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. )

Check the appropriate box:

 

ALAMO GROUP INC.

1627 East Walnut Street

Seguin, Texas 78155

 

 

 

 

Dear Fellow Stockholders:

 

You are cordially invited to attend the 20202021 Annual Meeting of Stockholders of Alamo Group Inc., Due to concerns relating to the COVID-19 pandemic, and to support the health and safety of our employees, directors and shareholders, the Annual Meeting will be held in a virtual-only format on Thursday, May 7, 2020,6, 2021, at 9:00 a.m. local time, atCentral Daylight Time.

 

Thank you for your support. We hope to see you at the meeting.

Chairman of the Board of Directors

March 13, 202015, 2021

 

 

 

 

 

 

 

1627 East Walnut Street

Seguin, Texas 78155

____________________

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 7, 20206, 2021

____________________

 

To the Stockholders of

Alamo Group Inc.

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Alamo Group Inc. (the “Company”) will be held at the Westin Riverwalk Hotel, 420 West Market Street, San Antonio, Texas,in a virtual-only format on Thursday, May 7, 2020,6, 2021, at 9:00 a.m. local time,Central Daylight Time, for the following purposes:

 

In accordance with the Bylaws of the Company, the Board of Directors fixed the record date for the meeting as

A complete list of stockholders entitled to vote at the meeting, showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten business days prior to the meeting, commencing April 23, 2020,22, 2021, at the offices of the Company’s Counsel, which is Clark Hill Strasburger, The Bakery Building, 2301 Broadway Street, San Antonio, Texas 78215-1157.

 

 

 

Dated: March 13, 202015, 2021

 

 

ALAMO GROUP INC.

1627 East Walnut Street

Seguin, Texas 78155

 

Proxy Statement for the Annual Meeting of Stockholders

To Be Held on May 7, 20206, 2021

GENERAL INFORMATION

 

 

Only holders of record of common stock, par value $.10 per share (“Common Stock”), of the Company at the close of business on March 13, 202015, 2021 (the “Record Date”) shall be entitled to vote at the meeting.  There were 20,000,000 authorized shares of Common Stock and 11,837,51411,899,169 shares of Common Stock outstanding on the Record Date.  Each share of Common Stock is entitled to one vote.  Any stockholder giving a proxy has the power to revoke the same at any time prior to its use by giving notice in person or in writing to the Secretary of the Company.

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock is necessary to constitute a quorum at the 20202021 Annual Meeting of Stockholders and any adjournment thereof. By signing and returning the enclosed proxy card, you authorize the persons named as proxies on the proxy card to represent you at the meeting and vote your shares. If you are not present at the meeting, your shares can be voted only when represented by a proxy either pursuant to the enclosed proxy card or otherwise. You may indicate a vote on the enclosed proxy card in connection with any of the listed proposals, and your shares will be voted accordingly. If you indicate a preference to abstain from voting, no vote will be cast.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by the inspectors of election appointed by the Company for the meeting. A majority of the outstanding shares of common stock present in person or represented by proxy constitutes a quorum for the transaction of business at the Annual Meeting. Abstentions and “broker non-votes” will be included in determining the presence of a quorum at the Annual Meeting. Where a stockholder’s proxy or ballot is properly executed and returned but does not provide voting instructions, the shares of such stockholder will nevertheless be counted as being present at the Meeting for the purpose of determining a quorum.

“Broker non-votes” occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the stockholder’s behalf.

Each director will be elected by a majority of the votes cast with respect to such director.  A “majority of the votes cast” means that the number of votes cast “for” a director exceeds the number of votes cast “against” that director.  Abstentions and "broker non-votes" are not considered to be votes cast with respect to the election of directors. Under Delaware law, if the director is not elected at the annual meeting, the director will continue to serve on the Board as a “holdover director.”  As required by the Company’s Bylaws, each director has submitted an irrevocable letter of resignation as director that becomes effective if he or she is not elected by stockholders and the Board accepts the resignation.  If a director is not elected, the Nominating/Corporate Governance Committee will consider the director’s resignation and recommend to the Board whether to

Approval of the say-on-pay proposal requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting.  Because your vote is advisory, it will not be binding on the Board or the Company. However, the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. Under New York Stock Exchange rules, if your broker holds your shares in its name, your broker is not permitted to vote your shares with respect to the say-on-pay proposal if your broker does not receive voting instructions from you. Abstentions are entitled to vote on this proposal and therefore will have the same effect as a negative vote on this proposal. Broker non-votes will have no impact on the proposal since they are not considered shares entitled to vote on the proposal.

The ratification of KPMG LLP’s appointment as the Company’s independent auditor requires the affirmative vote of a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote thereat. Abstentions are present and entitled to vote and will thus have the same effect as a negative vote on the proposal to approve and ratify the appointment of KPMG LLP.

Listed in the following table are the only beneficial owners of more than five percent of the Company's outstanding Common Stock that the Company is aware of as of February 21, 2020.19, 2021.  In addition, this table includes the outstanding voting securities beneficially owned by the Company’s directors, by its executive officers that are listed in the Summary Compensation Table, and by its directors and executive officers as a group as of February 21, 2020.19, 2021.  Unless indicated otherwise below, the address of each person named on the table below is: c/o Alamo Group Inc., 1627 East Walnut Street, Seguin, Texas 78155.

___________________

The Bylaws of the Company provide that the number of directors which shall constitute the whole Board of Directors shall be fixed and determined from time to time by resolution adopted by the Board of Directors.  Currently, the size of the Board of Directors has been fixed at seven (7) directors.  

  

Each director elected at the Annual Meeting will serve until the next Annual Meeting of Stockholders or until a successor is elected and qualified.  Unless otherwise instructed, shares represented by properly executed proxies in the accompanying form will be voted for the individuals nominated by the Board of Directors set forth below. Although the Board of Directors anticipates that the listed nominees will be able to serve, if at the time of the meeting any such nominee is unable or unwilling to serve, such shares may be voted at the discretion of the proxy holders for a substitute nominee.  The Nominating/Corporate Governance Committee of the Board of Directors recommended the individuals listed below to the Board of Directors and the Board of Directors nominated them. Certain information concerning such nominees, including all positions with the Company and principal occupations during the last five years, is set forth below. 

We have provided below information about our nominees, all of whom are incumbent directors, including their ages, years of service as directors, and business experience. We have also included information about each nominee’s specific experience, qualifications, attributes, or skills that led the Board to conclude that he/she should serve as one of our directors in light of our business and structure. All of our nominees bring to our Board extensive management and leadership experience gained through their service as executives and, in several cases, chief executive officers, chief operating officers or chief financial officers of diverse businesses. In these executive roles, they have taken hands-on, day-to-day responsibility for strategy and operations, including management of capital, risk and business cycles. In addition, several nominees bring private and public company board experience with either significant experience on other boards or long service on our board. This broadens their knowledge of board policies and processes, rules and regulations, issues and solutions.

Robert P. Bauer, age 61,62, has been a director of the Company since August 2015. Mr. Bauer serves as President and Chief Executive Officer and as a director of the L.B. Foster Company ("L.B. Foster"), a manufacturer, fabricator and distributor of products and services for transportation and energy infrastructure. L.B. Foster specializes in infrastructure maintenance material for freight and transit rail systems; construction products for highway bridges and ports; tubular products and services for pipeline and drilling applications; and precision metering solutions for pipelines. Mr. Bauer joined L.B. Foster in February of 2012. Prior to joining L.B. Foster, Mr. Bauer was President of the Refrigeration Business for Emerson Climate Technologies, a subsidiary of Emerson Electric Company, and served in various executive positions at Emerson Electric Company from 1994 until he was recruited to L.B. Foster. Mr. Bauer brings to the Board many years of experience in the global manufacturing environment, with valuable and extensive knowledge concerning global product marketing, new product development, strategic planning, corporate governance, and mergers and acquisitions.

Tracy C. Jokinen, age 51,52, has been a director of the Company since August 2016. She is the Executive Vice-President and Chief Financial Officer of Vyaire Medical, a global respiratory care company. Before joining Vyaire in March of 2020, Ms. Jokinen was the Executive Vice President and Chief Financial Officer of Acelity L.P. Inc. ("Acelity"), a leading global medical technology company, from June 2017 until October 2019 when Acelity was acquired by the 3M Company. Before joining Acelity in June of 2017, Ms. Jokinen served as the Chief Financial Officer of G&K Services, Inc. (“G&K”), a service-focused provider of branded uniform and facility services programs, from 2014 to 2017. Prior to her service as Chief Financial Officer of G&K, Ms. Jokinen spent 22 years with Valspar Corporation (“Valspar”), a global manufacturer of paints and coatings, in various positions of increasing responsibility. Most recently, she served as Valspar’s Vice President, Corporate Finance, where she led Valspar’s tax, treasury, investor relations, internal audit, operations, finance, and corporate accounting functions. Her previous positions at Valspar included Vice President, Finance & Strategy, and Vice President, Corporate Controller and Chief Accounting Officer. Ms. Jokinen's extensive and varied management experience, a significant portion of which was within the manufacturing sector, provides the Company with meaningful financial and accounting expertise as well as useful problem solving skills relevant to a large multinational manufacturing company.

Richard W. Parod, age 66,67, was appointed a director of the Company on December 14, 2017. Mr. Parod was the President and Chief Executive Officer and a director of the Lindsay Corporation ("Lindsay") from April 2000 until his retirement on December 1, 2017. Prior to Lindsay, Mr. Parod served as the Vice President and General Manager of the Toro Company's Irrigation Division from 1997 to 2000. Toro is a leading worldwide provider of outdoor turf, landscape, underground utility construction, irrigation and related equipment. In his role as President and CEO with Lindsay, a global manufacturer of agricultural and infrastructure equipment, Mr. Parod gained valuable executive leadership experience and he brings meaningful expertise in many areas relevant to the Company, including manufacturing operations, product development, sales and marketing, strategic planning, accounting and corporate governance.

Ronald A. Robinson, age 67,68, has been President, Chief Executive Officer and a director of the Company since 1999.  Mr. Robinson previously was President of Svedala Industries, Inc. ("Svedala"), the U.S. subsidiary of Svedala Industries AB of Malmo, Sweden, a leading manufacturer of equipment and systems for the worldwide construction, mineral processing and materials handling industries.  Mr. Robinson joined Svedala in 1992 when it acquired Denver Equipment Company of which he was Chairman and Chief Executive Officer.  Mr. Robinson has a deep knowledge and understanding of our Company and our lines of business. Mr. Robinson has demonstrated his leadership abilities and his commitment to our Company. In December 2020, Mr. Robinson informed the Board of Directors of his intention to retire by mid-year 2021 and upon the appointment of his successor. The Board has been preparing for such a transition in Company leadership and anticipates naming a new President and CEO as Mr. Robinson's successor in the near term. It is Mr. Robinson's intention to remain as a member of the Company's Board of Directors following his retirement as President and CEO.

Lorie L. Tekorius, age 52,53, has been a director of the Company since December 2019. Ms. Tekorius is President and Chief Operating Officer of The Greenbrier Companies, Inc. ("Greenbrier"). Greenbrier is one of the leading designers, manufacturers and marketers of railroad freight car equipment in North America, Europe and South America. The company manufactures and markets marine barges in North America and is also a leading provider of freight railcar wheel services, parts, repair and refurbishment in North America. Ms. Tekorius has served as Greenbrier’s Chief Operating Officer since August 2018 and was promoted to President in August 2019. She has served in various management positions for the company since 1995, most recently as Executive Vice President and Chief Operating Officer and, prior to that, as Executive Vice President and Chief Financial Officer. Ms. Tekorius provides the Company with highly relevant experience in finance, accounting, public company governance, strategic planning, and global manufacturing operations.

    

INFORMATION CONCERNING DIRECTORS

 

None of the nominees for director or the executive officers of the Company has a familial relationship with any of the other executive officers or other nominees for director. In accordance with our Corporate Governance Guidelines, no director may serve on more than three public company boards of directors (including the Company's Board).  Mr. Etchart has served as director of Graco Inc., a publicly traded company, since 2010 and is a member of the Audit and Compensation Committees of Graco. Mr. Etchart has also served as a director of the WD-40 Company, a publicly traded company, since December of 2016 where he is currently the chairman of the Nominating and Governance Committee and a member of the Finance Committee. Mr. Parod has served as a director of Raven Industries, Inc., a publicly traded company, since December of 2017 and is a member of their Audit Committee and Nominating/Corporate Governance Committee. Mr. Parod also serves on the advisory board of CPM, which is a privately held company. Ms. Jokinen serves as a director of Candela Medical, which is a privately held company. Mr. Bauer is a director of L.B. Foster, a publicly traded company, where he also serves as President and Chief Executive Officer.  Except as disclosed above, none of the directors or nominees is a director or has been a director over the past five years of any other company which has a class of securities registered under, or is required to file reports under, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or of any company registered under the Investment Company Act of 1940, as amended.

Non-management directors may meet in executive session, without the Chief Executive Officer, at any time, and there are regularly scheduled non-management executive sessions at each meeting of the Board of Directors and Committees thereof. The Chairman of the Board and the Chair of each Committee preside over their respective executive sessions.

In determining independence, each year the Board affirmatively determines whether each director has any “material relationships” with the Company other than as a director.  When assessing the “materiality” of a director’s relationship with the Company, the Board considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation, and the frequency or regularity of the services, whether the services are being carried out at arm’s length in the ordinary course of business and whether the services are being provided substantially on the same terms to the Company as those prevailing at the time from unrelated parties for comparable transactions.

Stockholders and other interested parties may communicate with non-management directors of the Board by sending their correspondence to the Corporate Secretary, Alamo Group Inc., 1627 East Walnut Street, Seguin, Texas 78155.

 

 

THE BOARD OF DIRECTORS HAS APPROVED THE SLATE OF DIRECTORS AND

RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL SEVEN NOMINEES, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY. PROXIES SOLICITED BY THE BOARD WILL BE VOTED "FOR" EACH NOMINEE UNLESS OTHERWISE INSTRUCTED.

CORPORATE GOVERNANCE

 

During the fiscal year ended December 31, 2019,2020, the Board held ninesix meetings.  Each incumbent director attended in person or by phone more than 75%100% of the total number of meetings of the Board and Committees on which the director served during 2019.2020. It is a policy of the Board that all directors attend the Annual Meeting of Stockholders.  All of our directors attended the Annual Meeting of Stockholders in May 2019.2020 which was held as a virtual meeting due to concerns relating to the COVID-19 pandemic. 

 

 

The Board does not have a policy on whether the same person should serve as both the CEO and Chairman of the Board or, if the roles are separate, whether the chairman should be selected from the non-employee directors or should be an employee.  The Board believes that it should have the flexibility to make these determinations at any given point in time in the way that it believes best to provide appropriate leadership for the Company at that time.

Currently, Mr. Baty serves as Chairman of the Board and Mr. Robinson serves as the CEO. The CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board sets the agenda for Board meetings and presides over meetings of the full Board. The Board believes that its current leadership structure is appropriate at this time.

The Board also has an active role in overseeing management of the Company’s risk. The Board regularly reviews information regarding the Company’s operational, financial, legal, cybersecurity, fraud and reputational risks which is usually conveyed to the Board by the senior management of the Company or by one of the Board’s Committees. The Board also continues to monitor risks posed to our European operations resulting from the UK's exit from the European Union. Because overseeing risk is an ongoing process and an inherent part of the Company’s strategic decisions, the Board discusses risk throughout the year at other meetings in relation to specific proposed actions.

The Board has delegated certain risk management oversight responsibility to the Board committees. The Audit Committee oversees risks related to the Company’s accounting, auditing, reporting, financial practices (including the integrity of the Company’s financial statements), cybersecurity, administration and financial controls, and compliance with legal and regulatory requirements. The Audit Committee also reviews and discusses the Company’s policies with respect to risk assessment and risk management. The Compensation Committee oversees risks relating to the Company’s compensation, incentive compensation, and equity-based compensation plans. The Nominating/Corporate Governance Committee oversees

 

The Company believes that its leadership structure also enhances the risk oversight function of the Board.  Our CEO regularly discusses material risks facing the Company with management and members of the Board. Our CEO, as a member of the Board, is also expected to report candidly to his fellow directors on his assessment of the material risks the Company faces, based upon the information he receives as part of his management responsibilities.

In January 2019,2020, the Audit Committee of the Board of Directors consisted of Ms. Jokinen (Chair), Ms. Tekorius and Messrs. Etchart, GrzelakBauer and Parod. In December of 2019, at the time Mr. Grzelak retired from the Board, Mr. Etchart departed from the Audit Committee, Mr. Bauer and Ms. Tekorius were appointed as new members of the Committee, and Ms. Jokinen and Mr. Parod were reappointed. The Committee met four times during fiscal 2019.2020. All Committee members were present in person or by telephone at the meetings. The duties and responsibilities of the Committee include, among other things, to:

 

 

 

 

The Audit Committee is currently comprised of four independent members of the Company’s Board of Directors. Each member of the Audit Committee is independent under applicable law and NYSE listing requirements.  The duties and responsibilities of the Audit Committee are set forth in the Audit Committee Charter, which the Board of Directors reviews on an annual basis.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control over financial reporting.  In fulfilling its oversight responsibilities in fiscal 2019,2020, the Committee reviewed and discussed with management the Quarterly Reports on Form 10-Q and the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020, including the quality, not just the acceptability, of the accounting principles, the reasonableness of significant adjustments, and the clarity of disclosures in the financial statements.

The Audit Committee discussed with the independent auditors the overall scope and plans for their audit.  They also discussed with management and the internal auditor the overall scope and plans for the Company’s assessment of internal control.  The Committee meets with the independent auditors and the internal auditor, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls over financial reporting, and the overall quality of the Company’s financial reporting.  The Committee met four times during fiscal 2019.2020.  All Committee members were present at the meetings.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board approved) that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020, for filing with the SEC.  The Audit Committee also recommended, subject to stockholder ratification, the appointment of KPMG LLP as the Company’s independent auditors for fiscal year 2020.2021.  Audit, audit-related and any permitted non-audit services provided to the Company by KPMG LLP are subject to preapproval by the Audit Committee.

 

In January 2019,2020, the Nominating/Corporate Governance Committee consisted of Messrs. Etchart (Chair), Bauer Grzelak and Ms. Jokinen. In December 2019, when Mr. Grzelak retired from the Board, Ms. Jokinen departed from the Committee, at which time Mr. Parod and Ms. Tekorius were appointed as new members of the Committee while Messrs. Etchart and Bauer were reappointed.Tekorius. During 2019,2020, the Committee held fourtwo meetings. All Committee members were present at the meetings.  The Committee has the responsibility, among other things, to:

Any stockholder of the Company who complies with the notice procedures set forth below and is a stockholder of record at the time such notice is delivered to the Company may make a director recommendation for consideration by the Nominating/Corporate Governance Committee. A stockholder may make recommendations at any time, but recommendations for consideration of a nominee at the Annual Meeting of Stockholders must be received not less than 120 days before the first anniversary of the date the proxy statement was released to stockholders in connection with the previous year’s annual meeting. Therefore, to submit a candidate for consideration for nomination at the 20212022 Annual Meeting of Stockholders, a stockholder must submit the recommendation, in writing, by December 2, 2020.2021. The written notice must demonstrate that it is being submitted by a stockholder of the Company and include information about each proposed director candidate, including name, age, business address, principal occupation, principal qualifications and other relevant biographical information. In addition, the stockholder must provide confirmation of each candidate’s consent to serve as a director. A stockholder must send recommendations to the Nominating/Corporate Governance Committee, Alamo Group Inc., 1627 East Walnut Street, Seguin, Texas 78155.

The Nominating/Corporate Governance Committee identifies, evaluates and recommends director candidates to the Board of Directors.  In identifying and recommending nominees for positions on the Board of Directors, the Nominating/Corporate Governance Committee places primary emphasis on (i) judgment, character, expertise, skills and knowledge useful to the oversight of our business; (ii) diversity of viewpoints, backgrounds, experiences and other demographics; (iii) business or other relevant experience; and (iv) the extent to which the interplay of the nominee's expertise, skills, knowledge and experience with that of other members of the Board will build a board that is active, collegial and responsive to the needs of the Company.  Although gender and diversity characteristics, such as race, ethnicity and nationality, are important considerations in the Committee’s process, the Committee and the Board of Directors do not have a formal policy with regard to the

Upon identifying a director candidate, or considering a director candidate recommended by a stockholder, the Committee initially determines the need for additional or replacement Board members and evaluates all the director candidates under the criteria described above, based on the information the Committee receives with the recommendation or otherwise possesses, which may be supplemented by certain inquiries. If the Committee determines, in consultation with other Board members including the Chair, that a more comprehensive evaluation is warranted, the Committee may then obtain additional information about the director candidate’s background and experience, including by means of interviews. The Committee will then evaluate the director candidate further, again using the evaluation criteria described above. The Committee receives input on such director candidates from other directors, and recommends director candidates to the full Board of Directors for nomination. The Committee may engage a third party to assist in the search for director candidates or to assist in gathering information regarding a director candidate’s background and experience.  If the Committee engages a third party, the Committee approves the fee that the Company pays for such services. 

 

In January 2019,2020, the Compensation Committee of the Board of Directors consisted of Messrs. GrzelakParod (Chair), Bauer and Etchart and Parod. In December of 2019, at the time Mr. Grzelak retired from the Board, Mr. Parod was appointed as Chair of the Committee, Ms. Jokinen was appointed as a new member of the Committee, and Messrs. Bauer and Etchart were reappointed.Jokinen. The Committee held three meetings in 2019.2020. All Committee members were present at the meetings.  The duties and responsibilities of the Committee include, among other things, to:

The Compensation Committee may delegate its duties and responsibilities to subcommittees as it deems necessary and advisable.  The role of our executive officers in determining compensation is discussed below under “Compensation Discussion and Analysis.”  The Compensation Committee has the authority to retain, at the Company’s expense, compensation consultants and other advisers as it deems necessary to assist in the fulfillment of its duties. In 2019,2020, the Compensation Committee engaged Pay Governance, LLC (the "Compensation Consultant") to provide consulting services regarding the Company's executive compensation program for 2020.2020 and 2021. The Compensation Consultant provided (i) comparative market data and recommendations concerning appropriate peer group companiespotential compensation adjustments to 2020 annual cash incentive compensation for the purposesCommittee to consider in light of benchmarkingthe impacts the COVID-19 pandemic had on the Company's business in 2020; (ii) recommendations concerning potential changes to PSU grants made in 2020 compensation; (ii)that were impacted by the COVID-19 pandemic; and (iii) market data information to assist with the setting of total executive compensation levels for 2020; and (iii) recommendations concerning the design of a long-term performance based compensation program to be implemented in 2020.2021.

The Compensation Consultant provided no services to the Company other than the services provided to the Compensation Committee as outlined above. The Committee assessed the independence of the Compensation Consultant under both SEC and NYSE rules and determined that the Compensation Consultant is independent and the work of the Compensation Consultant did not raise any conflict of interest.

The Board of Directors has determined that the members of the Committee are independent under the Company’s Corporate Governance Guidelines, the NYSE listing requirements, the Exchange Act and the rules and regulations of the SEC. 

Each senior executive and director is expected to meet the target ownership requirements within a period of five (5) years from the date of adoption of our guidelines (on or before May of 2023) or, for any newly hired/promoted executives or newly appointed directors, within five (5) years from the date of hire, promotion or appointment. Senior executives and directors are required to hold at least 50% of the net shares of Company stock obtained through the Company's equity compensation programs until the applicable ownership targets are achieved. Compliance with the stock ownership guidelines is measured annually and reported to the Compensation Committee. All of our NEOs and Directors, with the exception of Ms. Tekorius, who became a member of the Board in December 2019, have met share ownership requirements under our Stock Ownership Guidelines.

For purposes of calculating ownership value, we count (i) all vested Company stock owned directly and indirectly (e.g., held by a spouse or trust) including vested restricted stock and restricted stock units, (ii) all shares of time-based unvested restricted stock and restricted stock units, and (iii) the in-the-money value of vested but unexercised stock options. We do not count unvested stock options or unvested performance-based equity awards. The failure by an executive or director to achieve or to show sustained progress towards achievement of the applicable ownership target within the recommended time period(s) may result in the reduction of future long term incentive grants and/or a requirement that the executive/director retain all Company stock obtained through the vesting or exercise of any equity grants or the taking of any other action as may be appropriate.

Prohibition on Hedging and Pledging

The Company has adopted a policy prohibiting directors and executive officers from pledging Company stock as collateral for any outstanding obligation or entering into any transactions intended to hedge or offset any decrease in the market value of Company stock. Prior to 2020, the activity prohibited by our policy did not apply to the amount of Company stock held by our directors and executives in excess of their applicable share ownership requirement under the Company's Stock Ownership Guidelines. In 2020, we revised our policy concerning the hedging and pledging of Company stock to completely prohibit the hedging of Company stock by directors and executive officers of the Company and to completely prohibit the pledging of Company stock by directors and executive officers unless such pledging is expressly approved in advance by the Company's Board on an exception basis and, in the event any such approval by the Board is granted, pledging is only permissible with respect to Company stock held in excess of the share ownership requirement under our Stock Ownership Guidelines. To date, there have been no approvals provided by our Board with respect to pledging activity by any of our executive officers. Our policy concerning hedging and pledging of Company stock only applies to directors and executive officers of the Company and not to our general employee population.

In 2019, we began an important initiative focused on increasing transparency regarding our environmental, social and governance priorities. We believe sustainability is a critical consideration for all aspects of our business and we are committed to promoting a corporate culture that builds sustainability into our strategic planning while incorporating it into our day-to-day business operations. Our efforts in this area have led to the development of a sustainability framework focused on the following three key areas:

More details concerning our sustainability program can be found in our inauguralsecond annual Sustainability Report (published in March 2020)2021) which may be viewed on the Company's website under the "Our Commitment" tab. Because we are committed to making ongoing improvements in our sustainability practices over time, we felt it was important to measure certain key indicators on an annual basis as follows:

We chose the above metrics based on the Sustainability Accounting Standards Board ("SASB") standard for the Industrial Machinery and Goods Industry category. We have established future goals for the above indicators against which we will measure our ongoing performance as outlined in greater detail in our sustainability report.

We recognize that strong corporate governance contributes to long-term stockholder value. Accordingly, we are committed to sound governance practices including those described below:below.

 

The Company or one of our subsidiaries may occasionally enter into transactions with certain “related persons.”  Our Board has adopted a written Related Person Transactions Policy (the “Policy”) governing the approval or ratification of Related Person Transactions by the Audit Committee or all of the disinterested members of the Board, if necessary.

 

For purposes of the Policy, a Related Person Transaction generally means any transaction outside the normal course of business and not arms-length involving an amount in excess of $120,000 cumulatively within a twelve month period in which

 

Prior to entering into the Related Person Transaction, (a) the Related Person, (b) the director, executive officer, nominee or beneficial owner who is an immediate family member of the Related Person, or (c) the relevant business manager responsible for the potential Related Person Transaction shall provide notice to the Company's General Counsel of the facts and circumstances of the proposed Related Person Transaction. The General Counsel shall advise the Chair of the Audit Committee of any Related Person Transaction of which he becomes aware.

 Under the Policy, the Audit Committee shall consider each Related Person Transaction, unless the Audit Committee determines that the approval or ratification of such Related Person Transaction should be considered by all of the disinterested members of the Board of Directors. 

 

In considering whether to approve or ratify any Related Person Transaction, the Audit Committee or the disinterested members of the Board of Directors, as the case may be, shall consider all factors that are relevant to the Related Person Transaction, including, without limitation, the following:

There were no Related Party Transactions during the fiscal year ending December 31, 2019.2020.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

All members of the Compensation Committee are independent directors, and none are present or past employees or officers of the Company or any of its subsidiaries. None of our executive officers has served on the Compensation Committee (or its equivalent) or board of directors of another company that, in turn, had an executive officer serving on our Compensation Committee.

In 2019,2020, our NEOs were as follows:were:

The Compensation Committee has the sole responsibility for retaining compensation consultants and for determining the terms and conditions of their engagement, including fees. The Committee also evaluates and recommends compensation for directors. In 2019,2020, the Committee engaged the Compensation Consultant (Pay Governance, LLC) to provide executive compensation consulting services in connection with the Committee's review and consideration of potential compensation changes that may be appropriate in light of the Company's long-term incentive compensation program. The Compensation Consultant assistednegative business impacts resulting from the Committee in its development of an updated long-term performance-based compensation program that was implemented in early 2020. As described in further detail below, the updated performance- based program consists of both time-based RSAs that vest ratably over a three-year period and PSU awards that cliff-vest at the end of a three-year performance cycle.COVID-19 pandemic. The Compensation Consultant also provided current market information concerning NEO and executive level compensation for the Committee to consider in determining overall compensation levels in both 2020 and 2021 for our executive officers.

The Committee aims to set NEO compensation at sufficiently competitive levels within the agricultural and industrial equipment manufacturing industry, as well as within a broader group of companies of comparable size and complexity, in order to attract, retain and motivate its executive officers. For compensation benchmarking purposes, the Committee developed an appropriatea peer group of companies based on the following criteria: (i) industry commonality; (ii) annual revenues in line with ourthe Company's annual revenues; (iii) comparable total assets; (iv) comparable market capitalization; (v) similar enterprise value; and (vi) operational footprint similarities. Periodically, the Committee reviews and updates the Company's peer group in light of the above-stated evaluation criteria.

The Compensation Committee reviews and recommends all compensation for the CEO to the Board of Directors for its approval.  The Committee reviews recommendations by the CEO for the compensation of other NEOs as well as other senior managers and designated key employees.  The CEO annually reviews the performance of each NEO (other than the CEO, whose performance is reviewed by the Compensation Committee).  The recommendations based on these reviews, including salary adjustments, annual cash incentive awards and equity awards, are presented to the Compensation Committee.  The Committee reviews these recommendations and can exercise its discretion in modifying and recommending adjustments as deemed appropriate.  The decision is then recommended by the Compensation Committee to the Board for its approval.  Decisions regarding compensation for other key managers participating in the Company's Executive Incentive Plan (as described below) are made by the CEO and other NEOs of the Company and are reviewed by the Compensation Committee.

In its compensation decision-making process, the Compensation Committee considers whether the Company's executive compensation and benefits program serves the best interests of the Company's stockholders. In that respect, as part of its ongoing review of the Company's executive compensation program, the Compensation Committee considered our last advisory vote on NEO compensation which occurred at our 20192020 Annual Meeting, pursuant to which our stockholders approved the non-binding "say-on-pay" resolution by a vote in excess of 93%97% of the votes cast at the annual meeting, and determined that the Company's executive compensation philosophy, compensation objectives and compensation elements continue to be appropriate and aligned with the interests of our stockholders.

The Compensation Committee believes that compensation provided to executives on the basis of Company financial performance should be adjusted under certain circumstances in the event of a restatement of the Company's financial results. Accordingly, in 2020, the Company adopted a policy that allows recoupment or repayment of annual cash incentive and performance basedperformance-based long-term incentive compensation payments made to executive officers during the three years preceding the restatement of Company financial statements to the extent such payments exceeded the amounts that would have been payable based on the restated financial results.

The principal components of the Company's compensation program include:

We also provide our executive officers with certain perquisites as well as other benefits, including contributions to the Company's Supplemental Executive Retirement Plan and employee benefits that are generally available to non-executive employees of the Company.

The Company provides NEOs and other key managers with competitive annual base salaries to compensate them appropriately for services rendered during the fiscal year.  The Committee primarily considers the following for each of the NEOs as well as other executive officers and designated key employees:

The base salary level for Ronald A. Robinson, President and Chief Executive Officer, is recommended by the Compensation Committee and approved by the Board of Directors in February of each year. The base salary levels for all of our NEOs, other executive officers and designated key employees are also determined by the Committee based on those factors described in the preceding paragraph and are approved and generally reset on the same datesdate as for the CEO.

The Board of Directors has adopted the Company's Executive Incentive Plan (the “EIP”), which is an annual cash incentive plan that allows the Company to reward its NEOs and key managers based upon three factors: 

In February of each year, the Compensation Committee reviews proposed changes, if any, to the EIP, and then adopts incentive targets for the current year.  The Compensation Committee, in its sole discretion, is entitled to interpret the EIP.  Amounts under the EIP program are not deemed fully earned until paid.

 

EIP incentives for our CEO and other NEOs include a 75% objective component and 25% subjective component. All estimated incentives under the EIP are accrued and expensed monthly during each fiscal year and paid within 75 days afterby March 15th following the endconclusion of the fiscal year.

Generally, the primary objective incentive criteria are either the projected diluted earnings per share (EPS), return on assets (ROA), projected earnings before interest and taxes (EBIT) or pre-tax income for the Company as a whole or the relevant Divisions, subsidiaries or units, which include an appropriate accrual for the estimated payments under the EIP.  Actual earnings are actual EBIT calculated in a manner consistent with the target earnings and include adequate accruals to cover all estimated payments under the EIP.  Performance measures for any given year are subject to possible revisions or adjustments by the Compensation Committee if the Committee deems it appropriate to adjust for the effects of items such as extraordinary additions to or reversals of reserves, gains on bargain purchase, goodwill impairment, acquisitions and divestitures, restructuring costs, gains or losses from the sale of assets, and operating income and expenses of discontinued operations.  Some EIP participants may have additional objective criteria other than just EPS, ROA, EBIT or pre-tax income.  For example, some may have specific targets on inventory control, asset management, return on investment, or other criteria specific to that individual participant's area of responsibility.  In these cases, the objective targets are 75% of the total incentive target with a 25% subjective component. As a result of the uncertain tax effects associatedConsistent with the Tax Cuts and Jobs Act of 2017 (the "TCJA"),2019 design, the Board determined that a more appropriate corporate objective incentive criteria for 2018 was pre-tax income instead of the EPS criteria that had been used in prior years. The BoardCommittee continued to use adjusted pre-tax income as the corporate objective criteria for 2019corporate participants (including Mr. Robinson) and adjusted EBIT and return on assets ("ROA") for Mr. Leonard and Mr. Raborn's Divisions for 2020 EIP compensation purposes.

For 2019, the objective component of the EIP was based on one or more of the following criteria: (i) the relationship between target pre-tax income and actual pre-tax income; (ii) the relationship between target EBIT and actual EBIT; and (iii) the relationship between target ROA and actual ROA achieved, as more particularly described below for the Company or each relevant Division, subsidiary or business unit.  Target earnings for the Company and its Divisions, subsidiaries and business units are approved at the beginning of each plan year by the Board of Directors based on management’s proposed financial plan for the year considering previous earning trends, anticipated market conditions and appropriate goals for earnings growth. These targets were set in February of 2020, prior to the time when the Company could have anticipated or known the impact of the impending COVID-19 pandemic.

 

Actual payments under the objective components of the 20192020 EIP could range from 0% to 200% of established target payments on the basis of performance against the pre-established targets, established at the beginning of the year. In 2019, all NEOs, with the exception of Mr. Raborn, received a percentage of compensation for their objective components of the EIP.  In 2018 and 2017, all NEOs received a percentage of compensation for their objective components of the EIP.

 

All NEOs of the Company serve at the discretion of the Board of Directors.  The NEOs are appointed to their positions by the Board until the next annual meeting of directors or until their successors have been duly qualified and appointed.  There are currently no employment agreements with any NEOs of the Company.

20192020 GRANTS OF PLAN-BASED AWARDS

OUTSTANDING EQUITY AWARDS AT 20192020 FISCAL YEAR-END

PENSION BENEFITS

The following table quantifies the "deferred benefit" pension benefits expected to be paid from the SERP.

 

Prior to the effective date of the SERP on January 3, 2011, the applicable NEOs were not entitled to cash severance payments upon any termination of employment or upon a change in control of the Company.  Upon termination, the NEOs receive health and welfare benefits under COBRA that are generally available to all U.S.-based employees who participate in our health benefit plans and accrued vacation pay.  There are no special or enhanced termination benefits under the Company’s stock option plans for the NEOs as compared to non-named executive officer participants. For information with respect to potential payments under the SERP, see "SERP" below.

In March 2020, we entered into change in control agreements with our NEOs and certain of our other senior executive officers. Generally, each of the NEOs is entitled to receive, upon termination of employment within six months preceding or twenty-four months after a change in control of our Company (unless such termination is because of death, disability, for cause, or by the officer other than for "good reason," as defined in the change in control agreements): (a) a lump sum severance

A detailed list of the equity awards held by each NEO as of December 31, 20192020 is set forth in the “Outstanding Equity Awards at 20192020 Fiscal Year-End” table above. The NEOs do not hold any equity awards other than the stock options and the restricted stockequity awards listed in the table. Other than as provided in the following sentence, each NEO may exercise only vested options within 30 days of termination of employment (not for cause), 30 days of retirement, or 1 year of death. If the NEO is at least 62 years of age and has at least 5 years of service with the Company, the options become fully vested and may be exercised upon termination of the NEO’s employment (not for cause), retirement or death in accordance with their terms.

Stock options granted by the Company include provisions applicable upon a change in control, as defined in the applicable equity incentive plan and/or the applicable option agreement. Upon a change of control, all incentive stock options issued under our 2015 Incentive Stock Option Plan immediately vest while all non-qualified options issued under our 2009 Equity Incentive Plan immediately vest unless the award is assumed or an equitable substitution is made therefor.

The Company's outstanding restricted stock awards provide that if a NEO ceases to be a service provider for any reason before the restricted stock awards have vested, the NEO's right to the shares of restricted stock will be cancelled. In the event of a change in control, as defined in the Company's 2009 Equity Incentive Plan, all restricted stock awards immediately vest, unless the award is assumed or an equitable substitution is made therefor.

The following chart shows the value of restrictedRSAs, stock option awards and stock option awardsPSUs (assuming target payout) that would have become vested or forfeited for a termination of employment as of December 31, 2019.2020.  For this purpose, restricted stock awardsRSAs and PSUs were valued at our closing stock price as of December 31, 20192020 and stock options were valued as the difference between our closing price as of that date and the applicable exercise price of the stock options.