
Our Company
Governance
| Board Diversity and Composition |
Our Board of Directors is committed to sound corporate governance practices, promoting the long-term interests of our shareholders and holding itself and management accountable for performance.
The metrics included in the graphic below reflect the Board structure and composition of our thirteen current Directors. Each Director brings his or her own unique background and range of expertise, knowledge and experience, which we believe provides an optimal and diverse mix of skills and qualifications necessary for our Board to effectively fulfill its oversight responsibilities. | ||||||||
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| Board Tenure | Independence | ||||||||
| 7.8 years | 77% | ||||||||
| AVERAGE TENURE | INDEPENDENT | ||||||||
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| Age | Diversity | ||||||||
| 60.4 years | 62% | ||||||||
| AVERAGE AGE | GENDER/RACIALLY/ ETHNICALLY DIVERSE |
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 | ||||||||
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*One of our directors is both racially and ethnically diverse. Ethnicity is defined as country of birth or citizenship other than the United States. | |||||||||
| Director Experience | |||||||||
| Public Company Leadership | Manufacturing | ||||||||
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100% |
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100% |
 | ||||
| Corporate Strategy & Culture | Technology & Innovation | ||||||||
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100% |
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92% |
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| Risk Management | Finance & Accounting | ||||||||
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100% |
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92% |
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| International | Sales & Marketing | ||||||||
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92% |
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92% |
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| Industrial/Aerospace Industries | |||||||||
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92% |
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| 8 |
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Our Company
| Board and Committee Practices |
●Our Corporate Governance Guidelines and the charters of our Audit, Corporate Governance and Nominating and Human Resources and Compensation Committees expressly identify the specific areas of ESG oversight responsibility of the full Board and each Committee.
●Director retirement is mandatory (with no exceptions or conditions) after reaching age 72
●Robust stock ownership guidelines for our Directors and executive officers (all of whom are compliant with such guidelines)
●Annual Board, Committee and individual Director evaluations
●Annual review of our Chief Executive Officer by all independent Directors
●Thoughtful management of our Director's outside commitments – four do not sit on any other public company boards, six sit on one other public company board, and three sit on two other public company boards.
●Average Director attendance at all of our Board of Directors and Committee meetings was 96% and each of our Directors attended more than 86% of his or her meetings of our Board of Directors and his or her Committee meetings during fiscal year 2023
●Each Committee of our Board of Directors has a published charter that is reviewed and evaluated at least annually | |
| Shareholder Rights |
●Annual election of all Directors
●Majority voting and resignation policy for uncontested Director elections
●Proxy access permitted for eligible shareholders | |
| Board Independence |
●Board Committees are 100% comprised of independent Directors
●Independent Directors meet regularly and frequently (at least four times per year) without management | |
| Oversight of Risk |
●Our Executive Chairman of the Board and Lead Director ensure the entire Board of Directors maintains regular oversight of key risk areas, such as corporate strategy, management succession planning, cyber security, enterprise risk management, and ESG matters. For more information on the Board's oversight responsibilities, see pages 31-34 of this Proxy Statement. | |
| Guidelines and Codes of Conduct |
●Published Global Code of Business Conduct applicable to our Board of Directors
●Published Corporate Governance Guidelines |
| 2023 Proxy Statement | 9 |
Our Company
Shareholder Engagement Highlights
We actively seek and highly value feedback from our shareholders. During fiscal year 2023, in addition to our traditional investor relations outreach efforts, we proactively reached out to shareholders representing over 53% of our outstanding common stock to engage with them on ESG matters. We engaged with each shareholder that accepted our invitation.
| We Sought Input from Shareholders Representing | Company Representatives | Topics Discussed | Feedback/Actions Informed by Feedback | |||
 |
●General
Counsel and Secretary
●Investor
Relations
●Other
members of management, including our Environmental, Health and Safety ("EHS") leader |
Governance Topics
●Our commitment to performance-based executive compensation
●Compensation metrics tied to ESG
●Board refreshment and diversity
●Board composition & leadership structure
●Board risk oversight
Environmental and Social Topics
●Environmental / Climate goals and strategies
●Environmental reporting frameworks
●Human capital management matters, including labor market challenges and workplace safety incident reporting |
●Supportive of new Annual Cash Incentive Plan (ACIP) which includes ESG metrics
●Positive feedback on our climate commitments and reporting frameworks
●Enhanced director skills and diversity reporting
●Future ESG reporting to TCFD standards
|
| 10 |
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Proxy Statement Summary/Voting Roadmap |
| Item 1 – Election of Directors | |||
| Shareholder approval is sought to elect the following directors for a term that will expire at our Annual Meeting of Shareholders in 2023: | |||
|
●Lee C. Banks
●Jillian C. Evanko
●Denise Russell Flemings
●Lance M. Fritz
|
●Linda A. Harty
●Kevin A. Lobo
●Jennifer A. Parmentier |
●Joseph Scaminace
●Åke Svensson
●Laura K. Thompson |
●James R. Verrier
●James L. Wainscott
●Thomas L. Williams |
 |
The Board of Directors unanimously recommends a vote
“FOR” each of the nominees to the Board of Directors.
See page 14
for details |
| Item 2 – Proposal to Approve the Compensation of our Named Executive Officers on a Non-Binding, Advisory Basis | |||
| In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 and the related SEC rules, we are providing our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of the Named Executive Officers as disclosed in this Proxy Statement. We encourage our shareholders to carefully read this Proxy Statement in its entirety before deciding whether or not to vote for or against this Item | |||
|
|
The Board of Directors unanimously recommends a vote
“FOR” the approval of the compensation of the Named Executive Officers
as disclosed in this Proxy Statement on a non-binding, advisory basis.
See page 39
for details |
| 2023 Proxy Statement | 11 |
Proxy Statement Summary/Voting Roadmap
| Item 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm | |||
| The Audit Committee recommends ratification of its appointment of Deloitte and Touche LLP ("D&T") as the independent registered public accounting firm to audit our financial statements as of and for the fiscal year ending June 30, 2024. D&T served as the independent registered public accounting firm to audit our financial statements as of and for the fiscal year ended June 30, 2023, and has served as our independent auditor since fiscal year 2008. | |||
|
|
The Board of Directors unanimously recommends a vote
“FOR” the proposal to ratify the appointment of D&T as our independent
registered public accounting firm for the fiscal year ending June 30, 2024.
See page 85
for details |
| Item 4 – To approve the Parker-Hannifin Corporation 2023 Omnibus Stock Incentive Plan | |||
| Shareholder approval is sought for the Parker-Hannifin Corporation 2023 Omnibus Stock Incentive Plan, which we refer to as the 2023 Omnibus Stock Incentive Plan. | |||
|
|
The Board of Directors unanimously recommends a vote
“FOR” the proposal to approve the Parker-Hannifin Corporation 2023 Omnibus Stock Incentive Plan.
See page 90
for details |
| Item 5 – To approve the Amended and Restated Parker-Hannifin Corporation Global Employee Stock Purchase Plan | |||
| Shareholder approval is sought for the approval of the Amended and Restated Parker-Hannifin Corporation Global Employee Stock Purchase Plan, which we refer to as the Amended and Restated Purchase Plan. The Amended and Restated Purchase Plan offers eligible employees the opportunity to acquire our common stock through periodic payroll deductions that will be applied towards the purchase of our common shares. | |||
|
|
The Board of Directors unanimously recommends a vote “FOR” the
proposal to approve the Amended and Restated Parker-Hannifin Corporation Global Employee Stock Purchase Plan.
See page 101
for details |
| 12 |
|
Proxy Statement Summary/Voting Roadmap
| Item 6 – Advisory Vote on the Frequency of Future Advisory Votes to Approve Named Executive Officer Compensation | |||
| In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 and the related SEC rules, we are providing our shareholders with the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should conduct future advisory shareholder votes on the compensation of our Named Executive Officers. By voting with respect to this Item 6, shareholders may indicate whether they would prefer that we conduct future advisory votes on the compensation of our Named Executive Officers every year, every two years, or every three years. | |||
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The Board of Directors unanimously recommends a vote for the option of “EVERY YEAR” as the preferred frequency for future advisory votes to approve the compensation of our Named Executive Officers.
See page 106 for
details |
| 2023 Proxy Statement | 13 |
Item 1 – Election of Directors
Shareholder approval is sought to elect Lee C. Banks, Jillian C. Evanko, Denise Russell Fleming, Lance M. Fritz, Linda A. Harty, Kevin A. Lobo, Jennifer A. Parmentier, Joseph Scaminace, Åke Svensson, Laura K. Thompson, James R. Verrier, James L. Wainscott and Thomas L. Williams as Directors for a term that will expire at our Annual Meeting of Shareholders in 2024. Mr. Williams is standing for re-election but intends to retire from the Board on December 31, 2023 in accordance with his previously announced transition plan.
Our Board of Directors has concluded that the nominees presented in this “Item 1—Election of Directors” collectively represent a highly-qualified and diverse group of individuals who will effectively serve the long-term interests of our business, our team members and our shareholders. Our Board of Directors believes that each nominee should serve on our Board for the coming year based on his or her record of effective past service on our Board and the specific experiences, qualifications, attributes and skills described in his or her biographical information presented in this “Item 1—Election of Directors” section.
Should any nominee become unable to accept nomination or election, the proxies will be voted for the election of another person as our Board of Directors may recommend. However, our Board of Directors has no reason to believe that this circumstance will occur.
Board Nominees
| Committee Membership | ||||||||||
| Name | Principal Employment | Director Since | HRC | CGN | AC | |||||
| Lee C. Banks | Vice Chairman and President of Parker-Hannifin Corporation | 2015 | ||||||||
| Jillian C. Evanko | President and Chief Executive Officer of Chart Industries, Inc. | 2021 |  |
| ||||||
| Denise Russell Fleming | Executive Vice President, Technology & Global Services and Chief Information Officer of Becton, Dickinson & Company | 2023 | |
| ||||||
| Lance M. Fritz | Former Chairman, President and Chief Executive Officer of Union Pacific Corporation | 2021 | |
|
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| Linda A. Harty | Former Treasurer of Medtronic plc | 2007 | |
 | ||||||
| Kevin A. Lobo | Chairman, Chief Executive Officer and President of Stryker Corporation | 2013 | |
| ||||||
| Jennifer A. Parmentier | Chief Executive Officer of Parker-Hannifin Corporation | 2023 | ||||||||
| Joseph Scaminace | Former Chairman and Chief Executive Officer of OM Group, Inc. | 2004 | |
|
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| Åke Svensson | Chairman of Swedavia AB | 2010 | |
| ||||||
| Laura K. Thompson | Former Executive Vice President and Chief Financial Officer of The Goodyear Tire & Rubber Company | 2019 | |
| ||||||
| James R. Verrier | Former President and Chief Executive Officer of BorgWarner, Inc. | 2016 | |
| ||||||
|
James L. Wainscott (Lead Director) |
Former Chairman, Chief Executive Officer and President of AK Steel Holding Corporation | 2009 | |
|
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| Thomas L. Williams | Executive Chairman of Parker-Hannifin Corporation | 2015 | ||||||||
| AC Audit Committee |
|
Member | |
| HRC Human Resources and Compensation Committee | |
Chair | |
| CGN Corporate Governance and Nominating Committee |
 |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS. |
| 14 |
| |
Item 1 – Election of Directors
Director Selection and Nomination, Qualifications and Diversity
The Corporate Governance and Nominating Committee of our Board is responsible for identifying, evaluating and recommending potential Director candidates. The Corporate Governance and Nominating Committee ensures that Director recruiting, succession and refreshment are persistent areas of focus and regularly reviews the size, composition and independence of our Board, and any expected vacancies, in determining whether and to what extent to actively recruit new Directors or to replace departing Directors.
The Corporate Governance and Nominating Committee utilizes a variety of methods and processes to identify potential Director candidates, including through reputable third-party search firms, unsolicited recommendations from other third-party search firms, and referrals from current or past members of our Board. In addition, the Corporate Governance and Nominating Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as Directors provided that such recommendations comply with the procedures set forth under the caption “Shareholder Recommendations for Director Nominees” and will consider such candidates on the same basis as candidates recommended by other sources. The Corporate Governance and Nominating Committee generally will not, however, consider recommendations for Director nominees submitted by individuals who are not affiliated with us.
The Corporate Governance and Nominating Committee has developed and implemented a robust process to ensure that its formal Director searches are appropriately scoped and designed to produce a slate of potential candidates representing a broad range of backgrounds, educations, experiences, skills and viewpoints that will enable them, individually and collectively, to address the issues affecting our Board, our business, our team members and our shareholders, and optimize the functioning and decision-making and oversight roles of our Board and its Committees. The Corporate Governance and Nominating Committee currently focuses on the following key search and evaluation criteria, but considers the entirety of each proposed candidate’s credentials and all available information that may be relevant to each candidate’s nomination.
| Key Criteria | Overall Philosophy and Approach | |
| Culture and Values | The Corporate Governance and Nominating Committee places high value on cultural fit. Our Directors must be able to work together to efficiently and effectively oversee the issues and risks facing our business, and have the commitment, integrity, honesty, judgment and professionalism required under our Corporate Governance Guidelines and Global Code of Business Conduct, and to otherwise serve the long-term interests of our Board of Directors, our business, our team members and our shareholders. | |
| Diversity | The Corporate Governance and Nominating Committee firmly believes diversity is critical to a well-functioning Board of Directors, and is committed to enhancing diversity on our Board. As a result, our Corporate Governance Guidelines require each search for qualified director candidates to include individuals with diverse backgrounds, including gender, ethnicity and race. In our most recently completed Director searches, for example, a majority of the candidates presented for consideration were diverse candidates which ultimately resulted in the elections of Mses. Evanko and Fleming and Messrs. Lacey (since resigned from our Board; see page 25) and Fritz, strengthening the racial and gender diversity of our Board. In 2023, the Board also elected Jennifer A. Parmentier as a Director, which further strengthened gender diversity, and as a result, 38% of our Board is now gender diverse. | |
| Skills and Qualifications | The Corporate Governance and Nominating Committee also believes it is essential to have a Board with the range of skills and experience needed to effectively evaluate, monitor and oversee the wide range of considerations presented by the size and scope of our Company, operations, products and markets. As a result, the Corporate Governance and Nominating Committee seeks to identify nominees who are independent and well equipped with a broad set of key skills, including those shown on the table on page 16. |
The Corporate Governance and Nominating Committee, utilizing its robust and thoughtful approach to Director recruiting, succession and refreshment, has built an experienced, diverse and independent Board that provides significant oversight over our plans and strategies for growth, financial performance and shareholder value creation.
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6new directors since 2019
5new diverse directors since 2019 | ||||||
| Laura K. Thompson |
Jillian C. Evanko Lance M. Fritz William F. Lacey (since resigned; see page 25) |
Jennifer A. Parmentier Denise Russell Fleming |
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| 2023 Proxy Statement | 15 |
Item 1 – Election of Directors
Director Skills/Experience/Diversity
In addition to the metrics included on page 8, the following table presents on an individual basis the skills and experience of our Board in areas that are of importance to our Company. Our Board refreshment efforts over the last several years have strengthened the culture, skills and diversity of our Board. Each Director nominee brings his or her own unique background and range of expertise, knowledge and experience which provides a comprehensive and optimal mix of skills and qualifications necessary for our Board to effectively fulfill its oversight responsibilities.
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Public Company Leadership
Experience serving as CEO, COO, CFO, or other senior leadership roles, and/or on the Board of Directors of publicly traded companies of significant size and complexity. |
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Corporate Strategy & Culture
Experience developing and implementing strategies to drive and enhance culture, values, purpose, engagement, customer experience, profitable growth and financial performance. |
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Risk Management
Experience identifying, managing and mitigating significant business risks (financial. operational, compliance, reputational, etc.) including those related to ESG, cyber security, human capital, and supply chain. |
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International
Experience conducting business inside and outside the U.S., or other meaningful exposures to non-U.S. cultures, markets, economies, etc. |
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Industrial/ Aerospace Industries
Experience in the industrial and aerospace markets in which we operate or in those with similar business requirements, priorities, risks and challenges. |
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Manufacturing
Experience managing manufacturing operations, capabilities, capital needs, supply chains, cost and operating efficiencies, etc. |
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Technology & Innovation
Experience in engineering, research and development, product and/or process innovation, information technology, digitization, e-commerce, data management, etc. |
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Finance & Accounting
Experience in financial management, reporting and controls, capital allocation, capital markets, mergers and acquisitions, etc. |
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Sales & Marketing
Experience growing revenue and market shares through effective sales and marketing, customer relationships and channel management, reputation and brand building, etc. |
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| 16 |
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Item 1 – Election of Directors
| Director Diversity | Gender | Race | Ethnicity (Country of Birth/Citizenship) | |||
| Lee C. Banks | M | White | United States | |||
| Jillian C. Evanko | F | White | United States | |||
| Denise Russell Fleming | F | Black | United States | |||
| Lance M. Fritz | M | White | United States | |||
| Linda A. Harty | F | White | United States | |||
| Kevin A. Lobo | M | Asian | Country of Birth: India Dual Citizenship: Canada, United States | |||
| Jennifer A. Parmentier | F | White | United States | |||
| Joseph Scaminace | M | White | United States | |||
| Åke Svensson | M | White | Sweden | |||
| Laura K. Thompson | F | White | United States | |||
| James R. Verrier | M | White | Country of Birth: United Kingdom Dual Citizenship: United Kingdom, United States | |||
| James L. Wainscott | M | White | United States | |||
| Thomas L. Williams | M | White | United States |
| 2023 Proxy Statement | 17 |
Item 1 – Election of Directors
Director Biographies
Nominees for Election as Directors for Terms Expiring in 2024
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Lee C. Banks
Director Since: 2015
Age: 60
Committees: None |
Other Public Company Directorships (current in bold):
●Westinghouse Air Brake Technologies Corporation (Wabtec) (since 2020)
●Nordson Corporation (former) (2010-2020) | ||
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Mr. Banks has been our Vice Chairman and President since August 2021. From February 2015 to August 2021 he was President and Chief Operating Officer. He was our Executive Vice President from August 2008 to February 2015 and our Operating Officer from November 2006 to February 2015.
Mr. Banks has served in the public company leadership capacities noted above as well as other significant leadership roles since joining us in 1991. His experience includes leading and/or overseeing all of our operating groups, regions, and key commercial functions including strategic pricing, sales and marketing, and lean and quality. He has been instrumental in driving and implementing strategies to strengthen our culture, values, purpose, team member engagement, customer experience, profitable growth, financial performance, and management of ESG initiatives, and cybersecurity and other significant risks. Additionally, Mr. Banks has gained significant experience, perspective and insight from his service on other public company boards.
Based on his strong background, experience, performance in senior leadership roles and intimate working knowledge of our business, plans, strategies and initiatives, our Board believes Mr. Banks represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
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Jillian C. Evanko
Director Since: 2021
Age: 45
Committees: Audit
Human Resources and Compensation |
Other Public Company Directorships (current in bold):
●Chart Industries, Inc. (since 2018)
●Alliant Energy Corporation (former) (2019-2021) | ||
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Ms. Evanko has been President and Chief Executive Officer and a Director of Chart Industries, Inc. (cryogenic technologies) since June 2018. She was the Chief Financial Officer of Chart from March 2017 until January 2019. Prior to Chart, Ms. Evanko served as Vice President and Chief Financial Officer of Truck-Lite Co., LLC (truck and commercial vehicle products) since October 2016. Prior to Truck-Lite, Ms. Evanko was Vice President and Chief Financial Officer of Dover Corporation’s (diversified global manufacturer) Dover Fluids since January 2014.
Ms. Evanko has held the senior leadership positions noted above and other various public company leadership roles in significant global companies, including publicly traded industrial manufacturing companies. She has demonstrated significant expertise in leading and/or overseeing corporate strategy and culture, M&A activity (domestic and international), cybersecurity, supply chain, aerospace markets, team member engagement, industrial manufacturing, ESG initiatives, process optimization, digitization, capital allocation, safety and product innovation, among other critical areas. Additionally, Ms. Evanko has gained significant experience, perspective and insight through her service on other public company boards.
Based on her strong background, experience and performance in senior leadership roles and as a director, our Board believes Ms. Evanko represents each of the key skills and qualifications noted for her in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 18 |
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Item 1 – Election of Directors
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Denise Russell Fleming
Director Since: 2023
Age: 53
Committees: Audit
Corporate Governance and Nominating
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Other Public Company Directorships (current in bold):
●None | ||
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Ms. Fleming has been Executive Vice President, Technology and Global Services and Chief Information Officer of Becton, Dickinson & Company (medical technology) since July 2022. She was the Vice President, Information Technology at Boeing Defense, Space & Security (aerospace and defense) from December 2016 until June 2022. Prior to Boeing, Ms. Fleming served in several information technology leadership roles at BAE Systems, Inc. (aerospace and defense) from 2010 to 2016 and at Sprint Nextel Corporation (telecommunication technology) from 1997 to 2010.
Ms. Fleming has held the senior leadership positions noted above and various other public company leadership roles in significant global companies, including publicly traded technology, manufacturing and aerospace and defense companies. She has demonstrated significant expertise in leading and/or overseeing information technology systems, cybersecurity, digitization, aerospace markets, team member engagement, industrial manufacturing, ESG initiatives, and process optimization, among other critical areas. Ms. Fleming was initially recommended to the Corporate Governance and Nominating Committee by our third party search firm, SpencerStuart.
Based on her strong background, experience and performance in senior leadership roles, our Board believes Ms. Fleming represents each of the key skills and qualifications noted for her in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
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Lance M. Fritz
Director Since: 2021
Age: 60
Committees: Corporate Governance and Nominating
Human Resources and Compensation
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Other Public Company Directorships (current in bold):
●Union Pacific Corporation (2015-2023) | ||
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Now retired, Mr. Fritz served as Chairman of the Board of Union Pacific Corporation (rail transport) from October 2015 to August 2023, and President and Chief Executive Officer from February 2015 to August 2023. He also served as President and Chief Operating Officer of Union Pacific Railroad Company (the principal operating company of Union Pacific Corporation) from February 2014 to February 2015, and in various labor relations, sales and marketing, and other leadership roles with Union Pacific from July 2000 to February 2014.
Mr. Fritz has served in the public company leadership capacities noted above as well as other significant senior leadership roles. His experience includes leading and/or overseeing corporate strategy and culture, risk management, international trade, operations, compliance, supply chain and logistics, corporate finance, ESG initiatives, cybersecurity, capital allocation, M&A, and other key commercial functions including sales and marketing. Additionally, Mr. Fritz has gained significant experience, perspective and insight from his service on other public company boards.
Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Fritz represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 2023 Proxy Statement | 19 |
Item 1 – Election of Directors
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Linda A. Harty
Director Since: 2007
Age: 63
Committees: Audit (Chair)
Corporate Governance and Nominating
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Other Public Company Directorships (current in bold):
●Westinghouse Air Brake Technologies Corporation (Wabtec) (since 2016)
●Chart Industries, Inc. (since 2021)
●Syneos Health, Inc. (former) (2017-2023) | ||
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Now retired, Ms. Harty was Treasurer of Medtronic plc (medical technology) from February 2010 to April 2017. Prior to joining Medtronic, Ms. Harty served as Executive Vice President and Treasurer of Cardinal Health, Inc. (healthcare) from May 2008 to December 2009 and from August 2006 to March 2007, Executive Vice President – Finance and Chief Financial Officer of Cardinal Health’s Healthcare Supply Chain Services from March 2007 to May 2008, and Senior Vice President of Cardinal Health from January 2005 to August 2006.
Ms. Harty has served in the public company leadership capacities noted above as well as other significant leadership roles. Her experience includes leading and/or overseeing key commercial functions including corporate finance, financial reporting, risk management, strategic planning and pricing, capital allocation, M&A analysis and financing, supply chain management, and process innovation. Additionally, Ms. Harty has extensive and significant experience, perspective and insight, including management of cybersecurity events, from her service and leadership roles on other public company boards.
Based on her strong background, experience and performance in senior leadership roles and as a director, our Board believes Ms. Harty represents each of the key skills and qualifications noted for her in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
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Kevin A. Lobo
Director Since: 2013
Age: 58
Committees: Audit
Human Resources and Compensation
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Other Public Company Directorships (current in bold):
●Stryker (since 2012) | ||
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Mr. Lobo has been Chairman of the Board of Stryker Corporation (medical technologies) since July 2014 and has been Chief Executive Officer, President and a Director since October 2012. He previously served as Group President for Stryker's Orthopedics and Neurotechnology and Spine Groups.
Mr. Lobo has held the senior leadership positions noted above and other various public company leadership roles in global companies, including publicly traded medical technology and consumer products companies. His experience includes leading and/or overseeing corporate strategy and culture, profitable growth and financial performance, and key commercial functions including strategic pricing, sales and marketing, high-tech innovation, automation, digitization, capital allocation, cybersecurity, management of ESG initiatives and other significant risks and opportunities. Additionally, Mr. Lobo has gained significant experience, perspective and insight from his service on other public company boards.
Based on his strong background, experience and performance in senior leadership roles and as a director, our Board believes Mr. Lobo represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 20 |
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Item 1 – Election of Directors
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Jennifer A. Parmentier
Director Since: 2023
Age: 56
Committees: None |
Other Public Company Directorships (current in bold):
●Nordson Corporation (since 2020) | ||
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Ms. Parmentier has been our Chief Executive Officer since January 2023. From August 2021 to December 2022 she was our Chief Operating Officer. Prior to August 2021, she was Vice President and President of the Motion Systems Group from February 2019 to August 2021 and Vice President and President of the Engineered Materials Group from September 2015 to February 2019.
Ms. Parmentier has served in the public company leadership capacities noted above as well as other significant leadership roles since joining us in 2008. Her experience includes leading and/or overseeing all of our operating groups, regions, and key commercial functions. She has been instrumental in driving and implementing strategies to strengthen our financial performance, culture, values, purpose, team member engagement, customer experience, profitable growth, and management of ESG initiatives, cybersecurity and other significant risks and opportunities. Additionally, Ms. Parmentier has gained significant experience, perspective and insight from her service on other public company boards.
Based on her strong background, experience, performance in senior leadership roles and intimate working knowledge of our business, plans, strategies and initiatives, our Board believes Ms. Parmentier represents each of the key skills and qualifications noted for her in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
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Joseph Scaminace
Director Since: 2004
Age: 70
Committees: Human Resources and
Compensation (Chair)
Corporate Governance and Nominating
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Other Public Company Directorships (current in bold):
●Cintas Corporation (since 2010) (Lead Director) | ||
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Now retired, Mr. Scaminace served as the Chairman and Chief Executive Officer of OM Group, Inc. (metal-based specialty chemicals) from June 2005 to October 2015 and Chairman of the Board of OM Group from August 2005 to October 2015. Prior to joining OM Group, Mr. Scaminace held multiple leadership roles at The Sherwin-Williams Company (paints and coatings), ultimately serving as President and Chief Operating Officer from October 1999 to May 2005.
Mr. Scaminace has served in various senior leadership roles in significant global publicly traded manufacturing companies. He has demonstrated meaningful expertise in the management and oversight of corporate strategy and culture, sales and marketing, risk management, cybersecurity, ESG initiatives, international trade and compliance, M&A, aerospace markets, inventory controls, supply chain, and financial planning, performance and reporting. Additionally, Mr. Scaminace has gained significant experience, perspective and insight from his service and leadership roles on other public company boards.
Based on his strong background, experience and performance in senior leadership roles, our Board believes Mr. Scaminace represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 2023 Proxy Statement | 21 |
Item 1 – Election of Directors
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Åke Svensson
Director Since: 2010
Age: 71
Committees: Audit
Corporate Governance and Nominating
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Other Public Company Directorships:
●None | ||
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Mr. Svensson is Chairman of Swedavia AB (transport infrastructure). He was Chairman of the Association of Swedish Engineering Industries (manufacturing trade organization), and Board Member of the Confederation of Swedish Enterprises from May 2018 until May 2020. He was previously Director General of Swedish Engineering Industries from September 2010 to August 2016. Mr. Svensson is a former Director, Chief Executive Officer and President of Saab AB.
Mr. Svensson has served in various senior leadership roles in significant global publicly traded companies, primarily at Saab AB, an aerospace and defense manufacturing company. He has meaningful expertise in corporate strategy and culture, aerospace and defense, international markets and trade, manufacturing, sales and marketing, capital allocation, product innovation and technology, and financial and operational risk management.
Based on his strong background, experience and performance in senior leadership roles, our Board believes Mr. Svensson represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
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Laura K. Thompson
Director Since: 2019
Age: 59
Committees: Audit
Corporate Governance and Nominating
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Other Public Company Directorships (current in bold):
●Wesco International (since 2019)
●Titan International, Inc. (since 2021) | ||
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Now retired, Ms. Thompson served as Executive Vice President of The Goodyear Tire & Rubber Company (tire manufacturing) from December 2013 until her retirement in March 2019, and Chief Financial Officer of Goodyear from December 2013 until October 2018. Prior to those roles, Ms. Thompson held multiple leadership positions at Goodyear, including Vice President of Finance from 2009 to 2013 and Vice President of Business Development from 2005 to 2009.
Ms. Thompson has served in the public company leadership capacities noted above as well as other significant leadership roles. She has meaningful expertise in corporate strategy and culture, business development, financial and operational risk management, cybersecurity, corporate finance, financial reporting, international trade, industrial manufacturing, capital allocation, distribution, supply chain management, sales and marketing, technology and process innovation, and M&A strategy, finance and execution. Additionally, Ms. Thompson has significant experience, perspective and insight from her service on other public company boards.
Based on her strong background, experience and performance in senior leadership roles and as a director, our Board believes Ms. Thompson represents each of the key skills and qualifications noted for her in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 22 |
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Item 1 – Election of Directors
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James R. Verrier
Director Since: 2016
Age: 60
Committees: Audit
Human Resources and Compensation
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Other Public Company Directorships (current in bold):
●BorgWarner, Inc. (former) (2013-2018) | ||
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Now retired, Mr. Verrier served as a Board Advisor to BorgWarner, Inc. (powertrain solutions) from August 1, 2018 until his retirement on February 28, 2019. He previously served as Chief Executive Officer and director of BorgWarner, Inc. from January 2013 until July 2018, and President of BorgWarner from March 2012 until July 2018. Prior to those roles, Mr. Verrier held multiple leadership roles with BorgWarner, including Chief Operating Officer and other roles within operations management, quality control and human resources.
Mr. Verrier has served in various senior leadership roles in significant global publicly traded manufacturing companies, primarily at BorgWarner. He has demonstrated meaningful expertise in the management and oversight of corporate strategy and culture, sales and marketing, financial and operational risk management, cybersecurity, ESG initiatives, international trade and compliance, capital allocation, and supply chain management. Additionally, Mr. Verrier has gained significant experience, perspective and insight from his service on other public company boards.
Based on his strong background, experience and performance in senior leadership roles, our Board believes Mr. Verrier represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
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James L. Wainscott
Director Since: 2009
Age: 66
Committees: Corporate Governance and
Nominating (Chair and Lead Director)
Human Resources and Compensation
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Other Public Company Directorships (current in bold):
●CSX Corporation (since 2020) | ||
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Now retired, Mr. Wainscott was Chairman of the Board of AK Steel Holding Corporation (steel producer) from January 2006 to May 2016; and President, Chief Executive Officer and a Director of AK Steel Holding Corporation from October 2003 to January 2016. Prior to those roles, Mr. Wainscott held multiple leadership roles with AK Steel, including Chief Financial Officer from 1998 to 2003.
Mr. Wainscott has served in various senior leadership roles in significant global publicly traded manufacturing companies, primarily at AK Steel. He has significant expertise in corporate strategy and culture, manufacturing, financial and operational risk management, cybersecurity, international trade and compliance, supply chain management, inventory control, labor relations, quality and customer relations, cost control, sales and marketing, and financial planning, performance and reporting. Additionally, Mr. Wainscott has gained significant experience, perspective and insight from his service and leadership roles on other public company boards, including as our Lead Director since 2016.
Based on his strong background, experience and performance in senior leadership roles, our Board believes Mr. Wainscott represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 2023 Proxy Statement | 23 |
Item 1 – Election of Directors
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Thomas L. Williams
Director Since: 2015
Age: 64
Committees: None |
Other Public Company Directorships (current in bold):
●The Sherwin-Williams Company (since 2023)
●The Goodyear Tire & Rubber Company (since 2019)
●Chart Industries, Inc. (former) (2008-2019)
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Mr. Williams has been the Chairman of our Board since January 2016, serving as Executive Chairman since January 2023. He was our Chief Executive Officer from February 2015 to January 2023, our Executive Vice President from August 2008 to February 2015, and our Operating Officer from November 2006 to February 2015.
Mr. Williams served in the roles noted above and other significant leadership roles since joining Parker in 2003. His experience includes leading and/or overseeing all of our operating groups, regions, and key commercial functions including strategic pricing, sales and marketing, and lean and quality. He led the company through numerous significant global challenges throughout his tenure, while simultaneously driving and implementing strategies to strengthen our culture, values, purpose, team member engagement, customer experience, profitable growth, financial performance, and management of ESG initiatives, cybersecurity and other significant risks and opportunities. Additionally, Mr. Williams has gained significant experience, perspective and insight from his service and leadership roles on other public company boards.
Based on his strong background, experience, performance in senior leadership roles and intimate working knowledge of our business, plans, strategies and initiatives, our Board believes Mr. Williams represents each of the key skills and qualifications noted for him in the Director skills matrix on page 16, and will continue to effectively serve our Board, our business, our team members and our shareholders with a high level of integrity, honesty, judgment and professionalism. | ||||
| 24 |
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Item 1 – Election of Directors
Director Independence
Our Corporate Governance Guidelines require at least a majority of our Directors to be “independent” as defined in the listing standards established by the New York Stock Exchange. Our Board of Directors has also adopted standards for Director independence, which are set forth in our Independence Standards for Directors.
Of the thirteen current members of our Board of Directors, ten are independent based on our Board of Directors’ consideration of the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. In addition, each of the Audit Committee, the Corporate Governance and Nominating Committee and the Human Resources and Compensation Committee of our Board of Directors is composed entirely of independent Directors. As a result, independent Directors directly oversee critical matters such as our executive compensation program, our Corporate Governance Guidelines, policies and practices, the integrity of our financial statements and our internal controls over financial reporting.
Our Board of Directors has affirmatively determined that the following ten individuals who currently serve as Directors are independent: Jillian C. Evanko, Denise Russell Fleming, Lance M. Fritz, Linda A. Harty, Kevin A. Lobo, Joseph Scaminace, Åke Svensson, Laura K. Thompson, James R. Verrier and James L. Wainscott.
Among other things, our Board of Directors does not consider a Director to be independent unless it affirmatively determines that the Director has no material relationship with us either directly or as a partner, shareholder or officer of an organization that has a relationship with us. Our Corporate Governance and Nominating Committee and our Board of Directors annually reviews and determines which of its members are independent based on the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. During such review, our Corporate Governance and Nominating Committee and our Board of Directors broadly consider all facts and circumstances which they deem relevant, including any commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships between us and any of our Directors.
In fiscal year 2023, after considering the facts and circumstances applicable to each Director, our Board of Directors determined that Mses. Evanko and Fleming and Messrs. Fritz and Lobo served as executive officers of companies that have existing customer and/or supplier relationships with us. Our Corporate Governance and Nominating Committee and our Board of Directors further analyzed these relationships and found that each of Mses. Evanko and Fleming and Messrs. Fritz and Lobo does not receive any direct or indirect personal benefits as a result of these relationships, that the relationships were on ordinary course, competitive terms, and that the amounts paid to or by us under such relationships fell significantly below the threshold for independence provided in the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. Our Board of Directors thus affirmatively concluded that each of Mses. Evanko and Fleming and Messrs. Fritz and Lobo is independent.
Annual Elections; Majority Voting; No Cumulative Voting
Our Amended and Restated Regulations provide for the annual election of our entire Board of Directors. Accordingly, each Director elected at this Annual Meeting of Shareholders will hold office until the next Annual Meeting of Shareholders and until his or her successor is elected.
Our Amended Articles of Incorporation provide for a majority voting standard in the annual election of our Directors. Accordingly, at each Annual Meeting of Shareholders, each candidate for Director is elected only if the votes “for” the candidate exceed the votes “against” the candidate, unless the number of candidates exceeds the number of Directors to be elected. If the number of candidates exceeds the number of Directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected. Abstentions and broker non-votes shall not be counted as votes “for” or “against” a candidate, and shareholders are not able to cumulate votes in the election of Directors.
New Elections and Departures
On March 29, 2023, William F. Lacey resigned from our Board of Directors to pursue a career opportunity which conflicted with his ability to continue to serve on our Board. Our Board of Directors determined that Mr. Lacey was independent during his term of service. Effective on January 1, 2023, Jennifer A. Parmentier was elected to the Board and as our CEO in connection with her previously announced transition plan. Effective on September 1, 2023, Denise Russell Fleming was elected to the Board.
| 2023 Proxy Statement | 25 |
| Corporate Governance |
Board and Committee Structure
Current Leadership Structure
Our Board of Directors currently employs a “dual leadership” structure. We have a Lead Director who is also the Chair of the Corporate Governance and Nominating Committee, and an Executive Chairman of the Board.
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Thomas L. Williams
Executive Chairman of the Board since 2023 (previously Chairman of the Board since 2016)
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James L. Wainscott
Lead Independent Director since 2016 |
Our Lead Director is elected solely by the independent members of our Board of Directors and holds a position separate and independent from our Chairman of the Board. Our Corporate Governance Guidelines provide that the Chair of the Corporate Governance and Nominating Committee will serve as our Lead Director and that the Chair of the Corporate Governance and Nominating Committee is elected every five years.
The specific authorities, duties and responsibilities of our Lead Director are described in our Corporate Governance Guidelines. Among other things, our Lead Director presides over and supervises the conduct of all meetings of our independent Directors, calls meetings of our independent Directors, and prepares and approves all agendas and schedules for meetings of our Board.
Our Board believes that having a Lead Director who is elected by our independent Directors ensures that our Board will at all times have an independent Director in a leadership position. At the same time, our Board of Directors believes that it is important to maintain flexibility in its leadership structure to allow for a member of management to serve in a leadership position alongside the Lead Director if our Board of Directors determines that such a leadership structure best meets the needs of our Board, our business, our team members and our shareholders.
Our Board has determined that this leadership structure is currently more efficient and effective than a structure which employs a single, independent Chairman of the Board. Our Board of Directors views this structure as one that ensures both independence in leadership and a balance of knowledge and authority. For example, our leadership structure employs both an Executive Chairman of the Board who possesses an intimate working knowledge of our day-to-day business, plans, strategies and initiatives, and a Lead Director who has a strong working relationship with our non-management, independent Directors. These two individuals combine their unique knowledge and perspectives to ensure that management and our independent Directors work together as effectively as possible. Among other things, our Executive Chairman of the Board ensures that our Board addresses strategic issues that management considers critical, while our Lead Director ensures that our Board addresses strategic issues that our independent Directors consider critical.
Our Board recognizes, however, that no single leadership model may always be appropriate. Accordingly, our Board of Directors regularly reviews its leadership structure to ensure that it continues to represent the most efficient and effective structure for our Board of Directors, our business, our team members and our shareholders.
| 26 |
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Corporate Governance
As previously disclosed, Mr. Williams intends to retire as Executive Chairman and from the Board on December 31, 2023. The Corporate Governance and Nominating Committee and Board have been thoughtfully evaluating structural and succession options, and intend to make final decisions and elect a successor Chairman of the Board prior to the transition date.
Board Committees; Committee Charters
Our Board has established and delegated certain authorities and responsibilities to three committees: the Human Resources and Compensation Committee, the Corporate Governance and Nominating Committee, and the Audit Committee. Each Committee of our Board is governed by a written charter which is posted and available on the Corporate Governance page of our investor relations website at www.phstock.com. Shareholders may request copies of these charters, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000.
All members of each Committee are independent under the listing standards of the New York Stock Exchange as well as our Independence Standards for Directors. Each Committee regularly reports its activities to the full Board of Directors.
Each of our Committees works with members of our Human Resources, Internal Audit, Enterprise Compliance, Legal, and other departments to oversee and evaluate other risks relevant to each Committee.
| Human Resources and Compensation Committee | |
| Members: Joseph Scaminace (CHAIR), Jillian C. Evanko, Lance M. Fritz, Kevin A. Lobo, James R. Verrier, James L. Wainscott | Number of meetings in fiscal year 2023: 6 |
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KEY OVERSIGHT RESPONSIBILITIES
●Administration, structure and determination of our executive compensation program.
●ESG strategies, initiatives, policies and risks related to (a) key compensation and benefit plans (including the inclusion and impact of any ESG-based performance measures), (b) executive compensation program, strategy, structure and mix, (c) leadership performance, development and succession, (d) compensation-related ratings and disclosures, and (e) other ESG areas impacting or resulting from the Committee’s duties and responsibilities or as the Board may otherwise delegate.
●Working with its independent executive compensation consultant and our human resources, legal and other management personnel to oversee and evaluate other risks relating to our compensation policies and practices for all team members, our succession planning and talent development strategies and initiatives, and other human resources issues. | |
| 2023 Proxy Statement | 27 |
Corporate Governance
| Corporate Governance and Nominating Committee | |
| Members: James L. Wainscott (CHAIR), Denise Russell Fleming, Lance M. Fritz, Linda A. Harty, Joseph Scaminace, Åke Svensson, Laura K. Thompson | Number of meetings in fiscal year 2023: 3 |
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KEY OVERSIGHT RESPONSIBILITIES
●Evaluating and recommending to our Board of Directors qualified nominees for election as Directors and qualified Directors for Committee membership, establishing evaluation procedures for the performance of our Board of Directors and its Committees, developing corporate governance guidelines and independence standards, and considering other matters regarding our corporate governance structure.
●ESG strategies, initiatives, policies and risks related to (a) Board performance, structure, composition and refreshment, (b) corporate governance ratings and disclosures, (c) shareholder engagement processes and feedback, (d) Board and committee oversight responsibilities and meeting cadences on ESG matters, and (e) other ESG areas impacting or resulting from the Committee’s duties and responsibilities or as the Board may otherwise delegate.
●Working with our legal and other management personnel to oversee and evaluate other risks relating to:
●Director independence, qualifications and diversity issues;
●Board of Directors and Committee leadership, composition, function and effectiveness;
●alignment of the interests of our shareholders with the performance of our Board of Directors;
●compliance with applicable corporate governance rules and standards; and
●other corporate governance issues and trends.
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| Audit Committee | |
| Members: Linda A. Harty (CHAIR) (ACFE), Jillian C. Evanko (ACFE), Denise Russell Fleming, Kevin A. Lobo (ACFE), Åke Svensson, Laura K. Thompson (ACFE), James R. Verrier | Number of meetings in fiscal year 2023: 5 |
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The Audit Committee of our Board of Directors is our standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Each member of our Audit Committee is independent, as defined in our Independence Standards for Directors, and in compliance with the independence standards applicable to audit committee members under the New York Stock Exchange listing standards and under the federal securities laws.
KEY OVERSIGHT RESPONSIBILITIES
●Appointing, compensating, retaining, and overseeing our independent registered public accounting firm and evaluating its independence, approving all audit and non-audit engagements with our independent registered public accounting firm, and reviewing our annual and quarterly financial statements, internal and independent audit plans, the results of such audits and the adequacy of our internal control structure.
●ESG strategies, initiatives, policies and risks related to (a) ethics, integrity, and compliance, (b) audit and financial controls, reporting and disclosures, (c) audit and financial implications of ESG data and processes, (d) governance structures, financial impacts and funding status of employee retirement plans, and (e) other ESG areas impacting or resulting from the Committee’s duties and responsibilities or as the Board may otherwise delegate.
●Working with our internal audit, compliance, legal, and other departments, to oversee and evaluate other significant risks (financial, tax, strategic, operational, legal, regulatory) and management policies, guidelines and processes for assessing and managing such risks.
●Meeting privately at each of its meetings with representatives from our independent registered public accounting firm and our Vice President – Audit, Compliance and Enterprise Risk Management.
Our Board of Directors has determined that each of Jillian C. Evanko, Linda A. Harty, Kevin A. Lobo and Laura K. Thompson, are audit committee financial experts (designated above as (ACFE)) as defined in the federal securities laws. | |
| 28 |
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Corporate Governance
Meetings and Attendance; Executive Sessions
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During fiscal year 2023, there were seven meetings of our Board of Directors. Average Director attendance was 96% across all meetings held by our Board of Directors and its Committees and each Director attended at least 86% of all meetings held by our Board of Directors and the Committees on which he or she served.
We hold a regularly scheduled meeting of our Board of Directors in conjunction with our Annual Meeting of Shareholders. Directors are expected to attend the Annual Meeting of Shareholders absent an appropriate reason. We held our Annual Meeting of Shareholders in person in 2022 and all of the members of our Board of Directors attended and were available to answer shareholder questions.
In accordance with the listing standards of the New York Stock Exchange, our non-management Directors are scheduled to meet regularly in executive sessions without management and, if required, our independent Directors will meet at least once annually. Additional meetings of our non-management Directors may be scheduled from time to time when our non-management Directors determine that such meetings are desirable. Our non-management Directors met seven times during fiscal year 2023. |
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Director Education and Orientation Program
Our director orientation program includes extensive meetings with management and other Directors and familiarizes new directors with The Win Strategy and Parker’s businesses, strategies, policies and corporate governance framework; assists them in developing company and industry knowledge; and educates them with respect to their fiduciary duties and legal responsibilities.
Our Board places high importance on the continuous development and education of our Board members. Directors have ongoing education and development opportunities through participation in Board and Committee meetings, and publications and activities offered by reputable third party organizations. Directors receive specialized presentations on an established cadence from senior-level leaders across our global businesses and functions. When appropriate, our Board also travels to put “feet on the ground” at Company locations to expand their knowledge and oversight of the Company. Most recently, the Board visited our facilities in Clyde, New York and Erie, Pennsylvania as part of our regularly scheduled Board and Committee meetings in April 2022.
| 2023 Proxy Statement | 29 |
Corporate Governance
Board and Committee Evaluations
Our Board recognizes that a rigorous and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. Under the leadership of our Lead Director, the Corporate Governance & Nominating Committee oversees the annual evaluation process and periodically reviews the format of the process to help ensure it is eliciting actionable feedback with respect to the effectiveness of the Board, Board committees and each individual Director. The annual evaluation process consists of the following components:
| Continuous Evaluation/ Annual Review ●Through ongoing discussions at Board and Committee Meetings, our Board and Committees are continually seeking ways to strengthen their governance and oversight practices and effectiveness.
●Towards the end of our fiscal year, each director completes a questionnaire assessing the performance of the Board and its committees on which he or she serves.
●Our Lead Director and Chairman also conduct evaluations of each individual Director towards the end of our fiscal year. |
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Assessment
●The questionnaire results are provided to the Board and to each of the Audit, Human Resources and Compensation and Corporate Governance and Nominating Committees, generally at our regularly scheduled Board and Committee meetings in August.
●The results of the individual Director evaluations are also shared with the Corporate Governance and Nominating Committee in August. |
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Discussion
●The Board and each such committee discuss the results and identify areas for continuous improvement. The results of the committee sessions are communicated to the full Board. |
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Feedback
●As a result of the Board’s 2023 self-assessment process, the Board identified opportunities to further strengthen the Board’s practices in areas relating to Board and committee-level oversight of cybersecurity and technology matters, geopolitical business risk, and engagement with management. |
| 30 |
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Corporate Governance
Board Strategic and Risk Oversight
Management and our Board of Directors and its Committees are collectively engaged in identifying, overseeing, evaluating and managing the strategic priorities and material risks facing our business to ensure that our strategies and objectives align with the goals of The Win Strategy and work to minimize such risks. Our Board believes that its current level of independence, leadership structure and qualifications and diversity of its members facilitate the effective identification, oversight, evaluation and management of our business strategy and related risks.
Board’s Role in Strategic Oversight
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| One of the Board’s primary responsibilities is overseeing management’s development and execution of The Win Strategy. In addition to the ongoing activities detailed in the paragraph to the right, our Board conducts an in-depth annual review of our corporate strategy and annual operating plan, which covers significant strategic topics such as our key markets, operational priorities under The Win Strategy, strategic positioning, financial and operational outlooks, capital allocation, balance sheet strength, debt portfolio and positions, share repurchase activity, and dividend history and strategies. | Led by our CEO, our executive management team develops and implements strategic goals and priorities under The Win Strategy. On a quarterly basis the CEO, our executive leadership team and other business leaders provide detailed business and strategy updates to the Board including progress against business objectives, updates on the competitive landscape facing the Company, economic trends, acquisition and divestiture opportunities and other matters. | |||
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| 2023 Proxy Statement | 31 |
Corporate Governance
Board’s Role in Risk Oversight
Management and our Board of Directors and its Committees view the risk management role of our Board of Directors and its Committees, and their relationship with management in the identification, oversight, evaluation and management of risk, as paramount to the short-term viability and long-term sustainability of our business.
| BOARD OF DIRECTORS |
OUTSIDE ADVISORS
Management and our Board of Directors and its Committees also engage outside advisors where appropriate to assist in the identification, oversight, evaluation and management of the risks facing our business. These outside advisors include our independent registered public accounting firm, external legal counsel and insurance providers, and the independent compensation consultant retained by the Human Resources and Compensation Committee. | |
| Our Board of Directors has the ultimate responsibility to monitor the risks facing our business. Among other things, our Board of Directors receives a report from our Audit Committee which reviews and discusses in detail, at least annually, the business and operational risks identified through our enterprise risk management and integrated risk management programs which are led by our Vice President of Audit and Compliance. As set forth in our Corporate Governance Guidelines, although it may delegate certain oversight responsibilities to its Committees, our full Board retains ultimate oversight responsibility over the Company’s strategies, initiatives, policies and risks related to ESG matters, including in the areas of corporate strategy, purpose and values, environmental sustainability (e.g., climate targets and actions), social responsibility, team member safety and engagement, diversity, equity and inclusion, cybersecurity, and external reporting. For more detail on the Board's role in risk management, including cybersecurity and ESG oversight, see the spotlight sections on the next page. |
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| LEAD DIRECTOR AND BOARD COMMITTEES | ||
| The Committees of our Board of Directors are each responsible for the various areas of risk oversight as described in the "Board and Committee Structure" and "Board Strategic and Risk Oversight" sections of this Proxy Statement. Management and the Chair of the applicable Committee ensure that any significant risks are reported to and addressed with the entire Board of Directors. Our Lead Director and the other Committee Chairs ensure that risk management is a recurring agenda item for meetings of our Board and its Committees. Our Lead Director meets regularly with our other independent Directors without management to discuss current and potential risks and the means of mitigating those risks, and has the authority to direct and evaluate our risk management efforts. |
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| MANAGEMENT | ||
| Various members of management are responsible for our day-to-day risk management activities, including members of our Human Resources, Internal Audit and Compliance, Legal, Tax, Risk Management, Treasury, Finance, and Information Technology departments. We have an internal Cyber Security Committee comprised of our Vice President-Chief Digital and Information Officer and other senior members of our IT department. We also have an ESG Steering Committee which is comprised of senior management, including our Chief Operating Officer, General Counsel and Secretary and our EHS leader. Working together with our CEO, these management committees and individuals are charged with identifying, overseeing, evaluating and managing risks in their areas of responsibility and for ensuring that any significant risks are addressed with our Board or the appropriate Board Committees. |
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| 32 |
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Corporate Governance
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Spotlight: Oversight of Cybersecurity
Our Board understands the importance of maintaining a secure environment for our products, data and systems that effectively supports our business objectives and customer needs. We have adopted comprehensive Information Security Policies and Standards that clearly articulate Parker’s expectations and requirements with respect to acceptable use, risk management, data privacy, education and awareness, security incident management and reporting, identity and access management, third-party management, security (with respect to physical assets, products, networks and systems), security monitoring and vulnerability identification. These policies and standards set forth a detailed security incident management and reporting protocol, with clear escalation timelines and responsibilities. We also maintain a global incident response plan and regularly conduct exercises to help with our overall preparedness. We believe cybersecurity is the responsibility of every team member. We take measures to improve and update our cybersecurity program, including independent program assessments, penetration testing and scanning of our systems for vulnerabilities. The Digital and Information Technology strategy is led by our Vice President – Chief Digital and Information Officer, who provides multiple updates each year to the Board regarding this program, including information about cyber-risk management and the status of projects to strengthen cybersecurity effectiveness. In addition, the Board receives an in-depth report, at least annually, on the overall cybersecurity program from our Vice President – Chief Digital and Information Officer and our Vice President –Cyber Security and Infrastructure. |
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Spotlight: Succession Planning
As reflected in our Corporate Governance Guidelines, one of the Board’s primary responsibilities includes planning for CEO succession and overseeing management’s succession planning for other senior executives. The Board’s goal is to have a long-term program for effective senior leadership development and succession, as well as short-term contingency plans for emergency and ordinary course contingencies. The program plays an important role in our success and the effectiveness of our leadership development program. Most recently, our succession planning process facilitated our CEO and other senior leadership transitions in fiscal year 2023.
The Board and the Human Resources and Compensation Committee works with our CEO, Executive Vice President – Human Resources and External Affairs and other senior leaders to plan for succession. The Board has an opportunity to meet regularly with executives at many levels across the Company through formal presentations at Board meetings and other informal interaction throughout the year. Our Board reviews succession planning and management development topics on an ongoing basis, including an in-depth review of potential successors to key leadership positions at least annually. |
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Spotlight: ESG Oversight
Our ESG program includes a range of initiatives around corporate social responsibility and sustainability, taking into account the interests of our key stakeholders, including our shareholders, team members, customers and communities. Issues that we focus on include, among others, workplace health and safety, climate risk, water conservation, human capital management, diversity, equity and inclusion, cybersecurity, and business ethics and compliance.
Our Board maintains oversight over ESG matters at the full Board level and through our relevant committees, while senior management manages and monitors such matters on a day-to-day basis throughout the year, supported by our internal ESG Steering Committee, which includes our Chief Operating Officer and other members of our senior management. The full Board reviews our ESG program at least annually. In August 2022, we amended our Corporate Governance Guidelines and the charters of each of our Committees to more clearly describe ESG areas of oversight responsibility for the full Board and its Committees. |
| 2023 Proxy Statement | 33 |
Corporate Governance
The primary areas of ESG oversight responsibility of the Board and Committees are:
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Full Board
Our full Board retains ultimate oversight responsibility over strategies, initiatives, policies and risks related to ESG matters, including in the areas of corporate strategy, purpose and values, environmental sustainability (e.g., climate targets and actions), social responsibility, team member safety and engagement, diversity, equity and inclusion, cybersecurity, and external reporting. |
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Audit Committee |
Human Resources and Compensation Committee |
Corporate Governance and Nominating Committee | |||||
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Review, monitor and evaluate ESG strategies, initiatives, policies and risks related to (a) ethics, integrity and compliance, (b) audit and financial controls, reporting and disclosures, (c) audit and financial implications of ESG data and processes, (d) governance structures, financial impacts and funding status of employee retirement plans, and (e) other ESG areas impacting or resulting from the Committee’s duties and responsibilities or as the Board may otherwise delegate. |
Review, monitor and evaluate ESG strategies, initiatives, policies and risks related to (a) key compensation program and benefit plans (including the inclusion and impact of any ESG-based performance measures), (b) executive compensation program strategy, structure and mix, (c) leadership performance, development and succession, (d) compensation-related ratings and disclosures, and (e) other ESG areas impacting or resulting from the Committee’s duties and responsibilities or as the Board may otherwise delegate. |
Review, monitor and evaluate ESG strategies, initiatives, policies and risks related to (a) Board performance, structure, composition and refreshment, (b) corporate governance ratings and disclosures, (c) shareholder engagement processes and feedback, (d) Board and committee oversight responsibilities and meeting cadences on ESG matters, and (e) other ESG areas impacting or resulting from the Committee’s duties and responsibilities or as the Board may otherwise delegate. | |||||
Communications with Directors
Our shareholders and other interested parties may communicate with our Board of Directors as a group, with the non-management Directors as a group, or with any individual Director by sending written communications to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary. Complaints regarding accounting, internal accounting controls or auditing matters will be forwarded directly to the Chair of the Audit Committee. All other communications will be provided to the individual Director(s) or group of Directors to whom they are addressed. Copies of all communications will be provided to all other Directors; provided, however, that any such communications that are considered to be improper for submission to the intended recipients will not be provided to the Directors. Examples of communications that would be considered improper for submission include customer complaints, solicitations, communications that do not relate, directly or indirectly, to our business and/or our subsidiaries, or communications that relate to improper or irrelevant topics.
| 34 |
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Corporate Governance
Other Governance Matters
Review and Approval of Transactions with Related Persons
The Corporate Governance and Nominating Committee is responsible for considering questions of possible conflicts of interest of Directors and executive officers and for making recommendations to prevent, minimize or eliminate such conflicts of interest. Our Global Code of Business Conduct provides that our Directors, officers, and other team members and their spouses and other close family members must avoid interests or activities that create any actual or potential conflict of interest. These restrictions cover, among other things, interests or activities that result in receipt of improper personal benefits by any person as a result of his or her position as our Director, officer, or other team member or as a spouse or other close family member of any of our Directors, officers or other team members. Our Global Code of Business Conduct also requires our Directors, officers and other team members to promptly disclose any potential conflicts of interest to our Corporate Compliance Office. We also require that each of our executive officers and Directors complete a detailed annual questionnaire that requires, among other things, disclosure of any transactions with a related person meeting the minimum threshold for disclosure under the relevant U.S. Securities and Exchange Commission ("SEC") rules. All responses to the annual questionnaires are reviewed and analyzed by our legal counsel and, as necessary or appropriate, presented to the Corporate Governance and Nominating Committee for analysis, consideration and, if appropriate, approval.
The Corporate Governance and Nominating Committee will consider the following in determining if any transaction with a related person or party should be approved, ratified or rejected:
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the nature of the related person’s interest in the transaction; |
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the material terms of the transaction; |
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the importance of the transaction to the related person and to us; |
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whether the transaction would impair the judgment or the exercise of the fiduciary obligations of any Director or executive officer; |
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the possible alternatives to entering into the transaction; |
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whether the transaction is on terms comparable to those available to third parties; and |
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the potential for an actual or apparent conflict of interest. |
During fiscal year 2023, we determined that no material related-party transactions exist which would require disclosure under the U.S. Securities and Exchange Commission Rules or otherwise require approval, ratification, or rejection of the Corporate Governance and Nominating Committee. This review included a review of the annual questionnaires and a detailed evaluation of the transactions reviewed and analyzed by our Board of Directors in determining Director independence as described in the “Director Independence” section of this Proxy Statement.
None of our Directors are related to each other and no arrangements or understandings exist pursuant to which any Director was selected as a Director or Director nominee.
Proxy Access
Our Amended and Restated Regulations permit a shareholder, or a group of up to twenty shareholders, owning three percent or more of the Company’s outstanding shares of Common Stock continuously for at least three years to nominate and include in the Company’s annual meeting proxy materials a number of director nominees up to a greater of (x) two, or (y) twenty percent of the Board, provided that the shareholder(s) and nominee(s) satisfy the requirements specified in our Amended and Restated Regulations.
| 2023 Proxy Statement | 35 |
Corporate Governance
Stock Ownership Guidelines
Our stock ownership guidelines align the financial interests of our executive officers and Directors with those of our shareholders by encouraging the accumulation and retention of our common stock by our Directors and executive officers. Our Board of Directors has approved the following amended stock ownership guidelines for our Directors and executive officers:
| Participants | Guidelines | |||
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Chairman of the Board and Chief Executive Officer |
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6 times annual base salary | ||
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Vice Chairman and President |
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4 times annual base salary | ||
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Chief Operating Officer |
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4 times annual base salary | ||
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Executive or Senior Vice Presidents |
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3 times annual base salary | ||
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Other Executive Officers |
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2 times annual base salary | ||
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Non-Management Directors |
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5 times annual retainer |
The recommended time period for achieving compliance with the guidelines is five years from election or appointment to the position that is subject to the guidelines. The Human Resources and Compensation Committee reviews share ownership information with the Chief Executive Officer in August of each year to ensure compliance with the guidelines. As of June 30, 2023, all executive officers and Directors in their positions for at least five years were in compliance with the guidelines.
Stock Ownership Restrictions - Speculative Transactions/Hedging
We maintain an insider trading policy that applies to all of our Directors, officers, other team members and consultants. The insider trading policy prohibits those covered by the policy from engaging in speculative transactions with respect to Company securities that could lead to inadvertent violations of securities laws, such as short sales and acquiring exchange-traded options (including puts, calls and other derivatives). Furthermore, the insider trading policy prohibits certain arrangements that could result in sales or transfers of Company securities without the covered person’s consent at times at which he or she is not permitted to trade in Company securities, including holding Company securities in margin accounts or pledging them as collateral.
The insider trading policy also prohibits those covered by the policy from entering into hedging or monetization transactions (such as zero-cost collars and forward sale contracts) with respect to Company securities, because such transactions may provide ownership of Company securities without the full risks and rewards of such ownership.
Governance Documents
Our Global Code of Business Conduct, our Corporate Governance Guidelines, and our Independence Standards for Directors are posted and available on the Corporate Governance page of our investor relations website at www.phstock.com. Shareholders may request copies of these documents, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000. The information contained on or accessible through our website is not a part of this Proxy Statement.
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| Director Compensation |
Compensation of Directors
Directors who are also our team members do not receive any additional compensation for their services as Directors. As a result, Jennifer A. Parmentier, Thomas L. Williams and Lee C. Banks are not included in the table on page 38. During fiscal year 2023, non-employee Directors received an annual cash retainer and a restricted stock unit award. Our non-employee Directors are also eligible to participate in our Matching Gifts Program as described in the Compensation Discussion and Analysis section on page 62 of this Proxy Statement. The following table reflects the annual retainers of the non-employee Directors effective during fiscal year 2023:
| Approved August 11, 2021 |
Approved August 17, 2022(1) | |||||
| Annual Retainers | Effective beginning 10/27/2021 |
Effective beginning 10/26/2022 | ||||
| Lead Director and Corporate Governance and Nominating Committee Chair: | $ | 220,000 | $ | 225,000 | ||
| Audit Committee Chair: | $ | 180,000 | $ | 185,000 | ||
| Human Resources and Compensation Committee Chair: | $ | 180,000 | $ | 185,000 | ||
| Non-Chair Committee members: | $ | 150,000 | $ | 155,000 | ||
| (1) | On August 7, 2023, the Human Resources and Compensation Committee approved a $5,000 increase in retainer for the Lead Director and a $10,000 increase in the target value of equity awards, effective on October 25, 2023. |
In addition to the annual retainers described above, non-employee Directors are entitled to receive a $2,000 fee for attending each Board of Directors or Committee meeting that exceeds the number of regularly scheduled Board or Committee meetings in a fiscal year by more than two. There were no additional meeting fees paid in fiscal year 2023. During fiscal year 2023, Directors could elect to defer all or a portion of their annual retainers under our Deferred Compensation Plan for Directors.
Our Directors also receive a target value of $170,000 per year in restricted stock units ("RSUs"). Accordingly, each Director who was serving as a Director on October 26, 2022 and who was not then an employee was granted 653 restricted stock units ("RSUs") under our Amended 2016 Equity Plan (as defined below). The terms of the RSUs provide that the RSUs will vest 100% on the later of (a) one year from the grant date; or (b) on the date of our next Annual Shareholders Meeting, also known as, in each case, the Vesting Date, except that if a Director ceases to be a Director for any reason prior to the next Annual Meeting of Shareholders that occurs after the grant date, a pro-rated portion of her or his RSUs will vest on the Vesting Date and the remaining RSUs will be forfeited. All RSUs earn dividend equivalent units paid as additional RSUs, which are subject to the terms and conditions of the original RSU award and are payable directly to each Director to whom they are issued.
| 2023 Proxy Statement | 37 |
Director Compensation
Director Compensation for Fiscal Year 2023
The following table sets forth compensation information for our non-employee Directors for fiscal year 2023. Ms. Fleming does not appear in the table below as she joined our Board in fiscal year 2024.
| Name | Fees Earned or Paid in Cash ($) |
Stock Awards ($)(1) |
All Other Compensation ($)(2) |
Total ($) | ||||
| Jillian C. Evanko | 153,414 | 182,122 | 2,231 | 337,767 | ||||
| Lance M. Fritz | 153,414 | 182,122 | 12,231 | 347,767 | ||||
| Linda A. Harty | 183,414 | 182,122 | 2,231 | 367,767 | ||||
| William F. Lacey(3) | 113,831 | 182,122 | 2,231 | 298,184 | ||||
| Kevin A. Lobo | 153,414 | 182,122 | 2,231 | 337,767 | ||||
| Joseph Scaminace | 183,414 | 182,122 | 2,231 | 367,767 | ||||
| Åke Svensson | 153,414 | 182,122 | 2,231 | 337,767 | ||||
| Laura K. Thompson | 153,414 | 182,122 | 4,731 | 340,267 | ||||
| James R. Verrier | 153,414 | 182,122 | 2,231 | 337,767 | ||||
| James L. Wainscott | 223,414 | 182,122 | 12,231 | 417,767 |
| (1) | This column represents the aggregate grant date fair value of RSUs granted under our Amended 2016 Equity Plan in fiscal year 2023 and computed in accordance with FASB ASC Topic 718. The amount was calculated using the closing stock price on the date of each of the grants. Each of the non-employee Directors serving as a Director on October 26, 2022 received 653 RSUs on his or her grant date. As of June 30, 2023, each non-employee Director, other than Mr. Lacey, who vested in a pro rata portion (273) of his RSUs upon resignation from the Board and forfeited the remainder of his unvested RSUs (see page 25 and footnote 3 below), held 653 RSUs, and none of the non-employee Directors held options or SARs. |
| (2) | The amounts reported in this column include (a) the value of the dividend equivalent units earned as additional RSUs on the unvested RSUs granted in fiscal year 2023 and (b) the following matching gifts under our Matching Gifts Program: Mr. Fritz-$10,000; Ms. Thompson- $2,500; and Mr. Wainscott-$10,000. For more information regarding our Matching Gifts Program, see the Compensation Discussion and Analysis section on page 62 of this Proxy Statement. |
| (3) | Mr. Lacey resigned from our Board on March 29, 2023 (see page 25) and as a result forfeited 380 of the RSUs granted October 26, 2022. |
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| Executive Compensation |
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 and the related SEC rules, we are providing our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of the Named Executive Officers as disclosed in this Proxy Statement. We encourage our shareholders to carefully read this Proxy Statement in its entirety before deciding whether or not to vote for or against this Item 2.
At our 2017 Annual Meeting of Shareholders, shareholders voted in favor of annual frequency for the non-binding, advisory approval of the compensation of the Named Executive Officers. The next non-binding, advisory vote on the compensation of the Named Executive Officers is expected to take place at our 2023 Annual Meeting of Shareholders as discussed further in Item 6 below.
As described in detail throughout our Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation program features, among other things, the following:
| ● | A “pay-for-performance” structure which helps ensure that a significant portion of the compensation for our executive officers is “at-risk,” is dependent on the short-term and long-term performance of our business and encourages and rewards performance that drives the key goals, operational priorities and metrics that we use to profitably grow our business and enhance shareholder value; |
| ● | A structure which helps ensure that our executive compensation program aligns the interests of our executive officers and our shareholders, is not overly weighted towards annual cash incentive compensation and does not otherwise have the potential to threaten long-term shareholder value by promoting unnecessary or excessive risk-taking by our executive officers; |
| ● | A structure consistent with our philosophy of targeting executive compensation at market median, which allows us to remain competitive with companies that compete with us for talented team members and shareholder investment; |
| ● | Various executive compensation practices that contribute to good corporate governance, including a “clawback” policy, stock ownership guidelines for Directors and executive officers, hedging, pledging and other stock ownership restrictions, and an annual compensation risk review; and |
| ● | Effective oversight and decision-making by a highly-independent Board of Directors and a Human Resources and Compensation Committee consisting entirely of independent Directors that retains an independent executive compensation consultant. |
The vote on this Item 2 is non-binding and advisory in nature, which means that the vote is not binding on us, our Board of Directors or any of the Committees of our Board of Directors. However, our Board of Directors values the views of our shareholders and our Board of Directors and Human Resources and Compensation Committee will review the results of the vote and take them into account when addressing future compensation policies and decisions.
Our Board of Directors believes that our executive compensation program is reasonable and well-structured, satisfies its objectives and philosophies and is worthy of shareholder support. Accordingly, our Board of Directors requests that our shareholders vote to approve the following resolution:
RESOLVED, that the compensation paid to our Named Executive Officers, as disclosed pursuant to the rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussions, is approved on a non-binding, advisory basis.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT ON A NON-BINDING, ADVISORY BASIS. |
| 2023 Proxy Statement | 39 |
Executive Compensation
Compensation Discussion & Analysis
Named Executive Officers
Our named executive officers for fiscal year 2023 are:
| ● | Jennifer A. Parmentier Chief Executive Officer (since January 1, 2023) |
| ● | Thomas L. Williams Executive Chairman (CEO through December 31, 2022) |
| ● | Todd M. Leombruno Executive Vice President and Chief Financial Officer |
| ● | Lee C. Banks Vice Chairman and President |
| ● | Andrew D. Ross Chief Operating Officer |
| ● | Roger S. Sherrard Vice President and President - Aerospace Group |
Executive Summary
Objectives and Philosophies of the Executive Compensation Program
The Win Strategy has been the foundation of our business and has represented the unified strategic vision of our team members worldwide since it was first introduced in 2001. The Win Strategy defines the key goals, operational priorities and metrics used to profitably grow our business. We are confident that our continuing focus on The Win Strategy maximizes long-term shareholder value by helping us realize our goal of top-quartile performance among our competitors and peers and steady appreciation of our stock price.
The Win Strategy also provides the means by which we measure and reward success. In fact, the objective of our executive compensation program is to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy. The program is designed to:
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Align the financial interests of our executive officers and our shareholders by encouraging and rewarding our executive officers for performance that achieves or exceeds significant financial and operational performance goals and by holding them accountable for results. |
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Encourage and reward our executive officers for experience, expertise, level of responsibility, continuity of leadership, leadership qualities, advancement, individual accomplishment and other significant contributions to the enhancement of shareholder value and to the success of our business.
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Provide market competitive compensation to attract, retain and motivate highly-talented and ethical individuals at all levels who are focused on the long-term success of our business and who are equipped, motivated and poised to lead and manage our business presently and in the future.
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Promote accountability by providing executive officers a mix of cash and equity compensation, allocating a greater proportion of the compensation for executive officers, as compared to other team members, to elements that are dependent on the performance of our business. | |
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Maintain a level of flexibility sufficient to adjust for trends and changes in the continuously evolving global business and regulatory environment. | |||
| 40 |
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Executive Compensation
2023 Executive Compensation Program
Categories and Elements of Executive Compensation
Our executive compensation program covers all compensation paid to our executive officers. In fiscal year 2023 our executive officers included, among others, our Chief Executive Officer, our Executive Chairman and former CEO, our Chief Financial Officer and our three other most highly compensated executive officers identified in the Summary Compensation Table for Fiscal Year 2023, which we refer to as the Named Executive Officers.
Our executive compensation program offers the categories and elements of compensation identified in the following table. Each element of compensation is more specifically defined and described in the “Principal Elements of Executive Compensation” section beginning on the page indicated in the table.
| Category of Compensation | Element(s) of Compensation | Defined/Described Beginning on: | ||
| Base Salaries | Base Salaries | Page 50 | ||
| Annual Cash Incentive Compensation | Officer ACIP Awards | Page 50 | ||
| Long-Term Incentive Compensation | LTIP Awards | Page 54 | ||
| Stock Incentives | Page 56 | |||
| Employee Benefits | Various | Page 56 | ||
| Executive Perquisites | Various | Page 62 |
“Pay-for-Performance” — Structure, Key Financial Metrics and Impact on Compensation
Our executive compensation program is structured to ensure that a significant portion of the compensation for executive officers is dependent upon the performance of our business. This “pay-for-performance” structure drives the program to achieve its objective to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy. Our program is also structured to help ensure that the compensation for our executive officers is not overly weighted toward annual cash incentive compensation and does not otherwise have the potential to threaten long-term shareholder value by promoting unnecessary or excessive risk-taking by our executive officers. The “Compensation Setting Process” section describes our policies and practices for allocating executive compensation among the various categories and elements.
| 2023 Proxy Statement | 41 |
Executive Compensation
To illustrate, the following graphics show the mix of fixed and at-risk annual and long-term cash and equity compensation represented by base salaries and the elements of annual cash incentive compensation and long-term incentive compensation for the Named Executive Officers for fiscal year 2023 at target levels. The percentages of total target compensation reflected in this chart were calculated using each Named Executive Officer’s fiscal year 2023 base salary, target annual cash incentive compensation and target long-term incentive compensation (as set in August 2022) except for Ms. Parmentier and Messrs. Williams and Ross, who assumed their new roles mid-year of Chief Executive Officer, Executive Chairman of the Board and Chief Operating Officer, respectively. The percentages below for Ms. Parmentier and Messrs. Williams and Ross reflect prorated target compensation to account for mid-year compensation adjustments related to their new roles.
| Jennifer A. Parmentier | Thomas L. Williams | Todd M. Leombruno | ||
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| Lee C. Banks | Andrew D. Ross | Roger S. Sherrard | ||
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Base Salary (Annual Cash) 
Target ACIP award
LTIP Awards and Target Stock Incentives (Long Term/Equity)
The “Principal Elements of Executive Compensation” section provides detailed discussion and analysis regarding how each element of compensation encourages and rewards performance that implements the strategies and advances the goals of The Win Strategy. Our compensation structure includes both fixed and at-risk compensation comprised of various cash and equity elements, which is generally as follows:
| 42 |
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Executive Compensation
We provide base salaries, employee benefits and executive perquisites primarily to ensure that our executive compensation program remains competitive to attract, retain and motivate the individuals needed to implement and advance our strategies and goals. In addition, as illustrated in the following table, we provide annual cash incentive compensation and each element of long-term incentive compensation primarily to encourage and reward performance that implements and advances The Win Strategy, in particular, our strategies and goals relating to financial performance and profitable growth, aligning such elements with our performance in certain key financial metrics that we use to measure the overall performance of our business.
We also ensure that base salary adjustments consider performance and results in certain ESG-related metrics embedded in The Win Strategy, such as, among others, team member safety, engagement and inclusion. Additionally, as detailed further below, the Human Resources and Compensation Committee incorporated ESG-related metrics into our Officer ACIP plan in fiscal year 2023.
The following table shows the behaviors, key financial metrics and fiscal year 2023 results driven by each element of at-risk compensation provided to the Named Executive Officers.
| Element of Compensation | Encourages executive officers to maximize |
By focusing on various key business strategies, such as |
Fiscal year 2023 results | ||||||
| Officer ACIP Award (cash) | segment operating income, sales revenue, cash flow margin, ESG and other strategic imperatives | continuous improvement in net income, lean initiatives, inventory controls, collection of receivables, control of payables and capital, and individual metrics tied to the achievement of ESG and other strategic imperatives | Our results for segment operating income, sales revenue and cash flow margin, were all above target as explained in further detail below, resulting in a payout at 193.29% of target. | ||||||
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LTIP Awards (equity) | long-term revenue growth, earnings per share growth, and growth in average return on invested capital | market-driven innovation, on-time delivery of quality products, value-added services and systems, strategic supply chain, lean enterprise, value pricing and profitable growth | Our results for revenue and earnings per share growth were at top quartile, and our results for growth in average return on invested capital were between the median and top quartile performance levels, resulting in a payout at 174.11% of target. | |||||
| Stock Incentives/Stock Appreciation Rights (SARs) (equity) | our stock price | sustained profitable growth and financial and operational performance that contribute to appreciation of our stock price | Our stock price closed at $390.04 on June 30, 2023, as compared to $246.05 on June 30, 2022. |
| 2023 Proxy Statement | 43 |
Executive Compensation
Compensation Practices
The following table highlights some of the key aspects of our executive compensation program for fiscal year 2023. This table is not a substitute for, nor does it purport to include, all of the information provided in this Compensation Discussion and Analysis and the Compensation Tables presented later in this Proxy Statement.
 |
What We Do |  |
What We Don't Do | |
 Executive compensation program with pay-for-performance structure aligned with The Win StrategyThe target total direct compensation package for our Chief Executive Officer is a mix of 12% fixed and 88% at-risk, and for our other Named Executive Officers is an average mix of 17% fixed and 83% at-riskAnnual advisory vote on executive compensation with consistent high degree of approvalOne-year minimum vesting or performance period requirements for equity incentives“Claw back” policy to recover or withhold incentive-based compensation to executive officers in certain circumstancesAnti-hedging and anti-pledging policy for Directors and executive officersRobust Stock Ownership Guidelines for executive officers and Directors |
 Offer employment agreements to our executivesOffer above-market earnings on contributions to deferred compensation accountsGrant stock options or SARs with an exercise price less than the fair market value of Parker’s common stock on the date of grantRe-price stock options or SARsCash out underwater stock options or SARsInclude reload provisions in any stock option or SAR grantPermit directors or employees, or their respective related persons, to engage in short sales of Parker’s stock or to trade in instruments designed to hedge against price declines in Parker’s stockPermit directors or officers to hold Parker securities in margin accounts or to pledge Parker securities as collateral for loans or other obligations | |||
| 44 |
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Executive Compensation
Compensation Setting Process
Roles and Responsibilities
| THE HUMAN RESOURCES AND COMPENSATION COMMITTEE |
The Human Resources and Compensation Committee, which we refer to in this Compensation Discussion and Analysis as the Committee, consists solely of independent Directors and has various duties and responsibilities with respect to the administration, oversight and determination of executive compensation. As described in the Committee’s Charter, which is posted and available on the Corporate Governance page of our investor relations website at www.phstock.com, these duties and responsibilities include:
●establishing our executive compensation program and philosophies and overseeing their development and implementation;
●reviewing and approving the performance and compensation of our Chief Executive Officer and other executive officers; and
●overseeing and evaluating any significant risks arising from our compensation policies and practices.
To assist in its risk oversight duties and responsibilities, the Committee ensures management and the Committee's independent compensation consultant conduct an annual compensation risk review. The results of this review are evaluated and discussed among management, the Committee and its independent executive compensation consultant and, if any significant risks are identified, the full Board of Directors. Based on the review conducted during fiscal year 2023, we believe that our current compensation policies and practices are designed to mitigate risks related to compensation, and such policies and practices do not create risks that are likely to have a material adverse effect on our business.
The Committee also retains the discretion to authorize periodic compensation adjustments due to promotions or increases in the responsibilities of our executive officers.
In fulfilling its duties and responsibilities, the Committee seeks periodic input, advice and recommendations from various sources, including our Board of Directors, our executive officers and the Committee’s independent executive compensation consultant. The Committee is not bound by that input or advice or those recommendations. The Committee at all times exercises independent discretion in its executive compensation decisions. The Committee may, in its discretion, create subcommittees of its members and delegate to them any of its duties and responsibilities. It may also delegate certain authority to management with respect to our benefit plans, but it may not so delegate approval of executive officer compensation, stock plan design, director compensation, or change in control plans and agreements.
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| BOARD OF DIRECTORS | Our Board of Directors approves all plans and programs which, by their terms, require approval of our Board. Our Board does not authorize or approve any other specific executive compensation matters. Our Board oversees the Committee’s activities and performance, including the identification, evaluation and monitoring of risks arising from our compensation policies and practices, and reviews all material information relating to executive compensation matters approved by the Committee. This oversight helps ensure that the Committee fulfills its duties and responsibilities and that the executive compensation program is reasonable and appropriate, meets its objectives and effectively serves the interests of our business and our shareholders. | |
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EXECUTIVE OFFICERS |
Our executive officers also play a role in the administration, oversight and determination of executive compensation. At the beginning of each fiscal year, each executive officer sets annual performance goals for his or her direct reports, which may include other executive officers. The performance goals are designed to promote individual performance consistent with the strategies and goals of The Win Strategy. Throughout the fiscal year, each executive officer’s performance is reviewed and evaluated against his or her performance goals. At the end of the fiscal year, each executive officer conducts a final performance review for each of his or her direct reports. Based on those reviews, our executive officers, other than our Chief Executive Officer, recommend any annual compensation adjustments and awards for their executive officer direct reports to our Chief Executive Officer.
Our Chief Executive Officer similarly reviews and evaluates her direct reports, which include Messrs. Banks and Leombruno. Our Chief Executive Officer also reviews and evaluates the recommendations made with respect to all of our other executive officers and makes any modifications that she deems appropriate. Our Chief Executive Officer then recommends to the Committee annual compensation adjustments and awards for all of our executive officers other than herself.
Our Chief Executive Officer, Vice Chairman and President, Chief Operating Officer, Executive Vice President—Human Resources & External Affairs and our Secretary attend all meetings of the Committee other than executive sessions. None of these officers attend discussions regarding their individual compensation. Our executive officers prepare and provide to the Committee performance summaries for certain executive officers, which are used by the Committee to understand and measure the performance and effectiveness of our annual cash incentive compensation and long-term incentive compensation. Our executive officers also periodically consult with and assist the Committee in calculating incentive compensation payouts, establishing and monitoring performance goals and addressing other appropriate executive compensation matters.
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| 2023 Proxy Statement | 45 | |
Executive Compensation
Compensation Consultants and Competitive Market Analysis
The Committee regularly monitors, reviews and evaluates our executive compensation program to help ensure that it provides reasonable compensation ranges at competitive, appropriate and effective levels. The Committee engages Mercer Human Resource Consulting, an independent human resources and compensation consulting firm, which we refer to as Mercer, to assist the Committee in its monitoring, review and evaluation responsibilities, and to otherwise provide assistance and guidance to the Committee on executive officer and Director compensation matters. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. The Committee first engaged Mercer in fiscal year 2009 following a robust procurement process involving multiple consulting firms. The Committee selected Mercer based on its level of expertise and financial and strategic fit. Mercer reports directly to the Committee and attends all meetings of the Committee. The Committee has sole authority for the appointment, removal, replacement, compensation and oversight of Mercer and its affiliates for executive officer and Director compensation matters.
Mercer provides a wide range of executive officer and Director compensation consulting services for the Committee. Mercer prepares and provides to the Committee a comprehensive annual review of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation for all of our executive officers. Mercer uses this annual review to advise the Committee with respect to the effectiveness and competitiveness of our executive compensation program. The Committee considers this annual review when establishing compensation levels and otherwise to ensure that our executive compensation program remains competitive and effective.
Mercer uses proxy statement data and surveys published by leading human resources and compensation consultants to conduct market analyses of base salaries, target annual cash incentive compensation, target long-term incentive compensation and target total cash and direct compensation offered to executives of other diversified industrial companies with revenues and market values comparable to ours, which we refer to as the Peer Group or Peer Group companies. Mercer also uses broader market data on companies outside of the Peer Group to the extent that it is available and appropriate.
The Committee regularly reviews and, when necessary or advisable, updates the Peer Group to make sure it consists of companies that directly compete with us for talented team members and shareholder investment, and it otherwise represents a meaningful group of peers. In evaluating the Peer Group companies, the Committee looks for companies in the Diversified Industrials sector with characteristics and business strategies similar to ours. The Peer Group companies used for purposes of fiscal year 2023 compensation decisions remained the same as fiscal year 2022 and consisted of the following companies:
| Peer Group Companies | ||||
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●Caterpillar Inc.
●Cummins Inc.
●Danaher Corporation
●Deere & Company
●Dover Corporation
●Eaton Corporation plc
●Emerson Electric Co.
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●Enovis Corporation (formerly Colfax Corporation)
●Flowserve Corporation
●Fortive Corporation
●Honeywell International Inc.
●Illinois Tool Works Inc.
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●Ingersoll Rand Inc.
●ITT Inc.
●Johnson Controls International plc
●Rockwell Automation, Inc.
●Textron Inc.
●Trane Technologies plc
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In January 2023, the Committee modified the Peer Group in order to more closely align the Peer Group with the current size, characteristics and business strategy of the Company. Accordingly, the Committee removed Enovis Corporation and Danaher Corporation from the Peer Group and added 3M Company, Moog Incorporated and Raytheon Technologies Corporation to the Peer Group. This modified Peer Group will generally be used for purposes of fiscal year 2024 compensation decisions and to evaluate the final payout of the calendar year 2023-24-25 LTIP awards granted in January 2023 (as described below).
Mercer also provided other compensation consulting services to the Committee during fiscal year 2023, including:
| ● | preparing for and participating in the Committee’s meetings and conference calls, including advance and subsequent meetings with the chair of the Committee and senior management; |
| ● | conducting a pay-for-performance review to evaluate the level of alignment between our executive compensation program and performance levels relative to our Peer Group companies; |
| ● | preparing and providing to the Committee a comprehensive review of compensation provided to our non-management Directors; |
| ● | assessing our cash flow margin performance versus peers over a one, three and five-year period; |
| ● | working with management to conduct the annual compensation risk review; and |
| ● | periodically assisting management on other select executive compensation topics. |
| 46 |
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Executive Compensation
In fiscal year 2023, we paid $261,043 in fees, administrative charges, out-of-pocket expenses and other costs to Mercer for executive officer and Director compensation consulting services provided to the Committee.
We also directly engage Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) in the ordinary course of business, without the approval of our Board of Directors or the Committee, to provide services in areas other than executive officer and Director compensation. These additional services included:
| ● | consulting services regarding life insurance, prescription drug and other benefits programs for our team members generally; |
| ● | consulting services regarding investment options available under our benefit plans for our team members generally; |
| ● | providing benchmarking surveys for information on compensation and benefits for our team members generally; and |
| ● | providing services as an insurance broker. |
In fiscal year 2023, we paid $940,187 in fees, administrative charges, commissions, out-of-pocket expenses and other costs to Marsh & McLennan Companies, Inc. and its affiliates (including Mercer) for these additional services. The majority of these fees were not paid pursuant to engagements of Marsh & McLennan Companies, Inc. by management, but were rather either paid by our third-party administrators to Marsh & McLennan Companies, Inc. relating to risk insurance and for insurance and prescription drug services provided under our team member health and welfare plans, or were direct engagements with Marsh & McLennan Companies, Inc. made by various divisions worldwide for market surveys related to those particular divisions. The consolidated revenues of Marsh & McLennan Companies, Inc. were $20.72 billion as reported in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
The Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, that could give rise to a potential conflict of interest with respect to Mercer. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Mercer. The Committee also periodically reviews the relationship with Mercer to determine whether sufficient internal safeguards are in place to ensure that Mercer provides services to the Committee independent of any influence from management. The Committee identified the following safeguards:
| ● | Mercer reports directly to the Committee and not to management on executive officer and Director compensation matters; |
| ● | at each Committee meeting, Mercer and the Committee meet in executive session without members of management present; |
| ● | all non-executive compensation services are provided by Mercer consultants who are not involved in providing executive officer and Director compensation consulting services to the Committee; |
| ● | the Committee has exclusive authority to retain and set the compensation for Mercer’s executive officer and Director compensation consulting services; |
| ● | the individual Mercer consultants to the Committee do not provide any services to us other than those provided for the Committee; |
| ● | the individual Mercer consultants to the Committee do not participate in any client development activities that are not directly related to executive officer or Director compensation services for the Committee; and |
| ● | the amounts paid to Mercer by the Committee are not directly impacted by any growth in the fees we pay to Marsh & McLennan Companies, Inc. and its affiliates (including Mercer). |
Consideration of 2022 Say-on-Pay Vote
At our 2022 Annual Meeting of Shareholders, we received approval, based on the total votes cast of over 90%, for our advisory “say-on-pay” vote to approve the compensation of our Named Executive Officers. The Committee and Mercer specifically considered the voting results when exploring potential changes to our executive compensation program in fiscal year 2023. The Committee did not make any changes to our executive compensation program for fiscal year 2023 that were directly driven by the say-on-pay vote. The Committee believes the voting results demonstrate strong, consistent support for our executive compensation program. The Committee will continue to explore with Mercer potential improvements to our executive compensation program to the extent appropriate to keep our executive compensation program aligned with best practices in our competitive market.
| 2023 Proxy Statement | 47 |
Executive Compensation
General Policies and Practices Relating to Executive Compensation
Allocation of Executive Compensation
The Committee seeks to provide compensation, employee benefits and executive perquisites which are competitive with the market and help us attract, retain and motivate present and future executive officers. Annually, base salaries, target annual cash incentive compensation and target long-term incentive compensation for each executive officer is compared to the median of companies included in Mercer’s annual review with the objective that, in the aggregate, our target compensation remains generally aligned with the median of the Peer Group companies.
When deciding whether to increase or decrease the amount of any element of compensation, the Committee considers Mercer’s annual review, the annual performance reviews of the executive officers and the performance of our business as a whole. The Committee does not consider amounts realized from prior compensation in determining the levels of compensation paid to executive officers.
To ensure that our executive compensation program meets its objectives to drive and support The Win Strategy, the Committee allocates the majority of compensation for executive officers to annual cash incentive compensation and long-term incentive compensation. Each of the at-risk elements of compensation within those categories is directly tied to appreciation of our stock price and/or to significant financial and operational performance goals. More than one-half of the targeted total compensation for the executive officers is, therefore, “at-risk” and may significantly fluctuate from year to year based on our financial, operational and stock performance. In addition, the Committee makes sure that executive officers have a greater proportion of their total compensation allocated to these at-risk elements than other team members. The Committee structures the program in this manner to better align the financial interests of our executive officers with the financial interests of our shareholders, to better ensure a “pay-for-performance” result and to promote internal equity by recognizing that our executive officers, as compared to other team members, have greater responsibility and influence over the performance of our business.
Our executive compensation program is also structured to offer a reasonable balance of annual and long-term, as well as cash and equity, elements of compensation. The program provides a mix of those elements specifically designed to encourage and reward performance that contributes to the advancement of The Win Strategy. The Committee does not have any formal policies or guidelines with respect to the allocation of executive compensation between annual and long-term elements, cash and equity elements or different forms of equity elements. In practice, however, the Committee has taken the following approaches.
| ● | Allocation between annual and long-term elements. The Committee considers Mercer’s annual review as it sets each executive officer’s base salary and annual cash incentive compensation to ensure that it is reasonable in the context of the midpoint value of his or her comparable position within the Peer Group. The Committee also considers Mercer’s annual review as it sets the total target value of each executive officer’s long-term incentive compensation as a multiple of the midpoint of the base salary range of his or her comparable position within the Peer Group companies. |
| ● | Allocation between cash and equity elements. Base salaries and annual cash incentive compensation are paid in cash. Long-term incentive compensation is paid in equity because of the long-term nature of equity awards and our desire to encourage performance that drives long-term shareholder value. |
| ● | Allocation between different forms of equity elements. The Committee generally allocates 50% of the total target value of each executive officer’s long-term incentive compensation to LTIP Awards and 50% to Stock Incentives. The Committee takes this approach to balance the allocation between elements based on long-term financial, operational and strategic metrics and those based on long-term performance of our common stock. |
The Committee generally makes all elements of executive compensation available to all executive officers and makes executive compensation decisions on a consistent and equitable basis. The Committee generally does not offer any element to an executive officer that is not available to other executive officers. The Committee also occasionally grants retention and/or recognition awards to executive officers who make extraordinary contributions to the Company’s success, or for whom a retention incentive is appropriate.
Committee Discretion
The Committee does not change the pre-determined performance goals or increase the amount of any at-risk compensation following the grant date except as permitted by applicable laws and regulations. The Committee may increase the amount of any award of annual cash incentive compensation if appropriate to account for corporate policy changes, executive compensation program changes and major corporate programs, and to account for the negative impact of acquisitions on goodwill and amortization expense, losses on dispositions of real property during plant moves or shutdowns and other unexpected occurrences that negatively impact awards.
| 48 |
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Executive Compensation
The Committee may reduce the amount of any award of annual cash incentive compensation or long-term incentive compensation made to the Named Executive Officers other than Stock Incentives. The Committee retains this downward discretion for the following purposes:
| ● | to ensure greater control over final performance-based compensation amounts based on its assessment of the quality of our results relative to our various performance measures, the risks taken to attain those results and our overall financial performance; |
| ● | to help ensure that performance-based compensation continues to effectively serve the interests of our business and our shareholders; and |
| ● | to avoid inappropriately rewarding executive officers based on events or circumstances that were not expected at the beginning of the performance period. |
The Committee has historically exercised this downward discretion with respect to cash incentive awards under our prior annual cash incentive plan with respect to the Chief Executive Officer, the Chief Financial Officer and certain other executive officers. In addition, our calculation methodology for LTIP Award payouts also allows the Committee to exercise this discretion with respect to LTIP Award payouts.
Compensation Risk Review
The annual compensation risk review, first described on page 45, begins with a global assessment of any plans or programs that could potentially encourage excessive risk-taking or otherwise present significant risks to our business. The review also takes into account our individual business units to determine whether any of them carries a significant portion of our risk profile, structures compensation significantly different than others or is significantly more profitable than others.
The review then evaluates whether the applicable plans and programs are likely to encourage excessive risk-taking or detrimental behavior, vary significantly from our risk-reward structure, or otherwise present significant risks to our business.
During our fiscal year 2023 compensation risk review, we also identified and evaluated various mechanisms that we currently have in place that may serve to mitigate any existing or potential risks arising from our compensation policies and practices, including the following:
| ● | our executive officers and other management-level team members are compensated with a mix of annual and long-term incentives, fixed and at-risk compensation, cash and multiple forms of equity compensation; |
| ● | compensation packages gradually become more focused on long-term, at-risk and equity compensation as our team members ascend to and through management-level positions; |
| ● | our global compensation plans and programs generally utilize the same or substantially similar performance measures; |
| ● | we use multiple performance measures to determine payout levels under certain elements of incentive compensation and different performance measures for our annual incentives as compared to our long-term incentives; |
| ● | the performance of our team members is not evaluated or measured based solely on changes in our stock price; |
| ● | our incentive compensation programs generally limit payouts to a specified maximum, while those that do not are mitigated by other factors (e.g., stock appreciation rights are mitigated by long-term vesting periods and stock ownership guidelines); |
| ● | we do not offer “guaranteed” bonuses and all of our incentive compensation elements carry downside risk for participants; |
| ● | our executive officers are subject to specific stock ownership guidelines, a “clawback” policy and provisions requiring forfeiture of certain elements of incentive compensation under certain circumstances; |
| ● | our compensation packages, including severance packages and supplemental pensions, are within market ranges; |
| ● | the Human Resources and Compensation Committee has the discretion to assess the quality of our results in relation to our various performance measures and the risks taken to attain those results in approving final incentive payouts; |
| ● | our decentralized organizational structure lessens the impact of any excessive risks taken by individual business units or operating groups; and |
| ● | our team members are evaluated, measured and assessed based on their compliance with our Global Code of Business Conduct and other internal policies and controls, and the extent to which they act in the best interests of our business and our shareholders. |
During the annual compensation risk review, we also consider whether any changes to our compensation plans and programs may be necessary to further mitigate risk. No changes to our compensation plans and programs were made as a result of the fiscal year 2023 compensation risk review, as we concluded that there were no risks arising from our compensation policies and practices that would be reasonably likely to have a material adverse effect on us.
| 2023 Proxy Statement | 49 |
Executive Compensation
Principal Elements of Executive Compensation
Base Salaries
Each of the Named Executive Officers receives an annual base salary to:
| ● | encourage and reward attainment of individual performance goals established during the annual performance review process; |
| ● | recognize experience, expertise, level of responsibility, continuity of leadership, leadership qualities, advancement, individual accomplishment and other significant contributions to the enhancement of shareholder value and the success of our business; and |
| ● | attract, retain and motivate the highly-talented and values-driven individuals we need to advance the goals of The Win Strategy. |
The Committee establishes a base salary range for each Named Executive Officer by using Mercer’s annual review to analyze base salaries of persons holding comparable positions within the Peer Group companies. The Committee determines the base salary for each Named Executive Officer for the next fiscal year based on the Named Executive Officer’s annual performance review, and compares the amount to the applicable market range to make sure that it is reasonable. Among other matters, annual performance reviews and base salary adjustments consider performance and results aligned with The Win Strategy, including in certain of its ESG-related metrics such as, among others, team member safety, engagement and inclusion. The Committee may increase base salaries, where appropriate, periodically throughout the fiscal year based on the results of interim performance reviews. The Committee generally tries to target base salary amounts at approximately the median of the Peer Group companies.
In fiscal year 2023, base salaries for the Named Executive Officers were generally increased in the range of approximately 7.1% to 9.8% for officers remaining in their same role year over year in consideration of the factors described above and to better align with the Peer Group median for similarly situated persons at our Peer Group companies. The table below reflects the base salaries as approved by the Committee in fiscal year 2023 as well as the total base salary actually paid to each of the Named Executive Officers as of June 30, 2023, which is also included in the "Salary" column of the Summary Compensation Table for Fiscal Year 2023.
Base Salaries
| Named Executive Officers | FY2023 Base Salary Effective 9/1/22 ($)(1) |
FY2023 CEO/COO Transition Effective 1/1/23(2) |
FY2023 Base Salary ($) (Actual) 7/1/22-6/30/23 | |||
| Jennifer A. Parmentier | $900,000 | $1,300,000 | $1,086,667 | |||
| Thomas L. Williams | $1,500,000 | $375,000 | $920,833 | |||
| Todd M. Leombruno | $850,000 | — | $838,333 | |||
| Lee C. Banks | $1,220,000 | — | $1,204,167 | |||
| Andrew D. Ross | $735,000 | $850,000 | $782,117 | |||
| Roger S. Sherrard | $765,000 | — | $752,883 |
| (1) | Base salaries as set in August 2022 and effective September 1, 2022. |
| (2) | Mid-year salary changes effective January 1, 2023 reflect Ms. Parmentier's new role as Chief Executive Officer, Mr. Williams' new role as Executive Chairman of the Board, and Mr. Ross' new role as Chief Operating Officer. |
Annual Cash Incentive Compensation
On August 17, 2022, the Committee approved and adopted the Parker-Hannifin Corporation Officer Annual Cash Incentive Plan (the “Officer ACIP”), effective July 1, 2022, and established fiscal year 2023 target opportunities thereunder for the Company’s executive officers. The Officer ACIP replaced Target Incentive Bonuses, General RONA Bonuses, Converted RONA Bonuses and the Profitable Growth Incentive Plan from our annual incentive program for prior fiscal years.
The Officer ACIP provides for annual award payouts based on the achievement of performance goals. The performance goals are tied to three performance metrics (segment operating income weighted at 40%, sales revenue weighted at 20% and cash flow margin weighted at 40%), with each metric evaluated at three performance levels (threshold, target or maximum). The performance levels equate to a percentage of the target payout with respect to the applicable metric (50% for threshold, 100% for target and 200% for maximum). The percentage payout for each metric will be interpolated for performance levels achieved between threshold and target and between target and maximum. The award payout may be further modified by applying a multiplier of up to plus or minus 20% based upon the Committee's evaluation of each Named Executive Officer's performance relating to environmental, social and governance ("ESG") matters and other strategic imperatives, but in no event can the total payout exceed the 200% maximum.
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Executive Compensation
Segment Operating Income is consolidated operating income as reported, excluding any effects of currency rate changes, acquisitions and divestitures. Sales Revenue is consolidated net sales revenue as reported, excluding any effects of currency rate changes, acquisitions and divestitures. Cash Flow Margin is the percentage of sales represented by net cash flow from operating activities less capital expenditures, excluding any discretionary pension contributions and effects of acquisitions.
The Committee pre-determines the performance goals applicable to each financial metric by analyzing our annual goals and objectives for each such metric and in consideration of Mercer’s annual review. Through this process the Committee directly and materially links annual cash incentive compensation to performance that drives and supports The Win Strategy.
The Committee identified segment operating income, sales revenue and cash flow margin as performance measures critical to the financial performance and profitable growth goals of The Win Strategy. Utilizing segment operating income encourages executive officers and other team members to increase sales and to reduce operating expenses and other costs associated with managing our working capital and investments, while the sales revenue metric encourages strong sales execution, product and innovation investments, and market share gains. The Committee determined to continue to use cash flow margin, which was also an element of our prior annual incentive program, because of its importance in driving increases in net income, implementing lean initiatives, controlling inventory, collecting receivables, controlling accounts payable, and optimizing capital expenditures.
To further align annual cash incentive compensation to the value that we place on ESG matters and other strategic imperatives, the Committee incorporated a performance multiplier as a component of Officer ACIP. This multiplier may adjust Officer ACIP payout amounts upward or downward by up to 20% based on the Committee's evaluation of each such Named Executive Officer's individual performance related to our ESG and other strategic imperatives. In fiscal year 2023, for example, the multiplier incentivized our leaders to foster a culture of diversity, equity and inclusion, drive reductions in carbon emissions, successfully close and integrate the acquisition of Meggitt PLC and advance other strategic imperatives that are important to our goals under The Win Strategy. The Committee will not apply the multiplier to increase an annual cash incentive payout above the overall cap of 200% of the participant’s total target payout opportunity. The Committee believes that, versus our previous annual incentive compensation plan metrics that were based on return on net assets and cash flow, the use of segment operating income, revenue growth and cash flow margin, combined with the performance multiplier, more closely aligns Officer ACIP awards to the most meaningful drivers of Company performance and shareholder value creation.
Setting Targets
The Committee allocates a significant portion of the total cash compensation for executive officers to annual cash incentive compensation, which is wholly dependent on achieving pre-determined financial and operational goals. For fiscal year 2023, Officer ACIP awards, at target, represented the following percentages of base salary for each of our Named Executive Officers, which remained generally consistent (increased by 4%) with target aggregate percentages under the prior annual incentive compensation plan for fiscal year 2022 for officers serving in the same role year over year, except that Mr. Banks' target percentage was increased by 23% to 130% to reflect the Committee's view of his performance and position.
Target Percentage of Base Salary
| Named Executive Officers | Target Officer ACIP Award Percentage |
Target Officer ACIP Amounts ($)(1) | ||
| Jennifer A. Parmentier(2) | 165% | 1,590,000 | ||
| Thomas L. Williams | 165% | 1,546,875 | ||
| Todd M. Leombruno | 100% | 850,000 | ||
| Lee C. Banks | 130% | 1,586,000 | ||
| Andrew D. Ross(2) | 115% | 801,125 | ||
| Roger S. Sherrard | 85% | 650,250 |
| (1) | Because Officer ACIP awards are calculated based on actual base salary received during the fiscal year, mid-year changes in base salary rates, including the mid-year increases in salary for Ms. Parmentier and Mr. Ross and decrease in salary for Mr. Williams, had an impact on Officer ACIP payouts. |
| (2) | Ms. Parmentier's and Mr. Ross' Officer ACIP target award percentages were increased to those shown above upon assuming their new roles as Chief Executive Officer and Chief Operating Officer on January 1, 2023. Their Officer ACIP target percentages set in August 2022 relative to their prior roles were 115% and 85%, respectively. Their Officer ACIP target award amounts were prorated accordingly. |
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Executive Compensation
Performance Targets
During the first quarter of the fiscal year, the Committee determines the target award opportunity set forth above for each of the executive officers and establishes the levels of performance for threshold, target and maximum payouts after evaluating our annual plan, Peer Group data and Mercer’s annual review. The Committee focuses on setting targets that are reasonable in relation to the median of similar compensation offered to executives for similar positions by the Peer Group companies.
Based on this data, for the segment operating income and sales revenue metrics (which are new metrics for fiscal year 2023), the Committee set target performance based on the midpoint of our initial guidance range which was communicated to investors on August 4, 2022, adjusted to eliminate the impact of currency fluctuations and acquisition and divestiture activity. The threshold and maximum performance for these metrics were then set at 90% and 110% of target performance respectively. The resulting threshold, target and maximum performance metrics are set forth in the table below.
With respect to cash flow margin (which was also used in our prior annual cash incentive plan), the Committee determined levels of performance for threshold, target and maximum payouts after evaluating our annual plan for cash flow margin and the one-year, three-year and five-year average cash flow margin within the Peer Group. Based on this data, the Committee estimated that 7%, 11% and 15% cash flow margins would represent bottom-quartile, median and top-quartile cash flow margin results, respectively, within the Peer Group companies during fiscal year 2023. After review and consideration of such data and our annual plan for cash flow margin, the Committee increased the bottom-quartile, median and top-quartile cash flow payout thresholds from those used for our Target Incentive Bonuses in fiscal year 2022 of 5.5%, 10% and 14.5%, respectively, to 7%, 11% and 15%, respectively, for fiscal year 2023.
Performance Results
The following tables show how the 2023 Officer ACIP payout percentage was calculated:
| Below Threshold | Threshold | Target | Maximum | ||||||
|
Actual Segment Operating Income Performance: $4,044,656
% of Target Payout Earned: 200% |
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| Segment Operating Income | |||||||||
| (40% weight) | Less than | ||||||||
| $3,302,140 | $3,302,140 | $3,669,044 | $4,035,948 | ||||||
|
Actual Sales Revenue Performance: $17,456,150
% of Target Payout Earned: 166.4% |
|||||||||
| Sales Revenue | |||||||||
| (20% weight) | Less than | ||||||||
| $14,731,862 | $14,731,862 | $16,368,736 | $18,005,610 | ||||||
|
Actual Cash Flow Margin Performance: 15.8%
% of Target Payout Earned: 200% |
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| Cash Flow Margin | |||||||||
| (40% weight) | Less than | ||||||||
| 7% | 7% | 11% | 15% | ||||||
| Payout% | 0% | 50% | 100% | 200% | |||||
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| % of Target Payout Earned | Weighted Payout % | |||
| Segment Operating Income | 200% | 80% | ||
| Sales Revenue | 166.4% | 33.29% | ||
| Cash Flow Margin | 200% | 80% | ||
| Total Weighted Payout % | 193.29% |
Performance Multiplier
The Committee also evaluated the performance of our executive officers in our ESG and other strategic imperatives. The Committee determined that each individual had performed sufficiently to warrant a positive adjustment of up to 20%, which, if applied, would have increased the overall percentage payout for each of our Named Executive Officers to the maximum of 200% of their target Officer ACIP award. However, the Committee determined to use its discretion to not apply the multiplier for fiscal year 2023, as it determined that the strong performance and results across all Officer ACIP metrics were sufficiently reflected and rewarded by the base payout of 193.29%. Accordingly, the final Officer ACIP payout percentage approved by the Committee was 193.29%.
The following tables show each of the Named Executive Officers' Officer ACIP target and actual amounts paid:
| Officer ACIP Awards | ||||||
| Named Executive Officer | Base Salary Earned |
Actual Target Officer ACIP Award Amount(1) |
Officer ACIP Award Amount | |||
| Jennifer A. Parmentier | $1,086,667 | $1,574,667 | $3,043,673 | |||
| Thomas L. Williams | $920,833 | $1,519,375 | $2,936,800 | |||
| Todd M. Leombruno | $838,333 | $838,333 | $1,620,414 | |||
| Lee C. Banks | $1,204,167 | $1,565,417 | $3,025,794 | |||
| Andrew D. Ross | $782,117 | $792,299 | $1,531,435 | |||
| Roger S. Sherrard | $752,883 | $639,951 | $1,236,961 | |||
| (1) | Because Officer ACIP awards are calculated based on actual base salary received during the fiscal year, and base salary increases are not effective until September 1 each fiscal year, actual base salary paid in the fiscal year is generally below the base salary rate approved by the Committee in August and has a corresponding impact on Officer ACIP awards payouts. Similarly, the mid-year increases in salary for Ms. Parmentier and Mr. Ross and the decrease for Mr. Williams had an impact on base salaries earned and Officer ACIP payouts. |
Long-Term Incentive Compensation
The Named Executive Officers receive long-term incentive compensation consisting of long-term incentive performance awards, which we refer to as LTIP Awards, and stock appreciation rights, which we refer to as Stock Incentives. The target amounts of LTIP Awards and the number of Stock Incentives awarded to the Named Executive Officers are based on similar compensation awarded to persons holding comparable positions within the Peer Group companies.
LTIP Awards and Stock Incentives encourage long-term focus on shareholder value and are directly and materially linked to performance that advances both the financial performance and profitable growth goals of The Win Strategy over the long-term. LTIP Award payouts are based on a comparison of our performance against the Peer Group companies in certain key financial metrics over a three-year performance period. The holders of Stock Incentives realize a payout only if our stock price increases above the applicable grant price over a three-year pro-rata vesting period and the applicable exercise period thereafter. LTIP Awards and Stock Incentives work together to align the long-term financial interests of our executive officers and shareholders.
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Executive Compensation
| Component | Description | 2023 | 2024 | 2025 | ||||
|
LTIP Awards |
LTIP Awards are granted to eligible employees on an annual basis at the January meeting of the Committee. This meeting is typically scheduled at least one year in advance. Pro-rated LTIP Awards are also granted to individuals who become executive officers, are promoted to new executive officer positions, or are given increased responsibilities during a performance period. |
"Cliff" vesting after three-year performance period | ||||||
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Stock Incentives |
Stock Incentives are granted to eligible team members on an annual basis at the August meeting of the Committee. This meeting is typically scheduled at least one year in advance. |
Annual vesting over three-year performance period | ||||||
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1/3 |
1/3 |
1/3 | ||||||
The Committee does not grant LTIP Awards or Stock Incentives to executive officers in anticipation of the release of significant positive earnings announcements or other material non-public information likely to result in changes to the price of our common stock. Similarly, the Committee does not time the release of material non-public information based on Stock Incentive grant dates.
LTIP Awards
The Committee adopted a Long-Term Incentive Performance Plan under the Performance Bonus Plan, which we refer to as the Officer LTIP Plan, to establish the terms and conditions for LTIP Awards granted to our executive officers during and after fiscal year 2022. During the third quarter of fiscal year 2023, the Committee granted to each of the Named Executive Officers, under the terms of the Officer LTIP Plan and our Amended and Restated 2016 Omnibus Stock Incentive Plan, which we refer to as the Amended 2016 Equity Plan, the following target LTIP Award shares for the calendar year 2023-24-25 performance period based on the following target LTIP Award values for the calendar year 2023-24-25 performance period:
| Named Executive Officer | Target LTIP Award Values ($) |
Target LTIP Award Shares | ||
| Jennifer A. Parmentier(1) | 5,000,000 | 17,150 | ||
| Thomas L. Williams | 1,562,500 | 5,360 | ||
| Todd M. Leombruno | 1,400,000 | 4,800 | ||
| Lee C. Banks | 2,600,000 | 8,920 | ||
| Andrew D. Ross(1) | 1,650,000 | 5,660 | ||
| Roger S. Sherrard (1) | 875,000 | 3,000 |
| (1) | As a result of their promotions in fiscal year 2023, Ms. Parmentier and Messrs. Ross and Sherrard also received prorated LTIP awards during fiscal year 2023 of the following target shares for the performance periods set forth below to realign their compensation to market levels for their new roles. | |
| (a) | Mr. Parmentier: CY21-22-23: 6,828; CY22-23-24: 9,428 | |
| (b) | Mr. Ross: CY21-22-23: 1,518; CY22-23-24: 2,378 | |
| (c) | Mr. Sherrard: CY21-22-23: 284; CY22-23-24: 407 | |
The target LTIP Award shares shown in this table are also included in the “Estimated Future Payouts Under Equity Incentive Plan Awards—Target” column of the Grants of Plan-Based Awards for Fiscal Year 2023 table. The “Stock Awards” column of the Summary Compensation Table for Fiscal Year 2023 includes the aggregate grant date fair value of these awards in fiscal year 2023.
Under the Officer LTIP Plan, the actual payouts for these LTIP Awards will be calculated following the three-year performance period ending December 31, 2025, as follows:
| ● |
The Committee will first determine if, during the performance period, we achieved an average return on average equity of 4% or an average free cash flow margin of 4%. |
| ● |
If at least one of these threshold performance measures above is not achieved, participants will not receive a payout. |
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If at least one of these threshold performance measures above is achieved, participants will become eligible to receive the maximum payout of 200% of the applicable target LTIP Award shares. The Committee will then, if appropriate, apply its discretion to reduce the final payouts based on any performance measures that the Committee determines to be appropriate. The Committee determined that this calculation methodology would provide the Committee with more flexibility to ensure payout levels are as accurately reflective of the Company’s performance against the Peer Group as possible and are otherwise in the best interests of our business and our shareholders. |
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To provide the Committee with guidelines for exercising its discretion, the Officer LTIP Plan provides that the Committee may, among other things, following the calendar years 2023-24-25 performance period compare our revenue growth, growth in fully diluted earnings per share from continuing operations and average return on invested capital from continuing operations against the corresponding results of the Peer Group companies during their three most recent fiscal years. The Committee has identified long-term revenue growth, earnings per share growth and return on invested capital as performance measures critical to the financial performance and profitable growth goals of The Win Strategy because, among other things, they encourage our executive officers to provide on-time delivery of quality products, value-added services and systems, strategic supply chain, lean enterprise, value pricing, market-driven innovation and strong distribution.
For calendar year 2023-24-25 LTIP awards, the Committee determined to keep the same weighting as the prior year for revenue growth, growth in the fully diluted earnings per share from continuing operations, and average return on invested capital from continuing operations at 40%, 40% and 20% respectively.
The following table illustrates how final LTIP Awards will pay out using the weightings as specified above for the applicable performance period:
| Peer Group Percentile Rank: | Less than 35th | 35th | 50th | 75th or higher | ||||
| Payout% | 0% | 50% | 100% | 200% |
At the end of calendar year 2025, if we achieve an average return on average equity or an average free cash flow margin of 4% or greater for the performance period, the Committee may exercise discretion in determining the appropriate payout by determining our percentile rank as compared to the Peer Group for each of the three performance measures. Using the table above, the Committee will calculate the portion of the target LTIP Award value earned with respect to each performance measure. The Committee will multiply each portion by its applicable weight and add up the total to determine the total LTIP Award payout for the calendar years 2023-24-25 performance period. This table illustrates that recipients of LTIP Awards granted during calendar year 2023 will receive the maximum payout of 200% of the applicable target LTIP Award shares if we rank at or above the 75th percentile among the Peer Group companies in the aggregate based on all three performance measures, and will receive no payout if we rank below the 35th percentile in the aggregate based on all three performance measures. The payout percentage that is applied is interpolated on a linear basis between the points in the above table.
LTIP Award payouts for the calendar years 2023-24-25 performance period may only be paid after the end of the applicable three-year performance period in unrestricted shares of our common stock.
The Committee designed these LTIP Awards to reward executive officers directly in relation to our long-term performance against the Peer Group. The Committee determined that requiring performance in excess of the 50th percentile for a payout in excess of 100% would encourage executive officers to achieve performance above median Peer Group performance. The Committee also determined that requiring performance at the 75th percentile for a maximum payout, and awarding no payout for performance below the 35th percentile, would further encourage executive officers to achieve top-quartile performance within the Peer Group companies.
In addition, each of the Named Executive Officers received a payout during fiscal year 2023 under LTIP Awards granted during the third quarter of fiscal year 2020 for the three-year performance period ending December 31, 2022. We exceeded our threshold performance measures of 4% average return on average equity and 4% average free cash flow margin with an average return on average equity for the three-year performance period of 24% and average free cash flow margin for the three-year performance period of 14.5%, which caused each participant to be eligible for a payout of 200% of the applicable LTIP award. The Committee decided to exercise discretion to determine the appropriate payout and determined that we achieved the following percentile rankings among the peer group companies disclosed in the Company's 2020 proxy statement with respect to the LTIP Award performance measures for the calendar years 2020-21-22 performance period:
| Performance Measure | Result | Percentile Rank | Weighted Payout Percentage | |||
| Revenue Growth (20%) | 20.99% | 88th | 40% | |||
| Earnings Per Share Growth (40%) | 62.06% | 82nd | 80% | |||
| Average Return on Invested Capital (40%) | 16.26% | 58th | 54% |
As a result, the Named Executive Officers received the following LTIP Award payouts during fiscal year 2023 which are included in the “Number of Shares Acquired on Vesting” column of the Option Exercises and Stock Vested for Fiscal Year 2023 table: Ms. Parmentier-9,989; Mr. Williams - 48,887; Mr. Leombruno - 8,412; Mr. Banks - 22,436; Mr. Ross - 6,454; and Mr. Sherrard - 6,893. Each payment represents a total payout of 174.11% of the target LTIP Award shares for the three-year performance period ended December 31, 2022. In utilizing negative discretion to reduce the 2020-21-22 LTIP awards from 200% to 174.11% guided by the performance measures above, the Committee determined to exclude certain unusual expenses related to the acquisition of Meggitt PLC.
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Executive Compensation
Stock Incentives
Each of the Named Executive Officers received Stock Incentives under our Amended 2016 Equity Plan during the first quarter of fiscal year 2023. The Committee grants Stock Incentives to executive officers to encourage and reward efforts and accomplishments that advance the goals of The Win Strategy and make other contributions to maximize long-term shareholder value.
The number of Stock Incentives granted by the Committee is determined by utilizing the Black-Scholes valuation model to convert a target dollar value into the number of Stock Incentives to be granted. The Committee uses Mercer’s annual review to help ensure the target dollar values are reasonable in relation to the median of similar compensation offered within the companies included in Mercer’s annual review. The following table shows the target value and the number of Stock Incentives granted to each of the Named Executive Officers in the first quarter of fiscal year 2023:
| Named Executive Officer | Target Values ($) |
Stock Incentive Grants (# of Underlying Shares) | ||
| Jennifer A. Parmentier(1) | 1,650,000 | 17,260 | ||
| Thomas L. Williams(1) | 6,750,000 | 70,620 | ||
| Todd M. Leombruno | 1,400,000 | 14,650 | ||
| Lee C. Banks | 2,600,000 | 27,200 | ||
| Andrew D. Ross(1) | 875,000 | 9,150 | ||
| Roger S. Sherrard | 875,000 | 9,150 |
| (1) |
For Ms. Parmentier and Messrs. Williams and Ross, the stock incentive target amounts granted in August 2022 reflect their roles at that time prior to the leadership transition in January 2023. No additional stock incentives were granted upon assumption of their new roles. |
The fiscal year 2023 Stock Incentive grants shown above are also included in the “All Other Option Awards: Number of Securities Underlying Options” column of the Grants of Plan-Based Awards for Fiscal Year 2023 table and the “Option Awards—Number of Securities Underlying Unexercised Options—Unexercisable” column of the Outstanding Equity Awards at June 30, 2023 table. The “Option Awards” column of the Summary Compensation Table for Fiscal Year 2023 includes the aggregate grant date fair value of these awards in fiscal year 2023.
As required by the terms of our Amended 2016 Equity Plan, these fiscal year 2023 Stock Incentives have an exercise price equal to the closing price of our common stock on the date of grant. The plan does not permit the re-pricing of Stock Incentives. The Committee analyzed the terms of our Amended 2016 Equity Plan and considered Mercer’s annual review to establish all other terms of these Stock Incentives. These fiscal year 2023 Stock Incentives have a ten-year term and vest in one-third increments over three years following the grant date. When vested, each Stock Incentive will entitle the holder to receive the increase in value of one common share from the grant date to the date of exercise.
Upon exercise of fiscal year 2023 Stock Incentives, common shares will be issued directly to the holder. The appreciation in these Stock Incentives will be calculated by subtracting the grant price from the fair market value of the common shares at exercise, and multiplying the result by the number of Stock Incentives exercised. The number of common shares to be issued is determined by dividing that appreciation by the market price of the common shares at exercise.
Employee Benefits
The Named Executive Officers are eligible to participate in various employee benefit plans and programs. These plans and programs reward experience, expertise, level of responsibility, continuity of leadership and advancement. We use these plans to ensure that our executive compensation program remains sufficiently competitive to attract, retain and motivate the executive officers and other team members necessary to advance the goals of The Win Strategy.
Qualified Benefit Plans
During fiscal year 2023, the Named Executive Officers participated in the following tax-qualified benefit plans and programs:
| ● |
The Parker-Hannifin Consolidated Pension Plan, which we refer to as the Pension Plan, except for Ms. Parmentier who is not eligible to participate in the Pension Plan; and |
| ● |
The Parker Retirement Savings Plan, which we refer to as the Retirement Savings Plan. |
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PENSION PLAN
The Pension Plan is a qualified defined benefit pension plan in which most full-time non-union U.S. salaried employees hired prior to April 1, 2004 participate. The Pension Plan offers normal retirement, early retirement and death benefits. The monthly normal retirement benefit is the greater of a minimum benefit and an amount based on final average pay. The minimum benefit and final average pay amounts are calculated as follows:
| Minimum Benefit: |
$21.00 multiplied by years of service, up to a maximum of 40 years. | |
| Final Average Pay Amount: |
●0.75% of the highest five consecutive year average of monthly base salary and eligible annual cash incentive bonuses up to the social security wage base, multiplied by years of service up to a maximum of 35 years; plus
●1.36% of the highest five consecutive year average of monthly base salary and eligible annual cash incentive bonuses in excess of the social security wage base, multiplied by years of service up to a maximum of 35 years; plus
●0.50% of the highest five consecutive year average of monthly base salary and annual cash incentive bonuses multiplied by years of service in excess of 35 up to a maximum of five years. |
The amount of the benefit is reduced by 6% per year for each year prior to age 65 if retirement occurs and payments commence before age 65 and after age 55. We elected to freeze new participation in the Pension Plan in 2004. All participants as of April 1, 2004, were given the option to either remain in the Pension Plan or terminate in favor of maintaining a retirement income account under the Retirement Savings Plan. Employees hired after April 1, 2004, including Ms. Parmentier, are not eligible to participate in the Pension Plan and instead maintain a retirement income account under the Retirement Savings Plan. Each of the Named Executive Officers who are in the Pension Plan elected to remain in and continue to accrue benefits under the Pension Plan except for Mr. Sherrard, who elected to freeze his Pension Plan in 2004. All benefits accrued by team members who elected to terminate participation in the Pension Plan were frozen as of June 30, 2004. Those team members initiated their retirement income accounts on July 1, 2004.
RETIREMENT SAVINGS PLAN
The Retirement Savings Plan is a qualified defined contribution pension plan under Section 401(k) of the Internal Revenue Code. Most full-time U.S. team members are eligible to participate in the Retirement Savings Plan. Participants may make pre-tax and post-tax contributions to the Retirement Savings Plan up to the applicable statutory limit. Effective January 1, 2022, we provide each participant with a matching contribution of 100% on the first 5% of pay contributed. As described above, certain participants also maintain a retirement income account within the Retirement Savings Plan. We provide to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation up to the Internal Revenue Service statutory limit (currently $330,000 per year), based on age and length of service. These contributions range from 3% to 6% of the participant’s compensation which does not exceed that limit. Participants accrue earnings on contributions based on the performance of various investment funds available within the Retirement Savings Plan. The contributions made by us under the Retirement Savings Plan for the Named Executive Officers during fiscal year 2023 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2023 on page 64.
Non-Qualified Benefit Plans
During fiscal year 2023, the Named Executive Officers participated in the following non-qualified benefit plans and programs:
| ● |
The Parker-Hannifin Corporation Savings Restoration Plan, which we refer to as the Savings Restoration Plan; |
| ● |
The Parker-Hannifin Corporation Executive Deferral Plan, which we refer to as the Executive Deferral Plan. Only Mr. Leombruno participated in the Executive Deferral Plan in fiscal year 2023; |
| ● |
The Parker-Hannifin Corporation Deferred Compensation Plan, which we refer to as the Deferred Compensation Plan. Messrs. Williams and Sherrard did not participate in the Deferred Compensation Plan in fiscal year 2023; |
| ● |
The Parker-Hannifin Corporation Pension Restoration Plan, which we refer to as the Pension Restoration Plan, except for Ms. Parmentier who is not eligible to participate in the Pension Restoration Plan as she does not participate in the Pension Plan; |
| ● |
The Parker-Hannifin Corporation Supplemental Executive Retirement Benefits Program, which we refer to as the Supplemental Retirement Program, except for Mr. Leombruno and Ms. Parmentier who are not eligible to participate in the Supplemental Retirement Program; and |
| ● |
The Parker-Hannifin Corporation Defined Contribution Supplemental Executive Retirement Program, which we refer to as the Defined Contribution Supplemental Executive Retirement Program (Mr. Leombruno and Ms. Parmentier are the only Named Executive Officers who participate in the Defined Contribution Supplemental Executive Retirement Program). |
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Executive Compensation
DEFERRED COMPENSATION PLAN
Effective January 1, 2023, the Deferred Compensation Plan is available to eligible team members or those eligible due to their prior Savings Restoration Plan participation. The Deferred Compensation Plan was established to restore deferral opportunities and matching contributions lost because of statutory limits in the Retirement Savings Plan. Specifically, the Deferred Compensation Plan allows eligible participants to defer a portion of their pre-tax compensation, including ACIP awards, and receive matching contributions from us that would have been available under the Retirement Savings Plan if the Internal Revenue Service statutory limit did not exist. LTIP Award payouts are not eligible for deferral under the Deferred Compensation Plan. Each participant may annually defer to his or her Deferred Compensation Plan account any portion of the compensation that he or she cannot defer under the Retirement Savings Plan due to the statutory limit. Participants are able to defer up to 50% of base compensation and up to 80% of incentive compensation. We provided each participant with a matching contribution of 100% on the first 5% of pay contributed. These matching contributions were reduced by the maximum matching contribution available to the participant under the Retirement Savings Plan. In addition, all participants who maintain a retirement income account within the Retirement Savings Plan also maintain a separate retirement income account within the Deferred Compensation Plan. We provide to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation in excess of the Internal Revenue Service statutory limit determined based on age and length of service. These contributions range from 3% to 6% of the amount of the participant’s compensation in excess of that limit. All deferrals and contributions are made under the Deferred Compensation Plan by accounting entry rather than any physical exchange of cash or common stock. Participants also accrue earnings, on an accounting-entry basis, on deferrals based on the performance of various investment fund choices and on contributions based on the performance of our common stock. Participants are our unsecured creditors for their respective account balances. Account balances in the Deferred Compensation Plan are paid as indicated in the table below and all contributions, earnings, withdrawals, distributions, and aggregate balances for the Named Executive Officers participating in the Deferred Compensation Plan are included in the Nonqualified Deferred Compensation for Fiscal Year 2023 table.
SAVINGS RESTORATION PLAN
Through December 31, 2022, the Savings Restoration Plan was available to team members who earned base salaries equal to or in excess of $150,000 per year and who were otherwise eligible to participate in the plan. Effective January 1, 2023, this plan was closed and replaced by the Deferred Compensation Plan. The Savings Restoration Plan was established to restore deferral opportunities and matching contributions lost because of statutory limits in the Retirement Savings Plan. Specifically, the Savings Restoration Plan allowed executive officers to defer a portion of their pre-tax compensation and receive matching contributions from us that would have been available under the Retirement Savings Plan if the Internal Revenue Service statutory limit did not exist. Each Named Executive Officer could annually defer to his or her Savings Restoration Plan account any portion of the compensation that he or she could not defer under the Retirement Savings Plan due to the statutory limit, up to the greater of 20% of base pay or $25,000. We provided each participant with a matching contribution of 100% on the first 5% of pay contributed. These matching contributions were reduced by the maximum matching contribution available to the participant under the Retirement Savings Plan. We also took into account the matching contributions made under the Retirement Savings Plan to ensure that the maximum match under both plans did not exceed $17,000. In addition, all participants who maintained a retirement income account within the Retirement Savings Plan also maintained a separate retirement income account within the Savings Restoration Plan. We provided to each holder of a retirement income account an annual contribution equal to a percentage of the amount of the participant’s annual compensation in excess of the Internal Revenue Service statutory limit determined based on age and length of service. These contributions ranged from 3% to 6% of the amount of the participant’s compensation in excess of that limit. All deferrals and contributions were made under the Savings Restoration Plan by accounting entry rather than any physical exchange of cash or common stock. Participants also accrued earnings, on an accounting-entry basis, on deferrals based on the performance of various investment fund choices and on contributions based on the performance of our common stock. Participants are our unsecured creditors for their respective account balances.
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Savings Restoration Plan, Executive Deferral Plan and Deferred Compensation Plan account balances are paid out upon any of the following events as follows:
| Retirement: | Balances are distributed to the participant in either a lump sum or in periodic installments, based on a prior election by the participant. The participant can delay the commencement of payments up to five years following retirement. Balances continue to accumulate earnings under the various investment funds at all times during the payout period. | |
| Termination Before Retirement: | Balances accruing on or prior to December 31, 2004 are, at our election, distributed to the participant in either a lump sum upon termination or in periodic installments. Account balances accruing on or after January 1, 2005 are distributed to the participant in a lump sum upon termination. | |
| Disability: | If we determine that a participant is totally disabled, the participant’s account balance will be paid upon termination in the same manner as if he or she retired. | |
| Withdrawals During Employment: | Balances can be withdrawn without penalty during employment only if we determine that the participant suffered severe financial hardship. Balances accruing on or prior to December 31, 2004 can also be withdrawn voluntarily during employment, subject to a 10% forfeiture penalty. | |
| Death: | Balances are distributed to the participant’s beneficiary in a lump sum or, if elected by the participant, in installments. | |
| Change in Control: | Under the Savings Restoration Plan, balances accruing on or prior to December 31, 2004 are distributed to the participant in a lump sum without penalty if the participant expressly elected a lump sum. If the participant did not expressly elect a lump sum, distributions are treated as unscheduled withdrawals and are subject to a forfeiture penalty of 5% if they are withdrawn within 30 days or 10% if they are withdrawn beyond the 30-day period. Balances accruing on or after January 1, 2005 are distributed to the participant in a lump sum. Under the Executive Deferral Plan and Deferred Compensation Plan, balances are distributed to the participant in a lump sum. |
Our matching contributions made under the Savings Restoration Plan for the Named Executive Officers during fiscal year 2023 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2023. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Savings Restoration Plan during fiscal year 2023 are included in the Nonqualified Deferred Compensation for Fiscal Year 2023 table.
EXECUTIVE DEFERRAL PLAN
Through December 21, 2022, the Executive Deferral Plan was available to executive officers and certain other team members. Effective January 1, 2023, this plan was closed and replaced by our Deferred Compensation Plan. The Executive Deferral Plan provided executive officers with an opportunity to defer a portion of their compensation (in addition to that deferred under the Retirement Savings Plan and the Savings Restoration Plan) on a pre-tax basis, including Officer ACIP awards, and to accumulate tax-deferred earnings on the deferrals. LTIP Award payouts were not eligible for deferral under the Executive Deferral Plan. Each executive could defer to his or her account up to 80% of base salary and 80% of Officer ACIP awards paid in August. Similar to the Savings Restoration Plan, all deferrals were made under the Executive Deferral Plan by accounting entry rather than any physical exchange of cash. Participants also accrued earnings on an accounting-entry basis based on the performance of various investment fund choices. Participants are our unsecured creditors for their respective account balances. Account balances in the Executive Deferral Plan are paid as indicated in the table above. For those who were participants in the Executive Deferral Plan prior to January 1, 2016, prior to distribution, the balances were increased to reflect any “gross-up” amount necessary to offset federal excise taxes and any after-tax value the participant would have received if the account had remained in place and been paid as elected by the participant. Any balances on distribution to a participant in the Executive Deferral Plan who became a participant on or after January 1, 2016, were no longer increased to reflect any “gross-up” amount to offset federal excise taxes and any after-tax value the participant would have received if the account had remained in place and been paid as elected by the participant. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Executive Deferral Plan during fiscal year 2023 are included in the Nonqualified Deferred Compensation for Fiscal Year 2023 table.
THE PENSION RESTORATION PLAN
The Pension Restoration Plan is available to all individuals who participate in the Pension Plan and who are otherwise eligible to participate in the Pension Restoration Plan. The Pension Restoration Plan was established to restore benefits lost because of statutory limits on the Pension Plan. Specifically, the benefits available under the Pension Restoration Plan equal the amount that would be payable to the participant under the Pension Plan in excess of the Internal Revenue Service statutory limit if that limit did not exist and the participant had not elected to defer any compensation under the Savings Restoration Plan and the Executive Deferral Plan.
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Executive Compensation
SUPPLEMENTAL RETIREMENT PROGRAM
The Supplemental Retirement Program was established to provide executive officers with retirement benefits supplemental to the benefits under the Pension Plan. The benefit provided under the Supplemental Retirement Program is intended, at age 65, to provide to participants with at least 15 years of service 55% of the average of the three highest years of base salary plus annual cash incentive compensation. LTIP Awards and Stock Incentives are not considered in calculating the benefits available under the Supplemental Retirement Program. The benefit is subject to reduction for early retirement, less than 15 years of service, benefits under the Pension Plan, the Pension Restoration Plan and any of our non-U.S. pension plans, 50% of primary social security benefits and 100% of any similar non-U.S. state-provided retirement benefits, and contributions to the participant’s retirement income accounts under the Retirement Savings Plan and the Savings Restoration Plan. Participants vest at age 60, or at age 55 with the consent of the Committee, and with five years of participation in the Supplemental Retirement Program, or a lesser period established by the Committee at the time they become participants. To receive a benefit under the Supplemental Retirement Program, however, a vested participant must have at least five years of service. In January 2015, the Committee closed the Supplemental Retirement Program to new participants as of July 1, 2014.
DEFINED CONTRIBUTION SUPPLEMENTAL
RETIREMENT PROGRAM
The Defined Contribution Supplemental Retirement Program
was established to provide executive officers and certain other key management team members with retirement benefits supplemental to
the benefits under the Retirement Savings Plan and the Savings Restoration Plan. The Defined Contribution Supplemental Retirement
Program was established to replace the Supplemental Retirement Program for executive officers who are designated as participants on
or after July 1, 2014. Depending on a participant’s salary grade on December 31 of each year, we provide an annual
non-discretionary employer contribution of 8%, 10% or 12% of a participant’s base salary, and ACIP awards that were paid
during the calendar year. The Committee may determine to make an additional annual discretionary contribution to a designated
participant’s account. Participants vest at age 60, or at age 55 with the consent of the Committee, and with five years of
participation in the Defined Contribution Supplemental Retirement Program, or a lesser period established by the Committee at the
time they become participants. To receive a benefit under the Defined Contribution Supplemental Retirement Program, however, a
vested participant must have at least five years of service. Mr. Leombruno and Ms. Parmentier are the only Named Executive Officers
who participate in the Defined Contribution Supplemental Retirement Program.
Our contributions made under the Defined Contribution Supplemental Retirement Program during fiscal year 2023 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2023. All contributions, earnings, withdrawals, distributions and aggregate balances for the Named Executive Officers participating in the Defined Contribution Supplemental Retirement Program during fiscal year 2023 are included in the Nonqualified Deferred Compensation for Fiscal Year 2023 table.
Health and Welfare Benefits
The Named Executive Officers participated in various health and welfare programs generally available to all team members during fiscal year 2023. The Named Executive Officers also participated in our Officer Life Insurance Plan and our Executive Long-Term Disability Plan.
OFFICER LIFE INSURANCE PLAN
Under the Officer Life Insurance Plan, we pay all required premiums for life insurance on executive officers who were participants prior to January 1, 2008 (which includes Messrs. Sherrard, Williams and Banks) for the longer of 10 years or until the executive officer reaches age 65. For those executive officers who were participants after January 1, 2008 (which includes Ms. Parmentier and Messrs. Leombruno and Ross) we pay all required premiums for life insurance until retirement up to age 65. The premiums are designed to maintain death benefits equal to:
| ● | five times base salary during employment and two times final base salary after retirement at age 65 for our Chief Executive Officer; |
| ● | four times base salary during employment and two times final base salary after retirement at age 65 for our Chief Financial Officer, our President and our Chief Operating Officer; and |
| ● | three times base salary during employment and two times final base salary after retirement at age 65 for all other Named Executive Officers and other participants. |
If the participant retires between ages 55 and 65, the post-retirement death benefit is reduced by 10% of base salary for each year prior to age 65 that the participant retires. The amount of the death benefit is adjusted each year on January 1st based on the participant’s base salary as of the preceding December 1st. The policies underlying the plan are cash value life insurance policies owned by the participants. The premiums we paid on behalf of the Named Executive Officers during fiscal year 2023 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2023.
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Executive Compensation
EXECUTIVE LONG-TERM DISABILITY PLAN
The Executive Long-Term Disability Plan is intended to replace a reasonable amount of an executive officer’s income upon disability. The plan provides a total benefit in the event of a qualifying disability of two-thirds of base salary plus target Officer ACIP awards paid during the calendar year ending December 31 of the year prior to the disability, up to a maximum monthly benefit, in the case of Messrs. Sherrard, Ross, Williams and Banks, of $33,000, or, in the case of Ms. Parmentier and Mr. Leombruno, of $35,000. Our executive officers are not eligible to receive the long-term disability benefit generally available to other team members.
Other Compensation Policies and Practices
Change in Control Agreements
We are not a party to any written employment agreements with our executive officers. We have, however, entered into separate Change in Control Severance Agreements with our executive officers, which we refer to as the Change in Control Agreements. We are not obligated to pay severance to executive officers under any agreement other than the Change in Control Agreements. The executive officers are, however, eligible to receive severance upon termination for reasons other than a change in control in accordance with our general severance policy for salaried employees. The Change in Control Agreements are designed to attract, retain and motivate executive officers, provide for stability and continuity of management in the event of any actual or threatened change in control, encourage executive officers to remain in service after a change in control and ensure that executive officers are able to devote their entire attention to maximizing shareholder value and safeguarding team member interests in the event of a change in control. The Committee determined that the amounts payable under the Change in Control Agreements are reasonable and necessary to achieve those objectives. The Potential Payments upon Termination or Change of Control at June 30, 2023, tables and the related narrative descriptions provide additional information on the Change in Control Agreements, including a brief discussion of the material provisions of the Change in Control Agreements under the captions “Payments upon a Change in Control” and “Payments upon a Qualifying Termination in Connection with a Change in Control.”
Indemnification Agreements
We enter into separate Indemnification Agreements with each of our executive officers. Each agreement remains in effect during and after employment with respect to any action taken while the individual serves as an executive officer. The agreements are designed to attract, retain and motivate executive officers by encouraging reasonable and measured risk-taking in the interests of our business and our shareholders, and protecting against liabilities incurred in the performance of their duties to the maximum extent permitted by Ohio law.
The agreements provide for indemnification for all expenses, including attorney fees, judgments, fines, and settlement amounts, that the executive officer incurs by reason of his or her service:
| ● | in a civil action or proceeding by another party (unless it is proven that the officer’s act or failure to act was taken with deliberate intent to cause injury to our business or in reckless disregard for the best interest of our business); or |
| ● | in a criminal action or proceeding (unless the officer had reasonable cause to believe his or her conduct was unlawful). |
“Clawback” Policy
Our Board of Directors maintains a “clawback” policy which allows us to recover or withhold any Annual Incentive Awards or LTIP Awards which are paid or payable to an executive officer if:
| ● | payment, grant or vesting was based on the achievement of financial results that were subsequently the subject of a restatement of any of our financial statements filed with the SEC; |
| ● | our Board of Directors determines in its sole discretion that the fraud or misconduct of the executive officer caused or contributed to the need for the restatement; |
| ● | the amount that would have been paid or payable to the executive officer would have been less if the financial results had been properly reported; and |
| ● | our Board of Directors determines in its sole discretion that it is in our best interests and in the best interests of our shareholders to require the executive officer to repay or forfeit all or any portion of the amount paid or payable. |
In connection with the new SEC and stock exchange rules regarding clawback policies, the Company intends to adopt a compliant policy by the deadline specified by The New York Stock Exchange.
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Executive Compensation
Executive Perquisites
During fiscal year 2023, we made various executive perquisites available to each of the Named Executive Officers. These perquisites are offered to promote the business objectives for each perquisite as described below and to ensure that our executive compensation program remains competitive to attract, retain and motivate the individuals necessary to advance the goals of The Win Strategy. The costs of these perquisites for the Named Executive Officers reportable for fiscal year 2023 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2023.
Private Clubs. We pay or reimburse initiation fees for one private club for each executive officer. We offer this perquisite to encourage executive officers to entertain business colleagues and customers, engage in social interaction with peers from other companies, local leadership and the community, and hold business meetings at off-site locations. We maintain a policy of not providing gross up payments on private club initiation fees.
Spousal Travel. In limited circumstances and only with appropriate advance approval, we reimburse our executive officers for transportation, lodging, meals, entertainment and other travel expenses for their spouses or other family members who accompany them on out-of-town business. We offer these perquisites to encourage executive officers to spend an appropriate amount of time with their team members in locations away from corporate headquarters, to allow executive officers and their spouses to develop a more personal relationship with the executive officers’ team members and their families, and to encourage spouses to attend retirement parties, funerals, business dinners and other corporate functions at locations away from their homes.
Executive Physicals. We pay for annual physicals and any necessary travel vaccinations for each of our executive officers and certain other key team members. We offer this benefit as part of our overall preventive medicine program to promptly identify and address medical issues and to preserve our investment in our executive officers by encouraging them to maintain healthy lifestyles and be proactive in addressing actual or potential health issues.
Leased Vehicles. We lease an automobile for each of our executive officers and for certain other key team members. We offer this perquisite to provide executive officers with use of a company car for business travel needs, recognizing that the vehicles can also be used for personal purposes. We pay or reimburse each executive officer for lease payments on one automobile, typically for a three-year term. Each executive officer has a maximum allowance of $1,570 per month. We also reimburse each executive officer for the cost of tires and maintenance and provide insurance on each vehicle during the lease term. We require each executive officer to take title to his or her vehicle at the end of the lease term because we amortize the entire cost of the vehicle over the lease term. We pay or reimburse each executive officer for sales taxes on his or her vehicle at the time of title transfer, but the executive officer is responsible for the payment of all income taxes assessed on payments and reimbursements made during the lease term and at the time of title transfer, including those assessed on the fair market value of the vehicle at the time of title transfer.
Matching Gifts Program. We match any donation of $25 or more to qualified charitable organizations and educational institutions made by an active, full-time employee or member of our Board of Directors. Our matching contributions are capped at $10,000 per fiscal year per individual with an additional $5,000 cap for donations to charitable organizations and educational institutions that an individual supports through voluntary board service.
Company Apartments. We maintain apartments in Cleveland, Ohio, and Newport Beach, California to provide accommodations to team members working off-site at or relocating to our primary facilities. The apartments are also available to the executive officers for personal use with appropriate advance approval if the apartments are not otherwise being used for business purposes.
Entertainment Venues. We maintain loges, boxes and tickets at various entertainment venues to provide civic support to arts, entertainment and other cultural activities at certain significant business locations and to provide a favorable setting for our team members to entertain customers and other business associates. The loges, boxes and tickets are, however, available to executive officers for personal use if they are not otherwise being used for business purposes. We pay all costs of admission, but all costs of food are paid by the executive officer using the venue only for personal use.
Corporate Aircraft. Effective May 1, 2019, the Committee elected to offer limited non-business use of our corporate aircraft to our Chief Executive Officer, President, Chief Operating Officer and Chief Financial Officer for purposes of their safety, security, confidentiality and productivity while traveling. Such use is limited to U.S. domestic travel only and 50 hours of flight time per fiscal year for our Chief Executive Officer and 30 hours of flight time per fiscal year to each of our President, Chief Operating Officer and Chief Financial Officer. Otherwise, non-business use of our corporate aircraft by our executive officers is only available if (a) the flight was previously authorized for business purposes, there are available seats that are not being used for those business purposes and the officer’s use does not involve a deviation or extension of the planned business-travel itinerary, or (b) there is a medical emergency or other special circumstance and the flight is pre-approved by our Chief Executive Officer, President, Chief Operating Officer or Chief Financial Officer.
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Executive Compensation
Accounting and Tax Considerations
Our executive compensation program is structured to achieve flexibility, maximize benefits and minimize detriments to our business and our executive officers from a tax and accounting perspective. As a result, we continuously review and evaluate the impact of changes in tax laws and accounting practices and interpretations and similar factors affecting our executive compensation program.
Compensation Committee Report
The Human Resources and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Corporation’s management and, based on such review and discussions, the Human Resources and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
Human Resources and Compensation Committee:
Joseph Scaminace, Chair
Jillian C. Evanko
Lance M. Fritz
Kevin A. Lobo
James R. Verrier
James L. Wainscott
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Executive Compensation
Compensation Tables
Summary Compensation Table for Fiscal Year 2023
The following table sets forth compensation information for our Named Executive Officers.
| Name and Principal Position | Year | Salary ($)(1) |
Stock Awards ($)(2) |
Option Awards ($)(3) |
Non-Equity Incentive Plan Compensation ($)(4) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) |
All Other Compensation ($)(6) |
Total ($) | ||||||||
| Jennifer A. Parmentier(7) Chief Executive Officer (since January 1, 2023) |
2023 | 1,086,667 | 10,062,781 | 1,717,543 | 3,043,673 | — | 493,682 | 16,404,346 | ||||||||
| 2022 | 765,423 | 3,304,641 | 1,229,346 | 1,373,446 | — | 434,018 | 7,106,874 | |||||||||
| Thomas L. Williams Executive Chairman of the Board (CEO through January 1, 2023) |
2023 | 920,833 | 1,662,672 | 7,027,396 | 2,936,800 | 5,949,240 | 160,482 | 18,657,423 | ||||||||
| 2022 | 1,387,500 | 5,800,687 | 4,282,828 | 3,780,697 | 3,044,860 | 151,597 | 18,448,169 | |||||||||
| 2021 | 1,159,375 | 4,845,449 | 4,224,085 | 3,326,023 | 3,344,243 | 135,325 | 17,034,500 | |||||||||
| Todd M. Leombruno Executive Vice President and Chief Financial Officer |
2023 | 838,333 | 1,488,960 | 1,457,822 | 1,620,414 | 762,629 | 362,927 | 6,531,085 | ||||||||
| 2022 | 736,667 | 1,412,505 | 1,042,956 | 1,138,332 | 31,605 | 308,269 | 4,670,334 | |||||||||
| 2021 | 510,725 | 2,968,166 | 201,042 | 701,647 | 376,387 | 213,444 | 4,971,411 | |||||||||
| Lee C. Banks Vice Chairman and President |
2023 | 1,204,167 | 2,766,984 | 2,706,672 | 3,025,794 | 1,167,509 | 234,689 | 11,105,815 | ||||||||
| 2022 | 1,112,500 | 2,624,120 | 1,936,799 | 2,018,734 | — | 244,187 | 7,936,340 | |||||||||
| 2021 | 971,250 | 2,213,292 | 1,931,105 | 1,792,662 | 1,051,869 | 224,943 | 8,185,121 | |||||||||
| Andrew D. Ross(7) Chief Operating Officer |
2023 | 782,117 | 2,897,563 | 910,517 | 1,531,435 | 134,074 | 102,280 | 6,357,986 | ||||||||
| Roger S. Sherrard(7) Vice President and President - Aerospace Group |
2023 | 752,883 | 1,137,340 | 910,517 | 1,236,961 | — | 145,997 | 4,183,698 |
| (1) | For fiscal year 2023, reflects increases in base salary effective September 1, 2022 for all Named Executive Officers, and for Mr. Williams, Mr. Ross and Ms. Parmentier mid-year changes effective January 1, 2023, to the following base salary amounts: $1,300,000 for Ms. Parmentier, $375,000 for Mr. Williams; and $850,000 for Mr. Ross. Amounts also include amounts deferred under the Savings Restoration Plan, Executive Deferral Plan and Deferred Compensation Plan for fiscal year 2023: |
| Savings Restoration Plan: Ms. Parmentier-$4,792; Mr. Williams—$0; Mr. Leombruno—$5,750; Mr. Banks—$0; Mr. Ross—$8,182; Mr. Sherrard—$7,693 | |
| Executive Deferral Plan: Mr. Leombruno—$30,000 | |
| Deferred Compensation Plan: Ms. Parmentier-$6,500; Mr. Williams—$0; Mr. Leombruno—$42,500; Mr. Banks—$6,100; Mr. Ross—$4,250; Mr. Sherrard—$0 | |
| These amounts are also reported in the “Executive Contributions in Last Fiscal Year” column of the Nonqualified Deferred Compensation for Fiscal Year 2023 table on page 71. | |
| (2) | For fiscal year 2023, these amounts consist of the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of LTIP Awards granted during fiscal year 2023 to each of the Named Executive Officers. For the LTIP awards, the amounts do not reflect whether a Named Executive Officer has actually realized a financial benefit from the LTIP awards. The amounts were calculated by multiplying the closing price on the date of grant by the number of LTIP Awards received and assuming a payout of 100%. As described beginning on page 54, however, LTIP Award payouts will be calculated following the applicable three-year performance period and could range from a minimum of 0% to a maximum of 200%. The grant date fair value of the LTIP Awards granted during fiscal year 2023 at the maximum payout of 200% are: Ms. Parmentier-$20,125,562; Mr. Williams-$3,325,344; Mr. Leombruno-$2,977,920; Mr. Banks-$5,533,968; Mr. Ross-$5,795,126 and Mr. Sherrard-$2,274,680. Dividends in the form of dividend equivalent units are awarded as additional LTIP award shares. |
| (3) | Amounts reflect the aggregate grant date fair value for Stock Appreciation Rights granted in fiscal year 2023 computed in accordance with FASB ASC Topic 718. The amounts do not reflect whether a Named Executive Officer has actually realized a financial benefit from the award. The amounts were calculated using the Black-Scholes option pricing model with the following weighted-average assumptions: |
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| Fiscal Year of Grant |
Participant | Grant Date |
Type of Grant |
Risk-free Interest Rate |
Expected Life of Award |
Expected Dividend Yield of Stock |
Expected Volatility of Stock | |||||||
| 2023 | Named Executive Officers | 8/17/2022 | annual grant | 2.99% | 6.49 years | 1.77% | 35.3% |
| During fiscal year 2023, no Stock Incentive awards were forfeited by any of the Named Executive Officers. | |
| (4) | Amounts consist of the Officer ACIP awards for fiscal year 2023, which were paid in one or more installments with the final payments in August 2023. |
| (5) | Amounts consist of the change in annual actuarial present value of pension benefits for our Named Executive Officers. Ms. Parmentier and Mr. Sherrard do not have a benefit under our defined benefit pension plans. None of the Named Executive Officers received above-market or preferential earnings on deferred compensation. |
| (6) | The following table describes each component of the All Other Compensation column: |
| Name | Company Contributions to Defined Contribution Plans (a)($) |
Life Insurance Premiums Paid ($) |
Perquisites (b)($) |
Total “All Other Compensation” ($) | ||||
| Jennifer A. Parmentier | 353,279 | 72,124 | 68,279 | 493,682 | ||||
| Thomas L. Williams | 14,073 | 66,889 | 79,520 | 160,482 | ||||
| Todd M. Leombruno | 239,593 | 55,130 | 68,203 | 362,927 | ||||
| Lee C. Banks | 16,409 | 37,646 | 180,634 | 234,689 | ||||
| Andrew D. Ross | 15,207 | 47,223 | 39,850 | 102,280 | ||||
| Roger S. Sherrard | 95,794 | 37,232 | 12,971 | 145,997 |
| (a) | Amount consists of the following company contributions to our Defined Contribution Plans: | |
| Retirement Savings Plan: Ms. Parmentier-$16,029; Mr. Williams-$14,073; Mr. Leombruno-$17,388; Mr. Banks-$16,409; Mr. Ross-$14,634 and Mr. Sherrard-$15,567. | ||
| Savings Restoration Plan: Ms. Parmentier-$335; Mr. Leombruno-$403; Mr. Ross-$573 and Mr. Sherrard-$538. | ||
| Qualified and Non-qualified Retirement Income Account: Ms. Parmentier- $83,963 and Mr. Sherrard-$79,689. | ||
| Defined Contribution Supplemental Retirement Program: Ms. Parmentier-$252,952 and Mr. Leombruno-$221,802. | ||
| (b) | Reported in this column are amounts reimbursed or incurred by us with respect to: (i) executive long-term disability insurance premiums; and (ii) one or more of the following executive perquisites: (A) leased vehicle, including state sales tax if applicable; (B) spousal travel; (C) executive physicals; (D) matching gifts program; (E) corporate aircraft travel; and (F) certain private club fees. The Named Executive Officers also use our loges, box seats or tickets to various entertainment venues. However, there is no incremental cost to us for their use of these loges, box seats and tickets. Other than the aggregate incremental cost to the Company of each of Ms. Parmentier's and Messrs. Williams’, Banks’ and Leombruno's personal use of the corporate aircraft of $39,462; $52,543; $113,757 and $38,827, respectively, no Named Executive Officer received an executive perquisite in an amount that exceeds the greater of $25,000 or 10% of the total amount of executive perquisites received by the Named Executive Officer. We determine the incremental cost of the personal use of our corporate aircraft based on the variable operating costs to us, which includes: (i) landing, ramp, and parking fees and expenses; (ii) crew travel expenses; (iii) supplies and catering; (iv) aircraft fuel and oil expenses per hour of flight; (v) any customs, foreign permit, and similar fees; (vi) crew travel; and (vii) passenger ground transportation. Because our aircraft is used primarily for business travel, this methodology excludes fixed costs that do not change based on usage, such as salaries of pilots and crew, purchase or lease costs of aircraft, and costs of maintenance and upkeep. | |
| (7) | Ms. Parmentier was not a Named Executive Officer in fiscal year 2021 and Messrs. Ross and Sherrard were not Named Executive Officers in fiscal years 2021 and 2022. | |
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Executive Compensation
Grants of Plan-Based Awards for Fiscal Year 2023
The following table sets forth information with respect to non-equity and equity incentive plan awards granted to the Named Executive Officers during fiscal year 2023. The LTIP Awards and Stock Incentives listed below have been granted under our Amended 2016 Equity Plan.
| Name | Grant Date | Compensation Committee Action Date (If Different than Grant Date) |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or Units (#) |
All Other Option Awards: Number of Securities Underlying Options (#) |
Exercise or Base Price of Option Awards ($/Sh) |
Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||
| Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) | |||||||||||||||||||
| Jennifer A. Parmentier | ||||||||||||||||||||||||
| Officer ACIP Award(1) | — | — | — | 1,590,000 | 3,180,000 | — | — | — | — | — | — | — | ||||||||||||
| LTIP Award (CY21-22-23)(3) | 1/1/2023 | — | — | — | — | — | 6,828 | 13,656 | — | — | — | 1,992,138 | ||||||||||||
| LTIP Award (CY22-23-24)(3) | 1/1/2023 | — | — | — | — | — | 9,428 | 18,856 | — | — | — | 2,750,713 | ||||||||||||
| LTIP Award (CY23-24-25)(3) | 1/25/2023 | — | — | — | — | — | 17,150 | 34,300 | — | — | — | 5,319,930 | ||||||||||||
| Stock Incentives | 8/17/2022 | — | — | — | — | — | — | — | 17,260 | 299.19 | 1,717,543 | |||||||||||||
| Thomas L. Williams | — | |||||||||||||||||||||||
| Officer ACIP Award(1) | — | — | — | 1,546,875 | 3,093,750 | — | — | — | — | |||||||||||||||
| LTIP Award (CY23-24-25)(3) | 1/25/2023 | — | — | — | 5,360 | 10,720 | — | — | — | 1,662,672 | ||||||||||||||
| Stock Incentives | 8/17/2022 | — | — | — | — | — | — | — | — | 70,620 | 299.19 | 7,027,396 | ||||||||||||
| Todd M. Leombruno | ||||||||||||||||||||||||
| Officer ACIP Award(1) | — | — | — | 850,000 | 1,700,000 | — | — | — | — | — | — | — | ||||||||||||
| LTIP Award (CY23-24-25)(3) | 1/25/2023 | — | — | — | — | — | 4,800 | 9,600 | — | |||||||||||||||