| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
| SCHEDULE 14A INFORMATION |
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 |
| (Amendment No. ) |
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ý | Definitive Proxy Statement | ||
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| HNI CORPORATION | |||
| (Name of Registrant as Specified In Its Charter) | |||
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HNI CORPORATION
600 EAST SECOND STREET
MUSCATINE, IOWA 52761
563-272-7400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 20152017 Annual Meeting of Shareholders of HNI Corporation will be held at AllsteelHNI Corporate Headquarters, 2210600 East Second Avenue,Street, Muscatine, Iowa, on Tuesday, May 5, 2015,9, 2017, beginning at 10:30 a.m. (Central Daylight Time), for the purposes of:
| 1. | Electing |
| 2. | Ratifying the Audit |
| 3. | Holding an advisory vote to approve named executive officer compensation; |
| 4. | Holding an advisory vote on the frequency of future advisory votes on named executive officer compensation; |
| 5. | Approving |
| 6. | Approving |
| 7. | Approving the |
| 8. | Transacting any other business properly brought before the meeting or any adjournment or postponement. |
The holders of record of HNI Corporation common stock, par value $1.00 per share, as of the close of business on March 6, 2015,10, 2017, are entitled to vote at the meeting.
You are encouraged to attend the meeting.
By Order of the Board of Directors,
Steven M. Bradford
Senior Vice President, General Counsel and Secretary
March 23, 2015
YOUR VOTE IS VERY IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE OR VOTE USING THE TELEPHONE OR INTERNET VOTING PROCEDURES DESCRIBED ON THE PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER HOLDER OF RECORD, TELEPHONE OR INTERNET VOTING WILL BE AVAILABLE TO YOU ONLY IF OFFERED BY THEM. THEIR PROCEDURES SHOULD BE DESCRIBED ON THE VOTING FORM THEY SEND TO YOU.
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600 East Second Street
Muscatine, Iowa 52761
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY
HNI Corporation (the "Corporation," "we," "our"“Corporation,” “we,” “our” or "us"“us”) is mailing this Proxy Statement, with the accompanying proxy card, to you on or about March 23, 2015,24, 2017, in connection with the solicitation of proxies by and on behalf of the Corporation'sCorporation’s Board of Directors (the "Board"“Board” or "Directors"“Directors”) for the 20152017 annual meeting of shareholders and any adjournment or postponement of the meeting (the "Meeting"“Meeting”). The Meeting will be held on Tuesday, May 5, 2015,9, 2017, beginning at 10:30 a.m., Central Daylight Time, at AllsteelHNI Corporate Headquarters, 2210600 East Second Avenue,Street, Muscatine, Iowa.
Who can attend and vote at the Meeting?
Shareholders of record as of the close of business on March 6, 201510, 2017 (the "Record Date"“Record Date”) are entitled to attend and vote at the Meeting. Each share of the Corporation'sCorporation’s common stock, par value $1.00 per share ("(“Common Stock"Stock”), is entitled to one vote on all matters to be voted on at the Meeting and can be voted only if the shareholder of record is present to vote or is represented by proxy. The proxy card provided with this Proxy Statement indicates the number of shares of Common Stock you own and are entitled to vote at the Meeting.
What constitutes a quorum at the Meeting?
The presence at the Meeting, in person or represented by proxy, of the holders of a majority of the outstanding shares of Common Stock ("(“Outstanding Shares"Shares”) on the Record Date will constitute a quorum. On the Record Date, there were 44,518,27544,092,971 Outstanding Shares. To determine whether a quorum exists, proxies received but marked "abstain"“abstain” and so-called "broker non-votes"“broker non-votes” (described on the following page) will be counted as present.
What will I be voting on?
● | Election of each of the |
● | Ratification of the Audit |
● | Adoption of an advisory resolution approving the compensation of the |
| For “1 YEAR” frequency of |
| ● | “FOR” approval of the |
| ● | “FOR” approval of the 2017 Equity Plan for Non-Employee Directors of HNI Corporation, as described on page 43 of this Proxy Statement under “Proposal No. 6 - Approval of the 2017 Equity Plan for Non-Employee Directors of HNI Corporation.” |
| ● | “FOR” approval of the HNI Corporation Members’ Stock Purchase Plan, as described on page 46 of this Proxy Statement under |
How do I vote?
We urge you to vote by "proxy"“proxy” (one of the individuals named on your proxy card will vote your shares as you have directed) even if you plan to attend the Meeting so we will know as soon as possible whether a quorum exists for us to hold the Meeting. Follow
the instructions on your enclosed proxy card. Telephone and internet voting is available to all registered and most beneficial holders.
Shareholders voting by proxy may use one of the following three options:
| ● | Fill out the enclosed proxy card, sign it and mail it in the enclosed, postage-paid envelope; |
● | Vote byinternet (if available, instructions are on the proxy card); or |
● | Vote bytelephone (if available, instructions are on the proxy card). |
If your shares of Common Stock are held for you as the beneficial owner through a broker, trustee or other nominee (such as a bank) in "street“street name,"” rather than held directly in your name, please refer to the information provided by your bank, broker or other holder of record to determine the options available to you.
The telephone and internet voting facilities for shareholders will close at 11:59 p.m. Eastern Daylight Time on May 4, 2015.8, 2017. If you vote by mail, you should mail your signed proxy card sufficiently in advance for it to be received by May 4, 2015.
If you hold shares through the Corporation'sCorporation’s retirement plan, your vote must be received by 11:59 p.m. Eastern Daylight Time on April 30, 2015, or the shares represented by the card will not be voted.
If you sign, date and return the proxy card but do not specify how your shares are to be voted, then your proxy will vote your shares "FOR" all proposals, including "FOR" the“FOR” Proposal Nos. 2, 3, 5, 6 and 7, “FOR” election of each nominee for Director, and “1 YEAR” frequency of future advisory votes on named executive officer compensation, and in your proxy'sproxy’s discretion as to any other business which may properly come before the Meeting.
How do I vote if my shares of Common Stock are held in "street name"“street name”?
You will need to instruct your broker, trustee or other nominee how to vote your shares. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Meeting unless you obtain a legal proxy from the broker, trustee or other nominee holding your shares, giving you the right to vote the shares at the Meeting. Your broker, trustee or other nominee has enclosed with this Proxy Statement, or will provide upon request, voting instructions for you to use in directing the broker, trustee or other nominee how to vote your shares.
What discretion does my broker, trustee or other nominee have to vote my shares of Common Stock held in "street name"“street name”?
A broker, trustee or other nominee holding your shares of Common Stock in "street name"“street name” must vote those shares according to specific instructions it receives from you. New York Stock Exchange ("NYSE"(“NYSE”) rules determine the proposals ("(“Non-Routine Proposals"Proposals”) on which brokers may not vote without specific instructions from you. Your shares will not be voted on any Non-RoutineNon- Routine Proposal if you do not provide voting instructions, giving rise to what is called a "broker“broker non-vote."” Shares represented by broker non-votes will be counted as present for purposes of determining a quorum.
It is important, if you hold shares in "street“street name,"” you provide specific voting instructions to your broker, trustee or other nominee or your shares will not be voted with respect to Proposals No.Proposal Nos. 1, 3, 4, 5, 6 and 7 because they are Non-Routine Proposals for which your broker, trustee or other nominee may not vote your shares in its discretion.
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Can I change or revoke my vote or revoke my proxy?
Yes. You may change your vote at any time before the proxy is voted at the Meeting. For shareholders of record, if you voted your proxy card by mail, you may revoke your proxy at any time before it is voted by executing and delivering a timely and valid later-dated proxy, by voting by ballot at the Meeting or by giving written notice to the Secretary. If you voted via the internet or by telephone you may also change your vote with a timely and valid later-dated internet or telephone vote, as the case may be, or by voting by ballot at the Meeting. Attendance at the Meeting will not revoke a proxy unless (a) you give proper written notice of revocation to the Secretary before the proxy is exercised or (b) you vote by ballot at the Meeting. Once voting is completed at the Meeting, you will not be able to revoke your proxy or change your vote. Unless your proxy is
If your shares are held in "street“street name,"” you must follow the specific voting directions provided to you by your broker, trustee or other nominee to change or revoke any instructions you have already provided.
How do I vote my shares in the Corporation'sCorporation’s retirement plan?
If you participate in the Corporation'sCorporation’s retirement plan, the proxy card you receive will also include Common Stock allocated to your account. Properly completed and signed proxy cards, including telephone and internet voting, will serve to instruct the plan trustee on how to vote any shares allocated to your account and a portion of all shares as to which no instructions have been received (the "undirected shares"“undirected shares”) from plan participants. The proportion of the undirected shares to which your instructions will apply will be equal to the proportion of the shares to which the trustee receives instructions represented by your shares.
How is the Corporation soliciting proxies?
The Corporation bears the cost of preparing, assembling and mailing the proxy materials related to the solicitation of proxies by and on behalf of the Board. In addition to the use of the mail, certain of the Corporation'sCorporation’s officers may, without additional compensation, solicit proxies in person, by telephone or through other means of communication. The Corporation will bear the cost of this solicitation.
How will my vote get counted?
Broadridge will use an automated system to tabulate the votes and will serve as the Inspector of Election.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations identifying individual shareholders are handled in a manner to protect your voting privacy. Your vote will not be disclosed either within the Corporation or to third parties, except:
| ● | as necessary to meet applicable legal requirements; |
| ● | to allow for the tabulation of votes and certification of the vote; and |
| ● | to facilitate a successful proxy solicitation. |
Occasionally, shareholders provide written comments on their proxy cards, which may be forwarded to the Corporation'sCorporation’s management.
How do I get to the Meeting location?
The Meeting will be held at AllsteelHNI Corporate Headquarters, 2210600 East Second Avenue,Street, Muscatine, Iowa. If driving to the Meeting from the Quad City International Airport, from the main exit traffic light go straight onto I-74 to I-280, turn right (cloverleaf) onto I-280 West, drive approximately 10-1211 miles crossing the Mississippi River Bridge, take the second exit in Iowa (Exit 6 – Muscatine), at the traffic light turn left (west) onto Highway 61 South, continue approximately 22 miles to Muscatine, continue on Hwy 61 bypass, turn left (south) at traffic light ononto Park Avenue, veer right at stop sign at five-way stop onto Second Avenue, AllsteelStreet, HNI Corporate Headquarters is approximately two blocksone mile on the right.left. If driving to the Meeting on I-80, take Exit 271 (Highway(Hwy 38 South), drive approximately 12 miles, to Highwayproceed through major intersection of Hwy 38 and Hwy 61, turncontinue on Park Avenue, veer right (west) at the traffic light, turn left (south)stop sign at next traffic light onfive-way stop onto Second Avenue, AllsteelStreet, HNI Corporate Headquarters is approximately two blocksone mile on the right.
What should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account. If you are a shareholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card you receive.
The Securities and Exchange Commission (the "SEC"“SEC”) has adopted rules permitting delivery of a single annual report and/or proxy statement to any household at which two or more shareholders reside, whom the Corporation believes to be members of the same family. If you wish to participate in this program and receive only one copy of future annual reports and/or proxy statements, please write to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Your consent to receive only one copy of the annual report and/or proxy statement will remain in effect until Broadridge receives a written revocation notice from you, in which case the Corporation will begin sending individual copies within 30 days. The Corporation will continue
to separately mail a proxy card for each registered shareholder account. The Corporation will promptly deliver separate copies of its annual report and/or proxy statement upon request. Shareholders may request copies by writing to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761, or calling the Corporation at 563-272-7590.
Did the Corporation utilize the SEC'sSEC’s notice and access proxy rules for delivery of the voting materials this year?
No. The Corporation delivered its voting materials in the same manner as it has in the past. However, many shareholders have previously consented to receive electronic delivery of the proxy statement and annual report to security holders and therefore did not receive hard copies of these materials.
Why is the Corporation asking shareholders to approve, on a non-binding and advisory basis, named executive officer compensation again this year?
The Corporation is asking shareholders to approve, on a nonbinding, advisory basis, the compensation of the Corporation’s Chief Executive Officer, Chief Financial Officer and three other most highly compensated executives (collectively, the “Named Executive Officers”), as disclosed below under “Executive Compensation” beginning on page 17 of this Proxy Statement. The Corporation’s shareholders expressed a preference for, and the Board recommended, holding an advisory vote to approve named executive officer compensation every year. The Board recommends shareholders vote “FOR” the resolution approving the compensation of the Named Executive Officers.
Where can I find the voting results of the Meeting?
The Corporation intends to announce preliminary voting results at the Meeting and will publish final results on a Current Report on Form 8-K, which will be filed with the SEC within four business days after the Meeting and available on the Corporation'sCorporation’s website.
The Proxy Statement and annual report to security holders are available athttp://www.hnicorp.com/proxy.
The Corporation provides its annual reports, annual meeting notices and proxy statements over the internet. If you wish to give your consent to access suchreceive these documents in the future over the internet rather than receiving paper copies in the mail, please follow the instructions on your proxy card. These documents will be available on or about March 23, 2015,24, 2017, at http://www.hnicorp.com/proxy.investors.hnicorp.com/Docs. Once you give your consent, it will remain in effect until you notify the Corporation you wish to resume mail delivery of the annual reports and proxy statements. Even though you give your consent, you still have the right at any time to request copies of these documents at no charge by writing to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761, or calling the Corporation at 563-272-7590.
The Amended and Restated By-laws, as amended, of HNI Corporation (the "By-laws"“By-laws”) currently provide for ten Directors and the Board currently consists of ten Directors. Nine of the ten Directors are independent Directors as further discussed on page 8 of this Proxy Statement under "“Information Regarding the Board – Director Independence."” Stan A. Askren, Chairman, President and Chief Executive Officer of the Corporation, is the only Director currently employed by the Corporation and is not independent under the NYSE listing standards or the Corporation'sCorporation’s categorical independence standards for Directors (the "Categorical Standards"“Categorical Standards”).
The Board is divided into three classes. Generally, one class is elected each year for a term of three years. The terms of the five nominees, all of whom are current Directors, expire in 2017. The Board has nominated threefour Director candidates, Miguel M. Calado, Cheryl A. Francis, John R. Hartnett and Brian E. Stern, each to serve a three-year term expiring at the Corporation's 2018Corporation’s 2020 annual meeting of shareholders.
Director Nominations
The Board has adopted guidelines for identifying and evaluating candidates for Director. Under those guidelines, the Corporation'sCorporation’s Public Policy and Corporate Governance Committee (the "Governance Committee"“Governance Committee”) takes into account a number of factors when identifying potential nominees, including: possession of the desired skills, experience and abilities identified by the Governance Committee; ability to communicate ideas and contribute to Board deliberations; independence from management; diversity; judgment, skill, integrity and reputation; existing commitments to other businesses; potential conflicts of interest with other pursuits; and legal restraints.constraints. Although the Corporation has no specific policy on diversity, the guidelines broadly define diversity to include factors such as age, race, gender, education, ethnicity, career experience and personality; understanding of and experiences in manufacturing, distribution, technology, finance and marketing; and international experience and culture. The Governance Committee reviews these factors and others considered useful by the Governance Committee in the context of an assessment of the perceived needs of the Board from time to time. The Governance Committee may use a variety of means to identify potential nominees, including recommendations from the Chairman, Directors or others associated with the Corporation. The Governance Committee may also retain third-party search firms to identify potential nominees based on the Corporation'sCorporation’s established criteria for director candidates discussed above. The Governance Committee screens the potential candidates and eventually recommends suitable candidates to the Board for nomination.
The Corporation does not have any minimum qualifications for Directors; however, Directors should possess the highest personal and professional integrity and ethics and be willing and able to devote the required time to the Corporation. The Board believes it should be comprised of Directors with varied and complimentarycomplementary backgrounds, which together build the overall strength of the Board.
Shareholders wishing to recommend a candidate for nomination by the Corporation as Director for inclusion in the Corporation’s proxy statement for the 2018 annual meeting of shareholders should write to the Corporation’s Corporate Secretary before September 30, 2017, and include the information required by Section 2.16(a)(2) of the By-laws. The Governance Committee will consider candidates for Director recommended by shareholders by applying the criteria for candidates described above and considering the additional information required by the By-laws.
Nominees for Election
The Board is nominating for election at the Meeting StanMiguel M. Calado, Cheryl A. Askren, Mary H. BellFrancis, John R. Hartnett, and Ronald V. Waters, III,Brian E. Stern, each for a term of three years and Larry B. Porcellato for a term of two years (collectively, the "Nominees"“Nominees”). The Nominees elected as Directors at the Meeting will hold office for the indicated term or until their respective successors are elected and qualified, subject to their prior death, resignation or removal.
Ms. Francis and Messrs. AskrenCalado, Porcellato and WatersStern were most recently elected as Directors at the Corporation's 2012Corporation’s 2014 annual meeting of shareholders, and Ms. Bellshareholders. Mr. Hartnett was most recently elected as a Director for a two-year termappointed to the Board on August 9, 2016 at the Corporation's 2013 annual meetingrecommendation of
personal and professional integrity and ethics and a willingness and ability to devote the required time to the Corporation. The Board has determined each Nominee possesses these qualities. For a detailed description of the Corporation's business and structure, please see Item 1 of Part I of the Corporation's Annual Report on Form 10-K for the year ended January 3, 2015 ("Fiscal 2014").
Miguel M. Calado, age 61, has been a Director of the Corporation since 2000 and the Lead Director since May 2014. Ms. Smith is the Boris and Irene Stern Distinguished Service Professor of Accounting, and since 1999 has been a Chaired Professor, of The University of Chicago Booth School of Business, a national leader in higher education and research. She is a director of DFA Investment Dimensions Group Inc., Dimensional Investment Group Inc. and Ryder System, Inc., a commercial transportation, logistics and supply chain management solutions company. Ms. Smith is also a trustee of The UBS Funds (Chicago), UBS Relations Trust, UBS SMA Relationship Trust and Fort Dearborn Income Securities, Inc. Ms. Smith brings to the Board considerable financial and corporate governance expertise based primarily on her extensive research and teaching at the University of Chicago and her service on mutual fund complex and other public company audit, performance, finance and nominating committees. Although Ms. Smith does not currently serve on the Corporation's Audit Committee, she qualifies as an "audit committee financial expert."
Cheryl A. Francis
, ageJohn R. Hartnett, age 56, has been a Director of the Corporation since August 2016. Mr. Hartnett is an Executive Vice President at Illinois Tool Works Inc., a Fortune 200 global multi-industrial manufacturing leader with seven industry-leading business segments. Mr. Hartnett has been with ITW for 36 years and currently heads its Welding segment. He brings to the Board extensive engineering, marketing, manufacturing and management experience from his numerous business roles at ITW including his most recent roles as head of ITW’s Construction Products segment.
Larry B. Porcellato
, ageBrian E. Stern
, ageThe Corporation believes all Nominees listed above will be available to serve if elected. However, if any one of them becomes unavailable, the persons named as proxies in the accompanying proxy card have discretionary authority to vote for a substitute chosen by the Board. Any vacancies not filled at the Meeting may be filled by the Board.
Required Vote
Election of the Nominees as Directors requires the affirmative vote of the holders of a majority of the Outstanding Shares voted at the Meeting. Abstentions and broker non-votes will not be counted for purposes of determining whether this Proposal has received sufficient votes for approval.
Recommendation of the Board
| THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES AS DIRECTORS. |
Below is biographical information about each incumbent Director as well as the particular experience, qualifications, attributes and/or skills which led the Board to conclude the Director should serve as a Director. In addition, each Director must possess the highest personal and professional integrity and ethics and a willingness and ability to devote the required time to the Corporation. The Board has determined each Director possesses these qualities.
Messrs. Askren and Waters and Ms. Bell comprise a class of Directors whose terms will expire at the Corporation’s 2018 Annual Meeting.
Stan A. Askren, age 56, has been a Director of the Corporation since 2003. Mr. Askren has also been the Chairman and Chief Executive Officer of the Corporation since 2004 and the President of the Corporation since 2003. He is a director of Armstrong World Industries, Inc., a global leader in the design and manufacture of floors and ceiling systems and a director of Allison Transmission Holdings, Inc., the world’s largest manufacturer of fully automatic transmissions for medium- and heavy duty-commercial vehicles and a leader in hybrid-propulsion systems for city buses. Mr. Askren brings to the Board extensive experience and knowledge of the Corporation’s business, operations and culture. He has worked for the Corporation for 23 years. Mr. Askren was vice president of marketing, an executive vice president and president of the Corporation’s hearth products operating segment. He worked in the Corporation’s office furniture operating segment as a group vice president of The HON Company and president of Allsteel Inc. Mr. Askren has served as the vice president of human resources and an executive vice president of the Corporation. Mr. Askren also brings to the Board finance and corporate governance experience through his service on the audit and compensation committees of other public companies.
Mary A. Bell, age 56, has been a Director of the Corporation since 2006. Ms. Bell is a business consultant and a retired Vice President of Caterpillar, Inc., the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. She led Caterpillar’s Building and Construction Products Division from 2008 until her retirement in 2015. From 2004 to 2007, she was the Vice President of Caterpillar’s Logistics Division and served as Chairman and President of Cat Logistics Services, Inc., formerly a wholly owned subsidiary of Caterpillar. Ms. Bell brings to the Board considerable logistics, manufacturing and dealer channel expertise and general management experience derived primarily from her service in various roles at Caterpillar.
Ronald V. Waters III, age 65, has been a Director of the Corporation since 2002. Mr. Waters has been an independent business consultant since May 2010. Previously, from 2009 to May 2010, he was a Director and the President and Chief Executive Officer of LoJack Corporation, a premier worldwide marketer of wireless tracking and recovery systems for valuable mobile assets and a leader in global stolen vehicle recovery, and, from 2007 to 2008, he was a Director and the President and Chief Operating Officer of LoJack. He is a director of Fortune Brands Home & Security, Inc., an industry-leading home and security products company, and Paylocity Corporation, a leading software provider of cloud-based payroll and human capital management software. From October 2012 to January 2015, Mr. Waters was a director of Chiquita Brands International, Inc., a leading international marketer and distributor of nutritious high-quality fresh and value-added food products. Mr. Waters brings to the Board chief executive officer experience through his former role as Chief Executive Officer of LoJack and significant finance expertise derived primarily from his service on the audit committee of two other public companies and previous roles as Chief Operating Officer at two public
companies, Chief Financial Officer at Wm. Wrigley Jr. Company, Controller at The Gillette Company and partner of a large public accounting firm. He has extensive outside audit experience, and although Mr. Waters does not currently serve on the Corporation’s Audit Committee, he qualifies as an “audit committee financial expert.” Mr. Waters also brings to the Board international, law and information technology expertise derived primarily from his service in various roles at several large public companies.
Mses. Jones and Smith comprise a class of Directors whose terms will expire at the Corporation’s 2019 Annual Meeting.
Mary K.W. Jones, age 48, has been a Director of the Corporation since February 2016. Since January 2013, Ms. Jones has been Senior Vice President and General Counsel of Deere & Company, a world leader in providing advanced products and services for agriculture, construction, forestry and turf care. From 2010 through 2012, she served as Deere’s Vice President, Global Human Resources. Ms. Jones brings to the Board significant risk management, corporate governance and general legal expertise, derived largely from her role leading the Deere compliance and legal functions. In addition, she brings to the Board significant expertise in the areas of talent strategy, executive succession planning and compensation, derived from her former role as Deere’s Vice President, Global Human Resources.
Abbie J. Smith, age 63, has been a Director of the Corporation since 2000 and the Lead Director since May 2014. Ms. Smith is the Boris and Irene Stern Distinguished Service Professor of Accounting, and since 1999 has been a Chaired Professor, of The University of Chicago Booth School of Business, a national leader in higher education and research. She is a director of DFA Investment Dimensions Group Inc., Dimensional Investment Group Inc. and Ryder System, Inc., a commercial transportation, logistics and supply chain management solutions company. Ms. Smith is also a trustee of The UBS Funds (Chicago), UBS Relations Trust, UBS SMA Relationship Trust and Fort Dearborn Income Securities, Inc. Ms. Smith brings to the Board considerable financial and corporate governance expertise based primarily on her extensive research and teaching at the University of Chicago and her service on mutual fund complex and other public company audit, performance, finance and nominating committees. Although Ms. Smith does not currently serve on the Corporation’s Audit Committee, she qualifies as an “audit committee financial expert.”
Director Independence
In addition to complying with NYSE listing standards and applicable SEC rules pertaining to director independence, the Corporation adopted the Categorical Standards, which are attached as Exhibit A to the Governance Guidelines and available on the Corporation'sCorporation’s website atwww.hnicorp.com, under "“Investors-Corporate Governance –- Governance Guidelines." Under the Categorical Standards, the following relationships will not, in and of themselves, be considered material relationships, unless otherwise expressly provided for, under the NYSE listing standards:
Under the Governance Guidelines, at least three-fourths of the Directors must meet the NYSE listing standards pertaining to director independence and the Categorical Standards. The Board has determined each Director, including each nominee for Director, other than Mr. Askren, has no material relationship with the Corporation (either directly or as a partner, shareholder or officer of an organization having a relationship with the Corporation) and is independent under the NYSE listing standards and the Categorical Standards, including any heightened independence standards applicable to a Director'sDirector’s service on the Corporation'sCorporation’s Audit Committee (the "Audit Committee"“Audit Committee”), Human Resources and Compensation Committee (the "Compensation Committee"“Compensation Committee”) or Governance Committee.
Mr. Askren, the Corporation'sCorporation’s Chairman, President and Chief Executive Officer, does not meet these independence standards because he is employed by the Corporation.
Board Committees
The Board has three standing committees, the Audit Committee, the Compensation Committee and the Governance Committee. The Governance Committee fulfills the role of a nominating committee. Each committee operates under a written charter, which has been approved by the Board. The Board reviews each committee charter at least annually. Current copies of the committees'committees’ charters can be found on the Corporation'sCorporation’s website atwww.hnicorp.com, under "“Investors -Corporate Governance –- Committee Charters."” Shareholders may request a copy of the Board's committees'Board’s committees’ charters by writing to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761. During Fiscal 2014,2016, each current Director attended all of the meetings of the committees on which the Director served as well as all Board meetings.
Audit Committee.
The Audit Committee is comprised ofhas also determined Ms. Francis is an "audit“audit committee financial expert,"” as defined by Item 407(d)(5) of Regulation S-K. In accordance with the Audit Committee Charter, none of the Audit Committee members serve simultaneously on audit committees of more than three public companies. The Audit Committee met eight times during Fiscal 2014.2016. The Audit Committee appoints the Corporation'sCorporation’s independent registered public accountant and reviews the independent registered public accountant'saccountant’s performance, independence, fees and audit plans. The Audit Committee also reviews the annual and quarterly financial statements; internal audit staffing, plans and reports; nonaudit services provided by the independent registered public accountant; the Corporation'sCorporation’s insurance coverage; and any other matters as directed by the Board, including key risk oversight.
Human Resources and Compensation Committee.
The Compensation Committee is comprised ofPublic Policy and Corporate Governance Committee.
The Governance Committee is comprised ofProcesses and Procedures for the Consideration and Determination of Director Compensation by Governance Committee
The Governance Committee is responsible for annually reviewing the compensation paid to Directors for service on the Board and for recommending changes to suchin compensation to the Board, if appropriate. The Board is responsible for approving Director compensation based on recommendations of the Governance Committee. Neither the Governance Committee nor the Board delegates its authority with respect to setting Director compensation to any other person or group. However, the Corporation'sCorporation’s management may, at the request of the Governance Committee, assist the Governance Committee in its review of Director compensation, which may include recommending changes to compensation. Although it has not done so recently, the Governance Committee has authority to retain and terminate anya consultant to assist in the evaluation of the compensation and benefits for Directors and to approve the consultant'sconsultant’s fees and other retention terms.
Processes and Procedures for the Consideration and Determination of Executive Compensation by Compensation Committee
The Compensation Committee is responsible for developing and implementing the Corporation'sCorporation’s compensation policies and programs for the Chairman and CEO and other senior executives as further discussed throughout the Compensation Discussion and Analysis (the "CD&A"“CD&A”) which begins on page 17 of this Proxy Statement.
Board Leadership Structure
The Corporation'sCorporation’s current board leadership structure consists of a combined chairmanChairman and chief executive officerCEO position and nine independent Directors, one of whom has been designated Lead Director.
While certain of the conventional functions for the Chairman have been shared by all Directors, the Chairman position has traditionally been held by the Corporation'sCorporation’s CEO. The Board believes the combined role of Chairman and CEO promotes unified leadership and direction for the Corporation, which allows for a single, clear focus for management to execute the Corporation'sCorporation’s strategy and business plans. The Board believes this leadership structure has contributed to the long-term growth and financial success of the Corporation.
The Corporation has strong governance structures and processes in place to ensure the independence of the Board, eliminate conflicts of interest and prevent dominance of the Board by management. All Directors, with the exception of the Chairman, are independent as defined under NYSE listing standards, applicable SEC rules and the Categorical Standards, and all committees of
the Board are comprised entirely of independent Directors. In addition, the Board and the Governance Committee have assembled a Board comprised of strong and sophisticated Directors who are currently or have recently been leaders of major companies or institutions, are independent thinkers and have a wide range of expertise and skills.
In February 2005, the Board adopted Lead Director Guidelines. The Lead Director'sDirector’s duties and responsibilities include:
| ● | presiding at all meetings of the independent Directors; |
| ● | communicating to the Chairman and CEO the substance of the discussions and consensus reached at the meetings of independent Directors; |
| ● | encouraging the independent Directors and the Chairman and CEO to communicate with each other at any time and to act as principal liaison between the independent Directors and the Chairman and CEO on sensitive matters; |
| ● | providing input to the Chairman and CEO on preparation of agendas for Board and committee meetings; |
| ● | presiding at Board meetings when the Chairman and CEO is not in attendance; |
| ● | acting as spokesperson for the Corporation in the event the Chairman and CEO is unable to act due to conflict of interest or incapacity; and |
| ● | receiving and responding to communications from interested parties to the independent Directors. |
Abbie J. Smith has been the Lead Director since May 2014.
The Board regularly meets in executive session without the presence of management.management and the independent Directors meet at least quarterly without the presence of management or the CEO. The Lead Director presides at these meetings and provides the Board'sBoard’s guidance and feedback to the Chairman and CEO and the Corporation'sCorporation’s management team. Further, the Board has regular and complete access to the Corporation'sCorporation’s management team. At each Board and/orand committee meeting, Directors receive valuable information and insight from management on matters impacting the Corporation as well as current and future issues.
Given the strong leadership of the Chairman and CEO, the counterbalancing role of the Lead Director and a Board comprised of strong and independent Directors, the Board believes it is in the best long-term interests of the Corporation and its shareholders to maintain a combined role of Chairman and CEO.
Board’s Role in Risk Oversight
The Board administers its risk oversight role primarily through its committee structure and the committees'committees’ regular reports to the Board at each quarterly Board meeting. The Audit Committee meets frequently during the year (eight times in Fiscal 2014)2016) and discusses with management, the Corporation'sCorporation’s Vice President, Internal Audit, and the Corporation'sCorporation’s independent registered public accountant:
| ● | current business trends affecting the Corporation; |
| ● | major risks facing the Corporation; |
| ● | steps management has taken to monitor and control such risks; and |
| ● | adequacy of internal controls that could significantly affect the |
At least annually, the Board discusses with management the appropriate level of risk relative to corporate strategy and business objectives and reviews with management the Corporation'sCorporation’s existing risk management processes and their effectiveness. The Audit Committee also reviews the Corporation'sCorporation’s enterprise risk management process for identification of, and response to, major risks. The Audit Committee Chairperson provides the Board with a report concerning its risk oversight activities at each quarterly Board meeting. Each key risk identified for the Corporation is thenreferred to the Board or assigned a Committeecommittee of the Board for oversight. In addition, the Compensation Committee Chairperson providesoversight and each committee regularly reports to the Board with a report on compensation, including risk, annually.
Compensation Risk Assessment
A senior management team, under the oversight of the Compensation Committee, annually conducts a risk assessment of the Corporation'sCorporation’s compensation policies and practices to ensure they do not encourage excessive risk taking by members which could result in a material adverse effect on the Corporation. Members of the management team conducting the assessment include the Corporation's Vice President, Member Relations; Treasurer; Vice President, Financial Reporting; Vice President, Internal Audit; and Senior Counsel, Securities. As part of the assessment, management:
Based on this most recent compensation risk assessment, both management and the Compensation Committee believe the risks arising from the Corporation'sCorporation’s compensation policies and practices, as managed, are not reasonably likely to have a material adverse effect on the Corporation.
Board Meetings
The Board held four regular meetings and no special meetings during Fiscal 2014.2016. All current Directors attended 100% of the meetings of the Board and of any committee on which he or she served.
In accordance with the NYSE listing standards regarding corporate governance and the Corporation'sGovernance Guidelines, the Corporation’s non-management Directors meet at regularly scheduledin executive sessions without management present.present at each regular Board meeting. Ms. Smith, Lead Director, presides at these executive sessions. The Corporation'sCorporation’s non-management Directors met in executive sessions at all four timesregular Board meetings during Fiscal 2014.
Director Attendance at Annual Meetings of Shareholders
All Directors are encouraged to attend annual meetings of shareholders when possible. Last year all Directors attended the 20142016 annual meeting of shareholders ("2014 Annual Meeting").
Shareholder Communications with the Board
Shareholders and interested parties may communicate with the Lead Director, the Chairperson of the Governance Committee, and the Senior Vice President, General Counsel and Secretary, or with the Corporation'sCorporation’s non-management Directors as a group, by sending an email to "BoardOfDirectors@hnicorp.com" to“BoardOfDirectors@hnicorp.com”or by writing to Lead Director, Chairperson of the Governance Committee, Senior Vice President, General Counsel and Secretary or Non-Management Directors at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761, Attention: Corporate Secretary. All communications received will be opened by the office of the Corporate Secretary for the sole purpose of determining whether the contents are a message to the Directors. Any
The Corporation has adopted a written policy (the "Policy") for review of transactions involving the Corporation (including the Corporation'sCorporation’s subsidiaries) and its Directors, executive officers and other related persons. The transactions subject to the Policypolicy include any proposed, existing or completed transaction, arrangement or relationship (including charitable contributions and any series of similar transactions, arrangements or relationships)relationships in which the Corporation is a participant and in which any Director, executive officer or other related person has a direct or indirect material interest except:
| ● | transactions available to all members generally; |
| ● | transactions involving less than $100,000 when aggregated with all similar transactions; |
| ● | transactions involving compensation or indemnification of executive officers and Directors duly authorized by the appropriate Board committee; |
| ● | transactions involving reimbursement for routine expenses in accordance with Corporation policy; |
| ● | transactions in which a related |
| ● | transactions in which a related |
| ● | transactions in which the rate charged by a related person is determined by competitive bid; and |
| ● | purchases of any products on the same terms available to all members generally. |
The Corporation'sCorporation’s Office of the General Counsel (the "General Counsel"“General Counsel”) performs the initial review of all transactions subject to the Policy.policy. Factors to be considered by the General Counsel in reviewing the transaction include:
| ● | whether the transaction is in conformity with the |
| ● | whether the transaction |
| ● | whether the transaction is on terms comparable to those that could be obtained in |
| ● | the disclosure standards set forth in Item 404 of Regulation S-K or any similar provision; and |
| ● | whether the transaction could call into question the status of any Director or Director nominee as an independent director under the NYSE listing standards pertaining to director independence and the Categorical Standards. |
After reviewing the terms of the proposed transaction and taking into account the factors set forth above, the General Counsel will either:
| ● | approve the transaction if entered into in the ordinary course of business, for an aggregate amount of $120,000 or less and on terms comparable to those that could be obtained in |
| ● | disallow the transaction if not in the best interests of the Corporation; |
| ● | recommend the Audit Committee review the transaction in advance; or |
| ● | allow the transaction, subject to ratification by the Audit Committee, but only if the interests of the Corporation will be best served by allowing the transaction to proceed. |
Quarterly, the General Counsel reports to the Audit Committee each known transaction to be considered by the Audit Committee pursuant to the policy, including the proposed aggregate value of each transaction and any other relevant information. After review, the Audit Committee approves, ratifies or disallows each transaction in accordance with the guidelines set forth above.
If the General Counsel learns of an ongoing or completed transaction, arrangement or relationship not submitted for prior review and approval, the General Counsel will:
| ● | in the case of an ongoing transaction, submit it to the Audit Committee for ratification, amendment or termination; or |
| ● | in the case of a completed transaction, submit it to the Audit Committee for ratification, amendment or rescission. |
For purposes of the Policy,policy, an "executive officer"“executive officer” is an executive officer of the Corporation subject to Section 16 of the Exchange Act.
For purposes of the Policy,policy, a "related person"“related person” is:
| ● | an executive officer, Director or Director nominee of the Corporation; |
| ● | a person who is an immediate family member (including a |
| ● | a shareholder owning in excess of |
| ● | an entity which is owned or controlled by a related person or an entity in which a related person has a substantial ownership interest. |
State Farm beneficially owns more than 5% of Common Stock. One of the Corporation'sCorporation’s office furniture operatingbusiness units has an office furniture purchase agreement with State Farm Insurance Companies ("State Farm").Companies. State Farm purchased approximately $581,380$283,624 of office furniture and related services in Fiscal 2014. State Farm beneficially owns more than five percent of Common Stock.2016. The Corporation'sCorporation’s General Counsel reviewed and approved the transaction and informed the Audit Committee in accordance with the Policy.
The Corporation maintains the Ethics Code as part of its corporate compliance program. The Ethics Code applies to all Directors and members (i.e., employees), including the Corporation'sCorporation’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Ethics Code is available for download on the Corporation'sCorporation’s website atwww.hnicorp.com, under "“Investors - Corporate Governance—Governance - Member Code of ConductIntegrity."” The Corporation intends to disclose amendments to or waivers of the Ethics Code granted to the individual executive officers listed above and the Directors on the Corporation'sCorporation’s website within four business days of such amendment or waiver. Shareholders may request a copy of the Ethics Code by writing to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761.
The Corporation'sCorporation’s insider trading policy prohibits hedging transactions. Specifically, the Corporation prohibits any members, or directors, or their designees, from hedging their ownership of the Corporation'sCorporation’s Common Stock (includingprepaid variable forwards, equity swaps, collars and exchange funds), engaging in short sales or purchasing put or call options, pledging their shares of the Corporation'sCorporation’s CommonStock, holding them in a margin account or engaging in short-term transactions with shares of the Corporation'sCorporation’s Common Stock.
The Governance Guidelines are available for download on the Corporation'sCorporation’s website atwww.hnicorp.com, under "“Investors - Corporate Governance—Governance - Governance Guidelines."” Shareholders may request a copy of the Governance Guidelines by writing to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761.
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The Audit Committee has selected KPMG LLP (“KPMG”) as the Corporation'sCorporation’s independent registered public accountant for Fiscal 2015.
The Board proposes the shareholders ratify the selection by the Audit CommitteeCommittee’s selection of KPMG LLP to serve as the Corporation'sCorporation’s independent registered public accountant for Fiscal 2015.2017. The Audit Committee is directly responsible for the appointment of the independent registered public accountant. Although shareholder ratification of the Audit Committee'sCommittee’s selection of the independent registered public accountant is not required by the By-laws or otherwise, the Corporation is submitting the selection of KPMG LLP to its shareholders for ratification to permit shareholders to participate in this important decision. If the shareholders fail to ratify the Audit Committee'sCommittee’s selection of KPMG LLP as the Corporation'sCorporation’s independent registered public accountant for Fiscal 20152017 at the Meeting, the Audit Committee will reconsider the selection, although the Audit Committee will not be required to select a different independent registered public accountant.
Representatives of KPMG LLP will be present at the Meeting, have an opportunity to make a statement if they so desire and be available to respond to appropriate questions. No representative of PricewaterhouseCoopers LLP ("PwC"), which served as the Corporation's independent registered public accountant for Fiscal 2014, is expected to attend the Meeting.
Change in Independent Accounting Firm
The Audit Committee, at its meeting January 13, 2015, approved the appointment of KPMG LLP to serve as the Corporation'sCorporation’s independent registered public accounting firm for Fiscal 2015 and dismissed PwCPricewaterhouseCoopers LLP (“PwC”) effective upon the issuance of its reports on the consolidated financial statements as of and for the fiscal year ended January 3,2, 2015 and the effectiveness of internal control over financial reporting as of January 3,2, 2015 to be included in the Corporation'sCorporation’s Form 10-K.10-K for fiscal year ended January 3, 2015. On February 27, 2015, the Corporation filed its 20142015 Annual Report on Form 10-K and its auditor-client relationship with PwC ended.
The reports of PwC on the Corporation'sCorporation’s consolidated financial statements as of and for the years ended January 3,2, 2015 and December 28, 2013 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the years ended January 3,2, 2015 and December 28, 2013, and during the subsequent interim period through February 27, 2015, there have beenwere no disagreements between the Corporation and PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference thereto in their reports on the Corporation'sCorporation’s financial statements for those periods, and there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K.
The Corporation provided PwC with a copy of the disclosures above made in a Current Report on Form 8-K/A, prior to its filing and requested from PwC a letter addressed to the SEC indicating whether it agrees with the disclosures. PwC provided the requested letter, which is attached as Exhibit 16.1 to the Corporation'sCorporation’s Form 8-K/A filed on February 27, 2015.
During the fiscal years ended January 3,2, 2015 and December 28, 2013 and the subsequent interim period through February 27, 2015, the Corporation did not consult with KPMG regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Corporation'sCorporation’s financial statements, and neither a written report nor oral advice was provided to the Corporation that KPMG concluded was an important factor considered by the Corporation in reaching a decision as to thean accounting, auditing or financial reporting issue; (ii) any matter subject to a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K; or (iii) any reportable event within the meaning of Item
304(a)(1)(v) of Regulation S-K.
Recommendation of the Board
| THE BOARD RECOMMENDS A VOTE COMMITTEE’S SELECTION OF KPMG LLP AS THE ACCOUNTANT FOR FISCAL 2017. |
14
The Board has adopted a written charter for the Audit Committee. A current copy of the charter is available on the Corporation'sCorporation’s website at www.hnicorp.com, atwww.hnicorp.com,under "Corporate“Corporate Governance –- Committee Charters."Charters.” The primary functions of the Audit Committee are set forth in its charter and on page 98 of this Proxy Statement under "Information“Information Regarding the Board –- Board Committees."
All members of the Audit Committee are independent as defined in Section 303A.02 of the NYSE Listed Company Manual, Exchange Act Rule 10A-3(b)(1) and the Categorical Standards.
Management has represented to the Audit Committee the Corporation'sCorporation’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and PricewaterhouseCoopersKPMG LLP, the Corporation'sCorporation’s independent registered public accountant. Management has also represented it has assessed the effectiveness of the Corporation'sCorporation’s internal control over financial reporting as of January 3, 2015,December 31, 2016, and has determined that, as of that date, the Corporation maintained effective internal control over financial reporting. The Audit Committee has reviewed and discussed with management and the Corporation'sCorporation’s independent registered public accountant this assessment of internal control over financial reporting. The Audit Committee has also discussed with the Corporation'sCorporation’s independent registered public accountant its evaluation of the accounting principles, practices and judgments applied by management, and the Audit Committee has discussed any items required to be communicated to it by the Corporation'sCorporation’s independent registered public accountant in accordance with regulations promulgated by the SEC and the Public Company Accounting Oversight Board (the "PCAOB"“PCAOB”) including the matters required to be discussed by Auditing Standards No. 16, as adopted by the PCAOB.
The Audit Committee received and reviewed the written disclosures and the letter from the Corporation'sCorporation’s independent registered public accountant required by applicable requirements of the PCAOB regarding the Corporation'sCorporation’s independent registered public accountant'saccountant’s communications with the Audit Committee concerning independence and discussed with the Corporation'sCorporation’s independent registered public accountant its independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board the consolidated financial statements referred to above be included in the Corporation'sCorporation’s Annual Report on Form 10-K for the year ended January 3, 2015,December 31, 2016, for filing with the SEC.
AUDIT COMMITTEE
Cheryl A. Francis,
John R. Hartnett
Larry B. Porcellato
The following table sets forth the aggregate fees billed to the Corporation for the audit and other services provided by PwCKPMG LLP for Fiscal 2014fiscal 2016 and for the fiscal year ended December 28, 2013 ("Fiscal 2013"):
| Fiscal 2014 | Fiscal 2013 | |
Audit Fees (1) | $1,266,447 | $1,112,410 |
| Audit-Related Fees (2) | 176,981 | - |
| Tax Fees (3) | 550,998 | 411,707 |
| All Other Fees | 12,000 | - |
| Total | $1,994,426 | $1,524,117 |
| Fiscal 2016 | Fiscal 2015 | |||||||
| Audit Fees (1) | $ | 1,469,000 | $ | 1,300,000 | ||||
| Audit-Related Fees (2) | 51,829 | — | ||||||
| Tax Fees (3) | 196,137 | 278,389 | ||||||
| All Other Fees | — | — | ||||||
| Total | $ | 1,716,966 | $ | 1,578,389 | ||||
| (1) | Audit fees represent fees for professional services provided in connection with the audit of the annual financial statements, review of quarterly financial statements and audit services provided in connection with other statutory and regulatory filings or engagements. |
| (2) | Audit-related fees represent accounting consultations. |
| (3) | Tax fees represent fees billed for tax compliance, tax advice and tax planning. |
The Audit Committee may delegate to one or more members of the Audit Committee as it designates the authority to pre-approve audit-related and non-audit services not prohibited by law to be performed by the Corporation'sCorporation’s independent registered public accountant and associated fees. The delegated member or members must report any such pre-approvals of audit-related or non-audit related services and fees to the Audit Committee at its next scheduled meeting. All of the fees incurred in Fiscal 2014fiscal 2016 and Fiscal 2013fiscal 2015 were approved by the Audit Committee.
Our CD&A describes the key features of our executive compensation program and the Compensation Committee’s approach in deciding 2016 compensation for Fiscal 2014 highlights the Corporation's pay for performance philosophy, with a substantial portion of eachour Named Executive Officer's compensation tied to the achievement of financial and strategic goals and the creation of long-term value for shareholders. A majority of each Named Executive Officer's compensation opportunity in Fiscal 2014 was awarded through performance-based annual and long-term awards and stock options to incent long-term value creation for shareholders. Shareholders have continued to voice their support for the Corporation's pay for performance compensation program—approximately 98% of votes cast in last year's Say on Pay vote approved the compensation of the Named Executive Officers.
| Name | Title |
| Stan A. Askren | Chairman, President and Chief Executive Officer, HNI Corporation |
| Kurt A. Tjaden | |
| Jerald K. Dittmer | Executive Vice President, HNI Corporation; President, The HON Company |
| Jeffrey D. Lorenger | Executive Vice President, HNI Corporation; President, HNI Contract Furniture Group |
| Marco V. Molinari | Former Executive Vice President, HNI Corporation; President, HNI International* |
*Mr. Tjaden was appointed President, HNI International, effective January 19, 2017, replacing Marco V. Molinari who retired January 31, 2017. Marshall H. Bridges was appointed Vice President and Chief Financial Officer, effective January 19, 2017.
The CD&A is divided into five parts:
1. 2016 Financial Highlights
2. Executive Compensation Program Changes in 2014.
3. Executive Compensation Objectives and Governance
4. Executive Compensation Elements
5. Additional Compensation Programs and Policies
Following the CD&A is a Compensation Committee Report and Corporationcompensation tables.
1. 2016 Financial Highlights
In 2016, we achieved solid financial performance, made only minor structural changessignificant progress toward our long-term strategic and financial goals, and delivered attractive cash returns to the executiveour stockholders. We delivered an improvement in non-GAAP earnings on lower sales. We improved our operating margin while continuing significant long-term investments, transforming and restructuring multiple operations.
*Amounts represent non-GAAP values. See GAAP to non-GAAP reconciliation in Appendix A to this Proxy Statement.
2. Executive Compensation Overview
Primary Compensation Elements
The primary elements of our compensation program in 2014. are base salary, and annual and long-term performance-based incentive opportunities. These primary elements were chosen to attract the best talent and drive long-term shareholder value creation.
| Element | Description | Purpose |
| Base Salary (see page 21) | Annual cash compensation. | Compensation for expected day-to-day responsibilities. Pay adjustments are based on capabilities, responsibilities and market factors. |
| Annual Incentive Opportunity (see page 21) | Targeted variable compensation equal to a percentage of base salary paid once a year and based 80% on economic profit and 20% on individual objectives. | Focus executives on annual performance goals, typically financially driven. |
| Long-term Incentive Opportunity (see page 24) | Variable performance compensation typically in the form of stock options, restricted stock units and cash earned at the end of three-year period based on economic profit goals. | Align executives’ decisions with long-term shareholder value creation. Promote executive retention. |
Other Key Compensation Practices
The Compensation Committee increased the long-term compensation targets for Messrs. Dittmer and Lorenger from 150% of base salary to 175% of base salary based on the size, scope and complexity of the businesses they lead.
| Compensation Practice | ||
| What We Do | ||
| Pay for performance | √ | A large majority of executive compensation is based on achievement of long-term value creation. |
| Stock ownership guidelines | √ | Stock ownership guidelines require the CEO to hold shares valued at 5x base salary and other Named Executive Officers |
| Both a change in control and involuntary termination are required for the change in control agreement to take effect. | ||
| Clawback policy | √ | Performance-based compensation will be canceled or reclaimed if an executive engages in fraud or financial misconduct. |
| Anti-hedging policy | √ | Officers and directors are prohibited from hedging or pledging transactions with respect to HNI stock. |
| Independent compensation Consultant | √ | The Compensation Committee engages an independent compensation consultant who works only for the Committee. |
| Annual shareholder Say on Pay | √ | The Corporation holds an annual advisory vote regarding Named Executive Officer |
| Annual compensation risk assessment | √ | The Compensation Committee reviews a risk assessment of Named Executive Officer compensation program every year. |
| What We Don’t Do | ||
| No repricing of underwater options | X | Underwater options are not repriced or replaced. |
| No perquisites | X | Perquisites are not provided to |
| No employment contracts | X | Neither the |
| Dividends are not | ||
| No supplemental executive benefits | X | Executive officers are not offered additional benefits beyond those generally available to |
3. Executive Compensation Objectives and Governance
Philosophy and Objective
The Corporation’s Board believes in aligning the compensation of the Executive Compensation Program
Pay for Performance
The executive compensation program for 2016 highlights the Corporation’s pay for performance philosophy, with a large majority of each senior executive’s compensation tied to the achievement of long-term value creation, awarded through performance-based annual and long-term awards and stock options. Shareholders have continued to voice their support for the Corporation’s pay for performance compensation program— approximately 96% of votes cast in last year’s Say on Pay vote approved the compensation of the Named Executive Compensation Program
The Corporation believes economic profit is the best indicator of long-term shareholder value creation and uses economic profit to measure financial performance goal achievement under the annual and long-term incentive plans. Economic profit is defined as after-tax operating profit less a charge for invested capital. Economic profit promotes the simultaneous optimization of growth, earnings and capital efficiency.
Pay Mix
For 2016, the target compensation mix for the CEO and other Named Executive Officers is shown below. Approximately 81% of CEO compensation and 72% of all other Named Executive Officers’ compensation is considered variable based on achieving financial and strategic objectives.
Compensation Committee and Independent Directors.Directors
The Compensation Committee has primary responsibility for design and implementation of the executive compensation program. The Compensation Committee designs compensation strategy and structure to assure:
The Corporation's Law, Finance andCorporation’s Member and Community Relations, ("MCR")Law, and Finance Departments support the Compensation Committee and the Board in a variety of ways related to executive compensation, including conducting executive compensation benchmark analysis,benchmarking, preparing compensation-related materials providing recommendations on base salary changes and annual and long-term incentive compensation award targets and providing updates on corporate governance laws and best practices.
The Compensation Committee occasionally retains an outside compensation consultant to provide data and recommendations for structuring and designing the Corporation'sCorporation’s executive compensation program, selecting a peer group for benchmarking, and establishing competitive incentive award targets. Neither the Corporation nor the Compensation Committee engaged a compensation consultant or advisor in Fiscal 2014.2016. The Compensation Committee engaged Frederic W. Cook & Co., Inc. ("(“FW Cook"Cook”) to serve as the compensation consultant
in Fiscal 20132015 and determined, based on an analysis of relevant factors including those required by the SEC, FW Cook had no conflict of interest in providing services to the Compensation Committee.
Compensation Program Changes in 2016 and Market Data
The Compensation Committee did not make any structural changes to the executive compensation program in forming its recommendations regarding2016. In 2017, 20% of the Chairman and CEO'sAnnual Incentive for executives is based on achievement of the Board approved organic sales plan; in 2016, this 20% was based on achievement of individual objectives. The remaining 80% of the award will continue to be based on economic profit.
Benchmarking with Market Data
CEO Benchmarking
The Compensation Committee compares our CEO compensation in Fiscal 2014, benchmarked his compensation againstto the below-listed peer companies with assistance from FW Cook in late Fiscal 2013 and data provided by FW Cook to thecompanies. The Compensation Committee in Fiscal 2013.
| Company | Annual Revenues ($ billions) | Company | Annual Revenues ($ billions) |
| Leggett & Platt, Incorporated | $3.9 | A.O. Smith Corporation | $2.5 |
| Carlisle Companies Incorporated | $3.5 | Armstrong World Industries, Inc. | $2.4 |
| Lennox International Inc. | $3.5 | Donaldson Company, Inc. | $2.2 |
| Regal Beloit Corporation | $3.5 | Herman Miller, Inc. | $2.2 |
| Snap-On Incorporated | $3.4 | Kennametal Inc. | $2.1 |
| Steelcase Inc. | $3.1 | Briggs & Stratton Corporation | $1.8 |
| Valmont Industries, Inc. | $2.6 | Actuant Corporation | $1.2 |
| Lincoln Electric Holdings Inc. | $2.5 | Knoll Inc. | $1.1 |
HNI Corporation annual revenue: $2.3 Billion.
At the table below.
The Compensation Committee targetsutilized the sumCEO Compensation Review to establish the elements and targets of the Chairman and CEO'sCEO’s compensation for 2016, aged using a 3% annual increase to the base salary data. The target annual incentive, target long-term incentive and targetfor total CEO compensation is set at the median of the peer group.
Market Data for Other Named Executive Officers.
The Compensation Committee with the assistance of corporate expertise, annually monitors market levels of base salary and short-annual and long-term incentive compensation of more than 3,000 companies using the following commercially available broad-based, comparative market compensation survey reports developed by independent professional organizations and covering more than 3,000 companies over a broad range of industries (collectively, the "Survey Reports"“Survey Reports”):
| ● | Towers Watson, U.S. Compensation Data Bank – General Industry Executive Database, Single Regression Report dated March 1, |
| ● | Mercer Human Resource Consulting |
| ● | Towers Watson Data Services – CompSource Online, Survey Report on Top Management Compensation dated |
In 2016, the Compensation Committee's review, the Corporation provides information combining and averaging market data fromCommittee followed its regular process of using the Survey Reports to balance data outliershelp establish the elements and increase reliability. No industry peer group is selected from the data in the Survey Reports for competitive review because the Corporation competes for executives across varied industries. The Compensation Committee focuses on the scope and scaletargets of the executive officer's responsibility as the most important benchmarking factors for attracting and retaining executive officers.
| 4. Executive Compensation Elements |
Base Salary.Salary
For the Chairman and CEO, the Compensation Committee derives the base salary market median from the CEO Compensation Review. For other Named Executive Officers, the Compensation Committee, with the assistance of the Corporation, derives the base salary market median from the Survey Reports. For Fiscal 2014,2016, the base salary for each Named Executive Officer other than Mr. AskrenOfficer was at or belowappropriately indexed from the market median for the relevant position. For the reasons discussed under "MAnalysis of Base Salary Changes in 2014r" on page 22 of this Proxy Statement, Mr. Askren's. Askren’s base salary was set slightly above the market median.median in recognition of his demonstrated leadership, track record of performance over multiple economic cycles, significant capabilities highly relevant to the businesses and operations of the Corporation, and additional role as Chairman of the Board.
Actual base salaries may be higher or lower than the market median based on the following factors, which are also considered annually by the Compensation Committee (and independent Directors in the case of the Chairman and CEO'sCEO’s base salary) when determining changes in base salary:
| demonstrated growth, development and advancement; |
| ● | individual performance and competency; and |
| value of experience both in service to the Corporation and other |
The Compensation Committee conducts the CEO’s annual base salary review at the February Board meeting and all independent Directors participate with the Compensation Committee in this review. For other executive officers, the Compensation Committee normally approves base salary changes annually at the Board meeting prior to the anniversary date of each officer'sofficer’s appointment. The Compensation Committee conducts the Chairman and CEO's annual base salary review at the February Board meeting and all independent Directors participate with the Compensation Committee members in this review.
Analysis of Base Salary Changes in Fiscal 2014.Based primarily on a combination of performance, personal growth and market factors, the Compensation Committee (and with respect to the Chairman and CEO'sCEO’s base salary,salary, the independent Directors) awarded the following base salaries.salaries:
| Name | 2015 Annual Base Salary ($) | 2016 Annual Base Salary ($) | Increase ($) | Increase (%) | Approximate Market Median | 2016 Base Salary |
| Stan A. Askren | 1,086,750 | 1,135,654 | 48,904 | 4.5 | 980,792 | 116 |
| Kurt A. Tjaden | 423,550 | 440,490 | 16,940 | 4.0 | 461,462 | 95 |
| Jerald K. Dittmer | 475,755 | 491,930 | 16,175 | 3.4 | 486,213 | 101 |
| Jeffrey D. Lorenger | 447,100 | 467,220 | 20,120 | 4.5 | 485,229 | 96 |
| MarcoV. Molinari | 408,477 | 416,646 | 8,169 | 2.0 | 419,534 | 99 |
| Name | 2013Annual Base Salary ($) | 2014 Annual Base Salary ($) | Increase ($) | Increase (%) | Approximate Market Median Annual Base Salary ($) | 2014 Base Salary as Percentage of Market Median (%) |
| Stan A. Askren | 880,310 | 1,050,000 | 169,690 | 19.3 | 974,380 | 108 |
| Kurt A. Tjaden | 391,595 | 407,260 | 15,665 | 4.0 | 419,124 | 97 |
| Bradley D. Determan | 397,485 | 413,385 | 15,900 | 4.0 | 456,549 | 91 |
| Jerald K. Dittmer | 440,285 | 457,895 | 17,610 | 4.0 | 527,861 | 87 |
| Jeffrey D. Lorenger | 366,860 | 425,000 | 58,140 | 15.8 | 465,423 | 91 |
Annual Incentive
The Named Executive Officers are eligible for annual incentive compensation under the Annual Incentive Plan. The Annual Incentive Plan design encourages focus by the Named Executive Officers on both annual financial achievements and individual performance and market competitiveness. In recognition of and to retain Mr. Lorenger with his significantly expanded scope of responsibilities as the new President, HNI Contract Furniture Group, his base salary increase was above average. To retain Mr. Askren and in recognition of his demonstrated leadership, track record of performance over multiple economic cycles and significant capabilities highly relevantcontributions to the businesses and operations of the Corporation, and to improve the competitiveness of total compensation with peer group companies, the Compensation Committee recommended, and the independent Directors awarded, the increase in Mr. Askren's base salary to slightly above the peer group median. Mr. Askren's total compensation opportunity at target economic profit achievement approximates the peer group median.
For Fiscal 2014,2016, key features of the Annual Incentive Plan were:
| Award Target as a % of Base Salary | Basis of Award Achievement | |||
| CEO | 120% | Achievement of Financial Performance Goals | 80% | |
| Other Named Executive Officers | 75% | Attainment of Individual Objectives | 20% | |
The CEO’s annual incentive compensation award target is a greater percentage of annual base salary than the targets for the other Named Executive Officers.
Economic Profit Achievement ($) | Financial Component of Annual Incentive Compensation Award – Payout (%) |
| Less than $12,678,000 | 0% |
| $12,678,000 | 50% |
| $18,155,000 | 75% |
| $23,632,000 | 100% |
| $25,218,000 | 125% |
| $26,805,000 | 150% |
| $28,391,000 | 175% |
| $29,977,000 | 200% |
The awards are paid in February following the financial component of the Incentive Plan. These amounts were calculated as follows:
Economic Profit Achievement ($) | Financial Component of Annual Incentive Compensation Award – Payout (%) |
| Less than $9,818,000 | 0% |
| $9,818,000 | 50% |
| $12,314,000 | 75% |
| $14,810,000 | 100% |
| $16,105,000 | 125% |
| $17,400,000 | 150% |
| $18,695,000 | 175% |
| $19,990,000 | 200% |
| Name | Annual Incentive Compensation Award Target ($) | Actual Award Payout Attributable to Financial Goals ($) | Actual Award Payout Attributable to Strategic Objectives ($) | Total Payout ($) | Actual Payout as % of Target (%) |
| Stan A. Askren | 1,260,000 | 1,512,000 | 546,840 | 2,058,840 | 163 |
| Kurt A. Tjaden | 305,444 | 366,532 | 122,177 | 488,710 | 160 |
| Bradley D. Determan | 310,040 | 372,047 | 117,815 | 489,862 | 158 |
| Jerald K. Dittmer | 343,422 | 295,892 | 134,621 | 430,514 | 125 |
| Jeffrey D. Lorenger | 318,750 | 301,601 | 146,625 | 448,226 | 141 |
| Name | Total Long-Term Incentive Compensation Target ($) | Total Long-Term Incentive Compensation Award Target (% of Annual Base Salary at Time of Award) |
| Stan A. Askren | 3,150,000 | 300 |
| Kurt A. Tjaden | 587,391 | 150 |
| Bradley D. Determan | 596,231 | 150 |
| Jerald K. Dittmer | 770,499 | 175 |
| Jeffrey D. Lorenger | 743,750 | 175 |
| Name | Targeted Value of Stock Options Granted in 2014 ($)(1) | Number of Stock Options Granted (#) |
| Stan A. Askren | 2,362,497 | 167,791 |
| Kurt A. Tjaden | 440,549 | 31,289 |
| Bradley D. Determan | 447,167 | 31,759 |
| Jerald K. Dittmer | 577,871 | 41,042 |
| Jeffrey D. Lorenger | 557,807 | 39,617 |
| Payout % | Economic Profit Achievement for Fiscal 2014 | ||
| 2014-2016 Plan | 2013-2015 Plan | 2012-2014 Plan | |
| 25% | 7,000,000 | (1,000,000) | 3,622,000 |
| 50% | 14,000,000 | 6,000,000 | 18,328,000 |
| 75% | 20,000,000 | 13,000,000 | 33,034,000 |
| 100% | 26,000,000 | 20,000,000 | 47,740,000 |
| 125% | 28,000,000 | 25,000,000 | 59,070,000 |
| 150% | 29,000,000 | 31,000,000 | 70,400,000 |
| 175% | 30,000,000 | 36,000,000 | 81,731,000 |
| 200% | 31,000,000 | 42,000,000 | 93,061,000 |
Under the Annual Incentive Plan, the Corporation achieved economic profit of $43.0 million in 2016, compared to economic profit of $53.3 million for 2015. The following table sets forth aggregate payouts under the Annual Incentive Plan for each Named Executive Officer for 2016:
| Name | Annual Incentive Compensation Award Target ($) | Actual Award Payout Attributable to Financial Goals ($) | Actual Award Payout Attributable to Individual Objectives ($) | Total Payout ($) | Actual Payout as % of Target (%) |
| Stan A. Askren | 1,362,785 | 1,504,514 | 269,831 | 1,774,345 | 130 |
| Kurt A. Tjaden | 330,368 | 364,726 | 65,413 | 430,139 | 130 |
| Jerald K. Dittmer | 368,948 | 590,317 | 68,624 | 658,941 | 179 |
| Jeffrey D. Lorenger | 350,415 | 311,168 | 66,579 | 377,747 | 108 |
| Marco V. Molinari | 312,485 | 374,982 | 51,873 | 426,855 | 137 |
Each Named Executive Officer received the 2016 Annual Incentive Plan award payout in cash.
Financial Performance Goals. Economic profit is the measurement for financial performance goal achievement because it promotes the simultaneous optimization of growth, earnings and capital efficiency. Economic profit is defined as after-tax operating profit less a charge for invested capital.
The Corporation views economic profit asCompensation Committee uses the best indicator of long-term shareholder value creation.
Payout ranges are set between 0% and approves separate200% of the economic profit goals for the Corporation and each operating unit.
Messrs. Askren and Tjaden are eligible for awards based on the financial performance of the Corporation while Messrs. Dittmer, Lorenger and Molinari are eligible for awards based on the financial performance of each executive’s individual area of responsibility (one or more business units). This structure aligns executives’ interests with the financial performance of their relevant areas of responsibility.
For 2016, the economic profit goal for the Corporation was $38.5 million, and actual economic profit achievement was $43.0 million, resulting in 138% payout as reflected in the table below. Economic profit achievement, representing a 50 percent payout level reflects threshold performance requiredand therefore payouts under the financial portion of the Annual Incentive Plan for Messrs. Askren and Tjaden, was above the target primarily due to receive a minimum payout, whilestrong earnings by the Corporation’s office furniture segment.
| Economic Profit Achievement ($) | Financial Component of Annual Incentive Compensation Award – Payout (%) |
| Less than $24,474,000 | 0% |
| $24,474,000 | 35% |
| $27,701,000 | 50% |
| $33,079,000 | 75% |
| $38,456,000 | 100% |
| $41,437,000 | 125% |
| $44,418,000 | 150% |
| $47,399,000 | 175% |
| $50,379,000 | 200% |
Messrs. Askren and Tjaden earned payouts of $1,504,514 and $364,726, respectively, under the financial component of the Annual Incentive Plan. These amounts were calculated as follows:
| ● | For Mr. Askren: ($1,362,785 * 80%) * 138% |
| ● | For Mr. Tjaden: ($330,368 * 80%) * 138% |
The financial component of Mr. Dittmer’s annual incentive compensation award is based on the achievement of the economic profit achievement representing a 200 percent payout level reflectsgoals of The HON Company, the maximumCorporation’s business unit for which he is responsible. The financial component of Mr. Lorenger’s annual incentive for exceptional performance. Achievement at or below the 50 percent payout threshold orcompensation award is based on achievement of the economic profit goals of the Contract Furniture Group. The financial component of Mr. Molinari’s annual incentive compensation award is based on achievement of the economic profit goals of HNI International. The Corporation considers the economic profit goals and achievements of these business units confidential and does not disclose them, or individual operating company results, publicly.
As for all Named Executive Officers, the economic profit performance goals for Messrs. Dittmer, Lorenger, and Molinari are set aggressively and require superior performance by the officers and their corresponding business units and areas of responsibility. Nonetheless, because the Corporation and Board expect superior performance on a 200 percent payout level isconsistent basis, Messrs. Dittmer, Lorenger, and Molinari are expected to occur infrequently.
Individual Strategic Objectives.
Each Named Executive Officer'sOfficer’s individual strategic objectives are based on broad strategic objectives of the Corporation or one or more operatingbusiness units and are defined and measured within the Corporation's
At year-end, eachthe CEO evaluates Named Executive Officer evaluates theirOfficers’ performance against their individual strategic objectives. The Chairmanobjectives and CEO, after reviewing these self-evaluations, recommends thean achievement percentage for each other Named Executive Officer's individual strategic objectives for Compensation Committee approval. Achievement percentages for each objective range from 0% to 125%. The independent Directors, after reviewing the Chairman and CEO'sCEO’s self-evaluation, determine the achievement percentage of the ChairmanCEO’s individual objectives.
A summary of each Named Executive Officer’s individual objectives for 2016 is shown below.
| Name | Individual Objectives | |
| Stan A. Askren | ● | enhance customer value and market impact by enhancing brand strength, tailoring and focusing business and selling models and driving impactful product and solutions development; |
| ● | build best cost, lean enterprise by leading business system transformation, accelerating HNI-wide leverage and driving consistent flawless execution; and | |
| ● | enhance culture and capabilities by leveraging core culture and values and enhancing member engagement, leadership development and diversity. | |
| Kurt A. Tjaden | ● | provide leadership in achievement of breakthrough objectives and successfully deliver revolving credit facility refinancing; |
| ● | lead business system transformation to successful implementation on-time and on-budget with appropriate quality; and | |
| ● | lead corporate finance and information technology functions to deliver efficient and effective processes and controls and increased value creation, along with specified annual savings. | |
| Jerald K. Dittmer | ● | accelerate portfolio innovation and deliver breakthrough objectives for HON; |
| ● | drive growth in HON’s transactional and commercial contract businesses; and | |
| ● | enhance customer experience. | |
| Jeffrey D. Lorenger | ● | lead Contract Furniture Group profit transformation and achievement of breakthrough objectives; and |
| ● | lead distribution strategy to maximize long-term positioning for Contract Furniture Group. | |
| Marco V. Molinari | ● | accelerate HNI International profit growth; and |
| ● | deepen core capabilities. |
The Compensation Committee and CEO'sthe CEO (and with respect to the CEO, the independent Directors) determined the Named Executive Officers delivered significant results on the stated goals resulting in attainment of individual strategic objectives. Achievement percentages forobjectives from 83% to 99%.
Long-Term Incentive
In 2016, 75% of each objective range from 0 to 125 percent. There is no threshold performance level for the individual strategic objective component of the annualNamed Executive Officer’s long-term incentive compensation award.
Long-term incentive compensation is designed to focus executives on long-term value creation for shareholders measured by objective financial performance metrics and long-term stock price appreciation and incent executives to remain with the Corporation. Long-term incentive compensation is provided through annual:
| ● | performance-based awards with rolling three-year performance periods under the Long-Term Performance Plan; and |
| ● | equity grants to select executives, including all Named Executive Officers, under the |
The two types of long-term incentive compensation provide an appropriate balance between emphasizing financial performance (Performance(Long-Term Performance Plan awards) and stock price performance (stock options). The Compensation Committee and the Board annually evaluate and approve the award targets to strikeensure alignment with the appropriate balance between Performance Plan awards and stock optionsCorporation’s incentive compensation philosophy.
The table below shows the total long-term incentive compensation award targets for each Named Executive Officer.
| Name | Total Long-Term Incentive Compensation Target ($) | Total Long-Term Incentive Compensation Award Target (% of Annual Base Salary at Time of Award) |
| Stan A. Askren | 3,406,961 | 300 |
| Kurt A. Tjaden | 635,322 | 150 |
| Jerald K. Dittmer | 951,508 | 200 |
| Jeffrey D. Lorenger | 934,439 | 200 |
| Marco V. Molinari | 612,716 | 150 |
Performance Plan. Economic profit is used as the performance measure for the Performance Plan for the reasons described under "Incentive Compensation Philosophy and Plans – Incentive Plan – Financial Performance Goals" on page 28 of this Proxy Statement. Under the Performance Plan, economic profit is defined as after-tax operating profit less a charge for invested capital, with cash normalized to a fixed amount for purposes of the calculation. The amount of economic profit calculated under the Performance Plan differs from economic profit under the Incentive Plan because the Performance Plan's definition of economic profit assumes cash to be a fixed amount for purposes of the calculation. A fixed level of cash is assumed under the Performance Plan to eliminate the effect on long-term compensation of a change in corporate cash management strategy during the period.
Under the Stock Plan, the Board grants stock options with an exercise price equal to the closing price of a share of Common Stock on the date of grant. Annual grants typically occur at the February Board meeting. The Board may grant stock options, Long-Term Performance Plan awards or restricted stock units ("RSUs") throughout the year for a new hire, a significant promotion or other special circumstances. The amount of income realized by an executive from an option is equal to the stock appreciation between the grant and the exercise dates, which aligns the interests of the Named Executive Officers with the long-term value creation for shareholders. Stock option grants are limited to a group of executives (73(68 in Fiscal 2014,2016, including all Named Executive Officers) who have the ability through their leadership and strategic actions to significantly
The Corporation uses the Black-Scholes option valuation method to calculate the number of options granted, which is based on the targeted dollar value of the award. All stock options cliff-vest four years and expire ten years after the date of grant. Early termination of employment other than due to death, disability, retirement or a change in control of the Corporation results in forfeiture of unvested option awards and a reduction in the exercise period of vested option awards. This policy is designed to motivate executives to focus on long-term value creation and support retention.
The Board granted stock options to each Named Executive Officer on February 17, 2016. The exercise price for stock options, which is the closing price of a share of Common Stock on the date of grant, was $32.03 per share. See the following option valuation table for additional details regarding stock option awards in 2016 for each Named Executive Officer:
| Name | Targeted Value of Stock Options Granted in 2016 ($) (1) | Stock Options Granted (#) |
| Stan A. Askren | 2,555,221 | 262,883 |
| Kurt A. Tjaden | 476,492 | 49,022 |
| Jerald K. Dittmer | 713,631 | 73,419 |
| Jeffrey D. Lorenger | 700,829 | 72,102 |
| Marco V. Molinari | 459,537 | 47,277 |
| Notes |
| (1) | The Black-Scholes option value for award purposes was $9.72 and differs from the Black-Scholes option value calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“FASB ASC Topic 718”), for financial statement reporting purposes ($8.75). The difference between the Black-Scholes option value for award purposes and for financial statement reporting purposes results from utilizing a ten-year option life when calculating the value of an award and a six-year expected option life when reporting the value of the award under FASB ASC Topic 718. Utilization of the ten-year option life when calculating the value of an award results in fewer options granted to executives due to the higher option value produced. |
Cash Awards
Actual performance is measured each year, with one-third of the cash award earned based on economic profit achievement in each of the three years covered by the plan. Achievement for each year may range from 0% to 200% of the annual award target, with a 25% threshold level. Economic profit achievement representing a 100% payout level is established as an aggressive but achievable goal for the Corporation based on economic and competitive conditions at the time goals are established. Payout levels are expected to average approximately 100% across multiple performance periods and failure to achieve a 25% payout level or achievement of a 200% payout level will occur infrequently.
Under the Long-Term Performance Plan, economic profit is defined as after-tax operating profit less a charge for invested capital, with cash normalized to a fixed amount for purposes of the calculation. The amount of economic profit calculated under the Long-Term Performance Plan differs from the Annual Incentive Plan because the Long-Term Performance Plan’s definition assumes a fixed level of cash to eliminate the effect of a change in corporate cash management strategy during the period.
The 2016-2018 Plan award covers a three-year performance period (2016, 2017 and 2018). The Compensation Committee recommended, and the Board approved, the economic profit goals for each year in the performance period in February 2016. No portion of the award will be paid out until the first quarter of 2019, and a Named Executive Officer must remain continuously employed by the Corporation (other than leaving employment as a result of death, disability, retirement or in connection with a change in control of the Corporation) through the last day of 2018 to receive a payout.
Economic profit achieved by the Corporation in 2016 was measured against (i) the performance goal for the first year of the 2016-2018 Plan, (ii) the performance goal for the second year of the Long-Term Performance Plan for 2015-2017 (the “2015-2017 Plan”) and Other(iii) the final year of the Long-Term Performance Plan for 2014-2016 (the “2014-2016 Plan”). For 2016, the Corporation’s economic profit was:
| ● | $18.4 million, under the 2016-2018 Plan, resulting in an earned award of 90% for 2016; |
| ● | $18.3 million under the 2015-2017 Plan, resulting in an earned award of 0% for 2016; and |
| ● | $17.8 million under the 2014-2016 Plan, resulting in an earned award of 29% for 2016. |
The difference between the economic profit for 2016 under the three plans is attributable to the use of a different weighted average cost of capital assumption (as one target was set in 2014, one was set in 2015 and the other in 2016) and the treatment of the economic profit impact of an acquisition. A discussion of the 2014-2016 and 2015-2017 Plans was contained in the Proxy Statement for the 2015 Annual Meeting and the 2016 Annual Meeting, respectively. The following table represents the Economic Profit targets set for the 2016 year under the three plans.
| 2016 Economic Profit Matrix | |||
| Payout % | 2016-2018 Plan | 2015-2017 Plan | 2014-2016 Plan |
| 25% | 2,000,000 | 50,000,000 | 16,000,000 |
| 50% | 8,000,000 | 58,000,000 | 27,000,000 |
| 75% | 14,000,000 | 67,000,000 | 38,000,000 |
| 100% | 21,000,000 | 75,000,000 | 49,000,000 |
| 125% | 23,000,000 | 80,000,000 | 57,000,000 |
| 150% | 25,000,000 | 86,000,000 | 64,000,000 |
| 175% | 28,000,000 | 91,000,000 | 72,000,000 |
| 200% | 30,000,000 | 97,000,000 | 80,000,000 |
The economic profit target and payouts for 2016 differ between the 2016-2018 Plan, the 2015-2017 Plan and the 2014-2016 Plan as a result of the Compensation Plans
The Named Executive Officers earned the following amounts under the Long-Term Performance Plan based on 2016 performance:
| Name | Long Term Performance Plan | Target Award for 2016 Performance Period ($) | Actual 2016 Performance Period Achievement (%) | Award Earned for 2016 Performance Period Achievement ($) | ||||
| Stan A. Askren | 2016-2018 | 283,913 | 90 | 255,522 | ||||
| 2015-2017 | 271,688 | 0 | — | |||||
| 2014-2016 | 262,500 | 29 | 76,125 | |||||
| Total | 818,101 | 331,647 | ||||||
| Kurt A. Tjaden | 2016-2018 | 52,944 | 90 | 47,649 | ||||
| 2015-2017 | 50,907 | 0 | — | |||||
| 2014-2016 | 48,949 | 29 | 14,195 | |||||
| Total | 152,800 | 61,844 | ||||||
| Jerald K. Dittmer | 2016-2018 | 79,292 | 90 | 71,363 | ||||
| 2015-2017 | 66,777 | 0 | — | |||||
| 2014-2016 | 64,208 | 29 | 18,620 | |||||
| Total | 210,277 | 89,983 | ||||||
| Jeffrey D. Lorenger | 2016-2018 | 77,870 | 90 | 70,083 | ||||
| 2015-2017 | 65,202 | 0 | — | |||||
| 2014-2016 | 61,979 | 29 | 17,974 | |||||
| Total | 205,051 | 88,057 | ||||||
| Marco V. Molinari | 2016-2018 | 51,060 | 90 | 45,954 | ||||
| 2015-2017 | 49,333 | 0 | — | |||||
| 2014-2016 | 47,780 | 29 | 13,856 | |||||
| Total | 148,173 | 59,810 |
5. Additional Compensation Programs and Policies
The descriptions below summarize other compensation and retirement plans in which Named Executive OfficersOfficers are eligible to participate. These plans do not change significantly from year to year,year, and other than participation in the SIP,Supplemental Income Plan (“SIP”), do not involve annual compensation decisions by the Compensation Committee or the Board.
Supplemental Income Plan. Plan
The SIP provides a benefit to the plan’s participants, including the Named Executive Officers, equal to amounts the participants would have received had the Corporation’s qualified plan and cash profit-sharing benefits not been subject to statutory compensation caps, except no income attributable to the Long-Term Performance Plan is considered. The SIP is available to select key executives, approved by the Board, who consistently earn income above compensation caps on the qualified plan (i.e., 401(k) plan) and cash profit-sharing benefits. The 20142016 statutory compensation limit for qualified plan and cash profit-sharing benefits was $260,000.$265,000. Any compensation in excess is excluded from the eligible earnings used to calculate the benefits.
In Fiscal 2014,2016, the Compensation Committee determined all SIP benefits would be in the form of shares of Common Stock. The SIP shares cannot be transferred by sale, pledge, gift or otherwise while the participant is employed by the Corporation. The number of shares of Common Stock is calculated by dividing the amount of the benefit by the closing price of a share of Common Stock on the date the benefit is paid, with cash payable in lieu of any fractional share. The Corporation pays all SIP benefits on the first day of its March fiscal month (or the next closest business day if the day is a weekend or holiday) of each year. Participation in the SIP is provided to assure the overall competitiveness of the executive compensation program. The transfer restriction on SIP shares is intended to facilitate long-term stock ownership by executives, thereby further aligning the interests of executives with the interests of shareholders.
DeferDeferredred Compensation Plan. Plan
Executives eligible for compensation under the Annual Incentive Plan, which include all Named Executive Officers,Officers, are eligible to participate in the HNI Corporation Executive Deferred Compensation Plan (the "Deferred Plan"(“Deferred Plan”). The Deferred Plan allows executives to voluntarily defer base salary, Annual Incentive Plan awards, Long-Term Performance Plan awards, SIP benefits and
other amounts. The Deferred Plan allows eligible executives to voluntarily defer the receipt of compensation to supplement retirement and achieve personal financial planning goals. Amounts can be deferred to a cash account earning interest at a rate set each year at one percent1% above the prime interest rate or to a notional stock account in the form of nonvoting share units fluctuating in value based on the price increase or decrease of Common Stock and earnearning dividends distributed to all shareholders. The dividends are automatically reinvested for each participant to acquire additional nonvoting share units. For any cash compensation deferred to the notional stock account, the number of nonvoting share units is determined by dividing the amount of the compensation by the fair market value of a share of Common Stock on the date the compensation would have otherwise been paid. Each participant elects, on an annual basis, the date or dates of distribution (i.e., a participant can elect a lump-sum distribution or distribution via annual installments not to exceed 15) of any deferred amounts. During Fiscal 2014, Messrs.2016, Mr. Askren and Determan werewas the only Named Executive OfficersOfficer who participated in the Deferred Plan.
PProfit-Sharing Retirement Plan.rofit-Sharing Retirement Plan
Each Named Executive OfficerOfficer participates in the HNI Corporation Profit-Sharing Retirement Plan (the "Retirement Plan"“Retirement Plan”). The Retirement Plan is, a defined contribution plan including both pre- and after-tax member contributions as well as various employer contributions and is generally available to all members. Members are eligible to make voluntary (pre- and/or after-tax) contributions immediately upon hire. One year of service is typically required to be eligible for employer contributions. Each Named Executive OfficerOfficer is eligible for employer contributions. These contributions are reflected in the "All“All Other Compensation" ColumnCompensation” column of the Summary Compensation Table.
Each Named Executive Officer participates in andOfficer is eligible for distributions under the HNI Corporation Cash Profit-Sharing Plan (the "Cash Profit-Sharing Plan"). The Cash Profit-Sharing Plan consists ofCorporation’s cash profit-sharing calculated and generallyprogram. Cash profit-sharing is paid twice per year. The actual amount of the profit-sharing benefit paid is based uponon the profitability (net profit) of each respective operating unit for those members employed by an operating unit or consolidated adjusted net profit of the Corporation for those members employed directly by the Corporation. Members (who are not members of a bargaining unit)member’s business unit. Members are generally eligible to participate after completion of one year of continuous service. To be eligible for distribution, a member must be:
Change in Control,Control, Post-Employment and Other Events
NoThe Named Executive Officer has an employment contract with the Corporation, consistent with the Corporation's general practice. CertainOfficers and a few other key executives including the Named Executive Officers, have entered into a Change In Control Employment Agreement ("(“CIC Agreement"Agreement”) with the Corporation. The CIC Agreement is designed to assure continuity of executive management during a threatened takeover and ensure executive management is able to objectively evaluate any CIC proposal and act in the best interests of shareholders during a possible acquisition, merger or combination. Benefits payable under the CIC Agreements have a "double trigger," which means payments under the CIC Agreements are triggered only by termination of the executive by the Corporation other than for cause or disability or by the executive terminating employment for good reason. Please see "Potential Payments Upon Termination or Change in Control" for a discussion of the terms of the CIC Agreements.
PePerquisites.rquisites
Consistent with its longstanding culture, the Corporation does not provide executives with any special or unique perquisites, for example company cars or club memberships. Relocation assistance is provided to executives under a relocation program broadly available for employeesmembers transferred within the Corporation and newly hirednewly-hired professional employees.members. Executives participate in the same health, retirement, profit sharing, disability and life insurance programs and member stock purchase plan as other members. The dollar value of Corporation-paid life insurance premiums under the HNI Corporation Group Term Life Insurance Plan ("Life Insurance Plan") for each Named Executive Officer is reflected in the "All Other Compensation" Column of the Summary Compensation Table.
Anti-Hedging Policy.Policy
The Corporation's Insider Trading PolicyCorporation’s policy prohibits officersofficers (including the Named Executive Officers)Officers) or Directors from hedging their ownership of the Corporation'sCorporation’s Common Stock (including prepaid variable forwards, equity swaps, collars and exchange funds), engaging in short sales or purchasing put or call options, pledging their shares of the Corporation'sCorporation’s Common Stock, holding themshares in a marginmargin account or engaging in short-term transactions with shares of the Corporation Common Stock.transactions. This policy is designed to ensure alignment of officersofficers and Directors with shareholders and requires them to bear the full economic risk of share ownership. Each Named Executive Officer is in compliance with the Corporation's anti-hedging policy.
Executive Stock Ownership Guideline. Guideline
The Board has adopted an Executive Stock Ownership Guideline based on the belief key executives should have a significant ownership interest in the Corporation'sCorporation’s stock. Under the guideline, ownership levels are provided for executives to acquire and hold a recommended ownership interest in the Corporation'sCorporation’s stock based on their position and compensation level. The guideline is intended to align the interests of key executives with shareholder interests. The guideline ownership levels in effect for 2016 are shown below:
| Position | $ Value of Shares | |
| Chairman of the Board, President and CEO | 5.0 x Base Salary | |
Operating Company (Unit) Presidents, Chief Financial Officer, and Executive and Senior Vice Presidents | 3.0 x Base Salary | |
| Other Officers | 2.0 x Base Salary |
Executives are encouraged to reach their respective stock ownership level within five years of the date the individual assumes an executive position covered by the guideline. The Compensation Committee annually reviews each executive'sexecutive’s progress toward the goal. The Compensation Committee can specify a percentage of the executive'sexecutive’s annual incentive compensation be paid in shares of Common Stock if it determines an executive is not achieving appropriate progress toward the goal.
Executive Compensation Clawback. Clawback
If financial results are significantly restated due to fraud or intentional misconduct, the Board will review any performance-based compensation paid to executive officersofficers who are found to be personally responsible for the fraud or intentional misconduct leading to the restatement and may,may, to the extent permitted by law,law, seek recoupmentrepayment of amounts paid in excess of the amounts based on the restated financial results.
TTaxax Deductibility of Executive Compensation.Compensation
The Corporation typically seeks to maximize the tax deductibility of components of executive compensation where appropriate. Section 162(m) of the Code limits the ability of public companies to deduct compensation in excess of $1,000,000 paid annually to the chief executive officerofficer and the three other most highly compensated executive officers,officers, not including the chief financial officer.officer. There are exceptions to this limit, including compensation qualified as "performance-based."“performance-based.” The portion of the Annual Incentive Plan award linked to financial performance and any Long-Term Performance Plan and stock option awards complied with the exception to Section 162(m) and are not considered in determining the $1,000,000 limit. In Fiscal 2014, portions2016, a portion of Mr. Askren's salary and otherMr. Askren’s compensation exceeded the Section 162(m) limit and werewas not deductible by the Corporation.
Impact of Prior Compensation in Setting Elements of Compensation
Prior compensation of the Named Executive OfficersOfficers does not generally impact how elements of current compensation are set. The independent Directors and the Compensation Committee believe the competitive environment mandates current total compensation be sufficientsufficient to attract, motivate and retain top management. The Compensation Committee analyzes outstanding equity grants, outstanding Annual Incentive Plan and Long-Term Performance Plan awards and ownership of Common Stock for each Named Executive OfficerOfficer to ensure future stock equity grants, Annual Incentive Plan and Long-Term Performance Plan awards, CIC Agreements and other benefits provide appropriate and relevant incentives to the executives. Based on the current analysis, the Compensation Committee believes prior compensation will not impact the ongoing effectivenesseffectiveness of the compensation objectives.
Say on Pay VoteVote Results
At the 20142016 Annual Meeting. Approximately 98%Meeting, approximately 96% of the advisory votes cast by shareholders were in favor of the compensation program for Named Executive Officers described in the Corporation's proxy statement for the 2014 Annual Meeting.Officers. The Compensation Committee reviewed itscarefully considered this vote in setting the 2016 compensation of Named Executive Officer compensation decisions with respect to Fiscal 2014 in light of this substantial shareholder support and further considered the results of the advisory vote when making Named Executive Officer compensation decisions in early Fiscal 2014. Given the significant shareholder support voiced through the advisory vote to approve Named Executive Officer compensation, theOfficers. The Compensation Committee continuedcontinues to apply substantially the same principles in determining the amounts and structure of executive compensation and renewed its commitment to paying for performance.
TableCompensation Committee Interlocks and Insider Participation
Members of Contentsthe Compensation Committee have never been officers or members of the Corporation, and have no relationship with the Corporation other than as Directors and stockholders. During 2016, no executive officer of the Corporation served as a director, or as a member of any compensation committee, of any other entity that had an executive officer who served on the Board or Compensation Committee.
The Compensation Committee has reviewed and discussed the CD&A, which begins on page 17 of this Proxy Statement, with management, and based on review and discussions, the Compensation Committee recommended to the Board the CD&A be included in this Proxy Statement.
HUMAN RESOURCES AND COMPENSATIONCOMPENSATION COMMITTEE
RonaldV.Waters, III, Chairperson
Mary A. Bell
Miguel M. Calado
The table below shows the compensation awarded to, earned by or paid to each of the Named Executive OfficersOfficers for Fiscal 2014, Fiscal 20132016, 2015 and Fiscal 2012.2014. The Corporation does not have employment agreements with any of its executives. While employed, executives are entitled to base salary, participation in the executive compensation programs identified in the tables below and discussed in the CD&A and other benefits common to all members. The performance-based conditions associated with Long-Term Performance Plan and Annual Incentive Plan awards as well as salary and bonus in proportion to total compensation are discussed in detail throughout the CD&A, which begins on page 17 of this Proxy Statement.
| Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) (3) | All Other Compensation ($) (4) | Total ($) |
| Stan A. Askren | 2016 | 1,130,011 | 14,019 | 2,300,226 | 2,105,993 | 359,542 | 5,909,791 |
| Chairman, President and | 2015 | 1,082,510 | 11,422 | 1,990,903 | 2,452,680 | 345,363 | 5,882,878 |
Chief Executive Officer, HNI Corporation | 2014 | 1,050,612 | 9,841 | 1,758,450 | 2,404,414 | 230,722 | 5,454,039 |
| Kurt A. Tjaden | 2016 | 430,064 | 14,019 | 428,943 | 491,983 | 111,399 | 1,476,408 |
| Former Chief Financial Officer. Current SVP, HNI | 2015 | 413,524 | 11,422 | 373,041 | 546,424 | 99,256 | 1,443,667 |
| Corporation; President, HNI International | 2014 | 405,149 | 9,841 | 327,909 | 560,448 | 73,753 | 1,377,101 |
| Jerald K. Dittmer Executive Vice President, | 2016 | 489,441 | 13,727 | 642,416 | 748,923 | 134,595 | 2,029,102 |
| HNI Corporation; | 2015 | 473,007 | 11,965 | 489,331 | 721,323 | 115,273 | 1,810,899 |
| President, The HON Company | 2014 | 463,654 | 11,180 | 430,120 | 514,235 | 101,172 | 1,520,361 |
| Jeffrey D. Lorenger Executive Vice President, | 2016 | 464,898 | 9,792 | 630,893 | 465,804 | 104,493 | 1,675,880 |
| HNI Corporation; President, HNI Contract | 2015 | 444,550 | 8,295 | 477,800 | 669,506 | 85,706 | 1,685,857 |
| Furniture Group | 2014 | 425,347 | 8,385 | 415,186 | 520,953 | 67,022 | 1,436,892 |
| Marco V. Molinari Former Executive Vice | 2016 | 414,447 | 14,019 | 413,674 | 486,665 | 83,535 | 1,412,340 |
| President, HNI Corporation; | 2015 | 404,758 | 11,422 | 361,509 | 389,085 | 65,696 | 1,232,470 |
| President, HNI International | 2014 | 398,670 | 9,841 | 320,070 | 259,001 | 20,933 | 1,008,515 |
Notes
| (1) | The amounts in this column reflect the payments of cash profit-sharing during calendar years |
| (2) |
| The amounts in this column reflect the aggregate grant date fair value of stock options granted in |
(3) | The amounts in this column include annual incentive compensation awards earned in |
| The amounts in this column include the |
The table below shows the grants of plan-based awards to the Named Executive Officers during Fiscal 2014,2016, including Performance Plan awards, Incentive Plan awards and stock options granted under the Stock Plan.Plan, Long-Term Performance Plan awards, and Incentive Plan awards. The aggregate grant date fair value of stock option awards are disclosed on a grant-by-grant basis in the table below. For additional information on the Annual Incentive Plan and the Stock Plan, see "“Annual Incentive Compensation"Incentive” on page 2321 and "“Long-Term Incentive Compensation"Incentive” on page 2624 of this Proxy Statement.
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | 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 ($) | ||
Threshold ($) | Target ($) | Maximum ($) | |||||
| Stan A. Askren | |||||||
| Stock Options | 2/12/2014 | 167,791 | 34.78 | 1,758,450 | |||
2014-2016 Performance Plan | 2/12/2014 | 196,875 | 787,500 | 1,575,000 | |||
| Incentive Plan | 2/12/2014 | 378,000 | 1,260,000 | 2,142,000 | |||
| Kurt A. Tjaden | |||||||
| Stock Options | 2/12/2014 | 31,289 | 34.78 | 327,909 | |||
2014-2016 Performance Plan | 2/12/2014 | 36,712 | 146,848 | 293,696 | |||
| Incentive Plan | 2/12/2014 | 91,633 | 305,444 | 519,255 | |||
| Bradley D. Determan | |||||||
| Stock Options | 2/12/2014 | 31,759 | 34.78 | 332,834 | |||
2014-2016 Performance Plan | 2/12/2014 | 37,265 | 149,058 | 298,116 | |||
| Incentive Plan | 2/12/2014 | 93,012 | 310,040 | 527,068 | |||
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | ||
Threshold ($) | Target ($) | Maximum ($) | |||||
| Jerald K. Dittmer | |||||||
| Stock Options | 2/12/2014 | 41,042 | 34.78 | 430,120 | |||
2014-2016 Performance Plan | 2/12/2014 | 48,156 | 192,625 | 385,250 | |||
| Incentive Plan | 2/12/2014 | 103,027 | 343,422 | 583,817 | |||
| Jeffrey D. Lorenger | |||||||
| Stock Options | 2/12/2014 | 39,617 | 34.78 | 415,186 | |||
2014-2016 Performance Plan | 2/12/2014 | 46,485 | 185,938 | 371,876 | |||
| Incentive Plan | 2/12/2014 | 95,625 | 318,750 | 541,875 | |||
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards | |||||||
| Name | Grant Date | Threshold ($) (1) | Target ($) | Maximum ($) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) |
| Stan A. Askren | |||||||
| Stock Options | 2/17/2016 | 262,883 | 32.03 | 2,300,226 | |||
| 2016-2018 Long Term Performance Plan | 212,935 | 851,740 | 1,703,480 | ||||
| Annual Incentive Plan | 381,580 | 1,362,785 | 2,521,152 | ||||
| Kurt A. Tjaden | |||||||
| Stock Options | 2/17/2016 | 49,022 | 32.03 | 428,943 | |||
| 2016-2018 Long Term Performance Plan | 39,708 | 158,831 | 317,662 | ||||
| Annual Incentive Plan | 92,503 | 330,368 | 611,181 | ||||
| Jerald K. Dittmer | |||||||
| Stock Options | 2/17/2016 | 73,419 | 32.03 | 642,416 | |||
| 2016-2018 Long Term Performance Plan | 59,469 | 237,877 | 475,754 | ||||
| Annual Incentive Plan | 103,305 | 368,947 | 682,552 | ||||
| Jeffrey D. Lorenger | |||||||
| Stock Options | 2/17/2016 | 72,102 | 32.03 | 630,893 | |||
| 2016-2018 Long Term Performance Plan | 58,403 | 233,610 | 467,220 | ||||
| Annual Incentive Plan | 98,116 | 350,415 | 648,268 | ||||
| Marco V. Molinari | |||||||
| Stock Options | 2/17/2016 | 47,277 | 32.03 | 413,674 | |||
| 2016-2018 Long Term Performance Plan | 38,295 | 153,179 | 306,358 | ||||
| Annual Incentive Plan | 87,496 | 312,485 | 578,097 | ||||
Notes
| (1) |
31
The following table shows the Named Executive Officers'Officers’ outstanding equity awards as of the end of Fiscal 2014.2016. All outstanding stock option awards reported in this table cliff-vest four years and expire ten years after the date of grant.
| Name | Option Awards | |||
Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) (2) | Option Expiration Date | |
| Stan A. Askren | 40,712 | 58.06 | 2/15/16 | |
| 58,676 | 48.66 | 2/14/17 | ||
| 63,434 | 31.69 | 2/13/18 | ||
| 112,644 | 10.36 | 2/23/19 | ||
| 226,909 | 23.99 | 2/17/20 | ||
| 140,842 | 31.98 | 2/16/21 | ||
| 218,364 | 25.46 | 2/15/22 | ||
| 166,166 | 31.79 | 2/13/23 | ||
| 167,791 | 34.78 | 2/12/24 | ||
| Kurt A. Tjaden | 12,931 | 10.36 | 2/23/19 | |
| 48,000 | 23.99 | 2/17/20 | ||
| 30,412 | 31.98 | 2/16/21 | ||
| 47,151 | 25.46 | 2/15/22 | ||
| 35,709 | 31.79 | 2/13/23 | ||
| 31,289 | 34.78 | 2/12/24 | ||
| Bradley D. Determan | 8,320 | 58.06 | 2/15/16 | |
| 11,876 | 48.66 | 2/14/17 | ||
| 30,871 | 31.98 | 2/16/21 | ||
| 48,092 | 25.46 | 2/15/22 | ||
| 36,246 | 31.79 | 2/13/23 | ||
| 31,759 | 34.78 | 2/12/24 | ||
| Option Awards | ||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date |
| Stan A. Askren | 112,644 | 10.36 | 2/23/19 | |
| 226,909 | 23.99 | 2/17/20 | ||
| 140,842 | 31.98 | 2/16/21 | ||
| 218,364 | 25.46 | 2/15/22 | ||
| 166,166 | 31.79 | 2/13/23 | ||
| 167,791 | 34.78 | 2/12/24 | ||
| 107,908 | 51.54 | 2/18/25 | ||
| 262,883 | 32.03 | 2/17/26 | ||
| Kurt A. Tjaden | 48,000 | 23.99 | 2/17/20 | |
| 30,412 | 31.98 | 2/16/21 | ||
| 47,151 | 25.46 | 2/15/22 | ||
| 35,709 | 31.79 | 2/13/23 | ||
| 31,289 | 34.78 | 2/12/24 | ||
| 20,219 | 51.54 | 2/18/25 | ||
| 49,022 | 32.03 | 2/17/26 | ||
| Jerald K. Dittmer | 25,750 | 31.98 | 2/16/21 | |
| 53,143 | 25.46 | 2/15/22 | ||
| 39,956 | 31.79 | 2/13/23 | ||
| 41,042 | 34.78 | 2/12/24 | ||
| 26,522 | 51.54 | 2/18/25 | ||
| 73,419 | 32.03 | 2/17/26 | ||
| Jeffrey D. Lorenger | 12,182 | 23.99 | 2/17/20 | |
| 26,725 | 31.98 | 2/16/21 | ||
| 44,067 | 25.46 | 2/15/22 | ||
| 58,540 | 31.79 | 2/13/23 | ||
| 39,617 | 34.78 | 2/12/24 | ||
| 25,897 | 51.54 | 2/18/25 | ||
| 72,102 | 32.03 | 2/17/26 | ||
| Marco V. Molinari | 60,024 | 31.79 | 2/13/23 | |
| 30,541 | 34.78 | 2/12/24 | ||
| 19,594 | 51.54 | 2/18/25 | ||
| 47,277 | 32.03 | 2/17/26 | ||
Table of ContentsNotes
| Name | Option Awards | |||
Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) (2) | Option Expiration Date | |
| Jerald K. Dittmer | 7,125 | 58.06 | 2/15/16 | |
| 10,463 | 48.66 | 2/14/17 | ||
| 88,000 | 23.99 | 2/17/20 | ||
| 33,950 | 31.98 | 2/16/21 | ||
| 53,143 | 25.46 | 2/15/22 | ||
| 39,956 | 31.79 | 2/13/23 | ||
| 41,042 | 34.78 | 2/12/24 | ||
| Jeffrey D. Lorenger | 2,957 | 58.06 | 2/15/16 | |
| 6,483 | 48.66 | 2/14/17 | ||
| 42,182 | 23.99 | 2/17/20 | ||
| 26,725 | 31.98 | 2/16/21 | ||
| 44,067 | 25.46 | 2/15/22 | ||
| 58,540 | 31.79 | 2/13/23 | ||
| 39,617 | 34.78 | 2/12/24 | ||
| (1) | All stock options cliff-vest four years after the grant date. |
The following table shows information concerning Named Executive Officers'Officers’ exercise of stock options during Fiscal 2014.
| Option Awards | ||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) |
| Stan A. Askren | 118,100 | 1,202,255 |
| Kurt A. Tjaden | 41,923 | 1,250,198 |
| Bradley D. Determan | 55,200 | 707,530 |
| Jerald K. Dittmer | 32,458 | 324,085 |
| Jeffrey D. Lorenger | 23,644 | 405,292 |
| Option Awards | ||
Name
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) |
| Stan A. Askren | 58,676 | 213,510 |
| Kurt A. Tjaden | 0 | 0 |
| Jerald K. Dittmer | 106,663 | 2,762,548 |
| Jeffrey D. Lorenger | 36,483 | 869,138 |
| Marco V. Molinari | 46,360 | 820,145 |
Name | Date of Exercise | Number of Shares Acquired on Exercise (#) | Option Exercise Price ($/Sh) | Sold or Retained Shares | Sale or Closing Price on Date of Exercise ($/Sh) | Value Realized on Exercise ($) | ||
| Stan A. Askren | 10/31/2014 | 29,987 | 42.66 | Sold | 47.06 | 131,820 | ||
| 11/3/2014 | 2,000 | 42.66 | Sold | 47.01 | 8,691 | |||
| 11/4/2014 | 13,200 | 42.66 | Sold | 46.52 | 50,906 | |||
| 11/5/2014 | 9,913 | 42.66 | Sold | 46.45 | 37,588 | |||
| 11/13/2014 | 37,716 | 31.69 | Sold | 47.23 | 586,152 | |||
| 11/14/2014 | 25,284 | 31.69 | Sold | 47.00 | 387,098 | |||
(1) This column is calculated by multiplying the number of Contentsshares acquired by the difference between the actual sale price on the date of exercise (or if the shares were retained by the Named Executive Officer, the closing price of a share of Common Stock on the date of exercise) and the exercise price of the stock options. Messrs. Askren, Dittmer, Lorenger, and Molinari exercised the following options in 2016:
| Name | Date of Exercise | Number of Shares Acquired on Exercise (#) | Option Exercise Price ($/Sh) | Sold or Retained Shares | Sale or Closing Price on Date of Exercise ($/Sh)* | Value Realized on Exercise ($) |
| Stan A. Askren | 7/29/2016 | 58,676 | 48.66 | Sold | 52.30 | 213,510 |
| Jerald K. Dittmer | 7/26/2016 | 10,463 | 48.66 | Sold | 51.96 | 34,518 |
| 7/26/2016 | 36,364 | 23.99 | Sold | 52.03 | 1,019,625 | |
| 8/9/2016 | 1,404 | 23.99 | Sold | 53.50 | 41,432 | |
| 8/11/2016 | 4,422 | 23.99 | Sold | 53.27 | 129,467 | |
| 8/12/2016 | 1,460 | 23.99 | Sold | 53.26 | 42,728 | |
| 8/15/2016 | 42,957 | 23.99 | Sold | 53.27 | 1,257,923 | |
| 8/16/2016 | 1,393 | 23.99 | Sold | 53.25 | 40,759 | |
| 8/29/2016 | 8,200 | 31.98 | Sold | 55.89 | 196,096 | |
| Jeffrey D. Lorenger | 07/26/2016 | 6,483 | 48.66 | Sold | 52.01 | 21,716 |
| 07/26/2016 | 30,000 | 23.99 | Sold | 52.24 | 847,422 | |
| Marco V. Molinari | 05/23/2016 | 46,360 | 25.46 | Sold | 43.15 | 820,145 |
| *Rounded to nearest penny. | ||||||
Name | Date of Exercise | Number of Shares Acquired on Exercise (#) | Option Exercise Price ($/Sh) | Sold or Retained Shares | Sale or Closing Price on Date of Exercise ($/Sh) | Value Realized on Exercise ($) | ||
| Kurt A. Tjaden | 5/27/2014 | 5,000 | 10.36 | Sold | 37.86 | 137,487 | ||
| 11/17/2014 | 36,923 | 17.01 | Sold | 47.15 | 1,112,712 | |||
| Bradley D. Determan | 3/7/2014 | 24,000 | 23.99 | Sold | 36.20 | 293,126 | ||
| 10/21/2014 | 24,000 | 23.99 | Sold | 40.75 | 402,206 | |||
| 10/29/2014 | 7,200 | 42.66 | Sold | 44.35 | 12,197 | |||
| Jerald K. Dittmer | 10/28/2014 | 9,200 | 42.66 | Sold | 44.00 | 12,328 | ||
| 10/30/2014 | 23,258 | 31.69 | Sold | 45.09 | 311,757 | |||
| Jeffrey D. Lorenger | 10/29/2014 | 3,800 | 42.66 | Sold | 44.47 | 6,881 | ||
| 10/30/2014 | 14,622 | 31.69 | Sold | 45.99 | 209,140 | |||
| 10/31/2014 | 5,000 | 10.36 | Sold | 46.60 | 181,211 | |||
| 10/31/2014 | 222 | 10.36 | Sold | 46.67 | 8,061 | |||
The Deferred Plan allows executives to defer certain compensation to a cash account earning interest at a rate set annually at one percent1% above the prime interest rate or to the Corporation'sCorporation’s notional stock account in the form of nonvoting share units earning dividends distributed to shareholders which are then automatically reinvested in additional nonvoting share units. The only Named Executive OfficersOfficer currently participating in the Deferred Plan are Messrs. Askren and Determan.is Mr. Askren. Mr. Askren deferred into the Corporation'sCorporation’s notional stock account the after-tax value of his 20132015 SIP award, which was granted in February 2014,2016, totaling $124,957$315,165 and is reflected in the table below. The value of Mr. Askren's 2013Askren’s 2015 SIP award, before taxes, was $130,599.$322,749. Mr. Askren'sAskren’s balance in the Deferred Plan as of the end of Fiscal 20142016 was 47,69063,604 nonvoting share units. Unless distributed earlier due to the occurrence of certain triggering events as described in the Deferred Plan (including death, disability or change in control),: (i) a portion of this balance will not be distributed untilupon separation from service, and (ii) the earlierremainder will be distributed the later of (A) January 31, 20162021 for a portion of the balance, January 31, 20172022 for anothera portion of the balance, and January 31, 20182023 for anothera portion of the balance, andor (B) the date Mr. Askren is no longer employed by the Corporation with respect to the entire remaining balance.
For additional information on the Deferred Plan, see "Retirement“Additional Compensation Programs and Other Compensation PlansPolicies – Deferred Compensation Plan"Plan” on page 3027 of this Proxy Statement.
| Name | Executive Contributions in Last FY ($) (1) | Aggregate Earnings in Last FY ($) (2) | Aggregate Balance at Last FYE ($) (3) |
| Stan A. Askren | 124,957 | 523,384 | 2,408,345 |
| Kurt A. Tjaden | 0 | 0 | 0 |
| Bradley D. Determan | 552,459 | 18,887 | 1,058,119 |
| Jerald K. Dittmer | 0 | 0 | 0 |
| Jeffrey D. Lorenger | 0 | 0 | 0 |
| Name | Executive Contributions in Last FY ($) (1) | Aggregate Earnings in Last FY ($) (2) | Aggregate Balance at Last FYE ($) (3) |
| Stan A. Askren | 315,165 | 1,117,537 | 3,556,736 |
| Kurt A. Tjaden | 0 | 0 | 0 |
| Jerald K. Dittmer | 0 | 0 | 0 |
| Jeffrey D. Lorenger | 0 | 0 | 0 |
| Marco V. Molinari | 0 | 0 | 0 |
Notes
| (1) | The amount of Mr. |
| (2) | The reported dollar value is the sum of (i) share price appreciation (or depreciation) in the account balance during |
| (3) | The reported dollar value is calculated by multiplying |
Retirement, death, disability and change in control ("CIC"(“CIC”) events trigger the payment of compensation to the Named Executive Officers not available to all salaried members.
Change in Control Employment Agreements. A limited number of executives, including the The Named Executive Officers and a few other executives have entered into a CIC AgreementChange in Control Employment Agreements with the Corporation. The CIC Agreement isAgreements are designed to assure the continuity of executive management during a threatened takeover and ensure executive management is able tocan objectively evaluate any CIC proposal and act in the best interests of shareholders during a possible acquisition, merger or combination.shareholders. The agreement is designed asCIC Agreements are part of a competitive compensation package thereby aidingto attract and retain top-quality executives.
Under the CIC Agreements, executives are eligible for severance benefits in attracting and retaining top-quality executives. The descriptionthe event there is a “double trigger;” meaning both a CIC of the amended formCorporation and termination of agreement below is qualified in its entiretyemployment (for any reason other than cause or disability or by the actual form ofexecutive for good reason). The termination must occur (i) during the two-years following a CIC Agreement, attached as Exhibit 10.1or (ii) prior to the Corporation's Current Report on Form 8-K filed November 16, 2006, as amended by Amendment No. 1, attached as Exhibit 10.1CIC where the executive’s termination is directly related to the Corporation's Current Report on Form 8-K filed August 10, 2007.
| ● | a lump-sum severance payment equal to two times (three times for the CEO) the sum of (i) the executive’s annual base salary and (ii) the average of the executive’s annual incentive compensation awards for the prior two years; |
| ● | annual salary through the date of termination and a bonus equal to the average of the executive’s annual incentive compensation awards for the prior two years; |
| ● | continuation of certain medical and dental benefits for up to 18 months and group life insurance benefits for up to two years; and |
| ● | a lump-sum payment for the cost of health and dental coverage for an additional six months and a lump-sum payment for two years of continued participation in disability benefit plans. |
In exchange for the CIC severance benefits, each executive is subject to confidentiality and non-competition provisions for one year from the date of termination.
The CIC Agreement defines a CIC as having occurred:
| ● | when a third person or entity becomes the beneficial owner of |
| ● | when more than one-third of the Board is composed of persons not recommended by at least three-fourths of the incumbent Board; |
| ● | upon the occurrence of certain business combinations involving the Corporation; or |
| ● | upon approval by shareholders of a complete liquidation or dissolution. |
Cause is defined as an act or acts of dishonesty on the executive's part resulting in substantial personal enrichment at the Corporation'sCorporation’s expense or repeated willful or deliberate violations by the executive of obligations under the agreement, which are demonstrably willful and deliberate on the executive's part and resultedCIC Agreement resulting in material injury to the Corporation.
Good reason is defined as:
| a substantially |
| ● | the Corporation’s failure to comply with |
| ● | a |
| ● | a purported termination of the |
| a successor company |
Depending on the lengthform of employment duringCIC Agreement to which a Named Executive Officer is a party, the year in which termination occurs) minus any incentive compensation amount already paidCorporation may be obligated to “gross-up” the executive with respect to the fiscal year in which the CIC occurs.
In exchange2016, the Corporation adopted a new form of CIC Agreement that does not include tax gross-up provisions. This is the only material difference between the new CIC Agreement and the prior agreement. The new form of CIC Agreement will be used for receipt of the severance payment, salary, bonus and benefits under the agreement as described above, the executive is prohibited, for a period of one year from the date of termination, fromexecutives entering into any relationship with any enterprise, business or division thereof (other thanCIC Agreements going forward. Marshall H. Bridges entered into the Corporation), engaged in the same business in those states within the United States in which the Corporation, at the time of termination of employment, conducts business and which has annual sales of at least $10,000,000. In addition, the executive shall not, without the Corporation's prior written consent, communicate or divulge any confidential information, knowledge or data relating to the Corporation or any of its affiliated companies to anyone other than the Corporation or its designees.
The Compensation Committee does not view the CIC Agreements as an element of current compensation, and the agreements do not necessarily affect the Compensation Committee'sCommittee’s annual decisions with respect to the compensation elements of the executive compensation program. The Compensation Committee receives and reviews information pertaining to compensation payable to the Named Executive Officers upon a CIC.
The description of the CIC including information contained on page 38Agreements is qualified in its entirety by the original form of this Proxy Statement under the heading "Potential Payments Upon Termination or Change in Control."
Other Compensation Triggered by a Change in Control Event. Under the Stock Plan, upon a CIC, vesting is accelerated for each outstanding RSU award is immediately vested and stock option is immediately exercisable in full and remains exercisable for the remaining term of the option. Under both the Annual Incentive Plan and the Long-Term Performance Plan, the Board values each outstanding Incentive Plan and Performance Plan award prior to the effective date of a CIC and the values are payable without proration within 30 days of the date of a CIC. The foregoing payments occurring on or after a CIC are not conditioned on termination of employment.
The following tables quantify compensation payable to the Named Executive Officers upon a CIC. The tables include only compensation items not available to all salaried members and assume the event occurred on December 30, 2016. The “Total” column in each of the following tables does not include deferred compensation, which may be payable sooner than the original election date. For a discussion of the Corporation’s obligations to the Named Executive Officers under the Deferred Plan, see theNonqualified Deferred Compensation for 2016 Table above.
Value in Event of Involuntary Termination or Voluntary Termination for Good Reason Following a Change in Control
| Name | Cash Severance Under CIC Agreement ($) (1) | Additional Benefits Under CIC Agreement ($) (2) | Annual Incentive Plan Acceleration ($) (3) | Long Term Performance Plan Acceleration ($) (4) | Stock Options Acceleration ($) (5) | Excise Tax Gross-Up Under CIC Agreement ($) (6) | Total ($) |
| Stan A. Askren | 8,720,324 | 56,091 | 1,774,345 | 1,186,480 | 14,450,549 | 13,430,773 | 39,618,562 |
| Kurt A. Tjaden | 1,741,495 | 56,091 | 430,139 | 221,535 | 2,810,050 | 2,263,038 | 7,522,348 |
| Jerald K. Dittmer | 1,914,992 | 55,228 | 658,940 | 300,111 | 3,738,100 | 3,117,061 | 9,784,432 |
| Jeffrey D. Lorenger | 1,920,270 | 52,160 | 377,747 | 291,851 | 4,125,245 | 3,397,003 | 10,164,276 |
| Marco V. Molinari | 1,241,493 | 56,091 | 426,855 | 215,225 | 3,340,767 | 2,277,091 | 7,557,522 |
Notes
| (1) | Under the CIC Agreements for each Named Executive Officer, the amounts in this column include the following: (i) an amount equal to two times (three times for Mr. Askren) the sum of (a) the executive’s annual base salary and (b) the average of the executive’s annual incentive compensation |
| (2) | Represents the value of the following benefits provided following termination of employment under the CIC Agreements for each Named Executive Officer: medical and dental benefits for 18 months, group life insurance benefits for 24 months, and the value of the Corporation’s required contributions to the Retirement Plan. |
| (3) | Represents the value of the annual incentive award earned for 2016, which the Named Executive Officer would be entitled to receive under the Annual Incentive Plan if he remained employed by the Corporation on the last day of 2016. |
| (4) | Represents the estimated 2014-2016 Plan, 2015-2017 Plan, and 2016-2018 Plan award payable. This amount has been based on the following economic profit assumptions (“Economic Profit Assumptions”). For the 2014-2016 Plan: (i) 35% of the targeted amount for 2014; (ii) 162% of the targeted amount for 2015; and (iii) 29% of the targeted amount for 2016. Amount payable accounts for employment during the entire 36-month performance period. No amount would be payable until the first quarter of 2017. For the 2015-2017 Plan: (i) 76% of the targeted amount for 2015; (ii) 0% of the targeted amount for 2016 ; and (iii) 100% of the targeted amount for 2017. The amount payable based on these assumptions has been prorated to account for employment during 24 months of the 36-month performance period. No amount would be payable until the first quarter of 2018. For the 2016-2018 Plan: (i) 90% of the targeted amount for 2016; (ii) 100% of the targeted amount for 2017; and (iii) 100% of the targeted amount for 2018. Amount payable has been prorated to account for employment during 12 months of the 36-month performance period. No amount would be payable until the first quarter of 2019. Amounts included for the Long-Term Performance Plan are estimates and are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Due to the number of factors, the actual amounts we pay or distribute under the Long-Term Performance Plan may differ materially. Factors affecting these amounts include the financial performance of the Corporation during 2017, 2018 and 2019 and the achievement of economic profit goals. |
| (5) | Represents the value of accelerating the vesting of stock options not otherwise vested in accordance with the Stock Plan. These options will remain exercisable until the expiration date established at the time of award. |
| (6) | Represents the payment to “gross-up” the executive’s compensation for any excise tax and for any federal, state and local taxes applicable to the excise tax “gross-up.” |
Value in Event of Change in Control with No Employment Termination
| Name | Cash Payment Under CIC Agreement ($) | Total Value of Benefits Under CIC Agreement ($) | Annual Incentive Plan Acceleration ($) (1) | Long Term Performance Plan Acceleration ($) (2) | Stock Option Acceleration ($) (3) | Total ($) |
| Stan A. Askren | 0 | 0 | 2,058,840 | 1,186,480 | 14,450,549 | 17,695,869 |
| Kurt A. Tjaden | 0 | 0 | 488,710 | 221,535 | 2,810,050 | 3,520,295 |
| Jerald K. Dittmer | 0 | 0 | 658,940 | 300,111 | 3,738,100 | 4,697,151 |
| Jeffrey D. Lorenger | 0 | 0 | 449,268 | 291,851 | 4,125,245 | 4,866,364 |
| Marco V. Molinari | 0 | 0 | 426,855 | 215,225 | 3,340,767 | 3,982,847 |
Notes
| (1) | Represents the higher of the value of the annual incentive award earned for 2016, or paid in respect to the three full fiscal years immediately prior to the CIC effective date. |
| (2) | Represents the estimated 2014-2016 Plan, 2015-2017 Plan, and 2016-2018 Plan award payable. See Economic Profit Assumptions in footnote 4 of the table titledValue in Event of Involuntary Termination or Voluntary Termination for Good Reason Following a Change in Controlon Page 35 of this Proxy Statement. |
| (3) | Represents the value of accelerating the vesting of stock options not otherwise vested in accordance with the Stock Plan. These options will remain exercisable until the expiration date established at the time of award. |
Compensation Triggered By Retirement, Death or Disability. Upon retirement at age 65, or after age 55 with ten years of service, all outstanding Annual Incentive Plan, Long-Term Performance Plan and stock option awards immediately vest. Upon disability or death, all outstanding Annual Incentive Plan, Long-Term Performance Plan, stock option and RSU awards immediately vest. Option holders who terminate employment due to disability may exercise stock options, which fully vest as of the date of disability, until the earlier of the expiration date of the stock option or the second anniversary of the date of disability. The representatives of option holders whose employment is terminated due to death may exercise stock options, which shall fully vest as of the date of death, until the earlier of the expiration date of the stock option or the second anniversary of the date of death. Option holders who terminate employment due to retirement may exercise stock options, which shall fully vest as of the date of retirement, until the earlier of the expiration of the stock option, or the third anniversary of the date of retirement.
In the event of a termination of employment not due to a CIC event, retirement, death or disability, the Named Executive Officers receive only those benefits available to all members. However, the Named Executive Officers may exercise stock options which are vested as of the date of termination until the earlier of the expiration of the stock option or 180 days following the date of termination.
The following tables quantifytable quantifies compensation payable to the Named Executive Officers upon a CIC or the death or disability of the executive. The tables include only compensation items not available to all salaried members and assumein the event occurred on the last business day of Fiscal 2014.death, disability or retirement. Only Mr.Messrs. Askren, Dittmer, wasand Molinari were retirement eligible as of the last business day of Fiscal 2014,2016, so retirement information is provided only for him.them. The "Total" Column in each of the following tables“Total” column does not include deferred compensation, which may be payable sooner than the original election date. For a discussion of the Corporation'sCorporation’s obligations to the Named Executive Officers under the Deferred Plan, see theNonqualified Deferred Compensation for Fiscal 20142016 Table above.
Value in Event of Involuntary TerminationDeath, Disability, or Voluntary Termination for Good Reason Following a Change in Control
| Name | Life Insurance Proceeds ($) (1) | Retirement & Profit Sharing (2) | Annual Incentive Plan Acceleration ($) (3) | Long Term Performance Plan Acceleration ($) (4) | Stock Options Acceleration ($) (5) | Total Value in Event of Death ($) | Total Value in Event of Disability ($) | Total Value in Event of Retirement ($) |
| Stan A. Askren | 150,000 | 27,944 | 1,774,345 | 1,186,480 | 14,450,549 | 17,589,318 | 17,439,318 | 17,439,318 |
| Kurt A. Tjaden | 150,000 | 27,944 | 430,139 | 221,535 | 2,810,050 | 3,639,668 | 3,489,668 | N/A |
| Jerald K. Dittmer | 150,000 | 27,672 | 658,940 | 300,111 | 3,738,100 | 4,874,823 | 4,724,823 | 4,724,823 |
| Jeffrey D. Lorenger | 150,000 | 24,013 | 377,747 | 291,851 | 4,125,245 | 4,968,856 | 4,818,856 | N/A |
| Marco V. Molinari | 150,000 | 27,944 | 426,855 | 215,225 | 3,340,767 | 4,160,791 | 4,010,791 | 4,010,791 |
| Name | Cash Severance Under CIC Agreement ($) (1) | Additional Benefits Under CIC Agreement ($) (2) | Incentive Plan Acceleration ($) (3) | Performance Plan Acceleration ($) (4) | Stock Options Acceleration ($) (5) | Excise Tax Gross-Up Under CIC Agreement ($) (6) | Total ($) |
| Stan Askren | 6,201,632 | 47,550 | 2,058,840 | 1,085,224 | 13,822,869 | 12,052,309 | 35,268,423 |
| Kurt Tjaden | 1,417,326 | 47,550 | 488,710 | 231,681 | 2,903,870 | 2,269,250 | 7,358,387 |
| Brad Determan | 1,762,518 | 43,369 | 489,862 | 263,034 | 2,953,369 | 2,597,570 | 8,109,722 |
| Jerry Dittmer | 1,664,987 | 48,203 | 430,514 | 225,617 | 3,352,212 | 2,577,690 | 8,299,223 |
| Jeff Lorenger | 1,392,593 | 46,196 | 448,226 | 227,805 | 3,316,443 | 2,650,971 | 8,082,235 |
Notes
| Represents the |
| (2) | Represents the value of the |
| (3) | Represents the value of the annual incentive award earned for |
| (4) | Represents the estimated |
| (5) |
Name | Cash Payment Under CIC Agreement ($) | Total Value of Benefits Under CIC Agreement ($) | Incentive Plan Acceleration ($) (1) | Performance Plan Acceleration ($) (2) | Stock Option Acceleration ($) (3) | Total ($) |
| Stan A. Askren | 0 | 0 | 2,058,840 | 1,085,224 | 13,822,869 | 16,966,933 |
| Kurt A. Tjaden | 0 | 0 | 488,710 | 231,681 | 2,903,870 | 3,624,260 |
| Bradley D. Determan | 0 | 0 | 489,862 | 263,034 | 2,953,369 | 3,706,265 |
| Jerald K. Dittmer | 0 | 0 | 430,514 | 225,617 | 3,352,212 | 4,008,342 |
| Jeffrey D. Lorenger | 0 | 0 | 448,226 | 227,805 | 3,316,443 | 3,992,474 |
| Represents the value of accelerating the vesting of stock options not otherwise vested in accordance with the Stock Plan. These options will remain exercisable until |
| Name | Life Insurance Proceeds ($) (1) | Retirement & Profit Sharing (2) | Incentive Plan Acceleration ($) (3) | Performance Plan Acceleration ($) (4) | Stock Options Acceleration ($) (5) | Total ($) |
| Stan A. Askren | 150,000 | 23,777 | 2,058,840 | 1,085,224 | 13,822,869 | 17,140,710 |
| Kurt A. Tjaden | 150,000 | 23,777 | 488,710 | 231,681 | 2,903,870 | 3,798,037 |
| Bradley D. Determan | 150,000 | 28,783 | 489,862 | 263,034 | 2,953,369 | 3,885,048 |
| Jerald K. Dittmer | 150,000 | 25,022 | 430,514 | 225,617 | 3,352,212 | 4,183,365 |
| Jeffrey D. Lorenger | 150,000 | 22,423 | 448,226 | 227,805 | 3,316,443 | 4,164,897 |
| Name | Retirement & Profit Sharing (1) | Incentive Plan Acceleration ($) (2) | Performance Plan Acceleration ($) (3) | Stock Options Acceleration ($) (4) | Total ($) |
| Stan A. Askren | 23,777 | 2,058,840 | 1,085,224 | 13,822,869 | 16,990,710 |
| Kurt A. Tjaden | 23,777 | 488,710 | 231,681 | 2,903,870 | 3,648,037 |
| Bradley D. Determan | 28,783 | 489,862 | 263,034 | 2,953,369 | 3,735,048 |
| Jerald K. Dittmer | 25,022 | 430,514 | 225,617 | 3,352,212 | 4,033,365 |
| Jeffrey D. Lorenger | 22,423 | 448,226 | 227,805 | 3,316,443 | 4,014,897 |
| Name | Retirement & Profit Sharing (1) | Incentive Plan Acceleration ($) (2) | Performance Plan Acceleration ($) (3) | Stock Options Acceleration ($) (4) | Total ($) |
| Jerald K. Dittmer | 25,022 | 430,514 | 225,617 | 3,352,212 | 4,033,365 |
NAMED EXECUTIVE OFFICER COMPENSATION
The Corporation conducts an annual shareholder advisory vote on named executive officer compensation as recommended by the Board, and approved by shareholders. In deciding
We urge shareholders to read the CD&A and other sections of this proxy describing how to vote on this proposal, please consider the following factors as well as the detailed discussion of theour executive compensation program containedoperates. The Compensation Committee and the Board believe the Corporation’s compensation program is effective in long-term shareholder value creation and contributing to the CD&A:
Accordingly, we ask shareholders to vote FOR the following resolution at the Meeting:
“RESOLVED, the shareholders approve, on an advisory basis, the compensation of the Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the CD&A, compensation tables and narrative discussion."
The vote on this proposal is advisory and non-binding and will not overrule any decision bybinding on the Corporation, the Compensation Committee or the Board. TheHowever, the Compensation Committee and the Board value the opinions expressed by our shareholders and will review andcarefully consider the outcome of this vote when making future compensation decisions for the Named Executive Officers.
Required Vote
The affirmative vote of the holders of a majority of the Outstanding Shares voted at the Meeting is required to adopt the resolution. Abstentions and broker non-votes will not be counted for purposes of determining whether this Proposal has received sufficient votes for approval.
Recommendation of the Board
COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. |
DIRECTORPROPOSAL NO. 4 – ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION
We are asking shareholders to vote, on a non-binding, advisory basis, on the frequency of future advisory votes on named executive officer compensation. The Corporation has had annual votes starting with the 2011 annual meeting.
The Board continues to believe an advisory vote on named executive officer compensation occurring every year is most appropriate and recommends shareholders approve an annual retainer of $155,000, of which $62,000 is paid in cash in equal installments of $15,500 at each quarterly Board meeting (prioradvisory vote on named executive officer compensation. Holding an annual advisory vote on named executive officer compensation allows shareholders to the May 6, 2014 Board meeting, the cash retainer was $60,000)provide timely input on our compensation philosophy, policies and $93,000 is paid in the form ofpractices and provides a Common Stock grant issued under the 2007 Equity Plan at the May Board meeting. In Fiscal 2014, each independent Director received:
Shareholders should understand they are not voting “for” or “against” a recommendation of the Audit Committee receives an additional annual retainer of $10,000. The ChairpersonsBoard; rather, shareholders are asked to choose whether future advisory votes on named executive officer compensation should be held every one, two or three years. This vote is advisory and not binding on the Board or the Corporation and the final decision on the frequency of the Compensation Committee and Governance Committee each receive an additional annual retainer of $7,500. Asadvisory vote on named executive compensation remains with the cash portionBoard. The Board values the opinions expressed by our shareholders through their votes and will carefully consider the outcome of the annual retainer for Board service, retainers for committee Chairpersons, Lead Director or Audit Committee service are paid in equal installments at each quarterly Board meeting.
Recommendation of the Corporation. Directors who areBoard
| THE BOARD RECOMMENDS A VOTE TO CONDUCT FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION EVERY YEAR. |
PROPOSAL NO. 5 – APPROVAL OF THE HNI CORPORATION 2017 STOCK-BASED COMPENSATION PLAN
General
On February 15, 2017, the Board adopted the HNI Corporation 2017 Stock-Based Compensation Plan (the “2017 Stock Plan”) for members of the Corporation do not receive additional compensation for service on the Board.
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3) | All Other Compensation ($) (4) | Total ($) |
| Mary H. Bell | 75,500 | 93,000 | -- | 1,991 | 170,491 |
| Miguel M. Calado | 61,500 | 93,000 | -- | 1,991 | 156,491 |
| Cheryl A. Francis | 65,500 | 93,000 | -- | 1,991 | 160,491 |
| James R. Jenkins | 65,500 | 93,000 | 3,316 | 1,991 | 163,807 |
| Dennis J. Martin | 69,000 | 93,000 | -- | 1,991 | 163,991 |
| Larry B. Porcellato | 69,000 | 93,000 | 272 | 1,991 | 164,263 |
| Abbie J. Smith | 69,000 | 93,000 | -- | 1,991 | 163,991 |
| Brian E. Stern | 65,500 | 93,000 | -- | 1,991 | 160,491 |
| Ronald V. Waters, III | 69,000 | 93,000 | 2,314 | 1,991 | 166,305 |
The 2017 Stock Plan permits the Corporation to issue to its members, and to members of which 1,951,198 are available for futureits subsidiaries, including executive officers, stock-based compensation awards in the form of non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), deferred share units, performance share awards, stock grant awards (i.e., bonus stock) and dividend equivalent awards.
Summary of the 2017 Stock Plan
The following is a summary of the 2017 Stock Plan, as proposed to be amended which is qualified in its entirety by reference to the full text of the 2017 Stock Plan. A copy of the full text of the 2017 Stock Plan reflecting the proposed amendment, is included as Appendix AB to the Proxy Statement filed electronically with the SEC on March 23, 2015, a copy of which is available on the Corporation's website at this proxy statement.
www.hnicorp.com, under "Investor Information—Proxy Report."
Administration. A committee (the "Committee"“Stock Plan Committee”) consisting of two or more non-employee Directors,directors, designated by the Board, administers the 2017 Stock Plan. Subject to the terms of the 2017 Stock Plan, the Stock Plan Committee has the power to determine, among other things, eligibility, the types and sizes of awards, the price and timing of awards, the terms and conditions of awards, any applicable vesting requirements or restrictions and the acceleration or waiver of any such vesting requirements or restrictions. The Stock Plan Committee also has the authority to interpret the 2017 Stock Plan and to prescribe, interpret and revokeestablish, amend, suspend or waive rules and regulations relating to the 2017 Stock Plan.
The Stock Plan Committee may delegate its responsibilities under the Stock Plan to the Chief Executive Officer or such other executive officer of the Corporation as it deems appropriate, except that the Stock Plan Committee may not delegate its responsibilities with respect to awards granted to “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), or decisions concerning the timing, pricing or amount of an award to an officer or other person subject to Section 16 of the Exchange Act.
Eligibility. The Stock Plan Committee determines which members of the Corporation or its subsidiaries are eligible to participate in the 2017 Stock Plan. Currently, the Stock Plan Committee has determined 7063 persons, including Section 162(m) covered employees, ("Section 162(m) Employees"), are eligible to participate in the 2017 Stock Plan.
Shares Authorized. The Board has reserved 9,000,0003,400,000 shares of Common Stockcommon stock for issuance under the Stock Plan. As of the date of this Proxy Statement, the Corporation has issued 5,663,790 shares as awards under the Stock Plan and 322,095 shares have been returned to the Stock Plan as a result of forfeited, terminated, lapsed or cancelled awards made under the2017 Stock Plan. Shares that are subject to awards that terminate, lapse or are cancelledcanceled or forfeited will be available again for grant under the 2017 Stock Plan.
Certain Limitations. Currently, no No more than 3,000,0001,500,000 shares of Common Stockcommon stock are available under the 2017 Stock Plan for issuance as full-value awards (e.g.,pursuant to restricted stock, restricted stock units,unit, deferred share units,unit, performance share, awards,dividend equivalent, deferred share unit and stock grant awards and dividend equivalent awards). The Corporation has issued 1,107,357 shares as full-value awards through the date of this Proxy Statement.awards. Shares subject to any such awards that terminate, lapse or are cancelledcanceled or forfeited will again be available for issuance as full-valuegrants of any of such awards. In addition, no participant may be granted awards under the 2017 Stock Plan for more than 500,000750,000 shares of Common Stockcommon stock in the aggregate in any calendar year.
Performance Measures.For awards under the 2017 Stock Plan intended to qualify under the performance-based compensation provisions of Section 162(m), of the Code, performance measure or measures to be used shall be chosen from amongcontingent on one or more of the following corporate-wide or subsidiary, division, or operating unit financial measures: pre-tax profit or after-tax gross profit;profit, operating income;income, operating profit;profit, earnings before interest, taxes, depreciation and amortization;amortization, income before taxes;taxes, net income; revenue;income, revenue, cash flow;flow, return on invested capital;capital, return on net assets;assets, pre-tax or after tax profit margin, pre-tax or after-tax profit margin; pre-tax or after-taxgrowth, revenue growth, stock price, economic profit, growth; revenue growth; stock price; and economic profit. If the proposed amendment is approved, total shareholder return willreturn. Each goal described above may be included asexpressed on an absolute or relative basis, may be based on current internal targets, the past performance of the Corporation (including the performance of one or more subsidiaries, divisions, or operating units) or the past or current performance of other companies, and in the case of earnings-based measures, may use comparisons relating to capital, shareholders’ equity and/or shares outstanding, or to assets or net assets. The performance measures may be applied on a pre- or post-tax basis and may be adjusted in accordance with Section 162(m) of the Code to include or exclude objectively determinable components of any performance measure, including foreign exchange gains and losses, asset writedowns, acquisitions and divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as well.restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Corporation or its financial statements or changes in law or accounting principles. In the sole discretion of the Stock Plan Committee, unless such action would cause a grant to a 162(m) covered employee to fail to qualify as qualified performance-based compensation under Section 162(m) of the Code, the Stock Plan Committee may amend
or adjust the performance measures or other terms and conditions of an outstanding award in recognition of any such adjustment events. With respect to participants who are not 162(m) covered employees, the performance measures may consist of any objective or subjective corporate-wide or subsidiary, division, operating unit or individual measures, whether or not listed above.
Types of Awards. The 2017 Stock Plan authorizes the following types of awards:
● | Stock Options. The Stock Plan |
exercise price may not be less than 100 percent of the fair market value of a share of |
● | Stock Appreciation Rights. The Stock Plan Committee may grant stock appreciation rights |
● | Restricted Stock and Restricted Stock Units. |
● | Deferred Share Units. The Stock Plan Committee may grant awards of deferred share units, subject to a deferral period of not less than one year. The deferred share units also may be subject to such restrictions as the Stock Plan Committee may impose, including satisfaction of |
● | Performance Share Awards. The Stock Plan Committee may grant performance share awards. Each performance share constitutes a right, |
● | Stock Grant Awards. The 2017 Stock Plan also authorizes grants of unrestricted shares of |
● | Dividend Equivalent Awards. The Stock Plan Committee may grant dividend equivalent awards on previously granted awards of |
All awards are subject to the terms of the 2017 Stock Plan and any other terms and conditions as the Stock Plan Committee may deem appropriate.
Non-transferability. Unvested awardsAwards (and rights under awards) under the 2017 Stock Plan may not be transferred except upon death, by will or the laws of descent and distribution or pursuantdistribution. The Stock Plan Committee, in its discretion and subject to such additional terms and conditions as it determines, may also permit a participant to transfer a stock option to acertain family member expressly permitted by the Committee.members.
Adjustment for Certain Corporate Changes. In the event of a dividend or other distribution, recapitalization, stock split, reverse stock dividend, recapitalization,split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of common stock or other securities of the Corporation, issuance of warrants or other rights to purchase shares of common stock or other securities of the Corporation or other similar corporate transaction or event, other than a regular cash dividend, which affects shares
requiring an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2017 Stock Plan, the Stock Plan Committee shall, in anysuch manner it deems equitable, make appropriate adjustments to the number and type of shares of Common Stockcommon stock available for grant (including the per person limitations in the 2017 Stock Plan), the number and type of shares of Common Stock covered bycommon stock subject to outstanding awards and the purchase or other terms as the Committee deems necessary or appropriate.
Change in Control. TheControl. Under the 2017 Stock Plan, provides,a change in control of the Corporation generally means (a) certain acquisitions of 20% or more of the then outstanding shares of common stock, (b) a change in the Board resulting in the incumbent directors ceasing to constitute at least a majority of the Board, or (c) the consummation of a reorganization, merger or consolidation or sale or disposition of all or substantially all of the assets of the Corporation (unless, among other conditions, the Corporation’s stockholders receive more than 50% of the stock of the resulting company).
In the event of a change in control involvingpursuant to clause (c) above or the approval by shareholders of a plan of complete liquidation or dissolution in which stockholders receive publicly traded common stock, (i) all outstanding awards will immediately vest and options and SARs immediately will become exercisable in full, with any applicable performance measures being deemed satisfied at the maximum level, and (ii) each outstanding award will be substituted and will represent a right to acquire the appropriate number of shares of common stock received in the merger or similar transaction.
In the event of a change in control pursuant to clause (a) or (b), or pursuant to clause (c) or the approval by shareholders of a plan of complete liquidation or dissolution in which stockholders receive consideration other than publicly traded common stock, the Stock Plan Committee may in its sole discretion require that each outstanding award be surrendered to the Corporation all awards will become vested and exercisable in full. Alternatively, the Committee may require each award to be surrendered and redeemedexchange for itsa cash equivalent.
Amendment. The Board may amend, alter, suspend, discontinue or terminate the 2017 Stock Plan at any time, exceptsubject to any requirement of stockholder approval required by applicable law, rule or regulation, including Section 162(m) of the Board may not amendCode and any rule of the NYSE. The Stock Plan to increase materially the benefits to participants without shareholder approval. In addition, the BoardCommittee may not make any amendment impairingamend, alter, suspend, discontinue or terminate an outstanding award, underprospectively or retroactively, but no such action may adversely affect the Stock Plan.rights of the holder of such award in any material respect without the consent of the holder.
Term. The 2017 Stock Plan expires on May 7, 2017,9, 2027, unless earlier terminated by the Board.
Effect of Termination of Employment. The 2017 Stock Plan authorizes the Stock Plan Committee to determine, at the time of the grant of any award, all terms relating to the exercise, cancellation, forfeiture or other disposition of such award upon a participant'sparticipant’s termination of employment. However, in the event of a termination of employment by reason of death or disability, each award
New Plan Awards.Benefits. Although the Corporation anticipates that awards will be made to members following the effective date and during the term of the 2017 Stock Plan, no specific determinations have been made regarding the timing, size or terms of individual awards at this time. All members of the Corporation and its subsidiaries, including executive officers, may be eligible for awards under the 2017 Stock Plan as determined by the Stock Plan Committee. The timing, size, terms and recipients of such awards are determined from time to time by the Board in its discretion.
To date, no incentive stock options have been granted under the Stock Plan and none are presently contemplated. The shares granted as full value awards, reflected in the table below, include grants of RSUs, shares granted on the 25th anniversary of service to the Corporation (which is offered to all members) and shares granted pursuant to the SIP. As of March 6, 2015, the closing price per share of the Corporation's Common Stock was $49.97.
Name and Position | Shares Underlying Options Granted | Shares Underlying Full Value Awards |
Stan A. Askren Chairman, President and Chief Executive Officer, HNI Corporation | 1,267,058 | 163,440 |
Kurt A. Tjaden Vice President and Chief Financial Officer, HNI Corporation | 287,634 | 44,695 |
Bradley D. Determan Executive Vice President, HNI Corporation President, Hearth & Home Technologies Group | 336,014 | 47,009 |
Jerald K. Dittmer Executive Vice President, HNI Corporation President, The HON Company | 363,809 | 54,545 |
Jeffrey D. Lorenger Executive Vice President, HNI Corporation President, HNI Contract Furniture Group | 273,872 | 31,921 |
| All current executive officers as a group | 3,094,239 | 436,680 |
| All employees, including all current officers who are not executive officers, as a group | 1,462,740 | 575,810 |
Shares Subject to Options Outstanding | Full-Value Awards Outstanding | Shares Remaining Available for Future Grant | |
| 2007 Stock Based Compensation Plan | 3,326,745 | 49,026 | 3,658,305 |
| Weighted-Average Exercise Price of Options | 30.63 | ||
| Weighted-Average Remaining Term of Options (in years) | 7.18 | ||
| Other Plans: | |||
| 2007 Equity Plan | 54,809 |
Shares Subject to Options Outstanding | Full-Value Awards Outstanding | Shares Remaining Available for Future Grant | |
| Deferred Plan | 238,482 | ||
| Directors Deferred Plan | 392,595 | ||
| Total: | 3,326,745 | 49,026 | 4,344,191 |
The following is a brief overview of the U.S. federal income tax consequences generally arising with respect to awards under the 2017 Stock Plan. This summary is not intended to be exhaustive, is subject to change and does not describe state, local or localnon- U.S. tax consequences or consequences of other applicable tax laws.
Tax Consequences to Participants. The tax consequences to the participants depend on the type of award granted under the 2017 Stock Plan.
● | Stock Options. In general: (1) no income will be recognized by the participant at the time a stock option is granted; (2) at the time of exercise of a stock option, ordinary income will be recognized by the participant in an amount equal to the |
depreciation) in the value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on whether the shares have been held for more than one year.
● | Stock Appreciation Rights. No income will be recognized by a participant in connection with the grant of SARs. When the SAR is exercised, the participant normally will be required to include as ordinary income in the year of exercise an amount equal to the amount of cash and the fair market value of any unrestricted shares received pursuant to the exercise. |
● | Restricted Stock |
● | Restricted Stock Units. A participant receiving an RSU award will not recognize taxable income upon the grant of such award. Upon the settlement of the award, the participant will recognize ordinary income in an amount equal to the fair market value of any shares delivered and any cash paid by the Corporation. Upon disposition of such shares, any appreciation (or depreciation) in the value of the shares after the date of the settlement of the award will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. |
| ● | Deferred Share Units. A participant receiving a deferred share unit will recognize ordinary income in the year the participant receives shares in an amount equal to the value of the deferred shares at that time less any consideration paid by the participant. Upon disposition of such shares, any appreciation (or depreciation) in the value of the shares after the date of the delivery of the deferred shares will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. |
● | Performance Share Awards. A participant receiving a performance share award will not recognize taxable income upon the grant of such award. Upon the settlement of the award, the participant will recognize ordinary income in an amount equal to the fair market value of any shares delivered and any cash paid by the Corporation. Upon disposition of such shares, any appreciation (or depreciation) in the value of the shares after the date of the settlement of the award will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. |
● | Stock Grant Awards. A participant receiving a stock grant award will recognize taxable income at the time the stock is awarded in an amount equal to the then fair market value of such stock less the amount, if any, paid for such shares. Upon |
| disposition of such stock, any appreciation (or depreciation) in the value of the stock after the date the participant received the stock will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. |
● | Dividend Equivalent Awards. If an award also includes a dividend equivalent award, a participant will recognize ordinary income when the participant receives payment of the dividend equivalents. |
Tax Consequences to the Corporation. To the extent a participant recognizes ordinary income in the circumstances described above, the Corporation or the subsidiary for which the member performs services will be entitled to a corresponding deduction if, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an "excess“excess parachute payment"payment” within the meaning of Section 280G of the Code and is not disallowed by Section 162(m).
Required Vote
The 2017 Stock Plan requiresmust be approved, in accordance with the NYSE Listed Company Manual, by the affirmative vote of the holders of a majority of the Outstanding Shares votedvotes cast on the proposal at the Meeting.
laws), which Iowa law indicates a proposal is approved if the votes cast at the meeting “for” the proposal exceed the votes cast “against” the proposal.See NYSE LCM § 312.07. Broker non-votes will not be counted for purposes of determining whether this proposal has received sufficient votes for approval. Pursuant to the NYSE Listed Company Manual, abstentions will be treated as “votes cast” and will have the same effect as a vote “against” this proposal for purposes of determining whether this proposal has been approved.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE HNI CORPORATION 2017 STOCK-BASED COMPENSATION |
The following is a summary of the Performance Plan which is qualified in its entirety by reference to the full text of the Performance Plan. A copy of the full text of the Performance Plan, as amended, is included as Appendix C to the Proxy Statement filed electronically with the SEC on March 26, 2010, a copy of which is available on the Corporation's website at www.hnicorp.com, under "Investor Information—Proxy Report."
General
On February 15, 2017, the Board adopted the 2017 Equity Plan for Non-Employee Directors of HNI Corporation (the “2017 Equity Plan”). The terms of the 2017 Equity Plan are requested to approve a proposed amendment toconsistent with the terms of the 2007 Equity Plan to increasefor Non-Employee Directors of HNI Corporation, as amended (the “2007 Equity Plan”), and upon approval, the number of shares authorized for issuance by 150,000 shares. The proposed amendment was approved by2017 Equity Plan will replace the Board on February 18, 2015 and will become effective only upon shareholder approval. The 2007 Equity Plan, was previouslywhich expires on May 7, 2017. As of March 10, 2017, there were approximately 160,738 shares of common stock that remained available for future issuance under the 2007 Equity Plan and which will cease to be available for future grants if the 2017 Equity Plan is approved by shareholders on May 8, 2007.shareholders. The 20072017 Equity Plan is designed to promote the long-term financial success of the Corporation and to increase shareholder value by enabling the Corporation to recruitattract and retain qualityoutstanding individuals to serve as non-employee Directorsdirectors and to further align theirthe interests of non-employee directors with the Corporation'sinterests of the Corporation’s shareholders. The 20072017 Equity Plan permits the Corporation to issue to its non-employee Directorsdirectors stock options, shares of restricted stock of the Corporation and stock grant awards. The 20072017 Equity Plan also permits non-employee Directorsdirectors to elect to receive all or a portion of their annual retainers, meeting fees and other compensationamounts payable to such director by the Corporation for services performed as a non-employee director in the form of shares of Common Stock.
Summary of the 20072017 Equity Plan
The following is a summary of the 20072017 Equity Plan, as proposed to be amended which is qualified in its entirety by reference to the full text of the 20072017 Equity Plan. A copy of the full text of the 20072017 Equity Plan reflecting the proposed amendment, is included as Appendix DC to the Proxy Statement filed electronically with the SEC on March 23, 2015, a copy of which is available on the Corporation's website at this proxy statement.
www.hnicorp.com, under "Investor Information—Proxy Report."
Administration. The Board administers the 20072017 Equity Plan and has the authority to interpret the 20072017 Equity Plan and to prescribe, interpretestablish, amend, waive and revokerescind rules and regulations relating to the 20072017 Equity Plan. The Board may delegate its authority to administer the 20072017 Equity Plan to any committee or subcommittee of non-employee Directors.directors.
Eligibility. Each Directordirector who is not a current member of the Corporation or any of its subsidiaries is eligible to receive awards under the 20072017 Equity Plan.
Types of Awards. The 20072017 Equity Plan authorizes the following types of awards:
● | Stock Options. The |
stock at a specified price and will become exercisable after the grant date, pursuant to the terms established by the Board. The per share option exercise price may not be less than 100 percent of the fair market value of a share of common stock on the grant date.
● | Restricted Stock. The |
● | Common Stock Grants. The |
● | Additional Cash Award to Offset Taxes. In connection with the grant of restricted stock or unrestricted shares of |
All awards are subject to the terms of the 20072017 Equity Plan and any other terms and conditions as the Board may deem appropriate.
Director Fees Payable in Shares. The 20072017 Equity Plan permits non-employee Directorsdirectors to elect to receive shares of Common Stockcommon stock in lieu of all or a portion of the cash payments to be made by the Corporation for annual retainers, meeting fees and otherwise forother services performed as a Director.non-employee director.
Non-transferability. In general, awardsAwards (and rights under awards) under the 20072017 Equity Plan may not be transferred except upon death, by will or the laws of descent and distribution, or pursuantdistribution. The Board, in its discretion and subject to such additional terms and conditions as it determines, may also permit a participant to transfer a stock option to acertain family member that is expressly permitted by the Board. In addition, the Board may impose transfer restrictions on all or any part of the shares of Common Stock to be issued upon the exercise of options or pursuant to awards of Common Stock grants.members.
Adjustment for Certain Corporate Changes. In the event of a dividend or other distribution, recapitalization, stock split, reverse stock dividend, recapitalization,split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of common stock or other securities of the Corporation, issuance of warrants or other rights to purchase shares of common stock or other securities of the Corporation or other similar corporate transaction or event, other than a regular cash dividend, which affects shares such thatrequiring an adjustment is required to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2017 Equity Plan, then the Board shall, in such manner as it may deemdeems equitable, make appropriate adjustments to the number and type of shares of Common Stockcommon stock available for grant, the number and type of shares of Common Stock covered bycommon stock subject to outstanding awards and the purchase or other terms as the Board deems necessary or appropriate.exercise price with respect to any award.
Amendment. The Board may amend, alter, suspend, discontinue or terminate the 20072017 Equity Plan at any time, exceptsubject to any requirement of stockholder approval required by applicable law, rule or regulation, including any rule of the NYSE. The Board may not amend, the 2007 Equity Plan to increase materially the benefits to participants under the 2007 Equity Plan without shareholder approval. In addition, the Board may not make any amendment that would impairalter, suspend, discontinue or terminate an outstanding award, underprospectively or retroactively, but no such action may adversely affect the 2007 Equity Plan.rights of the holder of such award in any material respect without the consent of the holder.
Term. The 20072017 Equity Plan expires on May 7, 2017,9, 2027, unless earlier terminated by the Board.
Effect of Termination of DirectorshipsSeparation from Service. The 20072017 Equity Plan authorizes the Board to determine all terms relating to the exercise, cancellation, forfeiture or other disposition of any award upon a non-employee Director's terminationdirector’s separation of service. In the event of a termination of directorshipseparation from service by reason of death, disability or change in control, each award granted under the 2017 Equity Plan will become fully exercisable and vested. In the event of a separation from service by reason of an eligible retirement, in the case of an option award, such award shall become fully exercisable and vested upon the date of retirement. In the event of a separation from service by reason of hardship or other special circumstances of a participant who holds an option award, restricted stock award or a common stock grant award, the Board or the Chairman may in its (or his or her) sole discretion take any action it (or he or she) deems to be equitable under the circumstances or in the best interests of the Corporation.
Under the 2017 Equity Plan, Awards
44
New Plan Benefits. Although the Corporation anticipates that awards will be made to non-employee Directors. Todirectors following the effective date only full-value stock awardsand during the term of the 2017 Equity Plan, no specific determinations have been granted undermade regarding the 2007 Equity Plan. No stock optionstiming, size or restricted stock have been granted under the 2007 Equity Plan.
Federal Income Tax Consequences
The following is a brief overview of the U.S. federal income tax consequences generally arising with respect to awards under the 20072017 Equity Plan. This summary is not intended to be exhaustive and does not describe state, local or localnon-U.S. tax consequences.
Tax Consequences to Participants. The tax consequences to the participants depend on the type of award granted under the 20072017 Equity Plan.
● | Stock Options. In general: (i) no income will be recognized by the participant at the time a stock option is granted; (ii) at the time of exercise of a stock option, ordinary income will be recognized by the participant in an amount equal to the |
● | Restricted Stock. A participant receiving restricted stock will not recognize ordinary income at the time of grant unless the participant makes an election to be taxed at such time. If such election is not made, the participant will recognize ordinary income at the time the restrictions lapse in an amount equal to the excess of the fair market value of the stock at such time over the amount, if any, paid for the stock. In addition, a participant receiving dividends with respect to restricted stock for which the above-described election has not been made and prior to the time the restrictions lapse will recognize ordinary income, rather than dividend income, in an amount equal to the dividends paid. Upon disposition of such stock, any appreciation (or depreciation) in the value of the stock after the date the restrictions lapsed will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. If a participant properly makes an election to be taxed at the time the restricted stock is granted, the participant will recognize ordinary income on the date of grant equal to the excess of the fair market value of the stock at such time over the amount, if any, paid for such stock. The participant will not recognize any income at the time the restrictions lapse. Upon disposition of such stock, any appreciation (or depreciation) in the value of the stock after the date the restricted stock was granted will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. |
● | Common Stock Grants. A participant receiving a common stock grant will recognize ordinary income upon the grant of such shares in an amount equal to the fair market value of any such shares delivered by the Corporation less the amount, if any, paid for such shares. Upon disposition of such shares, any appreciation (or depreciation) in the value of the shares |
| after the date of grant will be taxed as either short-term or long-term capital gain (or loss) depending on the holding period. |
● | Director Fees Payable in Shares. A participant receiving director fees in shares will recognize ordinary income upon the |
Tax Consequences to the Corporation. To the extent that a participant recognizes ordinary income in the circumstances described above, the Corporation will be entitled to a corresponding deduction to the extent that such a deduction is authorized under Section 162 of the Code.
Required Vote
The 2017 Equity Plan must be approved, in accordance with the NYSE Listed Company Manual, by the affirmative vote of a majority of the votes cast on the proposal at the meeting. Broker non-votes will not be counted for purposes of determining whether this proposal has received sufficient votes for approval. Pursuant to the NYSE Listed Company Manual, abstentions will be treated as “votes cast” and will have the same effect as a vote “against” this proposal for purposes of determining whether this proposal has been approved.
45
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE FOR NON-EMPLOYEE DIRECTORS OF HNI CORPORATION. |
PROPOSAL NO. 7 – APPROVAL OF THE HNI CORPORATION MEMBERS’ STOCK PURCHASE PLAN
General
On February 15, 2017, the Board adopted the HNI Corporation Members’ Stock Purchase Plan (the “2017 MSPP”). The terms of the 2017 MSPP are consistent with the terms of the HNI Corporation 2002 Members’ Stock Purchase Plan (f/k/a HON INDUSTRIES Inc. 2002 Members’ Stock Purchase Plan), as amended (the “2002 MSPP”), and upon approval, the 2017 MSPP will replace the 2002 MSPP. As of March 10, 2017, there were approximately 298,105 shares of common stock that remained available for future issuance under the 2002 MSPP and which will cease to be available for future grants if the 2017 MSPP is approved by shareholders. The Corporation takes pride in its member-owner culture and for more than 40 years has maintained programs to facilitate the purchase of common stock by members.
Summary of the 2017 MSPP
The following is a summary of the 2017 MSPP, which is qualified in its entirety by reference to the full text of the 2017 MSPP. A copy of the full text of the 2017 MSPP is included as Appendix D to this proxy statement.
Purpose. The 2017 MSPP is intended to (i) advance the interests of the Corporation and its shareholders by strengthening the Corporation’s ability to attract and retain members who have the training, experience and ability to enhance the profitability of the Corporation and (ii) align the interests of members with the interests of shareholders by rewarding members upon whose judgment, initiative and effort the success of the Corporation largely depends.
Administration. The 2017 MSPP is administered by a management committee consisting of not less than three members appointed by the Board (the “MSPP Committee”). The MSPP Committee has the authority to (i) interpret and construct the 2017 MSPP and the options granted thereunder, (ii) establish policies, procedures and rules related to the operation and administration of the 2017 MSPP, (iii) make adjustments in the option price and the number and kind of optioned shares as may be equitably required as a result of certain transactions and events affecting the common stock and (iv) subject to certain limitations, amend the provisions of the 2017 MSPP. The interpretation and construction by the MSPP Committee of any provision of the 2017 MSPP or of any option granted under it will be final.
Eligibility. Any person who is employed by the Corporation or a Subsidiary (as defined below) and who customarily works 20 hours or more per week, and who customarily works for five months or more in any calendar year is eligible to participate in the 2017 MSPP. A “Subsidiary” is defined under the 2017 MSPP as any corporation designated by the MSPP Committee that is a direct or indirect wholly owned subsidiary of the Corporation. As of March 10, 2017, approximately 7,700 members were eligible to participate in the 2017 MSPP.
Shares Authorized. The Board has reserved 800,000 shares of common stock for issuance under the 2017 MSPP.
Terms of Options and Acceptance. On the first business day of each fiscal quarter during which the 2017 MSPP is in effect (the “Entry Date”), each eligible, participating member will be granted an option to purchase shares of common stock. A member will evidence acceptance of the option by executing and providing to the Corporation a Subscription and Authorization Form (the “Form”). Each eligible member may elect that his or her compensation be reduced by a specified dollar amount. Notwithstanding the foregoing, a member will not be granted options under the Plan if (i) immediately after the option is granted, the member would have the right to purchase shares of common stock having a fair market value as of the relevant Exercise Date (as defined below) in excess of $21,250 (85% of $25,000) in any calendar year, or (ii) immediately after the option was granted (and assuming the purchase of all stock which such member has the right to purchase), such member would own 5% or more of the total combined voting power or value of all classes of stock of the Corporation or of any Subsidiary.
Once a member elects to participate in the 2017 MSPP, the member automatically will be deemed to have elected to participate in subsequent quarterly offering periods unless he or she withdraws from the 2017 MSPP or reaches one of the limitations described in the preceding paragraph. A member’s subscription to purchase shares during a quarter may be reduced by the MSPP Committee without notice to the member to the extent necessary to avoid exceeding a limitation imposed by the 2017 MSPP or by law.
Purchase of Stock. The purchase of shares of common stock takes place automatically on the last business day of each fiscal quarter during which the 2017 MSPP is in effect (the “Exercise Date”). The option shall be deemed automatically exercised on the Exercise Date to the extent of payments received from the member. If the number of shares which may be registered on any Exercise Date exceeds the number of shares authorized for issuance under the 2017 MSPP, the shares authorized for issuance will be made available for purchase on a pro-rata basis.
After each Exercise Date, the Corporation will deliver the shares purchased by the member to a brokerage account established for the member at a Corporation-designated brokerage firm. The shares will be held in the brokerage account until the member sells such shares or transfers them to other accounts or to another brokerage firm.
Price and Payment. The option price of shares purchased on any Exercise Date will be 85% of the fair market value of such stock on the Exercise Date. Payment of the option price through payroll deductions must be paid in full in U.S. dollars no later than the applicable Exercise Date. Minimum payroll deductions are $5.00 for members paid weekly and $10.00 for members paid semimonthly or biweekly. No interest is earned on any payroll deductions.
Termination of Employment. If a member terminates employment with the Corporation or a Subsidiary for any reason, the accumulated funds in his or her account at the time of termination will be used to purchase shares of common stock on the next Exercise Date, and the member will have no further rights under the 2017 MSPP.
Corporate Transactions. In the event of a proposed dissolution or liquidation of the Corporation, the offering period then in progress will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the MSPP Committee. In the event of a proposed sale of all or substantially all of the assets of the Corporation, or the merger of the Corporation with or into another corporation, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation in accordance with Section 424 of the Code, unless the Board or MSPP Committee determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the offering period then in progress by setting a new Exercise Date or to cancel each outstanding option and refund all sums collected from members during the offering period then in progress.
Rights as a Shareholder. The members shall have no rights as shareholders with respect to any common stock covered by options until the options are exercised and the purchase price is paid in full.
Duration. No options may be granted pursuant to the 2017 MSPP after the earlier of (i) the date on which the maximum number of shares of common stock authorized under the 2017 MSPP have been purchased under the 2017 MSPP or (ii) the date as of which the Board terminates the 2017 MSPP.
Federal Income Tax Consequences.
The following is a brief summary of the U.S. federal income tax consequences that may occur based on the federal income tax laws currently in effect. This summary is not intended to be exhaustive and does not describe state, local or non-U.S. tax consequences.
The 2017 MSPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Assuming the 2017 MSPP continues to qualify under Section 423 of the Code, participants will not recognize income for federal income tax purposes either upon enrollment in the 2017 MSPP or upon purchasing shares under the 2017 MSPP.
If the shares are held more than two years from the applicable Exercise Date, the participant will recognize ordinary income in an amount equal to the lesser of (i) 15% of the fair market value of the shares on the Exercise Date or (ii) the amount by which the fair market value of the shares at the time of the sale exceeds the purchase price, and any gain in excess of the fair market value of such shares on the Exercise Date will be taxable at long-term capital gain rates.
If the shares are not held for the minimum period described in the preceding paragraph, the participant will recognize ordinary income in the amount by which the fair market value of the shares on the Exercise Date exceeded the option price. This ordinary
income is not limited to the gain from the sale of the stock. The participant’s basis in the stock is increased by the amount of the ordinary income. The difference between the increased basis and the selling price of the stock is a capital gain or loss.
If a participant should die owning shares acquired under the 2017 MSPP, he or she will be deemed to have disposed of his or her shares on the date of death and will realize ordinary income to the extent of the ordinary income component described in the preceding paragraphs, as applicable, but no capital gain will result until the time of a subsequent sale, when the amount of gain will typically be equal to the excess of the selling price over the fair market value of the shares on the date of death or the alternative valuation date for federal estate tax purposes.
Required Vote
The 2017 MSPP must be approved, in accordance with the NYSE Listed Company Manual, by the affirmative vote of a majority of the votes cast on the proposal at the meeting. Broker non-votes will not be counted for purposes of determining whether this proposal has received sufficient votes for approval. Pursuant to the NYSE Listed Company Manual, abstentions will be treated as “votes cast” and will have the same effect as a vote “against” this proposal for purposes of determining whether this proposal has been approved.
Recommendation of the Board
| THE BOARD RECOMMENDS A VOTE “FOR” THE HNI CORPORATION MEMBERS’ STOCK PURCHASE PLAN. |
Each independent Director receives an annual retainer of $163,200, of which $65,280 is paid in cash in equal installments of $16,320 at each quarterly Board meeting (prior to the May 10, 2016 Board meeting, the cash retainer was $65,000) and $97,920 is paid in the form of a Common Stock grant issued under the 2007 Equity Plan following the May Board meeting (prior to the May 10, 2016 Board meeting, the Common Stock retainer was $95,000). In 2016, each independent Director received:
| ● | a cash installment payment of $16,250 at the February Board meeting and $16,320 at each of the May, August and November Board meetings; and |
| ● | a $97,920 Common Stock grant at the May Board meeting. |
The Lead Director receives an additional annual retainer of $19,000 (prior to the May 10, 2016 Board meeting, the retainer was $17,500). Each Audit Committee member receives an additional annual retainer of $6,000 (prior to the May 10, 2016 Board meeting, the retainer was $4,000). The Chairperson of the Audit Committee receives an additional annual retainer of $15,000. The Chairpersons of the Compensation Committee and Governance Committee each receive an additional annual retainer of $10,000. As with the cash portion of the annual retainer for Board service, retainers for committee Chairpersons, Lead Director or Audit Committee service are paid in equal installments at each quarterly Board meeting.
Independent Directors may receive an additional $1,000 for each meeting attended if they are required to travel six hours or more on a round-trip basis. Directors are also reimbursed for travel and related expenses incurred to attend meetings. For purposes of determining Director compensation, an independent Director is anyone who is not a member of the Corporation. Directors who are members of the Corporation do not receive additional compensation for service on the Board.
The Corporation’s policy with regard to Common Stock ownership by independent Directors is for each Director to own Common Stock with a market value of five times or more the cash portion of the annual retainer. To promote Common Stock ownership, Directors are required to receive one-half of the cash portion of their annual retainer in the form of shares of Common Stock to be issued under the 2007 Equity Plan or, to the extent the Director participates in the HNI Corporation Directors Deferred Compensation Plan (the “Directors Deferred Plan”), in the form of nonvoting share units to be credited to the Director’s account under the Directors Deferred Plan. This requirement does not, however, apply to any Director owning Common Stock with a market value of five times or more the cash portion of the annual retainer. As of the end of 2016, all of the Corporation’s independent Directors were in compliance with the Corporation’s policy with regard to stock ownership.
In addition to acquiring Common Stock as partial payment of their annual retainer, independent Directors can also acquire Common Stock in several other ways. Under the 2007 Equity Plan, Directors may elect to receive all or a portion of their cash retainers in the form of shares of Common Stock. Under the Directors Deferred Plan, each Director has the opportunity to defer up to 100% of his or her retainers. Amounts can be deferred to a cash account earning interest at a rate set each year at 1% above the prime interest rate or to the Corporation’s notional stock account in the form of nonvoting share units that fluctuate in value based on the price increase or decrease of Common Stock and earn dividends distributed to all shareholders. The dividends are automatically reinvested for each participant to acquire additional nonvoting shares units. For any cash compensation deferred to the Corporation’s notional stock account, the number of nonvoting share units is determined by dividing the amount of the compensation by the fair market value of a share of Common Stock on the date the compensation would have otherwise been paid. Each Director participating in the Directors Deferred Plan elects, on an annual basis, the date or dates of distribution (i.e., a Director can elect a lump-sum distribution or distribution via annual installments not to exceed 15) of any amounts he or she has deferred. In addition, each independent Director is eligible to receive awards of stock options to purchase Common Stock, restricted stock or Common Stock grants, or any combination thereof, under the 2007 Equity Plan in the amounts as the Board may authorize.
In May 2016, each of Mses. Bell, Francis, Jones and Smith and Messrs. Calado, Porcellato, Stern and Waters was granted 2,223 shares of Common Stock under the 2007 Equity Plan. In August 2016, Mr. Hartnett was granted 1,376 shares of Common Stock under the 2007 Equity Plan. The Corporation does not have a non-equity incentive plan for independent Directors. As of the Record Date, the Corporation has never issued stock options to purchase Common Stock or shares of restricted stock to the independent Directors and all shares of Common Stock issued to Directors in lieu of cash retainer amounts were fully vested upon issuance.
Director Compensation for 2016
| Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3) | All Other Compensation ($) (4) | Total ($) |
| Mary A. Bell | 65,210 | 97,920 | — | 1,834 | 164,964 |
| Miguel M. Calado | 67,710 | 97,920 | — | 1,834 | 167,464 |
| Cheryl A. Francis | 90,460 | 97,920 | — | 1,834 | 190,214 |
| John R. Harnett | 35,640 | 73,440 | — | 757 | 109,837 |
| James R. Jenkins | 24,250 | — | 636 | 1,834 | 26,720 |
| Mary K.W. Jones | 65,210 | 97,920 | — | 1,834 | 164,964 |
| Dennis J. Martin | 18,750 | — | — | 1,834 | 20,584 |
| Larry B. Porcellato | 70,710 | 97,920 | 318 | 1,834 | 170,782 |
| Abbie J. Smith | 85,710 | 97,920 | — | 1,834 | 185,464 |
| Brian E. Stern | 72,710 | 97,920 | — | 1,834 | 172,464 |
| Ronald V. Waters, III | 75,210 | 97,920 | 2,682 | 1,834 | 177,646 |
Notes
| (1) | For 2016, the independent Directors listed in the table above each earned the following fees: Ms. Bell - $65,210 annual retainer; Mr. Calado - $65,210 annual retainer plus $1,500 retainer for service on the Audit Committee and $1,000 for travel in excess of 6 hours on one occasion; Ms. Francis - $65,210 annual retainer plus $5,500 retainer for service on the Audit Committee, $15,000 retainer for service as Chairperson of the Audit Committee and $4,750 for a missed quarterly retainer payment for service on the Audit Committee; Mr. Hartnett - $32,640 annual retainer plus $3,000 retainer for service on the Audit Committee; Mr. Jenkins (service ended after May 10, 2016 meeting) – $16,250 annual retainer plus $5,000 retainer for service as Chairperson of the Governance Committee and $3,000 for travel in excess of 6 hours on three occasions; Ms. Jones - $65,210 annual retainer; Mr. Martin (service ended after May 10, 2016 meeting) - $16,250 annual retainer plus $2,500 retainer for service on the Audit Committee; Mr. Porcellato – $65,210 annual retainer plus $5,500 retainer for service on the Audit Committee; Ms. Smith – $65,210 annual retainer plus $18,625 retainer for service as Lead Director and $1,875 for a missed quarterly retainer payment; Mr. Stern – $65,210 annual retainer plus $7,500 retainer for service as Chairperson of the Governance Committee; and Mr. Waters - $65,210 annual retainer plus $10,000 retainer for service as Chairperson of the Compensation Committee. Mses. Francis and Bell elected to receive 100% of cash retainer in the form of shares of Common Stock under the 2007 Equity Plan, which equated to the following: Ms. Francis - 2,087 shares.; Ms. Bell - 1,523. Ms. Jones and Mr. Hartnett received 50% of cash retainer in the form of shares of Common Stock under the 2007 Equity Plan, which equated to to the following: Ms. Jones - 691; Mr. Hartnett - 352. Ms. Smith elected to receive 100% and Mr. Jenkins elected to receive 50% of their cash retainers in the form of nonvoting share units under the Directors Deferred Plan, which equated to the following number of nonvoting share units: Ms. Smith – 1,993; and Mr. Jenkins – 321. |
| (2) | Represents the portion of the annual retainer paid in the form of shares – a $97,920 Common Stock grant authorized by the Board on May 10, 2016 under the 2007 Equity Plan. Each independent Director serving on the Board as of May 10, 2016, was issued 2,223 shares of Common Stock at a price of $44.04 (the closing price of a share of Common Stock on the date of grant, May 10, 2016) for a total grant date fair value of $97,901, as computed in accordance with FASB Accounting Standards Codification Topic 718. The difference between the $97,920 Common Stock grant |
authorized by the Board and the actual value of Common Stock issued ($97,901) was approximately $19. As the Corporation only issues fractional shares under the Directors Deferred Plan, and not under the 2007 Equity Plan, the Corporation paid each independent Director serving on the Board as of May 10, 2016, $19, either in the form of cash in lieu of a fractional share for those Directors that did not elect to defer their Common Stock grant under the Directors Deferred Plan or in the form of a fractional share for those Directors that did elect to defer their Common Stock grant under the Directors Deferred Plan. Ms. Smith deferred 100% of her Common Stock grants under the Directors Deferred Plan. There are no unexercised option awards or unvested stock awards outstanding as of the end of 2016 for any of the Directors.
| (3) | Includes above-market interest earned on cash compensation deferred under the Directors Deferred Plan. Interest on deferred cash compensation is earned at one percent over the prime rate. Above-market earnings represent the difference between the interest earned under the Directors Deferred Plan and 120% of the applicable federal long-term rate. Mr. Jenkins deferred 50% of his cash compensation. Above-market interest earned by Mr. Porcellato is for cash compensation deferred prior to January 1, 2007, and interest earned by Mr. Waters is for cash compensation deferred prior to January 1, 2010. |
| (4) | Includes dividends earned on Common Stock grants during 2016. |
Security Ownership of Certain Beneficial Owners
On the Record Date, there were 44,518,27544,092,971 Outstanding Shares. On that date, to the Corporation'sCorporation’s knowledge, there were fourthree shareholders who owned beneficially more than five percent5% of all Outstanding Shares. The table below contains information, as of that date (except as noted below), regarding the beneficial ownership of these entities. Unless otherwise indicated, the Corporation believes each of the entities listed below has sole voting and investing power with respect to all the shares of Common Stock indicated.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |
| State Farm Insurance Companies (1) One State Farm Plaza Bloomington, Illinois 61710 | 7,385,624 | (2) | 16.8% |
| BlackRock, Inc. (3) 40 East 52nd Street New York, New York 10022 | 4,409,630 | (4) | 10.0% |
| The Vanguard Group, Inc. (5) 100 Vanguard Boulevard Malvern, PA 19355 | 3,619,006 | (6) | 8.2% |
Notes
| State Farm Insurance Companies consists of the following entities: State Farm Mutual Automobile Insurance Company; State Farm Fire and Casualty Company; State Farm Investment Management Corp.; State Farm |
(2) | Information is based on a Schedule |
| (3) | The following subsidiaries of BlackRock, Inc. hold the shares of Common Stock noted: BlackRock Institutional Trust Company, N.A.; BlackRock Fund Advisors; BlackRock Asset Management Canada Limited; BlackRock Asset Management |
| (4) | Information is based on a Schedule 13G/A filed |
| (5) | The following subsidiaries of The Vanguard Group, Inc. hold the shares of Common Stock noted: Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. |
| (6) | Information is based on a Schedule |
50
Security Ownership of Directors and Executive Officers
The following table sets forth the beneficial ownership of Common Stock as of the Record Date for each Director and nominee for Director, each Named Executive Officer and for all current Directors (including nominees) and executive officers of the Corporation as a group. The address of the persons listed below is 408600 East Second Street, Muscatine, Iowa 52761.
| Name of Beneficial Owner | Common Stock (1) | Common Stock Units (2) | Stock Options Exercisable as of the Record Date or Within 60 Days Thereof | Total Stock and Stock-Based Holdings | Percent of Class (3) |
| Stan A. Askren | 144,688 | 71,082 | 864,925 | 1,080,695 | 2.5% |
| Mary A. Bell | 12,834 | 30,021 | — | 42,855 | * |
| Miguel M. Calado | 47,636 | — | — | 47,636 | * |
| Cheryl A. Francis | 58,421 | — | — | 58,421 | * |
| John R. Hartnett | 2,014 | — | — | 2,014 | * |
| Mary K.W. Jones | 3,803 | — | — | 3,803 | * |
| Larry B. Porcellato | 15,152 | 18,735 | — | 33,887 | * |
| Abbie J. Smith | 2,956 | 49,247 | — | 52,203 | * |
| Brian E. Stern | 42,511 | — | — | 42,511 | * |
| Ronald V. Waters, III | 21,868 | 14,521 | — | 36,389 | * |
| Jerald K. Dittmer | 30,911 | — | 118,849 | 149,760 | * |
| Jeffrey D. Lorenger | 26,753 | — | 141,514 | 168,267 | * |
| Kurt A. Tjaden | 38,456 | — | 161,272 | 199,728 | * |
| Marco M. Molinari | 39,370 | — | 157,436 | 196,806 | * |
| All Directors and executive officers as a group – (19 persons) | 534,886 | 183,606 | 1,559,866 | 2,278,358 | 5.2% |
| Name of Beneficial Owner | Common Stock (1) | Common Stock Units (2) | Stock Options Exercisable as of the Record Date or Within 60 Days Thereof | Total Stock and Stock-Based Holdings | Percent of Class (3) |
| Stan A. Askren | 145,090 | 51,664 | 579,783 | 776,537 | 1.7% |
| Mary H. Bell | 8,738 | 25,407 | 0 | 34,145 | * |
| Miguel M. Calado | 47,802 | 0 | 0 | 47,802 | * |
| Cheryl A. Francis | 50,845 | 0 | 0 | 50,845 | * |
| James R. Jenkins | 0 | 34,523 | 0 | 34,523 | * |
| Dennis J. Martin | 5,994 | 21,336 | 0 | 27,330 | * |
| Larry B. Porcellato | 15,952 | 17,798 | 0 | 33,750 | * |
| Abbie J. Smith | 2,505 | 39,396 | 0 | 41,901 | * |
| Brian E. Stern | 38,311 | 0 | 0 | 38,311 | * |
| Ronald V. Waters, III | 22,144 | 13,795 | 0 | 35,939 | * |
| Bradley D. Determan | 32,048 | 2,385 | 8,320 | 42,753 | * |
| Jerald K. Dittmer | 26,961 | 0 | 139,538 | 166,499 | * |
| Jeffrey D. Lorenger | 24,337 | 0 | 78,347 | 102,684 | * |
| Kurt A. Tjaden | 34,624 | 0 | 78,412 | 113,036 | * |
| All Directors and executive officers as a group – (18 persons) | 540,662 | 206,304 | 994,611 | 1,741,577 | 3.9% |
Notes
| (1) | Includes restricted shares held by executive officers over which they have voting power but not investment power, shares held directly or in joint tenancy, shares held in trust, by broker, bank or nominee or other indirect means and over which the individual or member of the group has sole voting or shared voting and/or investment power. Each individual or member of the group has sole voting and/or investment power with respect to the shares shown in the table above, except Mr. |
(2) | Indicates the nonvoting share units credited to the account of the named individual or members of the group, as applicable, under either the Deferred Plan or the Directors Deferred Plan. For additional information on the Deferred Plan, see |
| (3) | * less than |
The following table provides information as of January 3, 2015,December 31, 2016, about Common Stock which may be issued under the Corporation'sCorporation’s equity compensation plans.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) (3) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
| Equity Compensation Plans approved by security holders | 3,780,673 (1) | 31.69 | 3,227,460 (4) |
| Equity Compensation Plans not approved by security holders | 217,135 (2) | –– | 612,972 (5) |
| Total | 3,997,808 | 31.69 | 3,840,432 |
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) (3) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | ||
| Equity Compensation Plans approved by security holders | 3,583,553 | (1) | 29.93 | 4,544,433 | (4) |
| Equity Compensation Plans not approved by security holders | 244,946 | (2) | –– | 632,019 | (5) |
| Total | 3,828,499 | $31.90 | 5,176,453 |
Notes
| (1) | Includes: (i) shares to be issued upon the exercise of outstanding stock options granted under the Stock Plan – |
(2) | Includes the nonvoting share units credited to the account of individual executive officers or Directors under either the Deferred Plan – |
| (3) | This column does not take into account any of the RSUs, Long-Term Performance Plan awards, Annual Incentive Plan awards or nonvoting share units discussed in Notes 1 and 2 above. |
| (4) | Includes shares available for issuance under the Stock Plan – |
| (5) | Includes nonvoting share units available for issuance under the Deferred Plan – |
Under the federal securities laws, the Directors and executive officers of the Corporation, and certain persons who own more than ten percent10% of the Outstanding Shares, are required to report their ownership of Common Stock and changes in ownership to the SEC and the NYSE. Specific due dates for these reports have been established by the SEC, and the Corporation is required to report in this Proxy Statement any known failure to file by these dates during Fiscal 2014.
Based solely on a review of copies of the reports the Corporation has received, or written representations from certain reporting persons, the Corporation believes during Fiscal 20142016 all reporting persons made all filings required by Section 16(a) of the Exchange Act on a timely basis except as follows: due to an administrative oversight by a broker, Ronald V. Waters, III failedon the part of the Corporation (i) Vincent P. Berger, President, Hearth & Home Technologies, was one business day past the filing deadline pertaining to timely filethe award of stock options of the Corporation for which a Form 4 covering one transaction relatedwas filed May 13, 2016, and (ii) Jerald K. Dittmer, Executive Vice President, HNI Corporation; President, The HON Company, was three business days past the filing deadline pertaining to 48 shares.
Proposals by shareholders intended to be presented at the 20162018 Annual Meeting must be received at the Corporation'sCorporation’s executive offices no later than November 24, 20152017 to be included in the proxy statement and form of proxy. All shareholder notice of proposals submitted outside the processes of Exchange Act Rule 14a-8 must be received between February 5, 20168, 2018 and March 6, 201610, 2018 to be considered for presentation at the 20162018 Annual Meeting.Meeting, but will not be included in the proxy statement. In addition, any shareholder proposals must comply with the informational requirements contained in Section 2.16(a)(2) of the By-laws in order to be presented at the 20162018 Annual Meeting. On written request to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761, the Corporation will provide, without charge to any shareholder, a copy of the By-laws.
52
The Board knows of no other matters that will be brought before the Meeting, but, if other matters properly come before the Meeting, it is intended the persons named in the proxy will vote the proxy according to their best judgment.
On written request to the Corporate Secretary at HNI Corporation, 408600 East Second Street, Muscatine, Iowa 52761, the Corporation will provide, without charge to any shareholder, a copy of its Annual Report on Form 10-K for the year ended January 3, 2015,December 31, 2016, including financial statements and schedules, filed with the SEC. The report is also available on the Corporation'sCorporation’s website atwww.hnicorp.com, under "Investor Information–Annual Reports“Investors - Financial Reporting - SEC Filings."
Information set forth in this Proxy Statement is as of March 23, 2015,24, 2017, unless otherwise noted.
Steven M. Bradford
Senior Vice President, General Counsel and Secretary
March 23, 2015
Notwithstanding anything to the contrary set forth in any of the Corporation'sCorporation’s previous filings under the Securities Act of 1933 or the Exchange Act that might incorporate future filings, including this Proxy Statement, in whole or in part, the Audit Committee Report beginning on page 1615 of this Proxy Statement and the Compensation Committee Report beginning on page 3329 of this Proxy Statement shall not be incorporated by reference into any such filings.
An Annual Report to Security Holders, including financial statements and schedules, of the Corporation for Fiscal 20142016 is being mailed to shareholders of the Corporation together with this Proxy Statement. The Annual Report to Security Holders does not form any part of the material for the solicitation of proxies.
| * GAAP to non- GAAP reconciliation | 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||
| Gross Profit | Net Income | Earnings Per Share | Gross Profit | Net Income | Earnings Per Share | Gross Profit | Net Income | Earnings Per Share | |||||||||||||||||||||||
| GAAP amount | $ | 835,013 | $ | 85,577 | $1.88 | $ | 847,398 | $ | 105,436 | $2.32 | $ | 784,200 | $ | 61,471 | $1.35 | ||||||||||||||||
| % of Net sales | 37.9 | % | 3.9 | % | 36.8 | % | 4.6 | % | 35.3 | % | 2.8 | % | |||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||||||
| Restructuring and impairment | $ | 5,302 | $ | 16,308 | $ | 792 | $ | 12,569 | $ | 5,213 | $ | 38,232 | |||||||||||||||||||
| Transition costs | $ | 9,334 | $ | 9,334 | $ | 4,704 | $ | 4,704 | $ | 4,894 | $ | 4,894 | |||||||||||||||||||
| (Gain) loss on sales of assets | — | $ | 22,613 | — | $ | — | — | $ | (10,723 | ) | |||||||||||||||||||||
| Building donation | — | $ | 4,397 | — | $ | — | — | — | |||||||||||||||||||||||
| Non-recurring gain | — | $ | (2,042 | ) | — | $ | — | — | — | ||||||||||||||||||||||
| Total adjustments | $ | 14,636 | $ | 50,610 | $ | 5,496 | $ | 17,273 | $ | 10,107 | $ | 32,403 | |||||||||||||||||||
| Tax impact of adjustments | — | $ | (16,997 | ) | — | $ | (5,689 | ) | — | $ | (4,144 | ) | |||||||||||||||||||
| Non-GAAP amount | $ | 849,649 | $ | 119,190 | $2.62 | $ | 852,894 | $ | 117,020 | $2.58 | $ | 794,307 | $ | 89,730 | $1.97 | ||||||||||||||||
| % of Net Sales | 38.6 | % | 5.4 | % | 37.0 | % | 5.1 | % | 35.7 | % | 4.0 | % | |||||||||||||||||||
HNI CORPORATION | VOTE BY INTERNET - www.proxyvote.com Use the internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 8, 2017. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the internet. To sign up for electronic delivery, please follow the instructions above to vote using the internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 8, 2017. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
| KEEP THIS PORTION FOR YOUR RECORDS | ||
| DETACH AND RETURN THIS PORTION ONLY | ||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | ||
| I. | PURPOSES; EFFECT ON PRIOR PLANS | 1 | |
| 1.1 | Purpose | 1 | |
| 1.2 | Effect on Prior Plans | 1 | |
| II. | DEFINITIONS | 1 | |
| III. | ADMINISTRATION | 4 | |
| 3.1 | Powers and Authority of the Committee | 4 | |
| 3.2 | Delegation | 4 | |
| 3.3 | Power and Authority of the Board | 5 | |
| 3.4 | Liability and Indemnification of Plan Administrators | 5 | |
| IV. | ELIGIBILITY | 5 | |
| V. | SHARES AVAILABLE FOR AWARDS | 5 | |
| 5.1 | Shares Available | 5 | |
| 5.2 | Accounting for Awards | 5 | |
| 5.3 | Adjustments | 5 | |
| 5.4 | Award Limitations | 6 | |
| VI. | OPTIONS AND STOCK APPRECIATION RIGHTS | 6 | |
| 6.1 | Options | 6 | |
| 6.2 | Stock Appreciation Rights | 6 | |
| VII. | STOCK AWARDS | 7 | |
| 7.1 | Restricted Stock and Restricted Stock Units | 7 | |
| 7.2 | Deferred Share Units | 7 | |
| 7.3 | Performance Share Units | 8 | |
| 7.4 | Stock Grant Awards | 8 | |
| 7.5 | Dividend Equivalents | 8 | |
| VIII. | GENERAL PROVISIONS GOVERNING AWARDS | 8 | |
| 8.1 | Consideration for Awards | 8 | |
| 8.2 | Awards Subject to Performance Measures | 8 | |
| 8.3 | Awards May Be Granted Separately or Together | 9 | |
| 8.4 | Forms of Payment under Awards | 9 | |
| 8.5 | Termination of Employment | 9 | |
| 8.6 | Limits on Transfer of Awards | 9 | |
| 8.7 | Restrictions; Securities Exchange Listing | 10 | |
| 8.8 | Tax Withholding | 10 | |
| IX. | AMENDMENT AND TERMINATION; CORRECTIONS | 10 | |
| 9.1 | Amendments to the Plan | 10 | |
| 9.2 | Amendments to Awards | 11 | |
| 9.3 | Correction of Defects, Omissions and Inconsistencies | 11 |
| X. | CHANGE IN CONTROL | 11 | |
| 10.1 | Consequences of Change in Control | 11 | |
| 10.2 | Definition of Change in Control | 12 | |
| XI. | GENERAL PROVISIONS GOVERNING PLAN | 13 | |
| 11.1 | No Rights to Awards | 13 | |
| 11.2 | Rights as Stockholder | 13 | |
| 11.3 | Governing Law | 13 | |
| 11.4 | Award Agreements | 13 | |
| 11.5 | No Limit on Compensation Plans or Arrangements | 13 | |
| 11.6 | No Right to Employment | 13 | |
| 11.7 | Severability | 13 | |
| 11.8 | No Trust or Fund Created | 14 | |
| 11.9 | Securities Matters | 14 | |
| 11.10 | No Fractional Shares | 14 | |
| 11.11 | Headings | 14 | |
| 11.12 | Nontransferability | 14 | |
| 11.13 | No Other Agreements | 14 | |
| 11.14 | Incapacity | 14 | |
| 11.15 | Release | 14 | |
| 11.16 | Notices | 14 | |
| 11.17 | Successors | 14 | |
| XII. | EFFECTIVE DATE AND TERM OF PLAN | 14 | |
| I. | AMENDMENT AND RESTATEMENT | 1 | |
| 1.1 | Amendment and Restatement | 1 | |
| 1.2 | Purpose | 1 | |
| 1.3 | Application of the Plan | ||
| II. | DEFINITIONS, GENDER AND NUMBER | 1 | |
| 2.1 | Definitions | 1 | |
| 2.2 | Gender and Number | 4 | |
| III. | ELIGIBILITY AND PARTICIPATION | 4 | |
| 3.1 | Eligibility | 4 | |
| 3.2 | Participation | 4 | |
| 3.3 | Participation After Commencement of Performance Period | 4 | |
| 3.4 | Missing Persons | 4 | |
| IV. | AWARDS | 4 | |
| 4.1 | Earned Performance Award | 4 | |
| 4.2 | Target Performance Award | 4 | |
| V. | PERFORMANCE MEASURES | 5 | |
| 5.1 | Performance Measures | 5 | |
| 5.2 | 162(m) Employees | 5 | |
| VI. | PAYMENT OF AWARDS | 5 | |
| 6.1 | Time and Form of Payment | 5 | |
| 6.2 | Special Rules for Chief Executive Officer and Chief Financial Officer | 5 | |
| VII. | TERMINATION OF EMPLOYMENT | 5 | |
| 7.1 | Termination Due to Death, Disability or Retirement | 5 | |
| 7.2 | Termination Other than Due to Death, Disability or Retirement | 6 | |
| VIII. | CHANGE IN CONTROL | 6 | |
| IX. | SALE OF OPERATING UNIT | 6 | |
| 9.1 | Sale of Subsidiary | 6 | |
| 9.2 | Sale of Other Operating Unit | 6 | |
| X. | TRANSFERS AND CHANGE IN RESPONSIBILITIES | 6 | |
| XI. | ADMINISTRATION | 7 | |
| 11.1 | Administration | 7 | |
| 11.2 | Actions of the Board | 7 | |
| 11.3 | Delegation | 7 | |
| 11.4 | Expenses | 7 | |
| 11.5 | Indemnification and Exculpation | 7 | |
| 11.6 | Powers of Committee | 7 | |
| XII. | AMENDMENT AND TERMINATION | 8 | |
| XIII. | WITHHOLDING | 8 | |
| XIV. | MISCELLANEOUS | 8 | |
| 14.1 | No Rights to Awards | 8 | |
| 14.2 | Rights as Stockholder | 8 | |
| 14.3 | Governing Law | 8 | |
| 14.4 | No Limit on Compensation Plans or Arrangements | 8 | |
| 14.5 | No Rights to Employment | 8 | |
| 14.6 | Severability | 8 | |
| 14.7 | No Trust or Fund Created | 8 | |
| 14.8 | Securities Matters | 8 | |
| 14.9 | No Fractional Shares | 8 | |
| 14.10 | Headings | 9 | |
| 14.11 | Nontransferability | 9 | |
| 14.12 | No Other Agreements | 9 | |
| 14.13 | Incapacity | 9 | |
| 14.14 | Release | 9 | |
| 14.15 | Notices | 9 | |
| 14.16 | Successors | 9 | |
| I. | AMENDMENT AND RESTATEMENT | 1 | |
| 1.1 | Amendment and Restatement | 1 | |
| 1.2 | Purpose | 1 | |
| 1.3 | Application of the Plan | ||
| II. | DEFINITIONS, GENDER AND NUMBER | 1 | |
| 2.1 | Definitions | 1 | |
| 2.2 | Gender and Number | 3 | |
| III. | ELIGIBILITY AND PARTICIPATION | 3 | |
| 3.1 | Eligibility | 3 | |
| 3.2 | Participation | 3 | |
| 3.3 | Participation After Commencement of Performance Period | 4 | |
| 3.4 | Missing Persons | 4 | |
| IV. | AWARDS | 4 | |
| 4.1 | Earned Performance Award | 4 | |
| 4.2 | Target Performance Award | 4 | |
| 4.3 | Other Awards | 4 | |
| V. | PERFORMANCE MEASURES | 4 | |
| 5.1 | Performance Measures | 4 | |
| 5.2 | 162(m) Employees | 4 | |
| VI. | PAYMENT OF AWARDS | 5 | |
| 6.1 | Time and Form of Payment | 5 | |
| 6.2 | Special Rules for Chief Executive Officer and Chief Financial Officer | 5 | |
| VII. | TERMINATION OF EMPLOYMENT | 5 | |
| 7.1 | Termination Due to Death, Disability or Retirement | 5 | |
| 7.2 | Termination Other than Due to Death, Disability or Retirement | 5 | |
| VIII. | CHANGE IN CONTROL | 5 | |
| IX. | SALE OF OPERATING UNIT | 5 | |
| 9.1 | Sale of Subsidiary | 5 | |
| 9.2 | Sale of Other Operating Unit | 5 | |
| X. | TRANSFERS AND CHANGE IN RESPONSIBILITIES | 6 | |
| XI. | ADMINISTRATION | 6 | |
| 11.1 | Administration | 6 | |
| 11.2 | Actions of the Board | 6 | |
| 11.3 | Delegation | 6 | |
| 11.4 | Expenses | 6 | |
| 11.5 | Indemnification and Exculpation | 6 | |
| 11.6 | Powers of Committee | 7 | |
| XII. | AMENDMENT AND TERMINATION | 7 | |
| XIII. | WITHHOLDING | 7 | |
| XIV. | MISCELLANEOUS | 7 | |
| 14.1 | No Rights to Awards | 7 | |
| 14.2 | Rights as Stockholder | 7 | |
| 14.3 | Governing Law | 8 | |
| 14.4 | No Limit on Compensation Plans or Arrangements | 8 | |
| 14.5 | No Rights to Employment | 8 | |
| 14.6 | Severability | 8 | |
| 14.7 | No Trust or Fund Created | 8 | |
| 14.8 | Securities Matters | 8 | |
| 14.9 | No Fractional Shares | 8 | |
| 14.10 | Headings | 8 | |
| 14.11 | Nontransferability | 8 | |
| 14.12 | No Other Agreements | 8 | |
| 14.13 | Incapacity | 8 | |
| 14.14 | Release | 8 | |
| 14.15 | Notices | 8 | |
| 14.16 | Successors | ||
| I. | PURPOSES; EFFECT ON PRIOR PLANS | 1 | |
| 1.1 | Purpose | 1 | |
| 1.2 | Effect on Prior Plans | 1 | |
| II. | DEFINITIONS | 1 | |
| III. | ADMINISTRATION | 3 | |
| 3.1 | Administration by the Board; Delegation | 4 | |
| 3.2 | Administrative Powers | 4 | |
| 3.3 | Professional Assistance; Good Faith Actions | 4 | |
| 3.4 | Liability and Indemnification of Board Members | 4 | |
| IV. | ELIGIBILITY | 4 | |
| V. | SHARES AVAILABLE FOR AWARDS | 4 | |
| 5.1 | Shares Available | 4 | |
| 5.2 | Accounting for Awards | 4 | |
| 5.3 | Adjustments | 4 | |
| VI. | OPTIONS | 4 | |
| 6.1 | Options | 4 | |
| 6.2 | Exercise Price | 5 | |
| 6.3 | Option Term | 5 | |
| 6.4 | Time, Method and Conditions of Exercise | 5 | |
| VII. | STOCK AWARDS | 5 | |
| 7.1 | Restricted Stock | 5 | |
| 7.2 | Stock Grant Awards | 5 | |
| 7.3 | Additional Cash Award to Offset Tax | 5 | |
| VIII. | GENERAL PROVISIONS GOVERNING AWARDS | 5 | |
| 8.1 | Consideration for Awards | 5 | |
| 8.2 | Awards Subject to Performance Measures | 5 | |
| 8.3 | Awards May Be Granted Separately or Together | 6 | |
| 8.4 | Forms of Payment under Awards | 6 | |
| 8.5 | Separation from Service; Vesting | 6 | |
| 8.6 | Limits on Transfer of Awards | 6 | |
| 8.7 | Restrictions; Securities Exchange Listing | 7 | |
| IX. | ELECTION TO RECEIVE FEES IN SHARES | 7 | |
| 9.1 | Election to Receive Fees in Shares | 7 | |
| 9.2 | Participation Agreement | 7 | |
| 9.3 | Issuance of Shares | 7 | |
| 9.4 | Holding Period | 7 | |
| X. | AMENDMENT AND TERMINATION; CORRECTIONS | 8 | |
| 10.1 | Amendments to the Plan | 8 | |
| 10.2 | Amendments to Awards | 8 | |
| 10.3 | Correction of Defects, Omissions and Inconsistencies | 8 | |
| X. | AMENDMENT AND TERMINATION; CORRECTIONS | 8 | |
| 10.1 | Amendments to the Plan | 8 | |
| 10.2 | Amendments to Awards | 8 | |
| 10.3 | Correction of Defects, Omissions and Inconsistencies | 8 | |
| XI. | GENERAL PROVISIONS GOVERNING PLAN | 8 | |
| 11.1 | No Rights to Awards | 8 | |
| 11.2 | Rights as Stockholder | 8 | |
| 11.3 | Governing Law | 8 | |
| 11.4 | Award Agreements | 8 | |
| 11.5 | No Limit on Compensation Plans or Arrangements | 8 | |
| 11.6 | No Right to Remain a Director | 8 | |
| 11.7 | Severability | 9 | |
| 11.8 | No Trust or Fund Created | 9 | |
| 11.9 | Securities Matters | 9 | |
| 11.10 | No Fractional Shares | 9 | |
| 11.11 | Headings | 9 | |
| 11.12 | Nontransferability | 9 | |
| 11.13 | No Other Agreements | 9 | |
| 11.14 | Incapacity | 9 | |
| 11.15 | Release | 9 | |
| 11.16 | Notices | 9 | |
| 11.17 | Successors | 9 | |
| XII. | EFFECTIVE DATE AND TERM OF PLAN | 10 | |
| 1. | Election of Directors | ||||
| Nominees | For | Against | Abstain | ||
| 1a. | Miguel M. Calado | ☐ | ☐ | ☐ | |
| 1b. | Cheryl A. Francis | ☐ | ☐ | ☐ | |
| 1c. | John R. Hartnett | ☐ | ☐ | ☐ | |
| 1d. | Larry B. Porcellato | ☐ | ☐ | ☐ | |
| 1e. | Brian E. Stern | ☐ | ☐ | ☐ | |
| For | Against | Abstain | |||
| 2. | Ratify the Audit Committee’s selection of KPMG LLP as the Corporation’s independent registered public accountant for fiscal year ending December 30, 2017. | ☐ | ☐ | ☐ | |
| Yes | No | ||||
| Please indicate if you plan to attend this meeting | ☐ | ☐ | |||
| For | Against | Abstain | |||
| 3. | Advisory vote to approve Named Executive Officer compensation. | ☐ | ☐ | ☐ | |
| The Board of Directors recommends you vote 1 YEAR on the following: | 1 year | 2 years | 3 years | Abstain | |
| 4. | Advisory vote on the frequency of future advisory votes on named executive officer compensation. | ☐ | ☐ | ☐ | ☐ |
| The Board of Directors recommends you vote FOR the following: | For | Against | Abstain | ||
| 5. | Approval of the | ☐ | ☐ | ☐ | |
| Approval of the | |||||
| ☐ | ☐ | ☐ | |||
| 7. | Approval of the HNI Corporation | ☐ | ☐ | ☐ | |
| NOTE:Such other business as may properly come before the meeting or any adjournment thereof will be | |||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] | Date |
| Signature (Joint Owners) | Date |
0000323096_1 R1.0.1.15
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement and Annual Report with Form 10-K Wrap are available at
http://investors.hnicorp.com/Docs.
Annual Meeting of Shareholders May 9, 2017 10:30 AM (CDT) This proxy is solicited by the |
| The shareholders hereby appoint(s) Steven M. Bradford and Marshall H. Bridges, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of HNI CORPORATION the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:30 AM (CDT) on May 9, 2017, at the HNI Corporate Headquarters, 600 East Second Street, Muscatine, IA 52761, and any adjournment or postponement thereof. |
| This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. |
| Continued and to be signed on reverse side |
0000323096_2 R1.0.1.15