SCHEDULE 14A
xoo☐Preliminary☐ oConfidential,x☒Definitive Proxy Statement o☐Definitive Additional Materials o☐Soliciting Material under §240.14a-12 Payment of Filing Fee (Check the appropriate box): x☒No fee required. o☐Fee paid previously with preliminary materials. ☐ Fee computed on table belowin exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.(1)Title of each class of securities to which transaction applies:(2)Aggregate number of securities to which transaction applies:(3)Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):(4)Proposed maximum aggregate value of transaction:(5)Total fee paid:oFee paid previously with preliminary materials.oCheck box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.(1)Amount Previously Paid:(2)Form, Schedule or Registration Statement No.:(3)Filing Party:(4)Date Filed:
2020
2023 Notice of Annual Meeting of Stockholders HEXCEL 75 Years Propelling Innovation for Lightweight Solutions Since 1948
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 1, 2020
May 4, 2023
The Annual Meeting of Stockholders of Hexcel Corporation will be held on June 1, 2020May 4, 2023 at 10:30 a.m., eastern daylight time, for the following purposes:
1. | To elect eight directors to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified; |
2. | To vote on a proposal to approve, on an advisory, non-binding basis, the company’s |
3. | To vote on a proposal to approve, on an advisory, non-binding basis, the frequency of the stockholder vote to approve executive compensation; |
4. | To vote on a proposal to ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for |
5. | |
To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
As part of our precautions regarding the recent pandemic of the novel strain of coronavirus (COVID-19), thisThis year’s meeting will again be a “virtual meeting” of stockholders. You will be able to attend the meeting, vote, and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/HXL2020.HXL2023. To participate in the annual meeting, you will need the 16-digit control number that is printed in the box marked by an arrow included in the Notice of Internet Availability of Proxy Materials, the proxy card or the voting instruction card mailed to you. Online check-in will begin at 10:0015 a.m., eastern daylight time. Please allow time for the online check-in procedures. We currently intend to resume holding in-person meetings for our 2021 Annual Meeting of Stockholders and thereafter, assuming normal circumstances.
As permitted by the rules of the Securities and Exchange Commission, we are also pleased to be furnishing our proxy materials to stockholders primarily over the Internet. We believe this process expedites stockholders’ receipt of the materials, lowers the cost of our meeting, and conserves natural resources. On or about April 21, 2020,March 23, 2023, we will mail to our stockholders (other than those who previously requested electronic delivery or a printed copy of our proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials and vote online. Such notice is not a proxy card and cannot be used to vote your shares. The notice will also include instructions on how you can receive a paper copy of the proxy materials.
The Board of Directors has fixed the close of business on April 15, 2020,March 10, 2023, as the record date for determination of the stockholders entitled to vote at the meeting or any adjournments or postponements thereof.
By order of the Board of Directors
Gail E. Lehman
Executive Vice President, General Counsel and Secretary
Dated: April 21, 2020March 23, 2023
YOUR VOTE IS IMPORTANT. WE ENCOURAGE YOU TO VOTE BY PROXY BY CASTING YOUR VOTE THROUGH THE INTERNET, BY TELEPHONE, OR BY MAIL, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING ONLINE.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THESTOCKHOLDER
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 1, 2020
MAY 4, 2023
The proxy statement, annual report to stockholders and related materials are available at www.proxyvote.com.www.proxyvote.com.
2023 Proxy Statement | |||
TABLE OF CONTENTS
HEXCEL CORPORATION |
This proxy statement is furnished to the holders of common stock of Hexcel Corporation (“Hexcel”Hexcel,” the “company,” “we,” “us” or the “company”“our”) in connection with the solicitation of proxies by Hexcel on behalf of the Board of Directors of the company (the “board of directors” or the “board”) for use at the Annual Meeting of Stockholders, or any adjournments or postponements thereof, to be held on June 1, 2020May 4, 2023 (the “Annual Meeting”). The proxy materials, including this proxy statement, our annual report to stockholders, and form of proxy card, or the Notice of Internet Availability of Proxy Materials (the “Notice”), are first being distributed or made available to stockholders on or about April 21, 2020.March 23, 2023.
This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our sustainability goals, targets, commitments, plans and strategies. These statements involve risks and uncertainties and are based on current expectations, are inherently uncertain and are subject to changing assumptions. Actual results could differ materially from any future results expressed or implied by the forward-looking statements for a variety of reasons, including due to the risks and uncertainties that are discussed in our most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. We do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances, except as otherwise required by law. No assurance can be given that any plan, initiative, projection, goal, target, commitment, expectation, or prospect set forth in this proxy statement can or will be achieved. Inclusion of information in this proxy statement is not an indication that the subject or information is material to our business or operating results.
Although we include references to our website throughout this proxy statement, information contained on or accessible through our website, including any reports, is not a part of, and is not incorporated by reference into, this proxy statement or any other report or document we file with the Securities and Exchange Commission (the “SEC”). Any reference to our website throughout this proxy statement is intended to be an inactive textual reference only.
2023 Proxy Statement |
COMMITMENT TO SUSTAINABILITY
WHO WE ARE
Our Purpose We propel the future of flight, energy generation, transportation and recreation through excellence in advanced material solutions that create a better world for us all. |
Our Values | ||||||||||
Innovation We embrace the curiosity to explore ideas, the passion to challenge the impossible, and the conviction to succeed beyond expectations. | One Hexcel We thrive on the contributions each person brings to the company by valuing diversity, developing talent, fostering teamwork, and rewarding success. | Accountability We are accountable — to customers, stockholders, the community, suppliers and ourselves for achieving superior performance by expecting excellence in everything we do. | Responsibility We work with uncompromised integrity on behalf of our stockholders, employees and customers. We strive to be good citizens in the communities in which we live and work. | |||||||
OUR COMMITMENT TO SUSTAINABILITY
Hexcel is leading the transition to more lightweight, fuel-efficient transportation. Lighter yet stronger than any comparable material in the world, Hexcel advanced composites are turning the dream of cleaner, efficient, and more sustainable flight and transportation into reality today. We are committed to conducting our business in a safe, environmentally responsible, and sustainable manner where our innovation helps our customers reduce energy use, lower lifecycle operational costs and improve lifecycle efficiency.
Board Oversight of Sustainability
Our board oversees management’s efforts to integrate sustainability principles into Hexcel’s business strategy in ways that optimize opportunities to make positive impacts while advancing long-term financial and sustainability goals. Our nominating, governance and sustainability committee assists the board in its sustainability oversight responsibility by regularly reviewing the company’s sustainability strategy, including initiatives, goals, policies and disclosures in the company’s key areas of focus.
We maintain an employee sustainability strategy team, led by our Executive Vice President, General Counsel and Secretary, which includes cross-functional and business leadership. The sustainability strategy team, overseen by senior executive leadership, is responsible for leading our sustainability strategy and monitoring our sustainability initiatives, goals, policies and disclosures.
Sustainability Topic Assessment
Given the strategic importance of sustainability to Hexcel, our senior executive leadership is tasked by the board with driving results in our key areas of focus. In 2022, with the assistance of outside sustainability experts, we performed an assessment to rank the importance of key sustainability topics, by collecting the views of our internal and external stakeholders. We are using this assessment to further inform our strategic direction and priorities and to ensure we report on the issues that are most important to our stakeholders. The four key areas of focus for our sustainability program and strategy align with the Hexcel Values and are listed below, along with each sustainability topic assessed.
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COMMITMENT TO SUSTAINABILITY
Innovating for the Future |
We make products using lighter weight materials that result in less fuel consumption and thereby less environmental impact without sacrificing toughness, strength, or durability. A significant portion of our Research & Technology investment supports developing product technologies to further advance the sustainability initiatives of our customers, by increasing lightweighting and reducing the impact to the environment. We are also actively pursuing the substitution of raw materials where possible with sustainable sources. Finally, we are continuing to collaborate with recyclers globally to reduce the amount of material that goes to landfill to support our 2030 waste reduction goal.
Caring for People |
Protecting the health and safety of our workers is a top priority, and we are committed to providing a safe working environment. We use worker inputs, incident data and trends, and leading indicators to create systemic improvement plans to reduce hazardous conditions and at-risk behaviors. We also utilize employee feedback to best serve our workforce. Members of our human resources department regularly review benefits to ensure we are supporting the well-being of our employees and their families.
We believe in upholding human rights principles and observing fair labor practices within our organization and within our supply chain. Our Code of Business Conduct includes a requirement to comply with all applicable laws where Hexcel does business. We also require 100% of our key suppliers to commit, through our Supplier Code of Conduct, to comply with all applicable laws where they do business, including laws related to equal opportunity and non-discrimination, and laws prohibiting forced labor, human trafficking and slavery.
We embrace diversity, equity & inclusion (DEI), which we believe fosters innovation through new ideas and perspectives. We have committed to sourcing from diverse slates for 100% of our external salaried positions, including executive management and board of director level appointments. We engage in efforts aimed at hiring diverse talent, including targeted university recruitment and attendance at conferences promoting racial and gender diversity in engineering. We have also implemented policies and training focused on non-discrimination and harassment prevention.
Doing the Right Thing with Transparency |
Responsible governance is the cornerstone of everything we do at Hexcel. We have implemented a robust ethics and compliance program overseen by our board of directors to ensure compliance with applicable laws and regulations governing ethical business practices. Hexcel’s Code of Business Conduct establishes a comprehensive framework for compliance to promote accountability, and 100% of Hexcel’s officers, directors and salaried employees are required to certify compliance with the Code of Business Conduct annually. In 2022, reflecting a commitment to continuous improvement, we conducted company-wide ethics and compliance training and solicited feedback related to our culture of compliance using an anonymous survey at the conclusion of the training.
Our accounting, financial, and information technology reporting functions are subject to rigorous controls and audits, and the board of directors actively oversees our enterprise risk management practices. Under this process, our Chief Financial Officer and Chief Accounting Officer coordinate with subject matter experts throughout the business to identify, monitor and mitigate material risks, regularly reporting the results to our board.
At Hexcel, we are committed to the security of our products and services, the protection of employee, customer and Hexcel data and the safeguarding of our manufacturing capability. We leverage the latest encryption configurations and cybertechnologies, and continuously monitor and audit our information technology and data
assets to detect any anomalies and to respond quickly to threats that may arise. Our senior executive leadership are directly involved through a formalized response team that regularly participates in tabletop exercises simulating cyberattacks. Our board actively oversees our cybersecurity practices, with our Chief Information Officer regularly reporting directly to our board.
We also advanced our supply chain integrity efforts in 2022 by conducting sustainability surveys and various risk assessments with our top global suppliers. Further, we enhanced our Supplier Code of Conduct to include additional sustainability and cybersecurity requirements.
Stewarding Resources Responsibly |
We believe it is of utmost importance to address environmental challenges based on data-driven scientific criteria. As a result, we regularly evaluate waste and emissions data and implement projects to work toward achieving our 2030 greenhouse gas emissions reduction goal, including: instituting on-site renewable power generation where possible, such as solar projects at our manufacturing sites in Neumarkt, Austria, Casa Grande, Arizona, and Casablanca, Morocco; optimizing our processes through third party energy assessments; retrofitting existing facilities with low-energy LED lighting and installing energy efficient equipment and systems throughout our sites; utilizing LEED (green building) guidelines for new building design; and pursuing ISO 50001 (Energy Standard) and ISO 14001 (Environmental Management) certifications.
We also focus on process improvements to facilitate standardization and efficient production, which reduces material consumption and waste, and have undertaken a number of other initiatives to encourage environmentally friendly work practices, such as recycling and reuse.
Our recent achievements in environmental stewardship include:
∎Sustainability Award from Airbus Defence and Space for a new composites recycling partnership ∎MSCI upgrade to AA from A, with our issuance of 2030 sustainability goals a key contributor ∎Submitted first complete CDP Climate Change report, receiving a “C” rating |
Furthermore, we recognize our responsibility to help make the world a better place for us all through both charitable giving and volunteerism. Our Hexcel Foundation is committed to investing in local communities around the world by supporting organizations with a global focus on STEM education, health, hunger and homelessness. In 2022, the Hexcel Foundation made grants to: the Smithsonian National Air and Space Museum for its STEM in 30 program, connecting middle-school students with content that shows how science extends into real life; the Cancer Research Institute, which funds promising clinical and laboratory research to fight cancer through immunotherapies; and the Children’s Feeding Initiative, sponsored by Convoy of Hope, which provides meals and monitors the health of children in countries around the world.
Our grants to these organizations were 10% higher in 2022 compared to 2021, reflecting the company’s commitment to strong communities as part of our 2030 sustainability goals. Local Hexcel sites made additional charitable donations, sponsored events and fundraisers, participated in numerous philanthropic activities, and donated thousands of volunteer hours to support their communities.
We are committed to continued transparency related to sustainability matters. In 2023, we are developing a sustainability dashboard to report progress against our 2030 sustainability goals and expect to provide disclosures aligning with one or more recognized disclosure frameworks. For more information, please visit our website: www.hexcel.com/sustainability/ |
2023 Proxy Statement | ii |
2023 PROXY STATEMENT SUMMARY
20202023 PROXY STATEMENT SUMMARY
This summary highlights selected information contained in this proxy statement. Please read the entire proxy statement carefully before voting your shares.
The Meeting
TO BE HELD | May 4, 2023 | |
TIME 10:30 a.m., eastern daylight time | ||
VIRTUAL MEETING www.virtualshareholdermeeting.com/HXL2023 |
RECORD DATE March 10, 2023 | |||
You will be eligible to vote your shares of common stock at the Annual Meeting if you were a stockholder of record at the close of business on |
ProposalsProposal and Board Recommendations
Proposal No. | Proposal | Board Recommendation | See Page | |||
1 | Elect eight directors | FOR all nominees | 1 | |||
2 | Approve, on an advisory, non-binding basis, 2019 executive compensation | FOR | 55 | |||
3 | Ratify the appointment of Ernst & Young LLP as independent registered public accounting firm for 2020 | FOR | 59 |
Proposal No. | Proposal | Board Recommendation | Page No. | |||
1 | Elect eight directors | FOR all nominees | 1 | |||
2 | Approve, on an advisory, non-binding basis, 2022 executive compensation | FOR | 61 | |||
3 | Approve, on an advisory, non-binding basis, the frequency of the stockholder vote to approve executive compensation | ONE YEAR | 62 | |||
4 | Ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2023 | FOR | 71 |
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20202023 PROXY STATEMENT SUMMARY
Company HighlightsBoard Nominees
Fiscal 2019 Performance
* Chairman and CEO **Lead Director
Board Diversity
2023 Proxy Statement | iv |
2023 PROXY STATEMENT SUMMARY
Director Skills and Experience | Stanage | Campbell | Egnotovich | Gendron | Graves | Hachey | Minus | Suever | ||||||||||
Senior Leadership | ||||||||||||||||||
Financial Literacy | ||||||||||||||||||
Public Company | ||||||||||||||||||
Industry Experience | ||||||||||||||||||
Global Business | ||||||||||||||||||
Manufacturing & Operations | ||||||||||||||||||
Strategy & Marketing | ||||||||||||||||||
Technology & Innovation | ||||||||||||||||||
Sustainability | ||||||||||||||||||
Committees | ||||||||||||||||||
Audit | C | |||||||||||||||||
Compensation | C | |||||||||||||||||
Nominating, Governance & Sustainability | C |
C = Chair
Corporate Governance PracticesHighlights
We believe that our corporate governance practices generally reflect best practices consistent with Hexcel’s and our stockholders’ interests. Key features of our corporate governance practices include:
BOARD INDEPENDENCE | ∎Seven of eight director nominees are independent |
∎Independent lead director empowered with broad responsibilities and governance duties ∎ CEO is the only management director ∎ All board committees are composed exclusively of independent directors |
BOARD PRACTICES | ∎ Annual elections for all directors ∎Majority voting policy triggering resignation in uncontested elections of directors |
∎Annual board and board committee self-evaluations, and peer review of individual directors every other year ∎ Regular review of committee chair and member rotation ∎ Mandatory retirement age of 70 for directors ∎ Regular executive sessions of board and committees without management present ∎ Director resignation policy for material changes in principal occupation ∎ Limits on director “overboarding” |
OTHER BEST PRACTICES | ∎ One class of stock with equal voting rights ∎ Comprehensive enterprise risk, succession and business strategy oversight ∎Policies prohibiting hedging and pledging Hexcel stock by directors and officers ∎ Robust stockholder engagement and outreach to allow for management and the board to understand and consider issues that matter most to stockholders, including executive compensation, corporate governance practices and sustainability matters |
Stock Ownership
ANNUAL BASE SALARY/CASH RETAINER FEE
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2023 PROXY STATEMENT SUMMARY
Executive Compensation Highlights
Our compensation philosophy is to deliver pay for performance that is aligned with stockholders’ interests, and we follow a number of compensation practices designed to provide a level of performance that creates sustainable value for our stockholders.
Annual |
Pay for performance – 84% of target CEO pay in |
No excise tax gross-up under severance agreements |
Challenging performance targets under short-term | No repricing of any stock options, including underwater stock options, without stockholder approval | |||||||||
Multi-year vesting period for equity incentive awards | No dividends on performance share awards or restricted stock units unless performance goals or time-based vesting conditions are met | |||||||||
Caps on incentive payouts | No pledging, hedging or short selling by our directors or by any Hexcel employee, including executive officers | |||||||||
Robust stock ownership guidelines – 6x base salary for CEO | No excessive executive perquisites | |||||||||
Stockholder Engagement and Returning to Traditional Compensation Practices
In the spring of 2022 and again in the fall of 2022, in response to the low Say-on-Pay support at the 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”), the chair of our compensation committee and certain senior executives engaged with a significant number of our stockholders on various topics, including executive compensation.
Spring 2022 Outreach 75% of our outstanding shares | Stockholders representing 44% of our outstanding shares elected to meet with management, including each of our top 5 largest institutional investors | Fall 2022 Outreach 73% of our outstanding shares | Stockholders representing 36% of our outstanding shares elected to meet with management, including 4 of our top 5 largest institutional investors, with stockholders representing 26% of our outstanding shares confirming no call was necessary |
Key Highlights | ||||||||
Following a brief transition period to address the impact of the global pandemic, due in part to feedback received from our stockholders, Hexcel is returning to its steady-state executive | ||||||||
Core financial metrics for performance share awards reintroduced ∎ For 2022, Return On Invested Capital (25% weighting) and Relative EPS Growth (25% weighting), measured over a 3-year period, included as metrics for performance share awards with weighting for Incremental Adjusted EBIT Leverage reduced to 50% ∎ For 2023, Return On Invested Capital (50% weighting) and Relative EPS Growth (50% weighting), measured over a 3-year period, and Incremental Adjusted EBIT Leverage eliminated | ||||||||
Continuing focus on performance-based equity for executive officers and no adjustments to the performance targets for in-flight long-term incentive awards ∎ For 2023, increased the allocation to performance share awards to 66.7% for the CEO and 50% for all other executive officers ∎ Zero payouts under performance share awards for three consecutive years | ||||||||
0 Payout 2018-2020 performance cycle | 0 Payout 2019-2021 performance cycle | 0 Payout 2020-2022 performance cycle | ||||||
Legacy use of excise tax gross-up eliminated | ||||||||
Restricting use of one-time equity grants ∎ Reinforced commitment not to issue one-time equity grants except under extraordinary circumstances | ||||||||
2023 Proxy Statement | vi |
2023 PROXY STATEMENT SUMMARY
Why is Hexcel holding the Annual Meeting virtually this year?
We will be hostingAfter careful consideration, the board of directors, has decided that the Annual Meeting will be a virtual meeting of stockholders, conducted exclusively online via a live via the Internet, dueaudio-only webcast, in order to an abundance of caution relatedcontinue to the coronavirus disease (“COVID-19”) pandemic. We currently intend to resume holding in-person meetingsprovide expanded access, improved communication and cost savings for our 2021 Annual Meeting of Stockholdersstockholders. We believe that hosting a virtual meeting enables more stockholders to attend and thereafter, assuming normal circumstances.participate in the meeting.
What is required in order to attend the Annual Meeting?
A summary of the information you need to attend the Annual Meeting online is provided below:
∎ | Any stockholder on the record date can attend the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/ |
∎ | Webcast starts at 10:30 a.m., eastern daylight time |
∎ | Online check-in will begin at 10: |
∎ | Please have the 16-digit control number |
∎ | Stockholders may vote and submit questions electronically while attending the Annual Meeting on the Internet |
∎ |
A webcast replay of the Annual Meeting will be available beginning on May 5, 2023 until June 4, 2023 on the Investor Relations section of our website.
What if I need technical assistance accessing or participating in the virtual Annual Meeting?
If you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual stockholderstockholders’ meeting log-in page. Technical support will be available starting at 10:0015 a.m., eastern daylight time, on June 1, 2020.May 4, 2023.
In the event of technical difficulties with the Annual Meeting, we expect that an announcement will be made on www.virtualshareholdermeeting.com/HXL2023. If necessary, the announcement will provide updated information regarding the date, time, and location of the Annual Meeting. Any updated information regarding the Annual Meeting will also be posted on
our Investor Relations section of our website at investors.hexcel.com.
Can I ask questions at the Annual Meeting?
If you would like to submit a question, you may do so by joining the virtual Annual Meeting at www.virtualshareholdermeeting.com/HXL2020,
HXL2023, entering the 16-digit control number printed in the box marked by an arrow included in the Notice, the proxy card or the voting instruction card maileddelivered to you, typing your question in the “Ask a Question” box in the Annual Meeting portal, and clicking submit. You may also submit a question in advance of the Annual Meeting at www.proxyvote.com after logging in with your 16-digit control number.
You may submit questions in advance until 11:59 p.m., eastern daylight time on May 3, 2023.
We ask that you limit your remarks to a brief question that is relevant to the Annual Meeting or our business. Questions may be ruled as out of order if they are, among other things, profane, irrelevant to our business, related to pending or threatened litigation, disorderly, or repetitious of statements already made. In addition, questions may be grouped by topic by our management with a representative question read aloud and answered. Stockholders will be limited to one question each unless time otherwise permits. Questions will be addressed in the Q&A portion of the Annual Meeting, and we maywill also respond to questions on an individual basis or, by postingif the question meets the guidelines established for the Annual Meeting, we will post answers on ourthe Investor Relations section of our website after the Annual Meeting.
Who is entitled to vote at the Annual Meeting?
You will be eligible to vote your shares of common stock at the Annual Meeting if you were a holder of our common stock at the close of business on April 15, 2020,March 10, 2023, the record date.date for the Annual Meeting. Each share of common stock that you hold will entitle you to cast one vote with respect to each matter that will be voted on at the Annual Meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with our transfer agent, American Stock Transfer and Trust Company LLC, an Equiniti company, you are considered the stockholder of record or a “record holder” with respect to those shares, and you may vote those shares in the manner described in this proxy statement.
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2023 PROXY STATEMENT SUMMARY
Most of our stockholders hold their shares as a beneficial owner through a broker, bank or other nominee, rather than directly in their own name. If your shares are held through a broker, bank or other nominee, you are considered the “beneficial owner” of
2020 PROXY STATEMENT SUMMARY
the shares. As the beneficial owner, you generally have the right to direct your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee is responsible for providing you with a voting instruction form that youfor your use to give instructions as to how your shares are to be voted.
Why did I receive a “Notice of Internet Availability of Proxy Materials” instead of a paper copy of the proxy materials?
This year, we are taking advantage of the Securities and Exchange Commission’s (the “SEC”)The SEC’s rules that allow us to furnish our proxy materials over the Internet instead of mailing a printed copy to each stockholder of record. If you receive athe Notice of Internet Availability of Proxy Materials (the “Notice”) by mail, you will not receive a printed copy of the proxy materials other than as described in this proxy statement. Instead, the Notice will instruct you as to how you may access and review the proxy materials. The Notice will also instruct you as to how you may submit your proxy over the Internet. If you receive a Notice by mail and would like to receive a printed copy of our proxy materials,you should follow the instructions for requesting proxy materials included in the Notice.
On or about April 21, 2020,March 23, 2023, we mailedwill mail the Notice to our stockholders (other than those who previously requested electronic delivery or a printed copy of our proxy materials). The proxy statement and the form of proxy relating to the Annual Meeting will be made available to our stockholders on the date that the Notice is first sent.
Using this method of delivery contributes to our sustainability efforts, expedites receipt of proxy materials by our stockholders and reduces the cost of producing and mailing the full set of proxy materials.
How do I vote?
The process for voting your shares depends on how your shares are held. Generally, as discussed above, you may hold shares as a record holder (that is, in your own name) or as a beneficial owner (that is, through a nominee, such as a broker or bank). You may also hold shares as a participant in one of our employee savingsbenefit plans.
Voting by record holders
If you are a record holder, and received your materials by mail, you may vote your shares by completing, signing, and dating the proxy card and mailing it to: Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.using the enclosed return envelope.
You also may vote prior to the Annual Meeting via the Internet, in the manner described on the proxy card or the Notice,
including by scanning the QR code provided on the Notice or proxy card with your mobile device, or via telephone, in the manner described on the proxy card.
In each case, you will need the 16-digit control number included in the Notice or the proxy card delivered to you in order to vote.
Finally, you may attend the Annual Meeting (virtually) and vote online during the Annual Meeting. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/HXL2020HXL2023 and entering the 16-digit control number that is printed in the box marked by an arrow included in the Notice or the proxy card or the voting instruction card maileddelivered to you. Please have your 16-digit number in hand when you access the website and then follow the instructions. Online check-in will begin at 10:0015 a.m., eastern daylight time. Please allow time for the online check-in procedures. Even if you plan to virtually attend the Annual Meeting, we recommend that you vote by proxy prior to the Annual Meeting so that your vote will be counted if you later decide not to attend the Annual Meeting.
Voting by beneficial holders
If you are a beneficial owner, you should receive separate instructions from your broker, bank or other nominee describing how to vote. As a beneficial owner, you have the right to instruct the person or organization holding your shares on how to vote your shares.
Voting by participants in an employee savingsbenefit plan
If you hold shares through our Employee Stock Purchase Plan or our 401(k) savings plan, you will receive a separate voting instruction form to instruct the custodian or trustee for the applicable plan as to how to vote your shares. With respect to the 401(k) savings plan, all shares of common stock for which the trustee has not received timely instructions will be voted by the trustee in the same proportion as the shares of common stock for which the trustee received timely instructions, unless inconsistent with applicable law. With respect to our Employee Stock Purchase Plan, we consider all shares of common stock for which the custodian has not received timely instructions not present for quorum purposes, and those shares will not be voted by the custodian.
Our distribution agent, Broadridge Financial Solutions, Inc. (“Broadridge”), provides proxy materials to participants in these plans on behalf of the custodian or trustee. If you are a plan participant and also a record holder, Broadridge may combine the shares registered directly in your name and the shares credited to your applicable plan account onto one proxy card. If Broadridge does not combine your shares, you will receive more than one Notice or set of proxy materials. In that case, you will need to submit a vote for each set of shares. The vote you submit via the Internet, telephone or proxy card will serve as your voting instructions to the custodian or trustee. To allow sufficient time for voting
2020 PROXY STATEMENT SUMMARY
by your custodian or trustee, your voting instructions must be received by 10:30 a.m., eastern daylight time, on May 27, 2020.1, 2023.
2023 Proxy Statement | viii |
2023 PROXY STATEMENT SUMMARY
What does it mean if I receive more than one Notice, proxy card or voting instruction form?
If your shares are held in more than one account, you will receive a Notice, a proxy card or a voting instruction form for each account. To ensure that all of your shares are voted, please follow the voting submission instructions you receive for each account.
How does the board of directors recommend that I vote?
The board recommends that you vote:
∎ | FORthe election of the eight director nominees; |
∎ | FORthe approval, on an advisory, non-binding basis, of the company’s |
∎ | ONE YEAR, on an advisory, non-binding basis,for the frequency of the advisory stockholder vote to approve executive compensation; and |
∎ | FORthe ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for |
What if I return my proxy card or otherwise vote, but do not vote for all of the proposals?
All properly voted shares that we receive prior to the deadlines described herein will be voted at the Annual Meeting. The persons designated on the proxy card as “proxies” (the “proxy holders”) will vote all shares covered by the proxy in accordance with your instructions. If no instructions are given on a valid proxy, the proxy holders will vote the shares in accordance with the board’s recommendations.
If any other matter properly comes before the Annual Meeting, the proxy holders will vote the shares in their discretion. If any director nominee becomes unavailable for election for any reason prior to the vote at the Annual Meeting, the board may reduce the number of directors to be elected or substitute another person as nominee, in which case the proxy holders will vote for the substitute nominee.
What is a “broker broker “non-vote”?
A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power with respect to that proposal and has not received voting instructions from
the beneficial owner. Under New York Stock Exchange
(“NYSE”) rules, brokers are not permitted to vote on matters that are not considered “routine,” including the election of directors, the advisory vote on the compensation of our named executive officers or the advisory vote on the frequency of the stockholder vote on the compensation of our named executive officers; therefore, if your shares are held by a broker, you must provide voting instructions if you want your broker to vote on these matters. Ratification of the appointment of Ernst & Young is considered a “routine” matter; therefore, your broker generally will have discretion to vote your shares on this proposal if you do not provide voting instructions.
How do I revoke a proxy?
If you are a record holder and have provided a proxy, you may revoke it at any time prior to the Annual Meeting by:
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If you are a beneficial owner, you should contact your broker, bank, or other nominee for instructions on how to revoke your proxy or change your vote. If you are an employee stockholder who holds shares through one of our benefit plans, you should contact the trustee or custodian for instructions on how to revoke your proxy or change your vote.
What are the quorum and vote requirements?
A quorum of stockholders is necessary to hold a valid Annual Meeting. A quorum will exist if a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting are present at the virtual annual meeting online or represented by proxy at the Annual Meeting. As of the record date, April 15, 2020, 83,490,766March 10, 2023, 84,367,756 shares of our common stock were issued and outstanding. The holders of 41,745,38442,183,879 shares will constitute a quorum at the Annual Meeting. Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present.
ix | HEXCEL CORPORATION |
20202023 PROXY STATEMENT SUMMARY
The following table indicates the vote required for approval of each matter to be presented to the stockholders at the Annual Meeting and the effect of abstentions and broker non-votes.
Required Vote | Effect of Abstentions and Broker Non-Votes | |||
Proposal 1 — Elect eight directors | Number of votes cast “for” the nominee must exceed the number of votes cast “against” that nominee. | Abstentions and broker non-votes will have no effect on the voting for this matter. | ||
Proposal 2 — Approve, on an advisory, non-binding basis, | Affirmative vote of a majority of the shares of common stock present in person (virtually) or represented by proxy and entitled to vote. | Abstentions will have the effect of a vote “against.” Broker non-votes will have no effect on the voting for this matter. | ||
Proposal 3 — Approve, on an advisory, non-binding basis, the frequency of the advisory stockholder vote to approve executive compensation | The option of one year, two years, or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders. | Abstentions and broker non-votes will have no effect on the voting for this matter. | ||
Proposal 4 — Ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for | Affirmative vote of a majority of the shares of common stock present in person (virtually) or represented by proxy and entitled to vote. | Abstentions will have the effect of a vote “against.” Broker non-votes (if any) will have no effect on the voting for this matter. There should be no broker non-votes |
How may the company solicit my proxy?
We will pay all costs of preparing, assembling, printing and distributing the proxy materials. We have retained MacKenzie Partners, Inc., to assist in soliciting proxies for a fee of approximately $15,000,$12,000, plus reasonable out-of-pocket expenses. Our employees may solicit proxies on behalf of our board through the mail, in person, by telephone or by other forms of electronic communication, without additional compensation. We will reimburse brokers, banks and other nominees who hold shares of common stock in their names for the expenses of furnishing proxy materials to beneficial owners of the shares.
How will the votes at the Annual Meeting be tabulated?
At the Annual Meeting, Broadridge will tabulate all votescast online during the Annual Meeting or by proxy. Its officers, employees or employeesagents will serve as inspectors of election.
Where will I find the voting results on the proposals presented at the Annual Meeting?
We intend to announce the preliminary voting results at the Annual Meeting. We will publish the final voting results in a Current Report on Form 8-K that we will file with the SEC, within four business days following the Annual Meeting.
How may I obtain a copy of the Annual Report and proxy materials?
We will provide by mail or by email, without charge, a copy of our Annual Report on Form 10-K for the year ended December 31, 20192022 (not including exhibits and
documents incorporated by reference), this proxy statement, and the Annual Report and proxy materials for future Annual Meetings (once available) at your request. Please follow the instructions as set forth in the Notice, or you may direct all requestsyour request to Hexcel Corporation, Attention: Vice President, Investor Relations, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901, or by email to InvestorRelations@hexcel.com. These materials also are available, free of charge, at www.proxyvote.com and on our website at www.hexcel.com. Requests for materials relating to the Annual Meeting must be made by May 18, 2020April 20, 2023 to facilitate timely delivery.
2023 Proxy Statement | x |
2023 PROXY STATEMENT SUMMARY
Several stockholders live at my address. Why did we receive only one copy of the Notice or one set of proxy materials?
We typically deliver only one copy of the Notice or one set of the proxy materials to multiple stockholders at the same address, unless we have received contrary instructions from one or more of the stockholders. We will, upon written or oral request, promptly deliver a separate copy of the Notice or proxy materials to a stockholder at a shared address to which a single copy was delivered. Record holders who wish to receive a separate copy of the Notice or proxy materials in the future, or record holders sharing an address who wish to receive a single copy of the Notice or proxy materials in the future, should notify our company’s Corporate Secretary at Hexcel Corporation, Attention: Corporate Secretary, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901, by email to CorporateSecretary@hexcel.com, or by telephone at +1 (203) 969-0666. Beneficial owners who have the same address and wish to receive a separate copy of the Notice or proxy materials in the future should contact their broker, bank, or other nominee.
PROPOSAL 1—ELECTION OF DIRECTORS
PROPOSAL 1—ELECTION OF DIRECTORS
At the Annual Meeting, eight directors will be elected to hold office until the 20202024 Annual Meeting of Stockholders and until their successors are duly elected and qualified. All nominees identified in this proxy statement for election to the board are currently serving as directors of the company.
Majority Voting Standard for Election of Directors
Our Bylaws provide for a majority voting standard for the election of directors in uncontested elections. Under this standard, which will apply to the election of directors at the Annual Meeting, a director nominee will be elected only if the number of votes cast “for” that nominee exceeds the number of votes cast “against” that nominee. Broker non-votes and abstentions will have no effect on the outcome of the vote. If a nominee who currently is serving as a director is not re-elected,elected or reelected, Delaware law provides that the director will continue to serve on the board. However, each incumbent director nominee standing for re-electionelection or reelection must submit an irrevocable resignation in advance of the stockholder vote regarding the election of directors. The resignation is contingent upon both the director not receiving the required vote for re-electionelection or reelection and the board’s acceptance of the resignation, which the board, in its discretion and in accordance with the procedures described below, may reject if it deems such rejection to be in the best interestinterests of the company.
Prior to the board’s determination to accept or reject thea resignation, the nominating, governance and corporate governancesustainability committee, composed entirely of independent directors, will make a recommendation to the board with respect to the tendered resignation. The board mustwill take action on the committee’s recommendation within 90 days following the meeting at which the election of directors occurred. An incumbent director whose resignation is the subject of the board’s determination is not permitted to participate in the deliberations or votes of the committee or the board regarding the acceptance of the resignation.
In the case of contested elections (a situation in which the number of nominees exceeds the number of directors to be elected, which is not the case with respect to the election of directors at the Annual Meeting), a plurality voting standard will apply.apply, and the directors with the highest number of “for” votes will be elected.
2023 Proxy Statement |
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PROPOSAL 1—Election of DirectorsELECTION OF DIRECTORS
Information Regarding the Directors
All but one of our current directors Lynn Brubaker, who indicated to the board that she wishes to retire, have been nominated for re-electionreelection to the board. Effective as of the date of the Annual Meeting, the number of directors will be reduced to eight. The nominating and corporate governance committee considered the following attributes inIn connection with its determination that our current directors should continue to serve on our board: familiarity with large-scale operations; industry expertiseboard, the nominating, governance and professional relationships;sustainability committee considered, among other factors, certain key attributes, experience, qualifications and skills that the abilityboard considers valuable to utilize pastensure effective oversight of the company, which we refer to as “core competencies.” These core competencies are defined in the chart below and listed in each director’s biography, as applicable. In addition to the core competencies, the nominating, governance and sustainability committee also considered the experience of certain directors in financing, mergers and acquisitions, investor relations, risk management finance, technology, operations,and compliance, and other relevant areas related to address issues we face on a recurring basis; collegiality and the ability to work together as a group; outstanding integrity and business judgment; and the ability to ask probing questions during board discussions and to carefully scrutinize significant business financing and other proposals suggested by management. In additionThe following chart summarizes the core competencies and illustrates how the current directors collectively represent these core competencies. These indicators are intended to these factors, the committee also considered the respective attributes with respect to each nominee that are listed below that nominee’s biographical information:
NICK L. STANAGE
Chairman, Chief Executive Officer and President
Hexcel Corporation
Age:61
Director Since:2013
Mr. Stanage becamebe a director and our Chief Executive Officer and President on August 1, 2013, and also became our Chairmanhigh-level summary of the Board on January 1, 2014. He has served as our President since November 2009. Mr. Stanage served as our Chief Operating Officer from May 2012 until assuming the Chief Executive Officer position. Prior to joining Hexcel, Mr. Stanage was President of the Heavy Vehicle Products group (including both Commercial Vehicle Products and Off Highway Products) at Dana Holding Corporation from December 2005 to October 2009, and served as Vice President and General Manager of the Commercial Vehicle Group at Dana from August 2005 to December 2005. From 1986 to 2005, Mr. Stanage held positions of increasing responsibility in engineering, operations and marketing with Honeywell Inc. (formerly AlliedSignal Inc.). Among the positions held by Mr. Stanage at Honeywell were Vice President Integrated Supply Chain and Technology for the Consumer Products Group from 2003 to January 2005, and Vice President and General Manager of the Aerospace Group’s Engine Systems and Accessories Division from January 2005 to August 2005. Mr. Stanage began his career as a design engineer with Clark Equipment Company. Mr. Stanage also serves onwhat the board views as the core competencies and are not a comprehensive list of directors of TriMas Corporation, as well as oneach director’s skills or contributions to the audit, compensation, and corporate governance and nominating committees of TriMas.board.
Senior Leadership | Financial Literacy | Public Company | ||||||||
Experience in senior scale or global operation | 8 out of 8 An understanding of | 7 out of 8 Experience with | ||||||||
Industry Experience | Global Business | Manufacturing & Operations | ||||||||
6 out of Expertise in the company’s industries and end markets it serves | 6 out of 8 Experience with operations and business strategy outside the U.S. | 5 out of 8 Experience with complex manufacturing/operations | ||||||||
Strategy & Marketing | Technology & Innovation | Sustainability | ||||||||
5 out of 8 Experience in or management responsibility for developing business or marketing strategies | 3 out of 8 Experience in research and development, engineering, science, digital media or technology | 2 out of 8 Experience overseeing environmental, social and other sustainability initiatives |
2 | HEXCEL CORPORATION |
PROPOSAL 1—ELECTION OF DIRECTORS
NICK L. STANAGE | ||
Chairman, Chief Executive Officer and President Hexcel Corporation Age: 64 Director Since: 2013 | ||
Core Competencies: |
∎ | Extensive experience with management, strategy, financial and operational requirements of a global manufacturing |
Substantial knowledge of the company’s industry, technologies, customers and product base |
∎ | In-depth understanding of the company’s operations, growth opportunities and challenges |
PROPOSAL 1—Election of Directors
JOEL S. BECKMAN
Retired Managing Partner
Greenbriar Equity Group LLC
Age:64
Director Since:2003
Current Committees/Committees Upon Re-election:Nominating and Corporate Governance
Mr. Beckman is a retired Managing Partner of Greenbriar Equity Group LLC, a private equity fund focused exclusively on making investments in transportation and transportation-related companies. Prior to founding Greenbriar in 2000, Mr. Beckman was a Managing Director and Partner of Goldman, Sachs & Co., which he joined in 1981. Mr. Beckman is on the board of a number of private companies, and is active in various civic organizations.Career Highlights:
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JEFFREY C. CAMPBELL
∎ | Former President of the Heavy Vehicle Products group at Dana Holding Corporation (2005-2009) |
∎ | Prior leadership roles of increasing significance at Honeywell Inc. (formerly Allied Signal) (1986-2005), including Vice President Integrated Supply Chain and Technology for the Consumer Products Group and Vice President and General Manager of the Aerospace Group’s Engine Systems and Accessories Division |
Executive Vice President and Chief Financial Officer
American Express Company
Age:59
Director Since:2003 (Lead Director)
Other Current Committees/Committees Upon Re-election:Audit (Chair), Nominating and Corporate Governance
Mr. Campbell has served as Executive Vice President and Chief Financial Officer of the American ExpressPublic Company a global services company, since August 2013. From January 2004 to June 2013, he served as Executive Vice President and Chief Financial Officer of McKesson Corporation, a leading healthcare services, information technology and distribution company. Mr. Campbell was Senior Vice President and Chief Financial Officer of AMR Corp., the parent company of American Airlines, from June 2002 to December 2003, served as a Vice President at American Airlines from 1998 to June 2002 and held various management positions of American Airlines from 1990 to 1998. Earlier in his career, Mr. Campbell worked as a certified public accountant with Deloitte, Haskins & Sells from 1986 to 1988. Mr. Campbell has been a director of Aon plc since March 2018, and is a member of its audit committee and its organization and compensation committee.Directorships:
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Vice Chairman and Chief Financial Officer Director Since: 2003 (Lead Director since 2018) | ||
Core Competencies: |
∎ | Extensive finance and accounting |
∎ | Significant experience in compliance, risk management, financing, systems solutions, investor relations, and |
∎ | Senior leadership and management positions in the commercial aviation industry |
∎ | In-depth knowledge of the |
Career Highlights:
∎ | Vice Chairman and Chief Financial Officer of American Express |
∎ | Former Executive Vice President and Chief Financial Officer of McKesson Corporation (2004-2013) |
Positions of increasing significance at American Airlines (1990-2003), including Senior Vice President and Chief Financial Officer of AMR Corp., then parent company of American Airlines |
PROPOSAL 1—Election of Directors
CYNTHIA M. EGNOTOVICH
Retired President, Aerospace Systems Customer Service
United Technologies Corporation
Age:63
Director Since:2015
Other Current Committees:Audit, Compensation
Committees Upon Re-election:Audit, Nominating and Corporate Governance (Chair)
Ms. Egnotovich served as President, Aerospace Systems Customer Service of United Technologies Corporation (“UTC”) from July 2012 to November 2013. Previously, Ms. Egnotovich served as Segment President, Nacelles and Interior Systems for Goodrich Corporation (which was acquired by UTC in July 2012) from 2007 to 2012. Ms. Egnotovich joined Goodrich in 1986 and held leadership roles of increasing significance, including Segment President of Engine Systems, Segment President of Electronic Systems and Segment President of Engine & Safety Systems. Ms. Egnotovich served as a director of The ManitowocPublic Company from 2008 to 2016, where she was a member of its audit committee and served as the chair of its compensation committee. In February 2016, she became a director and chairperson of the board of The Manitowoc Food Service Company, a spinoff of The Manitowoc Company, subsequently renamed Welbilt, Inc. Ms. Egnotovich continues to be the chairperson of Welbilt’s board and also serves as chair of its governance committee.Directorships:
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2023 Proxy Statement | 3 |
PROPOSAL 1—ELECTION OF DIRECTORS
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Retired President, Aerospace Systems Customer Service United Technologies Corporation Age: 65 Director Since: 2015 Committees: Audit; Nominating, Governance and Sustainability (Chair) | ||
Core Competencies: |
∎ | Extensive senior leadership and management experience in the aerospace industry |
∎ | Significant experience overseeing and assessing the performance of companies, as well as their accountants |
∎ | In-depth global manufacturing and public company governance experience |
THOMAS A. GENDRON
Chairman, Chief Executive Officer and President
Woodward, Inc.
Age:59
Director Since:2010
Current Committees:None
Committees Upon Re-election:Compensation
Mr. Gendron has been Chairman, Chief Executive Officer and President of Woodward, Inc. (“Woodward”), a designer, manufacturer and service provider of energy control and optimization solutions used in global infrastructure equipment, serving the aerospace, power generation and distribution and transportation markets, since 2007. He previously served Woodward as President and Chief Executive Officer from 2005 to 2007 and as President and Chief Operating Officer from 2002 to 2005. Prior to becoming President of Woodward, Mr. Gendron served in a variety of other management positions at Woodward.Career Highlights:
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∎ | Prior leadership roles of increasing significance at Goodrich Corporation (1986-2012, when acquired by United Technologies Corporation), including Segment President, Nacelles and |
Other Current Public Company Directorships:
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Former Public Company Directorships:
∎ | The Manitowoc Company (2008-2016) |
∎ | Welbilt, Inc. (2016-2022) |
THOMAS A. GENDRON | ||
Retired Chairman, Chief Executive Officer and President Age: 62 Director Since: 2010 Committees: Compensation | ||
Core Competencies: |
∎ | Extensive manufacturing, operations, strategy and marketing experience in the aerospace and |
Significant knowledge and experience in executive leadership and operational and management issues relevant to global manufacturing environments |
∎ | In-depth experience overseeing executive compensation |
PROPOSAL 1—Election of Directors
JEFFREY A. GRAVES
Chief Executive Officer and President
MTS Systems Corporation
Age:58
Director Since:2007
Current Committees:Compensation
Committees Upon Re-election:Compensation, Nominating and Corporate Governance
Since May 2012, Dr. Graves has served as Chief Executive Officer, President and a director of MTS Systems Corporation, a leading global supplier of test systems and sensors. From 2005 until May 2012, Dr. Graves served as President and Chief Executive Officer of C&D Technologies, Inc., a producer of electrical power storage systems. From 2001 to 2005, he was employed by Kemet Corporation as Chief Executive Officer (2003-2005); President and Chief Operating Officer (2002-2003); and Vice President of Technology and Engineering (2001-2002). From 1994 to 2001, Dr. Graves was employed by the General Electric Company, holding a variety of management positions in GE’s Power Systems division from 1996 to 2001, and in GE’s Corporate Research and Development Center from 1994 to 1996. Earlier, Dr. Graves was employed by Rockwell International and Howmet Corporation, now a part of Alcoa Corporation. Since 2017, he has been a member of the board of directors of FARO Technologies, Inc. and serves on its audit, compensation and governance and nominating committees. He was a member of the board of directors of C&D Technologies, Inc. from 2005 until 2012, and Teleflex Incorporated from 2007 until 2017. He holds a PhD in Materials Science and has extensive prior involvement in materials development and application processes for airframe, propulsion systems and energy fields.Career Highlights:
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∎ | Prior leadership roles of increasing significance at Woodward, Inc., including Chief Operating Officer and President (2002-2005), Vice President and General Manager of Industrial Controls (2001-2002), Vice President of Industrial Controls (2000-2001), and Director of Global Marketing and Industrial Controls’ Business Development (1999-2000) |
Former Public Company Directorships:
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4 | HEXCEL CORPORATION |
PROPOSAL 1—ELECTION OF DIRECTORS
DR. JEFFREY A. GRAVES | ||
Chief Executive Officer and President 3D Systems Corporation Age: 61 Director Since: 2007 Committees: Compensation; Nominating, Governance and Sustainability | ||
Core Competencies: |
∎ | Extensive experience in executive and management roles with companies heavily engaged in manufacturing and
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∎ | Significant experience in energy storage facilities and international market development |
Ph.D. in Materials Science, with expertise in aerospace airframes, propulsion systems and energy fields |
∎ | In-depth knowledge of the company’s product base and research and technology strategy |
PROPOSAL 1—Election of Directors
GUY C. HACHEY
Retired President and Chief Operating Officer
Bombardier Aerospace, Inc.
Age:64
Director Since:2014
Current Committees/Committees Upon Re-election:Compensation (Chair)
From May 2008 to July 2014, Mr. Hachey served as President and Chief Operating Officer of Bombardier Aerospace, Inc. Prior to joining Bombardier in 2008, Mr. Hachey held numerous roles with Delphi Corporation, including the combined positions of Vice President, Delphi Corporation and President, Delphi Europe, Middle East and Africa, as well as Executive Champion for Delphi’s global manufacturing operations. Mr. Hachey began his career in 1978 with General Motors Corporation, where he held manufacturing and engineering leadership positions in Canada and the U.S. Since January 2019, Mr. Hachey has been a member of the board of directors of Meggitt PLC, a British company whose shares are listed on the London Stock Exchange, and is a member of its audit, remuneration and nominations committees.Career Highlights:
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∎ | Former Chief Executive Officer and President of MTS Systems Corporation, a leading global supplier of test systems and sensors (May 2012-May 2020) |
∎ | Former President and Chief Executive Officer of C&D Technologies, Inc. (2005-2012) |
∎ | Prior leadership roles of increasing significance at KEMET Corporation (2001-2005) |
∎ | Variety of management and research and technology positions at the General Electric Company (1994-2001) |
Other Current Public Company Directorships:
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Former Public Company Directorships:
∎ | FARO Technologies, Inc. (2017-2021) |
∎ | MTS Systems Corporation (2012-2020) |
∎ | Teleflex Incorporated (2007-2017) |
∎ | C&D Technologies, Inc. (2005-2012) |
2023 Proxy Statement | 5 |
PROPOSAL 1—ELECTION OF DIRECTORS
GUY C. HACHEY | ||
Retired President and Chief Operating Officer Age: 67 Director Since: 2014 Committees: Compensation (Chair) | ||
Core Competencies: |
∎ | Extensive manufacturing, operations, strategy, merger & acquisition and marketing experience in |
∎ | Significant knowledge and |
∎ | In-depth experience overseeing executive compensation |
Career Highlights:
∎ | Former President and Chief Operating Officer of Bombardier |
CATHERINE A. SUEVER
Executive Vice President – Finance and Administration and Chief Financial Officer
Parker Hannifin Corporation
Age:61
Director Since:2018
Current Committees/Committees Upon Re-election:Audit
Ms. Suever has served as Executive Vice President—Finance and Administration and Chief Financial Officer of Parker Hannifin Corporation, a leading worldwide manufacturer of motion and control technologies and systems, since April 2017. Ms. Suever joined Parker Hannifin in 1987 and has held roles of increasing responsibility, including Vice President and Corporate Controller from 2010-2017; Vice President and Controller, Climate & Industrial Controls Group from 2008-2010; Assistant Treasurer in 2007; and Director, Finance and Investor Relations Support in 2006. She has also served Parker Hannifin as Manager of External Reporting and as a Division Controller and Business Unit Manager for its Gas Turbine Fuel Systems Division. Ms. Suever serves on the Board of Trustees for the National Multiple Sclerosis Society’s Ohio Buckeye Chapter. She is also a member of the CFO Council of the Manufacturers Alliance for Productivity & Innovation (MAPI), the American Institute of Certified Public Accountants (AICPA), and Financial Executives International (FEI).
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Prior leadership roles of increasing significance at Delphi Corporation, including Vice President, Delphi Corporation and President, Delphi Europe, Middle East and Africa, and Executive Champion for Delphi’s global manufacturing operations |
∎ | Variety of manufacturing and engineering leadership positions at General Motors Corporation |
Former Public Company Directorships:
∎ | Meggitt plc (2019-2022) |
DR. MARILYN L. MINUS | ||
Chair of the Department of Mechanical and Industrial Engineering Committees: Nominating, Governance and Sustainability | ||
Core Competencies: |
∎ | Extensive senior leadership experience in higher education |
∎ | Ph.D. in Polymer, Textile and Fiber Engineering, with expertise in sustainability, including the production of energy-efficient lightweight polymer-matrix nano-composite materials |
∎ | Substantial experience developing initiatives and programs that enhance cultural, racial, and socioeconomic diversity in engineering |
Career Highlights:
∎ | Professor (since July 2018) and Chair (since May 2020) of the Department of Mechanical and Industrial Engineering at Northeastern University |
∎ | Director of the Macromolecular Innovation in Nano-materials Utilizing Systems (MINUS) Laboratory (since January 2010) |
∎ | Prior roles of increasing significance at Northeastern University, including Assistant Professor (2010-2015), Associate Professor (July 2015-July 2018), and Associate Chair for Graduate and Research Affairs, Department of Mechanical and Industrial Engineering (July 2018-April 2020) |
∎ | Member of the American Society for Mechanical Engineers, American Chemical Society, Materials Research Society, Institute of Industrial and Systems Engineers, and Society for the Advancement of Material and Process Engineering |
6 | HEXCEL CORPORATION |
PROPOSAL 1—ELECTION OF DIRECTORS
CATHERINE A. SUEVER | ||
Retired Executive Vice President – Finance and Administration and Chief Financial Officer Parker-Hannifin Corporation Age: 64 Director Since: 2018 Committees: Audit | ||
Core Competencies: |
∎ | Extensive experience in finance and accounting; SEC “audit committee financial expert” |
∎ | Significant experience in compliance, risk management, financing, systems solutions and investor relations |
∎ | Senior leadership and management role at a global manufacturing organization serving both aerospace and industrial markets |
Career Highlights:
∎ | Former Executive Vice President—Finance and Administration and Chief Financial Officer of Parker-Hannifin Corporation, a leading worldwide manufacturer of motion and control technologies and systems (April 2017-December 2020) |
∎ | Prior leadership roles of increasing significance at Parker-Hannifin Corporation, including Vice President and Corporate Controller (2010-2017), Vice President and Controller, Climate & Industrial Controls Group (2008-2010), Assistant Treasurer (2007-2008), Director, Finance and Investor Relations Support (2006-2007), Manager of External Reporting and a Division Controller and Business Unit Manager for the Gas Turbine Fuel Systems Division |
∎ | Member of the American Institute of Certified Public Accountants |
Other Current Public Company Directorships:
∎ | Ingredion Incorporated, since August 2021 (audit committee) |
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFORELECTION OF EACH OF THE NOMINEES FOR DIRECTOR. |
2023 Proxy Statement | 7 |
PROPOSAL 1—Election of DirectorsELECTION OF DIRECTORS
Our board has affirmatively determined that each current member of our board of directors is independent within themeaning of the listing standards of the NYSE, other than Mr. Stanage, our Chairman of the Board, Chief Executive Officer and President. In addition, the board has determined that the members of the audit committee, compensation committee and nominating, governance and corporate governancesustainability committee are, and were during the year ended December 31, 2019,2022, independent within the meaning of the NYSE listing standards, and that members of the audit and compensation committees currently meet and, during the year ended December 31, 2019 met,including the additional independence requirements of the NYSE applicable to audit committee and compensation committee members. In making its independence determinations, the board considered the following: Ms. Brubaker and Dr. Graves are both non-employee directors of a company that is our supplier; Mr. Campbell is a non-employee director of a company that provides consulting services to us; Ms. Egnotovich is a non-employee director of a company that was, during 2021, a customer of ours; and Mr. Hachey iswas, during 2022, a non-employee director of a company that is both a customer and a supplier of ours. After considering, among other things, our sales topurchases by each company that is a customer as a percentage of our total sales, our purchases (if any) of goods or services from each company that is a supplier or service provider as a percentage of such company’s total sales, (or projected sales for 2019), and the fact that Ms. Brubaker, Mr. Campbell, Dr. GravesMs. Egnotovich and Mr. Hachey arewere not employed by the companies referenced above, the board concluded that our relationships with these companies do not impair Ms. Brubaker’s, Dr. Graves’, Mr. Campbell’s, Ms. Egnotovich’s or Mr. Hachey’s independence. In making
Board Service
Director Tenure
The company has a majority voting standard for the independence determination with respectelection of directors, as described above under “Majority Voting Standard for Election of Directors.”
Our corporate governance guidelines also provide that the nominating, governance and sustainability committee is required to Dr. Gravesconsider the previously tendered resignation of any non-employee director who retires, changes his or her employer or experiences a significant reduction in his or her professional or employment responsibilities, and Ms. Suever,recommend to the board whether to accept such resignation. The board, on the recommendation of the committee, may decline to accept any such resignation. During 2022, the previously tendered resignation of Mr. Gendron was considered thatunder this policy upon his retirement from Woodward, Inc. On April 27, 2022, upon the recommendation of the nominating, governance and sustainability committee, and after considering factors relevant to Mr. Gendron’s continued service on the board, the board rejected Mr. Gendron’s previously tendered resignation.
Our corporate governance guidelines require employee directors to resign from the board at the time when they are no longer employed by the company. In addition, it is the general policy of the company that no director having attained the age of 70 years shall be nominated for reelection or reappointment to the board.
Director Overboarding Policy
Pursuant to our corporate governance guidelines, directors may not serve on a total of more than four public company boards, and no director who serves as chief executive officersofficer of companiesa public company may serve on a total of more than three public company boards (including the board of the company of which such director is the chief executive officer). All of our current directors comply with our overboarding policy. However, we are aware that some of our stockholders have their own board membership policies that are eithermore restrictive than our policy. When a supplier ordirector joins our board and during the peer evaluation process, which most recently took place in 2021 and will occur again in 2023, we ensure that each director has sufficient time to be a customer of Hexcel. After considering, among other things, the de minimis amount of the transactions with these companies, the board concluded that our relationships with these companies do not impair Dr. Graves’ or Ms. Suever’s independence.
On January 12, 2020, we announced that we had entered into an agreement and plan of merger (the “Merger Agreement”) with Woodward and Genesis Merger Sub, Inc., a wholly owned subsidiary of Woodward (“Merger Sub”), which provided that, upon the terms and subject to the conditions set forth therein, Merger Sub would merge with and into Hexcel, with Hexcel surviving the merger as a wholly owned subsidiary of Woodward (the “Merger”). Mr. Gendron, the current Chairman of the Board, Chief Executive Officer and President of Woodward, is aproductive member of our board of directors. In February 2020, during our annual review of the independence of our directors, theand has exhibited this capacity through his or her contributions to board determineddiscussions and decision-making. Our board believes that the execution ofabove policy strikes the Merger Agreement created a material relationship between Mr. Gendronright balance by allowing for the experience gained through membership on other boards and the company, and that Mr. Gendron could not be considered independent while the Merger was pending. As a result, Mr. Gendron was removed from the compensation committee. On April 5, 2020, Hexcel and Woodward entered into an agreement to terminate the Merger Agreement (the “Termination Agreement”). In light of the termination of the Merger, and the limited continuing obligations between Hexcel and Woodward, on April 16, 2020, thetime commitment needed for engaged board determined that Mr. Gendron meets the independence requirements of the NYSE listing standards.service.
Meetings and Standing Committees of the Board of Directors
During 2019,2022, there were seven meetings of the board, and 1815 meetings in the aggregate of the fourthree standing committees of the board. Each of the incumbent directors who served on the board and its committees during 2019 attended or participated in at least 75% of the aggregate number of board meetings and applicable committee meetings held during 2019, except for Mr. Gendron who, due to his recusal in connection with the potential Merger with Woodward, attended 67% of the aggregate board meetings and applicable committee meetings, but attended all of the board and committee meetings for which he was not recused.2022. A director is expected to regularly attend and participate in meetings of the board and of the committees on which the director serves, and to attend the annual meeting of stockholders, pursuant to the company’s corporate governance guidelines. Each of the incumbentour directors attended the last annual meeting of stockholders.
During 2019,2022, the board had the following standing committees: audit committee; compensation committee; finance committee; and nominating, governance and corporate governancesustainability committee. The board may establish other special or standing committees from time to time. Members
8 | HEXCEL CORPORATION |
PROPOSAL 1—ELECTION OF DIRECTORS
of committees serve at the discretion of the board. Effective January 1, 2020, our board of directors eliminated the finance committee and shifted its delegated duties back to the board of directors. Each of the remaining three standing committees operates under a charter which is reviewed at least annually by the relevant committee and approved by the board. The charter for each committee requires that all members be independent, as required by NYSE listing standards. Our board has also adopted corporate
PROPOSAL 1—Election of Directors
governance guidelines. All committee charters and the corporate governance guidelines are available through the Investor Relations pagesection of our website, www.hexcel.com, under “Governance.” You may obtain a copy of any of these documents, free of charge, by directing your request to Hexcel Corporation, Attention: Vice President, Investor Relations, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901, or by email to InvestorRelations@Hexcel.com.
The following table provides information regarding the membership of each board committee as of December 31, 2019 and the number of meetings held during fiscal year 2019:
Nominating and | ||||
Name | Audit | Compensation | Corporate Governance | Finance |
Joel S. Beckman | ■ | Chair | ||
Lynn Brubaker | ■ | Chair | ||
Jeffrey C. Campbell | Chair | ■ | ||
Cynthia M. Egnotovich | ■ | |||
Thomas A. Gendron | Chair | ■ | ||
Jeffrey A. Graves | ■ | ■ | ||
Guy C. Hachey | ■ | |||
Catherine A. Suever | ■ | |||
Number of Meetings | 8 | 6 | 2 | 2 |
Actions by Written Consent | — | 1 | 1 | 4 |
In connection with the board’s determination in February 2020 that Mr. Gendron was no longer independent, he was removed as a member and the Chair of the compensation committee, and the board appointed Cynthia M. Egnotovich as a member and Guy C. Hachey as the Chair of the compensation committee. The following table provides information regarding the current membership of each standing board committee asand the number of the date of this proxy statement:meetings held during fiscal year 2022:
Name | Audit | Compensation | Nominating, Governance and Sustainability | |||||||
Jeffrey C. Campbell | Chair | ∎ | ||||||||
Cynthia M. Egnotovich | ∎ | Chair | ||||||||
Thomas A. Gendron | ∎ | |||||||||
Dr. Jeffrey A. Graves | ∎ | ∎ | ||||||||
Guy C. Hachey | Chair | |||||||||
Dr. Marilyn L. Minus | ∎ | |||||||||
Catherine A. Suever | ∎ | |||||||||
Number of Meetings | 8 | 5 | 2 | |||||||
Actions by Written Consent | 0 | 0 | 2 |
Assuming re-election of the following directors at the Annual Meeting, the membership of each standing board committee will be as follows, effective June 1, 2020:
The audit committee assists the board in its oversight of the integrity of our financial statements, our exposure to risk and mitigation of those risks, our compliance with legal and regulatory requirements, our independent registered public accounting firm’s qualifications, independence and performance, and our internal audit function. Additional information regarding the audit committee, including additional detail about the functions performed by the audit committee, is set forth in the Audit Committee Report included on page 5870 of this proxy statement.
All members of our audit committee meet the financial literacy requirements of the NYSE. In addition, our board has determined that Jeffrey C. Campbell and Catherine A. Suever are each an “audit committee financial expert” under SEC rules.
PROPOSAL 1—Election of Directors
The audit committee has adopted procedures for the receipt, retention and handling of complaints regarding accounting, internal controls and auditing matters by employees, stockholders or other persons. Any person with such a complaint should report it to the board as set forth under “Contacting the Board” on page 12.14. The audit committee has also adopted procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
Nominating, Governance and Corporate GovernanceSustainability Committee
The nominating, governance and corporate governancesustainability committee regularly seeks input fromof the board regarding the skills and attributes it believes new nominees should possess in order to strengthen the board; identifies and recommends to the board individuals qualified to serve as directors and on committees of the board; advises the board with respect to board and committee procedures; develops and recommends to the board, and reviews periodically,maintains our corporate governance principles; and oversees the evaluation of the board and the committees of the board; and assists the board and management. in fulfilling its oversight responsibilities relating to the company’s sustainability strategy.
The nominating, governance and corporate governancesustainability committee evaluatesoversees the evaluation of the board’s and each committee’s performance at least annually. In addition, the nominating, governance and corporate governancesustainability committee, in collaboration with the lead director, conducts a peer review of individual directors every other year. The board evaluation process is more fully described under “Board Evaluation Process” on page 1112 below.
The nominating, governance and sustainability committee also reviews, at least on an annual basis, and reports to the board on trends and changes with respect to corporate governance law, regulation, and practice and with respect to the company’s sustainability strategy, including initiatives and policies relating to environmental stewardship, corporate social responsibility and corporate culture (except where delegated to other board committees). The committee also considers any other corporate governance and sustainability issues that arise from time to time and develops related recommendations for the board to consider.
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PROPOSAL 1—ELECTION OF DIRECTORS
Director Candidate Process
Under the charter of the nominating, governance and corporate governancesustainability committee and our corporate governance guidelines, the nominating, governance and corporate governancesustainability committee is responsible for assessing the appropriate balance of criteria required of board members and, in considering potential director candidates, will consider, among other things, the background and qualifications of the potential director candidate, including knowledge, experience, diversity (such as race, gender and national origin), personal and professional integrity, business judgment, time availability in light of other commitments, potential conflicts of interest and such other factors that the nominating, governance and corporate governancesustainability committee considers appropriate in the context of the needs or stated requirements of the board.board, including the core competencies. The nominating, governance and corporate governancesustainability committee has independent authority to select and retain a search firm to assist it in identifying qualified candidates for board membership and has the sole authority to approve the search firm’s fees and terms of engagement.
WeWhile we do not have a formal policy with regard to consideration of diversity in identifying director nominees. However,nominees, both the charter of the nominating, governance and corporate governancesustainability committee and our corporate governance guidelines list diversity (such as race, gender and national origin) as one of many attributes and criteria that the committee will consider when identifying and recruiting candidates to fill positions on the board. The committee considers a broad range of diversity, including diversity with respect to experience, skill set, areas of expertise and professional background, as well asin addition to race, gender and national origin.
In 2020, the committee explicitly requested that the external search firm engaged to identify candidates for appointment to the board of directors include racially and ethnically diverse candidates in the slate for consideration and expects to include a similar requirement when engaging in general searches for board candidates in the future.
The nominating, governance and corporate governancesustainability committee will consider director candidates recommended by stockholders, as well as by other sources, including our non-management directors, our chief executive officer, and other executive officers. In considering candidates submitted by stockholders, the committee will take into consideration the needs of the board and the qualifications of the candidate, according to the criteria set forth above. To have a director candidate considered by the committee, a stockholder must submit the recommendation in writing to the Corporate Secretary at the address listed below under “Contacting the Board” so that it is received at least 120 days prior to the anniversary date of our prior year’s annual meeting of stockholders. For the 2024 Annual Meeting of Stockholders, such recommendations must be received by the Corporate Secretary no later than January 5, 2024. The stockholder must supply the following with his or her recommendation:recommendation, as well as certain other information, as described in our Bylaws:
The name and record address of the stockholder and evidence of the stockholder’s ownership of Hexcel stock; and |
∎ | ||
The name, age, business address and residence address of the candidate, a listing of the candidate’s qualifications to be a director, and the candidate’s consent to be named as a director if selected by the committee and nominated by the board. |
In connection with its evaluation, the nominating, governance and corporate governancesustainability committee may request additional information from the candidate or the recommending stockholder. The committee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder.
The nominating and corporate governance committee also periodically reviews the company’s sustainability strategy, including initiatives and policies relating to environmental stewardship, corporate social responsibility and corporate culture.
PROPOSAL 1—Election of Directors
The compensation committee articulates our compensation policy and principles, reviews and approves our compensation programs, including director compensation, and oversees our benefit plans. In this regard, the compensation committee oversees the administration of our incentive plans and may make grants, for example, of non-qualified stock options (“NQOs”), restricted stock units (“RSUs”) and performance-basedperformance share awards (“PSAs”) to executive officers, other key employees, directors and consultants; any such grants to Mr. Stanage are subject to the approval ofby our independent directors.
The compensation committee may delegate its authority to a subcommittee of its members.
Additional information regarding the compensation committee, including additional detail about the policies and principles regardingof our compensation program, and information concerning the compensation consultant retained by the compensation committee (including a description of services provided by the consultant), is set forth under “Compensation Discussion and Analysis” beginning on page 1922 of this proxy statement.
PROPOSAL 1—ELECTION OF DIRECTORS
Board Leadership Structure
As stated in our corporate governance guidelines, we do not require separation of the offices of the Chairman of the Board and Chief Executive Officer.Officer (“CEO”). The board believes that the decision as to whether the positions of Chairman and CEO should be combined or separated, and whether an executive or an independent director should serve as Chairman if the roles are split, should be based upon the particular circumstances facing the company. Maintaining a flexible policy allows the board to choose the leadership structure that best serves the interests of the company and its stockholders at any particular time. At this time, the board continues to believe that combining the roles of CEO and Chairman is in the best interest of the company and its stockholders. The board believes that it is appropriate for Mr. Stanage to hold both offices because the combined role enables decisive leadership and clear accountability and enhances our ability to communicate our strategy clearly and consistently to stockholders and other key constituencies, such as our employees and key customers and suppliers. We also believe we have additionalour board structure and board and committee oversight attributes thatprocesses serve to facilitate our maintenance of a high standard of corporate governance and effective accountability of the CEO to the board, including the following:
Each of the other directors on the board is independent; |
∎ | ||
The board has named a highly qualified lead director, whose responsibilities are described below; |
∎ | ||
Mr. Stanage’s performance and compensation is reviewed, and his compensation is recommended, by the compensation committee, subject to approval by the independent directors as a group; |
∎ | ||
The independent directors meet regularly in executive |
∎ | ||
The board regularly reviews performance, management development and succession plans for executive positions. |
Our Bylaws dictateprovide that if the Chairman of the Board is not independent, as is the case with Mr. Stanage, then the independent directors are required to designate an independent board member to serve as lead director. The independent directors have designated Mr. Campbell to serve as lead director. In addition to his authority to call a meeting of the independent directors, Mr. Campbell has the responsibilities listed below:
Oversees the flow of information to the board; |
∎ | ||
Determines the annual master agenda for board meetings with input from management and other directors; |
∎ | ||
Collaborates with the CEO to set meeting agendas and ensure that information and materials that are important to the board’s understanding of agenda items are sufficient in scope; |
∎ | ||
Oversees the board’s performance evaluations of the CEO and provides feedback directly to the CEO; |
∎ | ||
Collaborates with the nominating, governance and |
∎ | ||
Chairs executive sessions of the board and meets with the CEO to discuss matters of board concern; and |
∎ | ||
Collaborates with the nominating, governance and |
Under our corporate governance guidelines, the independentnon-management directors are required to meet as a board in executive session, without management, at eachon a regularly scheduled in person board meeting,basis, but no less than two times a year. The lead director presides at such sessions.
The board periodically reviews the board’s leadership structure and its appropriateness given the needs of the board and the company at such time. In addition, the board believes its risk oversight framework, as described under “Risk Oversight” on page 13 of this proxy statement, would be effective under a variety of leadership structures, and therefore does not materially affect its choice of structure.
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PROPOSAL 1—Election of DirectorsELECTION OF DIRECTORS
Board and committee evaluations play a critical role in ensuring the effective functioning of the board of directors. Our corporate governance guidelines assign responsibility for overseeing the annual board and committee evaluation process to the nominating, governance and corporate governancesustainability committee. The evaluation process is adopted by the board upon recommendation of the nominating, governance and corporate governancesustainability committee. The current board and committee evaluation process involves two steps. First, in each year,an annual self-evaluation by each director completes a questionnaire evaluatingof the board of directors as a whole and each standing committee of the board on which he or she serves including feedback on board and, committee effectiveness, size, composition and frequency of meetings, director access to management and the sufficiency and timeliness of information and materials provided by management, and the sufficiency of processes for risk oversight, as well as the overall mix of director skills, experience and backgrounds. The results of the survey are aggregated, summarized by the General Counsel, and presented to the nominating and corporate governance committee, which then provides a report, with recommendations of governance changes, if any, to the board and each committee. Second, every other year, a review of each individual director by his or her peer directors. The last individual director peer review is conducted, to provide feedback on the experience, background, skills, overall commitment and contribution to the effectiveness of the board of each director, with the last peer review beingwas conducted in 2019. The lead director interviews eachthe fall of the other directors to obtain an evaluation of all of the other directors, except the lead director. The chair of the nominating and corporate governance committee conducts a similar interview of each other director evaluating the lead director. Each director then receives feedback from the lead director,2021 and the lead director receives feedback fromnext one scheduled for the chairfall of the nominating and corporate governance committee; the evaluations by each director remain anonymous to the extent reasonable. If the lead director or the chair of the nominating and corporate governance committee believes that significant issues arise from the peer evaluations, he or she presents those concerns to the board.2023.
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PROPOSAL 1—ELECTION OF DIRECTORS
Risk Oversight
Board of Directors The board is actively involved in overseeing our risk management.management, both directly and through its standing committees, which provide regular reports to the board. Management presents to the board regularly regarding material risks facing the company, during which the board helps management define key risk and business continuity indicators, and determines any additional actions that should be taken to mitigate the risks. The board is regularly provided updates from leaders of our business units and engages in an in-depth strategic review where the most significant risks affecting the companys long-term plan are discussed. Our Chief Information Officer regularly reviews information technology and cybersecurity risks and the measures implemented to mitigate such risks with the board. The board regularly reviews the company's sustainability strategy with members of the companys sustainability strategy team, comprised of senior-level company employees representing each committee,of the companys business units and functional groups, including matters related to climate change and long-term emissions reduction goals. Management updates the board regularly consider potential risks. In addition, we haveon significant human capital matters related to succession planning, diversity and inclusion, employee health and safety, and talent attraction, retention and development. Audit Committee Compensation Committee Nominating, Governance & Sustainability Committee Oversees risks related to: financial statements and financial reporting and accounting and internal controls, including meeting in executive session with independent auditor and internal audit the companys ethics and compliance program regulatory compliance tax insurance currency exchange and hedging policies Oversees risks related to: board and executive compensation policies and practices welfare and benefit plans talent attraction, motivation and retentionOversees risks related to: corporate governance practices board succession sustainability strategy and initiatives, policies and long-term goals related to the companys sustainability areas of focus Senior Management The company has an active enterprise risk management program, which is designed to measure, manage and aggregate risks on an enterprise-wide basis, and provide a systematic approach to risk assessment and mitigation. Under the enterprise risk management program, management identifies and assesses various risks facing the company, including internal risks related to our operations, strategy, financial condition, and assesses suchemployees, and external risks related to our markets, geographic locations and geopolitical conditions, global supply chain, cybersecurity, regulatory environment, sustainability (including climate change), and macroeconomic outlook, taking into account the likelihood of occurrence and potential impact. Management is responsible for developing an action plan to eliminate, mitigate or monitor such risks. Management makes regular presentations to the board, no fewer than two times per year (and more frequently if circumstances warrant), regarding material risks facing the company, including internal risks related to our operations, strategy, financial condition, and employees, and external risks related to our markets, geographic locations, cybersecurity, regulatory environment, and macroeconomic outlook. Additionally, starting in the first quarter of 2020, the board has been meeting regularly to consider and discuss updates on the company’s management of the COVID-19 pandemic, including with regard to the company’s operations, financial position and liquidity, communications strategy, personnel management and government affairs engagement, among other items. At these meetings, the board discusses and reviews these risks, helps management define key risk and business continuity indicators, and determines what, if any, additional actions should be taken to mitigate these risks. In addition, each board committee is responsible for overseeing specific types of risk. The audit committee periodically reviews our currency exchange and hedging policies, insurance coverage, tax exposures and processes to ensure compliance with laws and regulations, and also reviews reports from our anonymous hotline that employees and third parties can use to report suspected violations of our Code of Business Conduct. The audit committee also regularly meets in executive session without management present with our outsourced internal audit firm and our independent registered public accounting firm to discuss areas of concern. Our compensation committee establishes compensation policies and programs that are designed to prevent incentivizing executives and employees to take on an inappropriate level of risk. The nominating and corporate governance committee is responsible for making recommendations to the board regarding succession planning for senior leadership positions, as well as the company’s initiatives and policies relating to environmental stewardship, corporate social responsibility and corporate culture. Each of our board committees delivers a report to the board, no later than the next scheduled board meeting, regarding matters considered at committee meetings that have taken place since the previous board meeting.
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13 |
PROPOSAL 1—Election of DirectorsELECTION OF DIRECTORS
On April 6, 2020, the board declared a dividend of one preferred share purchase right (a “right”) for each outstanding share of the company’s common stock and adopted a stockholder rights plan, as set forth in the rights agreement entered into as of April 6, 2020, by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent, which we refer to as the “rights agreement.” The dividend was payable on April 16, 2020 to stockholders of record of the company’s common stock as of the close of business on April 16, 2020. The stockholder rights plan was adopted in response to the extraordinary business and market dislocations resulting from the COVID-19 pandemic and the actions taken to contain it, as well as the termination of the company’s previously announced merger of equals with Woodward, as described on page 7 and page 60. The stockholder rights plan was not adopted in response to any specific takeover bid or other proposal to acquire control of the company. In general, the rights agreement works by imposing a significant penalty upon any person or group which acquires 15% or more of the outstanding common stock without the approval of the board. The rights agreement is intended to deter any person or group from triggering the rights without such acquisition first being approved by the board. If triggered by an acquiring person, the provisions of the rights agreement, among other things, will substantially dilute the equity and voting interests of any potential acquiring person unless the board approves the acquisition. If the rights become exercisable, each right will allow its holder to purchase from the company one one-hundredth of a share of Series A Junior Participating Preferred Stock (a “preferred share”) for $150.00. This portion of a preferred share will give the stockholder approximately the same dividend, voting and liquidation rights as would one share of common stock. The rights will not be exercisable until ten days after the public announcement that a person or group has become an “acquiring person” (as defined in the rights agreement) by obtaining beneficial ownership of 15% or more of the outstanding common stock. Prior to exercise, the right does not give its holder any dividend, voting, or liquidation rights. The rights will expire on April 6, 2021.Succession Planning
At least annually, theThe board regularly engages in a review of management development and succession planning to assess organizational and leadership effectiveness and conducts in-depth discussions regarding specific succession and contingency planning for all key senior leadership positions. In addition to the nominating, governance and sustainability committee’s review of the company’s human capital management actions and diversity and inclusion initiatives as part of its oversight of sustainability strategy, and the compensation committee’s review of risks relating to talent attraction, motivation and retention, during the board’s review of management development and succession planning, the full board reviews information related to the company’s diversity and inclusion metrics and initiatives, as well as other human capital strategy matters, including talent attraction, retention and development programs.
Stockholder Engagement
The company welcomes and seeks stockholder engagement throughout the year. Management, as well as all our directors,year, and management will be available to answer questions from stockholders at the Annual Meeting. In addition, company management of the company conducts stockholder outreach throughout the year to ensure management understands and the board understand and considerconsiders the issues that matter most to our stockholders. Management regularly apprises the board of relevant and topical investor feedback. We provide regular updates regarding the company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences, one-on-one meetings, earnings calls that include a question-and-answer period for analysts, investor days, and educational investor and analyst conversations. Senior management also regularly engages with individual investors at investor conferences, industry events, hosting investors at our corporate office, visiting investors at their offices and participating in teleconferences. In May 2019, we hosted an investor day event in Salt Lake City, Utah, which included a tour of the company’s facility, as well as a thorough review of the prior year’s results, discussion of the company’s long term strategy and outlook, and review of the company’s product portfolio, sustainability initiatives and capital allocation strategies. This investor day was webcast for those who could not attend in person. We also communicate with stockholders and other stakeholders through various media,other methods, including our annual report, proxy statement and other filings with the SEC, news releases, social media, webcasts and ourthe Hexcel website. We believe ongoing stockholder engagement allows us to communicate our strategy, as well as understand and effectively respond effectively to any stockholder concerns.
In the spring of 2022 and again in the fall of 2022, we engaged with a significant number of our stockholders, primarily to discuss topics related to the low Say-on-Pay support at the 2022 Annual Meeting. We answered stockholders’ questions regarding a variety of topics of interest to them, such as the impact of the COVID-19 pandemic on our business and our initiatives to realign the business in response, our return to growth, the design of our executive compensation program, board diversity and corporate governance best practices, and corporate social responsibility and sustainability matters. The chair of the compensation committee participated in a number of conversations with our stockholders, in addition to our Executive Vice President, Chief Human Resources Officer; Executive Vice President, General Counsel and Secretary (who participated in the fall 2022 engagements); and Vice President, Investor Relations.
Spring 2022 75% of our outstanding shares | Stockholders representing 44% of our outstanding shares elected to meet with management, including each of our top 5 largest institutional investors | Fall 2022 Outreach 73% of our outstanding shares | Stockholders representing 36% of our outstanding shares elected to meet with management, including 4 of our top 5 largest institutional investors, with stockholders representing 26% of our outstanding shares confirming no call was necessary |
The board of directors received regular updates related to the feedback we heard from our stockholders. The feedback we received through this engagement process was generally positive and constructive and made it clear that those stockholders who voted against the Say-on-Pay proposal at the 2022 Annual Meeting did so in response to the company’s specific pandemic-related compensation decisions made in 2021. With the effects of the pandemic largely behind us, we began to transition back to our traditional executive compensation program in 2022 and have completed the transition in 2023. More information on what we heard from our stockholders and the recent executive compensation actions taken by the compensation committee is set forth under “Compensation Discussion and Analysis” beginning on page 22 of this proxy statement.
Contacting the Board
Stockholders and other interested parties may contact the non-management members of the board or the lead director by sending their concerns to: Board of Directors, c/o Corporate Secretary, Hexcel Corporation, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901, or by email to CorporateSecretary@hexcel.com. The Corporate Secretary will review all communications and forward them to the lead director. The Corporate Secretary may, however, filter out communications that do not relate to our business activities, operations or our public disclosures, but will maintain a record of these communications and make them available to the lead director. Any communications received by the lead director regarding concerns relating to accounting, internal controls or auditing matters will promptly be brought to the attention of the audit committee and will be handled in accordance with the procedures established by the audit committee to address these matters.
14 | HEXCEL CORPORATION |
PROPOSAL 1—Election of DirectorsELECTION OF DIRECTORS
It is our policy that all of our directors, officers and employees worldwide conduct our business in an honest and ethical manner and in compliance with all applicable laws and regulations. Our board has adopted the Hexcel Code of Business Conduct, which applies to all of our directors, officers and employees worldwide, and addresses in detail our expectations with regard to conduct that fulfills our policy. The Code can be viewed on the Investor Relations section of our website, www.hexcel.com, under “Governance.” In addition, you may obtain a free copy of the Code by directing your request to Hexcel Corporation, Attention: Vice President, Investor Relations, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut 06901, or by email to InvestorRelations@Hexcel.com. Any amendment to the Code of Business Conduct (other than technical, administrative or non-substantive amendments), or any waiver of a provision of the Code that applies to our directors or executive officers, will be promptly disclosed on the Investor Relations section of our website under “Governance.”
Director Compensation in 20192022
Our non-employee
The company’s director compensation program is comprised of a mix of cash and stock-based compensation designed to enhance its ability to attract and retain highly qualified candidatesdirectors and to servealign their interests with the long-term interests of our stockholders. The program includes a cash component, which is designed to compensate non-employee directors for their service on ourthe board, and an equity component, which is designed to align the interests of non-employee directors and stockholders. The company also provides certain other benefits to non-employee directors, which are described below. Directors who are employees of the company receive no additional compensation for their service on the board.
The compensation committee regularly reviews compensation paid to our non-employee directors and makes recommendations for adjustments, as appropriate, to the full board. As part of this annual review, the compensation committee considers the significant time commitment and skill level required by each non-employee director in serving on the board and its various committees. The compensation committee seeks to maintain a market competitive director compensation program and, with the assistance of its independent compensation consultant, benchmarks our director compensation program against the peer group we use to evaluate our executive compensation program. In May 2022, the compensation committee performed its annual review of the director compensation program compared with the compensation peer group and survey data from the National Association of Corporate Directors (“NACD”). The review indicated that our directors were compensated below competitive levels for the company’s peer group and the NACD median. As a result, the board, upon the recommendation of the compensation committee, increased the annual cash retainer fee for non-employee directors by $15,000, and the nominating, governance and sustainability committee member and chair fees to align with the compensation committee member and chair fees, given the increase in committee responsibilities related to sustainability oversight.
In 2019, annual Annual non-employee director cash compensation consistedconsists of a retainer of $88,000, increased from $73,000, effective in the second quarter of 2022, plus:
$25,000 for the lead |
∎ | ||
$10,000 for each member of the audit |
∎ | ||
$7,500 for each member of the compensation |
∎ | ||
$ |
Each committee chair receives the following additional annual compensation:
∎ | ||
$12,500 for the audit committee |
∎ | ||
$7,500 for the compensation committee | ||
∎ | $7,500 for the nominating, governance and sustainability committee chair, increased from $5,000, effective in the second quarter of 2022. |
Under our non-employee director compensation program, each non-employee director is permitted to elect to receive restricted stock units (“RSUs”)RSUs in lieu of theirhis or her annual cash retainer to which they are entitled (“Retainer RSUs”). In addition, upon initial election to the board and each re-electionreelection thereafter, each non-employee director receives a grant of RSUs (“Annual RSUs”) in an amount determined by the compensation committee following its receipt of the advice of its independent compensation consultant and its consideration of other relevant factors. The grant date value of Annual RSUs issued to directors in 20192022 was $105,000. $120,000. Non-employee director RSUs vest daily over the twelve months following the date of grant and convert into an equivalent number of shares of our common stock on the first anniversary of the grant date unless the director elects to defer conversion and delivery of the shares underlying the RSUs until termination of their service as a director. Vesting of Retainer RSUs is accelerated upon any termination of service as a director. If and when cash dividends are declared on
2023 Proxy Statement | 15 |
PROPOSAL 1—ELECTION OF DIRECTORS
shares of our common stock, we provide dividend equivalents for each RSU then held by the non-employee director equal to the cash dividend that we pay to holders of our common stock, which vest at the same time as the underlying RSUs to which they relate and are paid in cash.
In addition to the annual compensation described above, if a special committee is designated by the board, each non-employee director who serves on the special committee receiveswill receive $1,000 for each meeting attended.
In October 2019, the compensation committee performed its annual review of the director compensation program compared with survey data from the National Association of Corporate Directors (“NACD”). The review indicated that our directors were compensated below competitive levels for companies of our size, with the equity portion of the director compensation pay mix slightly below the company’s peer group and the NACD median. As a result, the compensation committee and the board approved a $15,000 increase in equity grant value from $105,000 to $120,000, beginning with the 2020 Annual RSUs.
In light of the significant financial impact of the COVID-19 pandemic on the company, the board, upon recommendation of the compensation committee, reduced the cash retainer fees of the non-employee directors of the Company, including the value of any Retainer RSUs, by 50%, effective for the second quarter of 2020. The
PROPOSAL 1—Election of Directors
extent and duration of these reductions will be reassessed by the compensation committee and the board of directors as the situation evolves, and will be described in our proxy statement for next year’s annual meeting of stockholders.
Our stock ownership guidelines, which are described on page 35,41, apply to non-employee directors, as well as executive officers. All of our non-employee directors, except Ms. Suever,Dr. Minus, who was electedappointed as a director in May 2018,December 2020, are in compliance with the guidelines.
The table below summarizes the compensation paid by the company to non-employee directors for the fiscal year ended December 31, 2019:2022:
Fees Earned or | Stock | |||||||||||||||||
Paid in Cash | Awards | Total | ||||||||||||||||
Name | ($)(1) | ($)(2)(3) | ($) | Fees Earned or ($)(1) | Stock Awards ($)(2)(3) | Total ($) | ||||||||||||
Joel S. Beckman | 87,904 | 104,967 | 192,871 | |||||||||||||||
Lynn Brubaker | 93,000 | 104,967 | 197,967 | |||||||||||||||
Jeffrey C. Campbell | 125,500 | 104,967 | 230,467 | 134,163 | 119,980 | 254,143 | ||||||||||||
Cynthia M. Egnotovich | 83,000 | 104,967 | 187,967 | 103,000 | 119,980 | 222,980 | ||||||||||||
Thomas A. Gendron | 93,000 | 104,967 | 197,967 | 88,000 | 119,980 | 207,980 | ||||||||||||
Jeffrey A. Graves | 85,404 | 104,967 | 190,371 | |||||||||||||||
Dr. Jeffrey A. Graves | 94,163 | 119,980 | 214,143 | |||||||||||||||
Guy C. Hachey | 80,500 | 104,967 | 185,467 | 95,500 | 119,980 | 215,480 | ||||||||||||
David L. Pugh(4) | 30,511 | — | 30,511 | |||||||||||||||
Dr. Marilyn L. Minus | 86,750 | 119,980 | 206,730 | |||||||||||||||
Catherine A. Suever | 83,000 | 104,967 | 187,967 | 90,413 | 119,980 | 210,393 |
(1) | The amounts in this column represent the fees that were earned or paid in cash, plus the grant date fair value of Retainer RSUs granted to Mr. Campbell, Dr. Graves and |
(2) | The grant date fair value of each Annual RSU granted to directors on May |
(3) | As of December 31, |
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
Set forth below is certain information concerning each of our current executive officers as of the date of this proxy statement. For additional information concerning Mr. Stanage, who has been an executive officer of Hexcel since 2009, see “PROPOSAL 1—ELECTION OF DIRECTORS—Information Regarding the Directors” on page 2.
Name | Age | Executive Officer Since | Position(s) With Hexcel | |||
Nick L. Stanage | 61 | 2009 | Chairman of the Board; Chief Executive Officer; President; Director | |||
Patrick J. Winterlich | 50 | 2017 | Executive Vice President; Chief Financial Officer | |||
Robert G. Hennemuth | 64 | 2006 | Executive Vice President; Human Resources and Communications | |||
Gail E. Lehman | 60 | 2017 | Executive Vice President; General Counsel; Secretary | |||
Thierry Merlot | 60 | 2016 | President – Aerospace, Europe, Middle East, Africa and Asia Pacific | |||
Colleen Pritchett | 46 | 2018 | President – Aerospace, Americas | |||
Brett Schneider | 47 | 2018 | President – Industrial and Global Fibers |
PATRICK J. WINTERLICH | ||
Executive Vice President and Chief Financial Officer Executive Officer Since: 2017 Age: 53 |
PATRICK J. WINTERLICHwas appointed our Executive Vice President and Chief Financial Officer in September 2017. Mr. Winterlich joined Hexcel in 1998 and has served in roles of increasing responsibility in Operations, Finance and Information Technology, serving most recently as Senior Vice President—Tax, Systems and Enterprise Reporting from March 2016 to August 2017. Prior to joining Hexcel, Mr. Winterlich served in several financial capacities at Courtaulds plc, a U.K. international chemicals group. He has a degree in accounting and financial analysis from Warwick University and is a member of the Chartered Institute of Management Accountants.Career Highlights:
∎ | Executive Vice President and Chief Financial Officer of Hexcel since September 2017. |
ROBERT G. HENNEMUTHwas appointed as our Executive Vice President, Human Resources and Communications in May 2016. Mr. Hennemuth joined Hexcel in March 2006 as Senior Vice President, Human Resources. Prior to joining Hexcel, Mr. Hennemuth served as Vice President—Human Resources of Jacuzzi Brands, Inc. from July 2003 to September 2005. Previously, he was employed by Honeywell International Inc. and, prior to the acquisition of Honeywell by AlliedSignal Inc. in 1999, by AlliedSignal where he served as Vice President of Human Resources & Communications for various businesses from December 1996 to June 2003, including the Honeywell Consumer Products Group.
∎ | Prior leadership roles of increasing significance at Hexcel since 1998 in Finance, Operations and Information Technology. |
∎ | Served in several financial capacities at Courtaulds plc, a U.K. international chemicals company. |
∎ | Member of the Chartered Institute of Management Accountants. |
GINA FITZSIMONS | ||
Executive Vice President, Chief Human Resources Officer Executive Officer Since: 2022 Age: 52 |
Career Highlights:
∎ | Executive Vice President, Chief Human Resources Officer of Hexcel since June 2022; Senior Vice President, Chief Human Resources Officer (January 2022-May 2022); Vice President, Global Total Rewards and Talent (May 2020-January 2022); and Vice President, Global Total Rewards (June 2019-May 2020). |
GAIL E. LEHMANwas appointed our Executive Vice President, General Counsel and Secretary in January 2017. Prior to joining Hexcel, she was Chief Administrative Officer, General Counsel & Corporate Secretary at Noranda Aluminum Holding Corporation from March 2012 to December 2016; its Vice President of Human Resources, General Counsel and Corporate Secretary from February 2011 to March 2012; and its Vice President, General Counsel and Secretary from January 2010 to February 2011.
∎ | Prior leadership roles of increasing significance at Avon Products, Inc., a global manufacturer and marketer of beauty and related products (2007-2017), including Group Vice President—Global Total Rewards and Human Resources Business Partner (2016-2017), Vice President, Human Resources Business Partner (2014-2016) and Vice President, Total Rewards Leader (2011-2014). |
∎ | Various global compensation and business development roles at Reader’s Digest (2001-2007) and Citigroup (1997-2001). |
2023 Proxy Statement | 17 |
EXECUTIVE OFFICERS
GAIL E. LEHMAN | ||
Executive Vice President, General Counsel and Secretary Executive Officer Since: 2017 Age: 63 |
Career Highlights:
∎ | Executive Vice President, General Counsel and Secretary of Hexcel since January 2017. |
∎ | Previously Chief Administrative Officer, General Counsel & Corporate Secretary (March 2012-December 2016); Vice President of Human Resources, General Counsel and Corporate Secretary (February 2011-March 2012); and Vice President, General Counsel and Secretary (January 2010-February 2011) at Noranda Aluminum Holding Corporation.* |
∎ | Served as Vice President, General Counsel and Corporate Secretary for Hawker Beechcraft Corporation (July 2007-August 2009) and Covalence Specialty Materials Corporation (April 2006-May 2007). |
∎ | Various positions of increasing responsibility in the Honeywell International Inc. Law Department (1993-April 2006), including Assistant General Counsel, Treasury and Finance, and Assistant Secretary (November 2001-April 2006). |
* On February 8, 2016, Noranda filed for bankruptcy protection under the U.S. Bankruptcy Code. Ms. Lehman was Vice President, General Counsel and Corporate Secretary at both Hawker Beechcraft Corporation (July 2007-August 2009) and Covalence Specialty Materials Corporation (April 2006-May 2007). From November 2001 through April 2006, she was Assistant General Counsel, Treasury and Finance, and Assistant Secretary of Honeywell International Inc. From 1993 to November 2001, Ms. Lehman held various position of increasing responsibility in the Law Department of Honeywell.
THIERRY MERLOTbecame our President, Aerospace, Europe, Middle East, Africa and Asia Pacific in May 2016. From 2010 to May 2016, he was Vice President and General Manager—Aerospace, Europe, Middle East, Africa and Asia Pacific. Mr. Merlot joined Ciba-Geigy in 1988, and became an employee of Hexcel upon the merger between Hexcel and Ciba-Geigy’s Composites business in 1996. Over the years, he has held several sales and marketing positions in Europe and Asia Pacific for the company. Mr. Merlot began his career in 1983 with Dassault Aviation as an R&D process engineer and Quality Manager for composite materials.
PHILIPPE CHEVRIER | |||||
President, Aerospace, Americas Executive Officer Since: 2023 Age: 47 |
EXECUTIVE OFFICERS
COLLEEN PRITCHETTbecame our President, Aerospace, Americas in November 2018. Prior to joining Hexcel, Ms. Pritchett served in a number of capacities for E.I. du Pont de Nemours and Company from June 1996 until November 2018, including most recently as Global Business Director and President of the Electronics & Imaging Advanced Printing business from January 2016 until November 2018; Global Business Director and President of the Electronics & Communications Microcircuit Materials business in Taiwan from May 2015 until December 2015; and Asia Pacific Director of the Performance Polymers business in Shanghai, China from July 2013 until May 2015. Prior to that, Ms. Pritchett held various positions of increasing responsibility at du Pont, such as Global Business Director of the Performance Polymers Kalrez®and Vespel®business; Strategic Planning Manager for the DuPont Company; Strategic Planning Manager for the Performance Coatings business; Americas Business Manager; North America Sales and Distribution Manager; and National Accounts Team Sales Manager, as well as roles in Engineering, Finance and Sales.
BRETT SCHNEIDERbecame our President, Industrial and Global Fibers in March 2020. From January 2018 through March 2020, Mr. Schneider was our President, Global Fibers. Prior to that, from May 2016 through December 2017, Mr. Schneider was our Senior Vice President, Business Development, and from October 2012 to May 2016, Mr. Schneider served as our Vice President, Business Development. Mr. Schneider joined Hexcel in 2001 and has held several other positions with Hexcel, including Shared Services Manager and Global Project Manager at our Duxford, UK plant, Plant Manager for our Salt Lake City fiber operations, Site Manager at our Salt Lake City plant and Director of Advanced Manufacturing. Prior to joining Hexcel, Mr. Schneider served as Operations & Process Development Manager at Meridian Automotive Systems, Plant Manager at Cambridge Industries and Automation Development Manager at U.S. Marine.Career Highlights:
∎ | President, Aerospace, Americas of Hexcel since January 2023. |
∎ | Previously held various roles of increasing responsibility at Honeywell International Inc., a diversified technology and manufacturing company (2003-July 2022), including most recently President of Aerospace Software, Services & Connectivity (January 2022-July 2022); Vice President and General Manager—Honeywell Aerospace Services & Connectivity (June 2021-January 2022); Vice President and General Manager—Honeywell Aerospace Customer Business Segment (June 2018-June 2021); and Vice President—Program Management for Honeywell Aerospace (July 2016-June 2018). |
∎ | Prior roles at Honeywell International Inc., beginning in 2003, include General Manager (Milan); Emerging Regions Business Development Leader—China and India; Program Leader—Aftermarket Operations; Business Director—EADS Group and Dassault; Customer Business Director—Defense International OEMs; and Senior Director and General Manager (Switzerland). |
EXECUTIVE OFFICERS
THIERRY MERLOT | ||
President, Aerospace, Europe, Middle East, Africa and Asia Pacific and Industrial Executive Officer Since: 2016 Age: 63 |
Career Highlights:
∎ | President, Aerospace, Europe, Middle East, Africa and Asia Pacific and Industrial of Hexcel since May 2020; President, Aerospace, Europe, Middle East, Africa and Asia Pacific (May 2016-May 2020); and Vice President and General Manager—Aerospace, Europe, Middle East, Africa and Asia Pacific (2010-May 2016). |
∎ | Previously held various sales and marketing positions in Europe and Asia Pacific for Ciba-Geigy (1988-1996), until Hexcel and Ciba-Geigy’s Composites business merged in 1996. |
∎ | Served as R&D process engineer and Quality Manager for composite materials at Dassault Aviation (1983-1988). |
2023 Proxy Statement | 19 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Beneficially Owned by Principal Stockholders
The following table sets forth certain information as of December 31, 20192022 with respect to the ownership by any person known to us to be the beneficial owner of more than five percent of the issued and outstanding shares of Hexcel common stock (the number of shares held by each listed stockholder may have changed subsequent to December 31, 2019)2022):
Name and Address | Number of Shares of Common Stock(1) | Percent of Common Stock(1) | ||
The Vanguard Group, Inc.(2) | 7,509,548 | 9.0% | ||
100 Vanguard Boulevard | ||||
Malvern, PA 19355 | ||||
BlackRock, Inc.(3) | 6,025,732 | 7.2% | ||
55 East 52nd Street | ||||
New York, NY 10055 |
Name | Number of Shares of Common Stock | Percent of Common Stock(1) | ||||||
BlackRock, Inc.(2) | 9,058,802 | 10.7 | % | |||||
The Vanguard Group, Inc.(3) | 7,718,731 | 9.1 | % | |||||
Morgan Stanley(4) | 6,648,134 | 7.9 | % | |||||
AllianceBernstein L.P.(5) | 6,060,002 | 7.2 | % | |||||
EARNEST Partners, LLC(6) | 5,152,535 | 6.1 | % |
(1) | Based on |
(2) | |
BlackRock, Inc. is the parent of several subsidiaries that hold the shares listed in the table, |
(3) | The Vanguard Group, Inc. is the parent of several subsidiaries that hold the shares listed in the table, none of which individually holds more than 5% of the company’s common stock. The Vanguard Group, Inc. has shared voting power with respect to 29,564 shares, sole dispositive power with respect to 7,614,991 shares and shared dispositive power with respect to 103,740 shares. The Vanguard Group’s business address is 100 Vanguard Boulevard, Malvern, PA 19355. The number of shares listed in the table and the information in this footnote are derived from an Amendment to the Schedule 13G filed by The Vanguard Group with the SEC on February 9, 2023. |
(4) | Morgan Stanley is the parent holding company that holds shares listed in the table, which shares are owned, or may be deemed to be beneficially owned, by Boston Management and Research, a wholly owned subsidiary of Morgan Stanley. Morgan Stanley has shared voting power with respect to 6,087,208 shares and shared dispositive power with respect to 6,626,505 shares. Boston Management and Research has shared voting power with respect to 341,617 shares and shared dispositive power with respect to 341,617 shares. Morgan Stanley’s business address is 1585 Broadway, New York, NY 10036. Boston Management and Research’s business address is Two International Place, Boston, MA 02110. The number of shares listed in the table and the information in this footnote are derived from an Amendment to the Schedule 13G jointly filed by Morgan Stanley and Boston Management and Research with the SEC on February 9, 2023. |
(5) | AllianceBernstein L.P. has sole voting power with respect to 4,561,179 shares, sole dispositive power with respect to 5,953,019 shares and shared dispositive power with respect to 106,983 shares. AllianceBernstein L.P.’s business address is 1345 Avenue of the Americas, New York, NY 10105. The number of shares listed in the table and the information in this footnote are derived from an Amendment to the Schedule 13G filed by AllianceBernstein L.P. with the SEC on February 14, 2023. |
(6) | EARNEST Partners, LLC has sole voting power with respect to 3,589,336 shares and sole dispositive power with respect to 5,152,535 shares. EARNEST Partners, LLC’s business address is 1180 Peachtree Street NE, Suite 2300, Atlanta, GA 30309. The number of shares listed in the table and the information in this footnote are derived from an Amendment to the Schedule 13G filed by EARNEST Partners, LLC with the SEC on February 14, 2023. |
20 | HEXCEL CORPORATION |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Beneficially Owned by Directors and Officers
The following table contains information regarding the beneficial ownership of shares of Hexcel common stock as of March 27, 202010, 2023 by our current directors and the executive officers listed in the Summary Compensation Table and by all current directors and current executive officers as a group. Except as otherwise indicated in the footnotes to the table, we have been informed that each person listed had sole voting power and sole investment power over the shares of common stock shown opposite his or her name.
Name | Number of Shares of Common Stock(1)(2) | Percent of Common Stock(3)(4) | Number of Shares of Common Stock(1)(2) | Percent of Common Stock(3)(4) | ||||||||||||
Nick L. Stanage | 643,924 | * | 818,279 | * | ||||||||||||
Joel S. Beckman | 40,345 | * | ||||||||||||||
Lynn Brubaker(5) | 12,299 | * | ||||||||||||||
Jeffrey C. Campbell | 48,654 | * | 58,860 | * | ||||||||||||
Cynthia M. Egnotovich | 12,622 | * | 18,225 | * | ||||||||||||
Thomas A. Gendron(6) | 48,219 | * | ||||||||||||||
Jeffrey A. Graves | 40,744 | * | ||||||||||||||
Thomas A. Gendron(5) | 55,930 | * | ||||||||||||||
Dr. Jeffrey A. Graves | 142,239 | * | ||||||||||||||
Guy C. Hachey | 12,831 | * | 20,500 | * | ||||||||||||
Dr. Marilyn L. Minus | 6,436 | * | ||||||||||||||
Catherine A. Suever | 3,191 | * | 14,544 | * | ||||||||||||
Patrick J. Winterlich | 33,973 | * | 105,887 | * | ||||||||||||
Robert G. Hennemuth | 112,963 | * | ||||||||||||||
Gail E. Lehman | 15,477 | * | 68,422 | * | ||||||||||||
Thierry Merlot | 80,567 | * | 104,573 | * | ||||||||||||
All executive officers and directors as a group (15 persons) | 1,135,837 | 1.3 | % | |||||||||||||
Gina Fitzsimons | 16,498 | * | ||||||||||||||
Robert G. Hennemuth(6) | 153,338 | * | ||||||||||||||
Colleen Pritchett(7) | 10,125 | * | ||||||||||||||
All current executive officers and directors as a group (13 persons) | 1,430,395 | 1.7 | % |
(1) | Beneficial ownership is determined in accordance with SEC regulations. Therefore, the table lists all shares as to which the person listed has or shares the power to vote or to direct disposition, including (a) shares underlying |
(2) | None of our directors or current executive officers has pledged any of our common stock. |
(3) | Based on |
(4) | An asterisk represents beneficial ownership of less than 1%. |
(5) | Amount includes (a) 220 shares held by |
(6) | Mr. Hennemuth, a former executive officer who is listed in the Summary Compensation Table, previously served as Executive Vice President, Chief of Staff until his involuntary termination without “cause” on May 31, 2022. The number of shares is based on information disclosed in a Form 4 filed by Mr. Hennemuth on February 7, 2022, as well as the number of exercisable NQOs held by Mr. Hennemuth as of March 10, 2023, according to the company’s records. Mr. Hennemuth is no longer required to report his holdings in the company’s securities pursuant to Section 16 of the Exchange Act (as defined below). |
(7) | Ms. Pritchett, a former executive officer who is listed in the Summary Compensation Table, previously served as President, Aerospace, Americas until her involuntary termination without “cause” on April 30, 2022. The number of shares is based on information disclosed in a Form 4 filed by Ms. Pritchett on February 7, 2022, as well as the number of exercisable NQOs held by Ms. Pritchett as of March 10, 2023, according to the company’s records. Ms. Pritchett is no longer required to report her holdings in the company’s securities pursuant to Section 16 of the Exchange Act. |
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION & ANALYSIS
22 | ||||
22 | ||||
Stockholder Engagement and Consideration of Last Year’s Advisory Say-on-Pay Vote | 22 | |||
24 | ||||
25 | ||||
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26 | ||||
28 | ||||
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42 |
2022 NEO Executive Summary
In this Compensation Discussion and Analysis (“CD&A”), we address the compensation paid or awarded to the following executive officers of the company, who are listed in the Summary Compensation Table that follows this discussion, and whom we refer to as our “named executive officers” or “NEOs.”“NEOs”:
Nick L. Stanage Chairman, Chief Executive Officer and President | ||||||||||
Patrick J. Winterlich Executive Vice President and Chief Financial Officer | ||||||||||
Gail E. Lehman Executive Vice President, | ||||||||||
General Counsel and Secretary |
Thierry Merlot President, | Gina Fitzsimons Executive Vice President, Chief Human Resources Officer |
Our named executive officers for 2022 also include Robert G. Hennemuth, who served as our Executive Vice President, Chief of Staff until his involuntary termination by the company without “cause” on May 31, 2022 and Colleen Pritchett, who served as our President, Aerospace, Americas until her involuntary termination by the company without “cause” on April 30, 2022. This CD&A focuses primarily on the compensation earned by our current named executive officers listed in the table above, but also describes, where appropriate, the compensation earned by Mr. Hennemuth and Ms. Pritchett.
Stockholder Engagement and Consideration of Last Year’s Advisory Say-on-Pay Vote
Since this Compensation DiscussionThe compensation committee considers stockholder feedback and Analysis describesresults of the annual advisory vote on executive pay (Say-on-Pay) when structuring our executive pay program. The company routinely engages stockholders in part to better understand their views on governance and executive compensation practices. The feedback we receive from stockholders enables the compensation committee to better understand stockholder perspectives, which has resulted in historically favorable Say-on-Pay proposal support since its inception in 2011.
With the onset of the COVID-19 pandemic and its impact on the global economy, and especially the commercial aerospace industry, we made certain one-time changes to our executive compensation program in 2021 as part of our efforts to return Hexcel to profitable growth and to enhance long-term stockholder value. Certain changes, such as the one-time “return to growth” equity grants and changes to the performance metrics and measurement period under our long-term incentive program, were viewed negatively by proxy advisory firms and some stockholders. We nonetheless believe that these one-time changes were essential to retaining and incentivizing our strong management team to position Hexcel for 2019, it does not addressa profitable return to growth, including generating cash to deleverage, and to enhance long-term stockholder value.
22 | HEXCEL CORPORATION |
COMPENSATION DISCUSSION AND ANALYSIS
Historically, our stockholders have overwhelmingly supported our executive compensation programs, with an average level of support for our Say-on-Pay proposal of approximately 92% of the votes cast during the Annual Meetings of Stockholders held in each of 2011 through 2021. Unfortunately, this trend ended at the 2022 Annual Meeting, where only 41% of our stockholders expressed support for the Say-on-Pay proposal (based on total votes cast). We were disappointed with this result.
Prior to the 2022 Annual Meeting, we engaged with a significant number of our stockholders. We answered their questions regarding a variety of topics of interest to them, such as the impact of the COVID-19 pandemic on the global economy, our business and financial results, orour initiatives to realign the business in response, our return to growth, the design of our executive compensation program, board diversity and corporate governance best practices, and corporate social responsibility and sustainability matters. In the fall of 2022, we completed another round of stockholder outreach prior to the compensation committee’s 2023 compensation decisions, in response to the low support for 2020.our Say-on-Pay proposal at the 2022 Annual Meeting. The following is a summary of our stockholder engagement efforts over the last year:
2022 STOCKHOLDER ENGAGEMENT | SPRING 2022 Pre-Annual Meeting | FALL 2022 Response to Low Say-on-Pay Support | ||||||
We solicited input from stockholders representing: | 75% of our outstanding shares | 73% of our outstanding shares | ||||||
And held meetings with stockholders who elected to meet with us, representing: | 44% of our outstanding shares, including | 36% of our outstanding shares, including 26% of our outstanding shares confirmed no call was necessary, with most indicating that the stockholder engagement presentation filed on a Form 8-K on November 21, 2022 was sufficient | ||||||
Including one or more of the following company participants: | ∎ Compensation Committee Chair ∎ Executive Vice President, Chief Human Resources Officer ∎ Vice President, Investor Relations | ∎ Compensation Committee Chair ∎ Executive Vice President, Chief Human Resources Officer ∎ Executive Vice President, General Counsel and Secretary ∎ Vice President, Investor Relations | ||||||
And primarily covering the following topics: | ∎ Actions to Realign the Business in Response to the Pandemic ∎ Rationale for 2021 Executive Compensation Decisions ∎ 2022 Executive Compensation Changes ∎ Hexcel’s Corporate Governance Practices and Sustainability Program | ∎ 2022 Executive Compensation Decisions ∎ 2023 Executive Compensation Changes Under Consideration ∎ Hexcel’s Return to Growth and Employee Retention ∎ Hexcel’s Corporate Governance Practices and Sustainability Program |
The feedback we received from investors through this engagement process was generally positive and constructive and made it clear that those stockholders who voted against the Say-on-Pay proposal at the 2022 Annual Meeting did so in response to the company’s specific pandemic-related compensation committee hasdecisions made in 2021. Investors expressed support for our historical executive compensation program, including the design of our annual incentive program and willlong-term incentive program, particularly the emphasis on performance-based equity. Investors also appreciated the transition back to our traditional long-term incentive program design in 2022 and 2023, which once again emphasizes Return On Invested Capital (“ROIC”) and Relative EPS Growth over a three-year performance period, and our commitment not to grant similar “return to growth” equity awards in the future, except under extraordinary circumstances.
2023 Proxy Statement | 23 |
COMPENSATION DISCUSSION AND ANALYSIS
Summary of Key Compensation Changes for 2022 and 2023
Our compensation programs continue to consider such impacts when reviewingbe primarily performance-based, with a significant portion of executive pay at-risk. We establish performance targets that are rigorous and reflective of the business plan we communicate to investors. With the effects of the pandemic largely behind us, we began to transition back to our 2020traditional executive compensation program in order to align 20202022 and completed the transition in 2023. Our stockholder engagement efforts provided helpful feedback regarding our executive compensation withprogram and reinforced the current economic environment. In light ofcommittee’s decision to return to our traditional compensation program. Summarized below are the significant financial impact of COVID-19 on the company,specific actions we recently disclosed a 50% reductiontook, based in base salary for Mr. Stanagepart on stockholder feedback.
What we heard from stockholders: | What the compensation committee did: | |||||||
Expect that one-time awards will be a rare event.
|
| We committed to issuing “one-time” equity awards only in extraordinary circumstances.
∎ In 2022, we did not grant additional “one-time” equity awards, per that commitment. | ||||||
Concerned with changes to the historic long-term incentive program, including a 100% focus on Incremental Adjusted EBIT Leverage measured over three separate annual periods, rather than a more diversified focus on our traditional long-term metrics: ROIC and Relative EPS Growth, each measured over a three-year period.
|
| We reintroduced our traditional financial metrics to the long-term incentive program:
∎ For 2022, we began to transition the long-term incentive program back to our traditional metrics by allocating 25% of the long-term award to ROIC and 25% to Relative EPS Growth, each measured over a three-year period. Although Incremental Adjusted EBIT Leverage was included in our long-term incentive program for 2022, the weighting was reduced to 50%.
∎ For 2023, we completed the transition back to our traditional long-term incentive program, by allocating 50% of the long-term award to ROIC and 50% to Relative EPS Growth, each measured over a three-year period, and we eliminated Incremental Adjusted EBIT Leverage from the program. | ||||||
Appreciated that the compensation committee did not make any changes to the performance metrics for “in-flight” long-term incentive awards during times of uncertainty.
Acknowledged that three consecutive years of zero payouts under performance share awards was negatively impacting executive compensation and retention.
|
| We continued in 2022 to not make any adjustments to the performance targets applicable to in-flight long-term incentive awards, which resulted in three consecutive years of no payouts. | ||||||
Zero payouts for three consecutive years under performance share awards | ||||||||
0 Payout 2018-2020 performance cycle | 0 Payout 2019-2021 performance cycle | 0 Payout 2020-2022 performance cycle | ||||||
Appreciated that a majority of the long-term incentive program is allocated to performance-based equity.
|
| For 2022, we maintained the percentage of the long-term incentive opportunity allocated to performance-based equity, and in 2023, we increased the allocation to performance share awards (payment of which depends on the achievement of long-term goals). | ||||||
2022 | 2023 | |||||||
CEO | ∎ 62.5% performance share awards ∎ 37.5% stock options | 66.7% performance share awards 33.3% stock options | ||||||
Other Named Executive Officers | ∎ 37.5% performance share awards ∎ 37.5% stock options ∎ 25% time-based restricted stock units | 50% performance share awards 25% stock options ∎ 25% time-based restricted stock units | ||||||
24 | HEXCEL CORPORATION |
COMPENSATION DISCUSSION AND ANALYSIS
Fiscal 2022 Performance Highlights
In 2022, we saw robust recovery in the commercial aerospace market and a 30% reduction in base salary for the remainder of our named executive officers effective April 20, 2020 for a period of at least three months. The extentbenefited from management actions taken and duration of these reductions will be reassessed by the compensation committee and the board of directors as the situation evolves, and will be describedbroad global strength in our proxy statement for next year’s annual meeting of stockholders.
Business Highlights
space and defense markets. Our operating performance in 2019 was strong,management team’s cost realignment and debt reduction actions throughout the COVID-19 pandemic, as we delivered record sales, earnings and free cash flow, reflecting continuedwell as a continuous focus on innovationoperational efficiency, positioned Hexcel for profitable growth in 2022 and execution, and stronger positions in the markets we serve:enhanced long-term stockholder value.
$1,578 million | Sales were | $1.49 | Diluted earnings per share was $1.49 in 2022, compared to $0.19 in 2021. | >$330 million | Total debt reduced by more than $330 million from December 31, 2019 to December 31, 2022. |
$1.28 | ||||||||
Adjusted diluted earnings per share was | ||||||||
$173 million | Net cash provided by operating activities was | |||||||
In 2022, the company delivered double digit adjusted operating margin growth. |
We achieved these results while continuing to make significant investments in capacity expansions and manufacturing process innovations to accommodate our customers’ anticipated growth, and in research and technology, both internally and through acquisitions and collaborations.Executive Compensation Overview
Our Compensation Philosophy and Principles
Our compensation philosophy is based uponto deliver pay for performance. We seek to provide a level of performance to createthat creates sustainable value for our stockholders. To further ourstockholders by generating short-term results while also making investments designed to increase profitability over the long term. Our compensation philosophy, ourprinciples, as articulated by the compensation committee, has articulated several compensation principles relating to, among other things, structuring performance-based compensation, discouraging excessive risk taking and preventing and remedying executive misconduct. See “Executive Compensation Overview – Our Compensation Philosophy and Principles,” below.are:
Objectives | Design | Governance | ||||||||||||
∎ Attract, retain and motivate high caliber executive talent ∎ Align executives’ and stockholders’ interests by requiring executive officers to meet ownership guidelines and prohibiting them from pledging our stock or engaging in short sales or any hedging or monetization transactions involving our stock ∎ Encourage retention and motivation of our talent, which is even more critical as we work through our recovery and our continued growth; incentivize key talent to focus on overcoming challenges with fewer resources to deliver results ∎ Continue to align executive compensation with the interests of our stockholders by ensuring stockholder value through stock price appreciation and stockholder returns | ∎ Ensure that a significant portion of total target compensation is variable compensation based on the company’s performance ∎ Establish goals for performance-based compensation that are challenging yet attainable ∎ Consider key strategic measures (including financial, non-financial and sustainability) in incentive plan design to maintain alignment with customers, stockholders and employees ∎ Encourage long-term focus while recognizing the importance of short-term performance | ∎ Determine compensation based on forward looking considerations and not solely on the basis of past compensation or results ∎ Discourage excessive risk taking by structuring pay to consist of both fixed and variable elements, using a mix of short- and long-term company performance-based metrics and setting maximum total payouts ∎ Prevent and remedy executive misconduct, and impose appropriate discipline on individuals who engage in misconduct ∎ Make compensation decisions that are equitable and shared by all employees based on one of the company’s values, “One Hexcel” |
We believe that the structure of our compensation program, which is explained in detail below, is consistent with these principles.
2023 Proxy Statement |
25 |
COMPENSATION DISCUSSION AND ANALYSIS
Structure of Our Compensation
Our pay for performance philosophy is demonstrated by the way we have structured the elements of our compensation, which provide a significant level of variability depending on our performance. These elements consist of salary, annual cash incentive awards under our Management Incentive Compensation Plan (“MICP”) and long-term equity awards in the form of NQOs, PSAs and, for all executivesexecutive officers other than Mr. Stanage, RSUs.
Total Direct Compensation—Key Elements
Short-Term Cash Incentives | ||||
Base Cash Salary | CASH | Base salaries are reviewed annually and are increased based on performance, peer benchmarking or at the time of a change in position or assumption of new responsibilities. | ||
Annual Cash Incentive Award (MICP) | CASH | Annual incentive program with payouts based on accomplishing specific financial performance measures. For 2022, these were: (1) Free Cash Flow (50%) (2) Adjusted EBIT (50%) | ||
Long-Term Equity Incentive Awards | ||||
PSAs | EQUITY | Performance-based vesting at the end of a three-year period, based on accomplishing specific financial performance measures. For 2022, these were: (1) ROIC percentage at the end of the three-year performance period (25%) (2) EPS Growth during the three-year performance period relative to the performance of the Standard & Poor’s (S&P) MidCap 400 Index companies (25%) (3) Incremental Adjusted EBIT Leverage at the end of each year during the three-year performance period (50%) | ||
NQOs | EQUITY | Time-based vesting: 12, 24 and 36 months from the grant date in three equal installments | ||
RSUs | EQUITY | Time-based vesting: 12, 24 and 36 months from the grant date in three equal installments |
As demonstrated by the chart below, a significant amount of target compensation for our named executive officers constitutes variable compensation tied to our financial performance. This is particularly the case for Mr. Stanage, as he does not receive RSUs, but rather, a greater percentage of PSAs.
CEO Compensation
Average NEO Compensation
For 2023, the compensation committee shifted more performance-based equity compensation from NQOs into PSAs, increasing the percentage allocated to PSAs from 62.5% to 66.7% for the CEO and from 37.5% to 50% for all other executive officers.
In addition to health and welfare and retirement plans made available to our U.S.-based employees, we provide our U.S.-based named executive officers with some or all of the following benefits: a non-qualified deferred compensation plan, supplemental retirement benefits and severance arrangements with respect to specified termination of employment events. See “Ongoing and Post-Employment Arrangements,” below for additional information. We do not provide limited personal benefits to our U.S.-based named executive officers (including Mr. Stanage) hired or appointed during the past several years, and only limited personal benefits to other named executive officers, as described below under “2019“2022 Compensation – Personal Benefits.”
26 | HEXCEL CORPORATION |
NEO Target Pay Mix
COMPENSATION DISCUSSION AND ANALYSIS
2022 Total Direct Compensation Levels*
Nick L. Stanage | Chairman, Chief Executive Officer and President
2019 Compensation
Salaries
MICP– Achievement with regard to the three equally-weighted financial measures under our MICP:
Base salary increased by 4%, representing the first base salary increase for the CEO since 2019 |
Target MICP award opportunity increased from 105% to 110% of base salary |
Target equity incentive compensation opportunity unchanged at 435% of base salary |
Patrick J. Winterlich | Executive Vice President and Chief Financial Officer
∎ | Base salary increased by 4% |
∎ | Target MICP award opportunity unchanged at 75% of base salary |
∎ | Target equity incentive compensation opportunity increased from |
Gail E. Lehman | Executive Vice President, General Counsel and Secretary
∎ | Base salary increased by 3.5% |
∎ | Target MICP award opportunity unchanged at 60% of base salary |
∎ | Target equity incentive compensation opportunity increased from 150% to 155% of base salary |
Thierry Merlot | President, Aerospace, Europe, MEA/AP and Industrial
∎ | Base salary increased by 5% |
∎ | Target MICP award opportunity unchanged at 60% of base salary |
∎ | Target equity incentive compensation opportunity increased from 120% to 125% of base salary |
Gina Fitzsimons | Executive Vice President, Chief Human Resources Officer
∎ | Base salary increased by 12.1% to reflect appointment to Chief Human Resources Officer |
∎ | Target MICP award opportunity increased from 35% to 50% of base salary |
∎ | Target equity incentive compensation opportunity increased from 55% to 95% of base salary |
* | For Mr. Hennemuth, base salary in 2022 was increased by 3%, and target MICP award and target equity incentive compensation opportunity, as a percentage of base salary, were unchanged. For Ms. Pritchett, base salary in 2022 was increased by 4.5%, target MICP award was increased from 55% to 60% of base salary and target equity incentive compensation was increased from 100% to 105% of base salary. |
2023 Proxy Statement | 27 |
COMPENSATION DISCUSSION AND ANALYSIS
Averaging the results with respect to these financial measures, the total award payable to each named executive officer was equal to 127.10% of the executive’s target award opportunity (the target award opportunity for the named executive officers ranged from 60% to 100% of the named executive officers’ salaries). For Messrs. Winterlich and Merlot, target award opportunity was increased 5% in 2019 to 70% and 60% of base salary, respectively. The increase to target award opportunity for Mr. Winterlich was to reflect his September 2017 promotion to his current role and further the company’s goal to bring his compensation in line with market median over time, and for Mr. Merlot, was in recognition of his strong performance and relative position compared to the survey data considered by the compensation committee.
For further information, including how we calculated the financial measures, see “2019 Compensation –Management Incentive Compensation Plan,” below.
Equity Awards– In 2019, we provided three types of equity awards for each named executive officer other than Mr. Stanage, having an aggregate value equal to the named executive officer’s target award opportunity (which ranged from 110% to 155% of such named executive officers’ salaries, increased from 95% to 145% of such named executive officers’ salaries in 2018), as follows:
To further increase the pay for performance focus of Mr. Stanage’s compensation, we provided equity awards having the following percentages of his target award opportunity (which was 394% of his salary, increased from 330% of his salary in 2018):
The number of shares that ultimately will be provided under the PSAs will be based upon our performance with respect to the following two financial measures:
Relative EPS Growth is computed based on our performance relative to the companies in the Standard & Poor’s (“S&P”) MidCap 400 Index.
To address retention concerns, during 2019, we provided Mr. Merlot with a one-time RSU award, which was not part of our regular compensation program.
See “2019 Compensation – Equity Awards” for additional information.
Performance Share Payout for 2017-2019 Period
The NEOs received equity awards in 2017, including PSAs providing for awards of our common stock based on our performance during the 2017-2019 period with regard to the following financial measures:
Based on our performance with regard to these financial measures during the 2017-2019 period, we provided a number of shares of our common stock equal to 137.2% of each named executive officer’s target PSA award opportunity.
See “2019 Compensation – Vesting of PSAs Granted in 2017” for further information.
COMPENSATION DISCUSSION AND ANALYSIS
Stockholder Advisory Vote on Executive Compensation
At our 2019 Annual Meeting of Stockholders, our stockholders approved, on an advisory basis, the compensation of our named executive officers. The stockholder vote in favor of our named executive officer compensation totaled approximately 91% of the votes cast, including abstentions. After consideration of the results of the advisory vote, we determined that no revisions to our executive compensation program were necessary in response to the vote.
Our Compensation Best Practices
We follow a number of compensation practices consistent with our stockholderstockholders’ interests and best practices:
What We Do | ||||
| Annual Say-on-Pay vote | |||
Pay for performance – 84% of target CEO pay in 2022 was variable and at risk | ||||
Challenging performance targets under short-term and long-term incentive programs | ||||
Multi-year vesting period for equity incentive awards | ||||
Caps on incentive payouts | ||||
Robust stock ownership guidelines – 6x base salary for CEO | ||||
Clawback policy for executive officer incentive- based compensation | ||||
What We Don’t Do | ||||
No excise tax gross-up under severance agreements Severance Policy | ||||
No repricing of any stock options, including underwater stock options, without stockholder approval | ||||
No dividends on PSAs or RSUs unless performance goals or time-based vesting conditions are met | ||||
executive officers | ||||
No | ||||
Our Compensation Philosophy and Principles
Our philosophy is to deliver pay for performance. We seek to provide a level of performance that creates sustainable value for our stockholders by generating short-term results while also making investments designed to increase profitability over the long-term.
Our compensation principles, as articulated by the compensation committee, are to:
We believe that the structure of our compensation program, which is explained in detail below, is consistent with these principles.
COMPENSATION DISCUSSION AND ANALYSIS
Role of Compensation Committee, Compensation Consultant, Human Resources Department and Chief Executive Officer
Role of the Compensation Committee– The compensation committee is responsible for oversight of our compensation and benefit plans and programs. The compensation committee approves the compensation of our executive officers other than Mr. Stanage, and determines Mr. Stanage’s compensation, including goals and target award opportunities, subject to ratification by our independent directors.
In addition, the compensation committee annually reviews our compensation policies, practices and programs to determine whether they could result in financial, operational, legal or reputational risk to the company. As a result of its most recent review, the compensation committee concluded that the risks arising from our compensation policies, practices and programs are not reasonably likely to have a material adverse effect on the company. In reaching its conclusion, the compensation committee considered, among other factors, that in designing our compensation programs we use a number of approaches to mitigate excessive risk taking, in designing our compensation programs, including maximum award levels, the use of multiple financial measures with respect to the MICP and PSAs, multi-year vesting of equity awards, stock ownership guidelines, and our clawback policy.
Role of Compensation Consultant– The compensation committee directly engaged Semler Brossy Consulting Group LLC (“Semler Brossy”) to provide advice with respect to its compensation decisions. From time to time, including in 2022, the compensation committee seeks the views of Semler Brossy on items such as incentive program design and market practices. In response, Semler Brossy provides data analyses and market assessments, and prepares related reports. The compensation committee assessed the independence of Semler Brossy in accordance with NYSE listing standards and concluded that no conflicts of interest were raised in connection with Semler Brossy’s service as an independent consultant to the compensation committee. In reaching its conclusion, the compensation committee noted that Semler Brossy does not provide any other services to us.
Role of our Human Resources Department– Our Human Resources Department provides statistical and other data to the compensation committee to assist it in reviewing compensation we provide to our executives.
Role of our Chief Executive Officer– Mr. Stanage provides recommendations to the compensation committee as to the components of our executive officers’ compensation based on his evaluation of their performance. However, he does not make recommendations regarding his own compensation and is not present during compensation committee discussions regarding determination of his compensation. While the compensation committee considers Mr. Stanage’s compensation recommendations for our other executive officers, the ultimate determinations regarding executive compensation are made by the compensation committee, subject, in the case of Mr. Stanage, to ratification by our independent directors.
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COMPENSATION DISCUSSION AND ANALYSIS
Competitive Assessment of Our Compensation
In making its compensation determinations for 2019,2022, the compensation committee took into account several forms of comparative data to gain insight into compensation paid by other companies to executives serving in similar capacities to our named executive officers.
Peer Group
The principal source of comparative data with respect to our named executive officers, to the extent available, was proxy statement data with regard tofor fourteen peer group companies, which was supplemented with survey data as described below. Our primary objective in constructing our peer group was to identify a group of similarly sized peers that represent a blend of companies producingmanufacturing products similar to ours or companies that are suppliers to the aerospace industry, with a preference for companies that fit within both categories. To meet this objective as best as reasonably possible, we used the following criteria:
Industry Fit | |
in the same Global Industry Classification Standards (“GICS”) sub-industry designation as Hexcel (Aerospace and Defense); or |
∎ | ||
in | ||
Size | |
have revenues in the range of 1/3 to three times our revenues; and |
∎ | ||
have a market capitalization in the range of 1/3 to three times our market capitalization. | ||
Other qualitative and quantitative factors that enable us to identify companies with similar talent, business and operational characteristics. |
COMPENSATION DISCUSSION AND ANALYSIS
Not every company in our peer group meets all of the peer group screening criteria. For example, twofive of the peer group companies we referenced with regard to 20192022 compensation were below the market capitalization range criterion.criterion (though they met the revenue size screening criteria). Nevertheless, we concluded that because those companies satisfied the other criteria used in our selection process and possess meaningful business similarities, their continued inclusion in the peer group was appropriate.
The peer group companies used in connection with the compensation committee’s assessment of competitive compensation which occurred in December 2018,2021 for fiscal year 2022 compensation were the following:
AAR Corp. | H.B. Fuller Company | |
Albemarle Corporation | ITT Inc. | |
AMETEK, Inc. | Moog Inc. | |
Barnes Group Inc. | Spirit AeroSystems Holdings, Inc. | |
Cabot Corporation | Teledyne Technologies Incorporated | |
Crane Co. | Triumph Group, Inc. | |
Curtiss-Wright Corporation | Woodward, Inc. |
For the determination of 2019 compensation, the company modified the peer group with regard to 2018 compensation to eliminate A. Shulman, Inc., Orbital ATK, Inc. and Rockwell Collins, Inc., each of which were acquired, and to add AMETEK, Inc., ITT Inc. and Triumph Group, Inc.
Other Data
The committee also reviewed compensation data from the Equilar Total Compensation Report, an executive compensation survey, which aggregates information from over 5,000 companies in various industries. The Equilar data was used to compare each of our named executive officers with thoseindividuals in the same or similar position in companies with revenues similar to Hexcel. In addition, the compensation committee referenced the Willis Towers Watson 20182021 General Industrial Executive Survey, a large compensation survey of hundreds of companies in various industries, as well as a subset consisting of Aerospace & Defense companies within that survey. Due to the breadth of companies in the survey, for purposes of comparison, we size adjust the data based on our revenue for purposes of comparison.revenue. In the case of Mr. Merlot, the compensation committee referenced survey data for executives serving in similar roles with respect to regional businesses with a revenue range comparable to the business for which Mr. Merlot has responsibility. The identity of the individual companies comprising the foregoing surveys was not considered by the compensation committee in its evaluation process and, therefore, the compensation committee does not consider the identity of the companies comprising the survey datasuch information to be material.
Use of Comparative Data
While we viewthe committee views competitive market information as a helpful reference, this information is not the sole determinant of our executive compensation. In establishing appropriate compensation opportunities for the named executive officers, the committee considers a variety of factors, such as, but not limited to, depth of experience, tenure in position, past performance, internal equity, retention risksrisk and market data. For 2019,2022, target compensation for each named executive officer was positioned within a competitive range of the market median.
COMPENSATION DISCUSSION AND ANALYSIS
Salaries2022 Compensation
Salary increases for named executive officers, other than Mr. Winterlich and Mr. Merlot, ranged from approximately 3% to 3.5%. Messrs. Stanage and Hennemuth
Salaries
For 2022, each received a base salary increase of 3%, and Ms. Lehman received a base salary increase of 3.5%. Mr. Winterlich’s salary increased by approximately 17.5% and Mr. Merlot’s salary increased by approximately 7.5%. In approving the salary increases for the named executive officers other than Mr. Stanage,Ms. Fitzsimons received a merit increase ranging from approximately 3% to 5%. In approving these salary increases, the compensation committee considered Mr. Stanage’s recommendations, which were based on performance evaluations he provided to the compensation committee, as well as data indicating how the salaries of the named executive officers compared to salaries indicated by the peer group data (where available), and survey data. Mr. WinterlichWhen Ms. Fitzsimons was promoted to Chief Human Resources Officer, she received a 12.1% increase in base salary adjustment of 17.5% to adjust his compensation to reflect his September 2017 promotion to his currenther new role and further the company’s goal to bring his compensation in line with market median over time. Mr. Merlot received a 7.5% increase in recognition of his strong performance and relative position compared to the survey data considered by the compensation committee.responsibilities.
COMPENSATION DISCUSSION AND ANALYSIS
Management Incentive Compensation Plan
The MICP is designed to provide an incentive for eligible participants to help us advance our annual business objectives. Participants, including the named executive officers, are given the opportunity to obtain cash payouts based on our achievement with respect to specified financial measures.
Target Award Opportunity
We provide target award opportunities for our named executive officers based on a percentage of their salary. For those named executive officers on our executive committee (Messrs. Stanage, Hennemuth and Winterlich, and Ms. Lehman)Mses. Lehman and Fitzsimons), the actual amount received was based entirely upon our performance with regard to the financial measures. For Mr. Merlot and Ms. Pritchett, 70% of the target award was based on our performance with regard to the financial measures and 30% was based on the achievement of both financial measures and individual goals and objectives. Because of the strong interdependency among our leadership team members for performance of their individual objectives, variations from target award payouts with respect to individual objectives are limited to specific superior or subpar individual performance. However, our overall award pool for the MICP awards is based solely on our achievement with respect to the financial metrics.measures. While individual performance can increase or decrease an award, the overall award pool does not increase or decrease as a result. The following table shows the target award opportunities for each of our named executive officers with respect to our 20192022 MICP:
Name | Salary | Percentage of Salary(1) | Target Award Opportunity | Salary | Percentage of Salary(1) | Target Award Opportunity | |||||||||||||||
Nick L. Stanage | $1,016,236 | 100 | % | $1,016,236 | $ | 1,056,886 | 110 | % | $ | 1,162,574 | |||||||||||
Patrick J. Winterlich | $497,250 | 70 | % | $348,075 | $ | 591,608 | 75 | % | $ | 443,706 | |||||||||||
Robert G. Hennemuth | $439,639 | 60 | % | $263,783 | |||||||||||||||||
Gail E. Lehman | $439,746 | 60 | % | $263,848 | $ | 482,843 | 60 | % | $ | 289,706 | |||||||||||
Thierry Merlot(2) | $398,685 | 60 | % | $239,211 | $ | 432,227 | 60 | % | $ | 259,336 | |||||||||||
Gina Fitzsimons | $ | 370,000 | 50 | % | $ | 185,000 | |||||||||||||||
Robert G. Hennemuth | $ | 475,742 | 60 | % | $ | 285,445 | |||||||||||||||
Colleen Pritchett | $ | 427,928 | 60 | % | $ | 256,757 |
(1) | The target award opportunity for each of Mr. Stanage and Ms. Pritchett was increased |
(2) | Mr. Merlot’s cash compensation is paid in euros. In determining the dollar amount of his target award opportunity, we converted Mr. Merlot’s salary to U.S. dollars at an exchange rate of |
30 | HEXCEL CORPORATION |
COMPENSATION DISCUSSION AND ANALYSIS
Financial Measures Used in the MICP
In 2019,As noted above, in 2022, we used threetwo financial measures in connection with the MICP: Free Cash Flow (weighted 50%) and Adjusted EBIT (earnings before interest and taxes), Adjusted Diluted Earnings Per Share (“Adjusted Diluted EPS”(weighted 50%) and Cash from Operating Activities. We used the same measures in our MICP for 2018 and, as was the case in 2018, we weighted the measures equally. We believe the financial measures and weighting of those measures have effectively incentivized strong financial performance..
How Did We Calculate the Financial Measures?
Free Cash Flow
∎ | Free Cash Flow is net cash provided from operating activities of continuing operations, as reflected in the Consolidated Statements of Cash Flows in our quarterly earnings release, less accrued capital expenditures as reported in the footnote to the Consolidated Statements of Cash Flows in our quarterly earnings release. The measurement period is five quarters – October 1, 2021 through December 31, 2022, as the target is set before the prior year is completed and the prior year closing balance sheet as of December 31 is not known. |
Adjusted EBIT
∎ | Adjusted EBIT is defined as operating income from continuing operations of the company and its subsidiaries (as reported in the Consolidated Statements of Operations in our quarterly earnings release) plus expenses attributable to merger and acquisition (“M&A”) activities (including expenses with respect to M&A activities that are abandoned), business consolidation and restructuring expense, plus severance costs and plus (minus) other expense (income), net, as reported in our Consolidated Statements of Operations. |
MICP Targets and Awards
With regard to each of the MICP financial measures described above, an executive can receive an award only if a specified threshold level of performance is achieved; no award will be provided with respect to the financial measure if performance is below the threshold level. Once the threshold level of performance is achieved, the award can range from a minimum (threshold) of 50% to a maximum of 200% of the target award allocated to that performance measure.
For 2022, the target established for each performance measure and the level of performance, expressed as a dollar amount and as a percentage of target performance, that would entitle a participant to a threshold or maximum award with respect to each measure were as follows:
Performance Required (Dollar Amount and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Measure | Threshold Award (50% of Target Award) | Target Performance | Maximum Award (200% of Target Award) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Free Cash Flow(1) | $ | 134.9 million | $ | 192.8 million | $ | 250.6 million | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBIT
For 2022, the Free Cash Flow target was set above the 2021 target, but below the 2021 actual result of $214.5 million. The impact of the pandemic on demand for our products and sales for 2021 resulted in a lower working capital and inventory level, which increased Free Cash Flow for that year. The target for 2022 was established based on the company’s projected return to growth and increase to working capital to support higher sales levels. The target and actual performance with respect to each financial measure, and the actual MICP award as a percentage of the target award with respect to each measure, is shown on the following table:
COMPENSATION DISCUSSION AND ANALYSIS The aggregate payments to the named executive officers were as follows:
The actual award payments to our named executive officers are also reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, which appears below under “Executive Compensation.” Equity Awards Our equity awards are designed to promote achievement of longer-term corporate goals, align the interests of our named executive officers with those of our stockholders and serve as an important element in our provision of compensation opportunities that are competitive with other companies seeking comparable executive talent. Equity Incentive Award Opportunity Similar to the process we use in determining the target award opportunity under the MICP, we base the named executive officers’ equity incentive compensation opportunity on a percentage of their salary, as indicated on the following table:
COMPENSATION DISCUSSION AND ANALYSIS Equity Awards Provided Our equity incentive compensation for 2022 consisted of NQOs, RSUs and PSAs. The percentage of the equity incentive compensation opportunity allocated to each type of equity award was as follows: To further increase the proportion of pay for performance elements within Mr. Stanage’s compensation, we do not provide RSUs to Mr. Stanage. In lieu of RSUs, Mr. Stanage receives PSAs (payment of which depends on the achievement of long-term goals). PSAs constituted 62.5% of his equity incentive compensation opportunity; the remaining 37.5% was allocated to NQOs. As a result, 100% of Mr. Stanage’s long-term incentive compensation is tied to our performance and stock price appreciation. For 2023, we increased the allocation to PSAs, such that 66.7% of Mr. Stanage’s long-term incentive opportunity is now allocated to PSAs and 50% of the other named executive officers’ long-term incentive opportunity is now allocated to PSAs. Non-Qualified Stock Options In accordance with the equity award allocations described above, we granted NQOs to each of our named executive officers in 2022 based upon 37.5% of their respective total equity incentive compensation opportunities. Using a Black-Scholes methodology, we valued the stock options, which were granted on January 31, 2022, at $21.40 per share. As a result of this valuation, the named executive officers received NQOs for the respective numbers of underlying shares set forth below:
The options have an exercise price per share of $52.17 (the closing price per share of our common stock, as reported by the NYSE, on the date of grant) and vest as to one-third of the underlying shares on each of the first three anniversaries of the date of grant. The Summary Compensation Table reflects the aggregate grant date fair value of each named executive officer’s NQOs in the “Option Awards” column. See notes 2 and 3 to the Summary Compensation Table for further information.
COMPENSATION DISCUSSION AND ANALYSIS Restricted Stock Units We granted RSUs to each of the named executive officers other than Mr. Stanage. As noted above, RSUs were granted based upon 25% of the participating named executive officers’ total equity incentive compensation opportunity. We valued the RSUs in accordance with ASC 718, based upon the closing price per share of our common stock, as reported by the NYSE on the date of grant, January 31, 2022, which was $52.17 per share. Based upon this valuation, we granted to the named executive officers the respective numbers of RSUs set forth below:
One-third of the RSUs vest and are converted into an equivalent number of shares of our common stock on each of the first three anniversaries of the date of grant, except for RSUs granted to Mr. Merlot, a French national. In order to provide certain tax benefits under French law, the RSUs granted to Mr. Merlot vest and are converted with respect to two-thirds of the underlying shares on the second anniversary of the date of grant, and with respect to the remaining one-third of the underlying shares on the third anniversary of the date of grant. For our U.S. named executive officers, if and when cash dividends are declared on shares of our common stock, we provide dividend equivalents for each RSU then held by the grantee equal to the cash dividend that we pay to holders of our common stock which vest at the same time as the underlying RSUs to which they relate and are paid in cash. Mr. Merlot’s RSUs do not accrue dividends for French tax law purposes. Performance Share Awards PSAs are designed to focus our executives’ efforts on specific long-term goals. Unlike our other equity awards, the actual number of shares, if any, ultimately awarded to a named executive officer is dependent upon our performance with respect to specified financial measures. For our U.S. named executive officers, if and when cash dividends are declared on shares of our common stock, we provide dividend equivalents for PSAs then held by the grantee equal to the cash dividend that we pay to holders of our common stock which vest and are paid in cash at the same time as the underlying PSAs to which they relate. Mr. Merlot’s PSAs do not accrue dividends for French tax law purposes. As noted above, we allocated 37.5% of the equity incentive opportunity for each named executive officer other than Mr. Stanage to PSAs; we allocated 62.5% of Mr. Stanage’s equity incentive award opportunity to PSAs. We determined the number of PSAs to be awarded assuming target performance and valued the PSAs based upon the closing price per share of our common stock, as reported by the NYSE on the date of grant, January 31, 2022, which was $52.17 per share. The per share price was equivalent to the fair value of the PSAs on the date of grant, determined in accordance with ASC 718. Based upon this valuation, the target amount of shares underlying PSAs received by each of the named executive officers is set forth below:
COMPENSATION DISCUSSION AND ANALYSIS Financial Measures Used in Connection with the PSAs The PSAs vest and payout at the end of the three-year period commencing January 1, 2022, based on our performance relative to three separate performance goals, set forth below. The payout with respect to 50% of the award is based on achieving our traditional ROIC and Relative EPS Growth goals that are established on the date of grant and measured over the entire three-year performance period. The remaining 50% of the award is based on achieving Incremental Adjusted EBIT Leverage goals that are established on the date of grant and measured each year of the three-year performance period to determine the earned shares, if any, with vesting of any earned shares at the end of the three-year performance period once performance results are certified by the compensation committee.
ROIC Percentage Payout with respect to 25% of the PSAs is based on achieving specified levels of ROIC at the end of the three-year performance period. ROIC is designed to measure the return on invested capital, calculated using our 2022 plan and strong year-over-year growth, with achievement measured using our ROIC results in accordance with the following formula: (EBIT x (1-tax rate)) + equity in earnings for 2024 Debt (current & long-term) + equity — cash and cash equivalents at the following two points: December 31, 2023 and December 31, 2024 We adjust EBIT to exclude expenses attributable to M&A activities (including expenses with respect to M&A activities that are abandoned), business consolidation and restructuring expense, severance costs and other expense (income), as reported in our Consolidated Statement of Operations. We adjust the tax rate to exclude certain items, consistent with the calculation of adjusted net income in our earnings releases. Information with respect to performance targets for the ROIC metric during the pendency of the performance period is not considered material to an understanding of our compensation arrangements and is not addressed in this discussion because it represents confidential business or financial information that we do not otherwise disclose to the public. Disclosing this information could cause significant competitive harm to the company. We believe our performance target for the ROIC measure was set at an appropriate level at the beginning of the performance period to be challenging, but sufficiently realistic to motivate the performance of our executive officers. We disclose information with respect to the ROIC threshold, target and maximum payout opportunities, and the actual number of shares awarded, in our executive compensation disclosures with the SEC in the year following conclusion of the performance period.
COMPENSATION DISCUSSION AND ANALYSIS Relative EPS Growth Payout with respect to 25% of the PSAs is based on our Relative EPS Growth during the three-year performance period. Relative EPS Growth is based on the extent to which the growth rate in our diluted earnings per share from continuing operations, calculated and presented in accordance with GAAP (“GAAP EPS”) for the three-year period ending December 31, 2024, exceeds the growth rate in the GAAP EPS of the companies included in the S&P MidCap 400 Index for the three-year period ending September 30, 2024. At the conclusion of the performance period, the growth rate in GAAP EPS for the company and for each company included in the S&P MidCap 400 Index during the comparison period, expressed as a percentage, is calculated as follows:
Award payouts in connection with the Relative EPS Growth performance measure are based on the percentage of S&P MidCap 400 companies whose growth rate in GAAP EPS we exceed (referred to below as the “Performance Percentile”), as follows:
To address possible changes in the composition of the S&P MidCap 400 during the comparison period, we established the following guidelines:
Incremental Adjusted EBIT Leverage Payout with respect to one-half of the PSAs is based on accomplishing specific levels of Incremental Adjusted EBIT Leverage that are established on the date of grant at the end of each of 2022, 2023 and 2024. Incremental Adjusted EBIT Leverage measures the change in Adjusted EBIT from year to year relative to the change in revenue from year to year. The definition of Adjusted EBIT is provided above under the MICP discussion. The Incremental Adjusted EBIT Leverage goal is a key metric for our investors and is designed to focus our executive team on earning strong margins on incremental sales and maximizing overhead leverage. To further drive performance, and align the interests of management with our stockholders, a minimum of 1% incremental revenue must be achieved for each year to be eligible to earn the shares allocable to that year. With regard to each year during the three-year performance period, an executive can receive a payout at the end of the three-year performance period with respect to the shares allocated to that year only if a specified threshold level of performance is achieved; no portion of the award allocated to a year will payout at the end of the three-year performance period if performance for that year is below the threshold level. Once the threshold level of performance for a year is achieved, the portion of the award allocated to that year will payout at the end of the three-year performance period based on a range of a minimum (threshold) of 50% to a maximum of 200%.
COMPENSATION DISCUSSION AND ANALYSIS For the 2022 fiscal year, the following Incremental Adjusted EBIT Leverage goals were established in January 2022:
For purposes of the PSAs, our Incremental Adjusted EBIT Leverage for 2022 was 37.2%, which was slightly below target, resulting in an achievement percentage of 86%. As a result, 14.3% of the shares under the PSA award were earned and will vest at the end of the three-year performance period. The remaining 33.4% of the PSAs tied to the Incremental Adjusted EBIT Leverage goals will be earned, if at all, based on the extent to which we achieve the Incremental Adjusted EBIT Leverage goals for each of 2023 (representing 16.7% of the shares) and 2024 (representing the remaining 16.7% of the shares). PSAs Granted in 2021 In 2021, as part of our long-term incentive plan, we granted PSAs to our named executive officers and other employees for the 2021-2023 performance period. Payout with respect to the PSAs is based on accomplishing specific levels of Incremental Adjusted EBIT Leverage that were established on the date of grant at the end of each of 2021, 2022 and 2023. To further drive performance, and align the interests of management with our stockholders, a minimum of 1% incremental revenue must be achieved for each year to be eligible to earn the shares allocable to that year. For the 2021-2023 cycle, the maximum payout at the end of the three-year performance period is capped at 150% of the target award to better align management with stockholders and avoid the possibility of a windfall for management if our recovery period was shorter than forecasted. Our target Incremental Adjusted EBIT Leverage under the 2021 PSAs for the 2022 performance period was 27.5%, with a maximum of 34.4%. As noted above, our Incremental Adjusted EBIT Leverage for 2022 was 37.2%, resulting in earned shares of 200% of the shares allocated to the 2022 performance period, subject to the overall payout cap at the end of 2023 of 150%. PSAs Granted in 2020 In 2020, as part of our long-term incentive plan, we granted PSAs to our named executive officers and other employees for the 2020-2022 performance period. The number of shares issuable upon vesting was based on our performance with respect to the two separate financial measures shown on the following table:
Financial Measure
Relative EPS Growth
33 | % | |
As described below, we did not achieve threshold with regard to the two financial measures resulting in no shares being issued under the PSAs granted in 2020.
ROIC – The threshold award was payable if the average ROIC equaled 13.6%. Due to the impact of the COVID-19 pandemic on our operating results in 2020-2022, the average of our ROIC for the 2020-2022 period was 3.6%, which resulted in an award attributable to ROIC that was equal to 0% of the target award.
Relative EPS Growth – The Relative EPS Growth was based on the degree to which our GAAP EPS, for the performance period from October 1, 2019 through September 30, 2022, exceeded the GAAP EPS of the S&P MidCap 400 companies, for the same 36-month period. The threshold award was payable if our Relative EPS Growth was at the 40th percentile of the S&P MidCap 400 companies. Due to the impact of the COVID-19 pandemic on our results of operations in 2020-2022, our Relative EPS Growth was at the 15th percentile of the S&P MidCap 400 companies, which resulted in an award attributable to Relative EPS Growth that was equal to 0% of the target award.
Award payouts in connection with the Relative EPS Growth performance measure are based on the percentage of S&P MidCap 400 companies whose growth rate in GAAP EPS we exceed (referred to below as the “Performance Percentile”), as follows:
Award Level | Performance Percentile | Award Payout: Percentage of Target Award Opportunity | |||
Threshold | 40% | 50% | |||
Target | 55% | 100% | |||
Maximum | 75% | 200% |
In 2019, we modified the comparison period for the Relative EPS Growth financial measure. For the PSAs granted in 2018, Relative EPS Growth is based on the degree to which the growth rate in our GAAP EPS during the period from October 1, 2017 through September 30, 2020 exceeds the growth rate in the GAAP EPS of the S&P MidCap 400 companies for the same 36-month period. For the PSAs granted in 2019, Relative EPS Growth is based on the degree to which the growth rate in our GAAP EPS during the period from January 1, 2019 through September 30, 2021 exceeds the growth rate in the GAAP EPS of the S&P MidCap 400 companies for the same 33-month period. We made this change to the comparison period in order to avoid the potential distortion that would occur if GAAP EPS at the beginning of the performance period for the PSAs granted in 2019 reflected the financial statement impact of the enactment of the Tax Cuts and Jobs Act (the “TCJA”) in the fourth quarter of 2017.
To address possible changes in the composition of the S&P MidCap 400 during the comparison period, we established the following guidelines:
2023 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS
Why Do We Use These Financial Measures?
Vesting of PSAs Granted in 2017
In 2017, as part of our long-term incentive plan, we granted PSAs to our named executive officers and other employees for the 2017-2019 performance period. The number of shares issuable upon vesting was based on our performance with respect to the two separate financial measures shown on the following table:
Our achievement with regard to the two financial measures is described below.
COMPENSATION DISCUSSION AND ANALYSIS
Relative EPS Growth | ||||
Award Progression | Performance Percentile | Payout % | ||
Threshold | 40th | 50% | ||
Target | 55th | 100% | ||
Maximum | 75th | 200% |
The weighted average award for the two financial measures was 0% of the target award; as a result, no shares underlying the PSAs for the 2020-2022 performance cycle were issued to our named executive officers.
Equity Grant Practices
In accordance with our equity award policy, equity awards, namely NQOs, RSUs and PSAs, are granted annually on the third full trading day after the financial results for the last completed fiscal year are released. Unless an exception is approved by the compensation committee, off-cycle equity awards are granted on the third full trading day after the financial results are released for a quarter. We value RSUs and PSAs, and determine the exercise price for our NQOs, based on the closing price of our common stock on the date of grant. Our RSUs and NQOs vest in equal increments on the first three anniversaries of the date of grant, except for RSUs granted to our French employees, including Mr. Merlot. RSUs granted to Mr. Merlot vest as to two-thirds of the underlying shares on the second anniversary of the grant date and the remaining one-third of the underlying shares on the third anniversary of the grant date for French tax law purposes. PSAs vest in the same manner as described above for PSAs granted in 2019, except that Relative EPS Growth was based on the degree to which our GAAP EPS, for the performance period from January 1, 2017 through December 31, 2019 exceeded the GAAP EPS of the S&P MidCap 400 companies, for the 36 month period beginning October 1, 2016 and ending September 30, 2019 (the “comparison period”). We used a one fiscal quarter earlier start and end to the comparison period to enable us to calculate the number of shares ultimately issuable under the PSA awards and to distribute the shares underlying PSA awards in the first quarter of the year following the performance period, after certification of performance results by the compensation committee.
We believe that these vesting terms, together with award opportunities under our PSAs, provide our executives with a meaningful incentive for continued employment. Our board of directors has delegated to Mr. Stanage, as sole member of our Equity Grant Committee, authority to grant equity awards on a discretionary basis. Mr. Stanage was provided this authority with respect to 100,000 shares commencing March 1, 2022 for a 12-month period. These grants may be made only to persons who are not executive officers, and no grant exceeding 10,000 shares may be made to any person in a single year. For the 12-month period commencing in March 2022, Equity Grant Committee awards were made with respect to an aggregate of 24,368 shares underlying RSUs.
Personal Benefits
We have ceased providing personal benefits to newly hired or appointed named executive officers, but we continued to provide limited personal benefits to Mr. Hennemuth and Mr. Merlot. In 2022, prior to his termination, Mr. Hennemuth received a monthly automobile allowance and an additional amount, which was intended to be used for club membership dues, financial counseling and tax planning and preparation, and supplemental life and health insurance beyond the basic life insurance available to our U.S.-based employees. This allowance was provided only if actually used, and no part of the allowance was permitted to be used as a reimbursement for taxes due on the income recognized by Mr. Hennemuth as a result of receiving these personal benefits. In accordance with local practices for French employees, Mr. Merlot, who is a resident of France, receives an automobile allowance. Ms. Lehman was inadvertently receiving a monthly automobile allowance through July 2022, which has been discontinued.
The compensation committee reviews the personal benefits annually.
Additional information regarding personal benefits for our named executive officers is provided in the “All Other Compensation” column of the Summary Compensation Table and the accompanying footnotes.
Ongoing and Post-Employment Arrangements
The target award was payable if the percentage of S&P MidCap 400 companies whose growth rate in GAAP EPS we exceeded was 55%. We exceeded 61% of the S&P MidCap 400 companies in GAAP EPS growth, which resulted in an award attributable to Relative EPS Growth that was equal to 130.0% of the target award.
COMPENSATION DISCUSSION AND ANALYSIS
The weighted average award for the two financial measures was 137.2% of the target award; as a result, in January 2020, each of our named executive officers received a number of shares of our common stock equal to 137.2% of the target amount of the shares underlying the PSAs granted to such named executive officer, as indicated in the following table:
Name | Number of Shares Underlying PSAs at Target | Number of Shares Issued Upon Vesting(1) | ||||||
Nick L. Stanage | 36,751 | 51,614 | ||||||
Patrick J. Winterlich | 1,333 | 1,871 | ||||||
Robert G. Hennemuth | 4,462 | 6,265 | ||||||
Gail E. Lehman | 4,135 | 5,806 | ||||||
Thierry Merlot | 2,284 | 3,207 |
Equity Grant Practices
In accordance with our equity award policy, equity awards, namely NQOs, RSUs and PSAs, are granted annually on the third full trading day after the financial results for the last completed fiscal year are released. Unless an exception is approved by the compensation committee, off-cycle equity awards are granted on the third full trading day after the financial results are released for a quarter. We value RSUs and PSAs, and fix the exercise price for our NQOs, based on the closing price of our common stock on the date of grant. Our RSUs and NQOs vest in equal increments on the first three anniversaries of the date of grant, except for RSUs granted to our French employees, including Mr. Merlot. The RSUs granted to our French employees vest as to two-thirds of the underlying shares on the second anniversary of the date of grant, and the remaining one-third of the underlying shares on the third anniversary of the date of grant. PSAs vest in the year following the performance period, after certification of performance results by the compensation committee. We believe that these vesting terms, together with award opportunities under our PSAs, provide our executives with a meaningful incentive for continued employment. Our board of directors has delegated to Mr. Stanage, as sole member of our Equity Grant Committee, authority to grant equity awards on a discretionary basis. Mr. Stanage was provided this authority with respect to 100,000 shares in 2019. These grants may be made only to persons who are not executive officers, and no grant exceeding 10,000 shares may be made to any person in a single year. In 2019, Equity Grant Committee awards were made only with respect to an aggregate of 22,612 shares underlying RSUs.
Personal Benefits
We have ceased providing personal benefits to newly hired or appointed named executive officers, including Messrs. Stanage and Winterlich, and Ms. Lehman, but we continued to provide limited personal benefits to Mr. Hennemuth and Mr. Merlot. Mr. Hennemuth receives a $12,000 annual automobile allowance and an additional $5,600, which is intended to be used for club membership dues, financial counseling and tax planning and preparation, and supplemental life insurance beyond the basic life insurance available to our U.S.-based employees. This allowance is provided only if actually used, and no part of the allowance may be used as a reimbursement for taxes due on the income recognized by the named executive officer as a result of receiving these personal benefits. In accordance with local practices for French employees, Mr. Merlot, who is a resident of France, receives an automobile allowance, which was approximately $9,277 in 2019.
The compensation committee reviews the personal benefits annually.
Additional information regarding personal benefits for our named executive officers is provided in the “All Other Compensation” column of the Summary Compensation Table and the accompanying footnotes.
Ongoing and Post-Employment Arrangements
We have several plans and agreements addressing compensation for our named executive officers that accrue value as the executive continues to work for us, provide special benefits upon certain types of termination events and provide retirement benefits. These plans and agreements were designed to be a part of a competitive compensation package that encourages our executives to remain employed by us. In some cases, the plans described below are available to other employees as well.
38 | HEXCEL CORPORATION |
COMPENSATION DISCUSSION AND ANALYSIS
Hexcel Corporation 401(k) Retirement Savings Plan
Under our 401(k) Retirement Savings Plan, referred to below as the “401(k) Plan,” substantially all of our U.S. employees may contribute up to 75% of their cash compensation (subject to applicable Internal Revenue Code limits). We match 50% of employee contributions up to 6% of the employee’s cash compensation, and provide an annual fixed contribution equal to 2% of each participant’s cash compensation (4% for U.S. employees who were 45 years old and employed by us on December 31, 2000). The 401(k) Plan also provides a profit-sharing feature under which we may make an annual contribution to the account of each U.S. employee based on our performance during the preceding year; for 2019, the contribution was 3% of an employee’s cash compensation.
All of our contributions vest incrementally over the first five years of service. Amounts credited to an employee’s account may be invested in a number of funds. Although the 401(k) Plan offers to employees the opportunity to invest our contributions (but not their own) into a Hexcel stock fund, our senior executives, including all U.S.-based named executive officers, are not permitted to invest in the fund.
Amounts that we contribute to the 401(k) Plan accounts of the named executive officers are included in the “All Other Compensation” column of the Summary Compensation Table.
Non-Qualified Deferred Compensation Plan
Under our Non-Qualified Deferred Compensation Plan (the “NDCP”), eligible U.S.-based employees, including our U.S.-based named executive officers, may defer amounts of their cash compensation in excess of Internal Revenue Code limits applicable to our 401(k) Plan, referred to below as “excess compensation.” We match 50% of a participant’s contributions to the NDCP, up to 6% of the participant’s excess compensation. We also provide the same fixed and profit-sharing contributions with respect to such excess contributions on the same basis as described above with respect to the 401(k) Plan. All participant and Hexcel contributions are fully vested at all times.
Amounts credited to a participant’s account may be invested in a number of funds based upon the funds, other than the Hexcel stock fund, available under the 401(k) Plan.
See “Executive Compensation – Non-Qualified Deferred Compensation in 2019” on page 47 below for additional information.
Other Benefits for Named Executive Officers
Supplemental Retirement Benefits
We entered into a supplemental executive retirement agreement (“SERP”) with Mr. Stanage and an executive deferred compensation agreement (“EDCA”) with Mr. Hennemuth that provide additional retirement benefits. The SERP provides benefits to Mr. Stanage based on a formula relating to years of service (subject to a maximum accrual once he attains the age of 65) and specified percentages of annual compensation, subject to offset for contributions we have made to certain other retirement plans. The EDCA generally provides benefits to Mr. Hennemuth based on a formula related to salary and cash incentive awards he has earned subsequent to the effective date of the EDCA. These agreements are described in more detail under “Executive Compensation –Pension Benefits in 2019,” below. We initially entered into these agreements in 2006 (with respect to the EDCA) and 2009 (with respect to the SERP). We have not entered into similar agreements with more recently designated named executive officers, and we would consider several factors, including the competitive compensation environment for executive talent, before we enter into such an agreement in the future.
Supplemental Death Benefit
Under agreements with Messrs. Stanage and Hennemuth, and in accordance with our executive life insurance program for Mr. Winterlich and Ms. Lehman, if the named executive officer dies while employed by us, a death benefit will be provided equal to two times the sum of (i) the executive’s salary on the date of death and (ii) the average of the MICP awards paid to the executive in the three years (two years for Mr. Winterlich and Ms. Lehman) prior to death, up to a maximum of $1,500,000 for the named executive officer (other than Mr. Hennemuth, for whom there is no maximum death benefit). If the named executive officer’s death is accidental, an additional death benefit will be provided pursuant to our executive accidental death and dismemberment insurance program equal to two times the sum of (i) the executive’s salary on the date of death and (ii) the average of the MICP awards paid to the executive in the two years prior to death, up to a maximum of $1,000,000 for the named executive officer ($1,500,000 for Mr. Stanage). The named executive officers do not participate in our basic life insurance or
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
accidental death and dismemberment insurance programs available to our U.S.-based employees. The death benefits provided under the SERP and the EDCA with Messrs. Stanage and Hennemuth are described in the discussions of each agreement under “Executive Compensation – Pension Benefits in 2019,
Hexcel Corporation 401(k) Retirement Savings Plan
Under our 401(k) Retirement Savings Plan (the “401(k) Plan”), substantially all of our U.S. employees may contribute up to 75% of their cash compensation (subject to applicable Internal Revenue Code limits). We match 50% of employee contributions up to 6% of the employee’s cash compensation and provide an annual fixed contribution equal to 2% of each participant’s cash compensation (4% for U.S. employees who were at least 45 years old and employed by us on December 31, 2001). The 401(k) Plan also provides a profit-sharing feature under which we may make an annual contribution to the account of each U.S. employee based on our performance during the preceding year; for 2022, the contribution was 3% of an employee’s cash compensation.
All of our contributions vest incrementally over the first five years of service. Amounts credited to an employee’s account may be invested in a number of funds. Although the 401(k) Plan offers employees the opportunity to invest our contributions (but not their own) into a Hexcel stock fund, our senior executives, including the named executive officers, are not permitted to invest in this fund.
Amounts that we contribute to the 401(k) Plan accounts of the named executive officers are included in the “All Other Compensation” column of the Summary Compensation Table.
Non-Qualified Deferred Compensation Plan
Under our Non-Qualified Deferred Compensation Plan (the “NDCP”), eligible U.S.-based employees, including our named executive officers, may defer amounts of their cash compensation in excess of Internal Revenue Code limits applicable to our 401(k) Plan, referred to as “excess compensation.” We match 50% of a participant’s contributions to the NDCP, up to 6% of the participant’s excess compensation. We also provide the same fixed and profit-sharing contributions with respect to such excess contributions on the same basis as described above with respect to the 401(k) Plan. All participant and Hexcel contributions are fully vested at all times.
Amounts credited to a participant’s account may be invested in a number of funds based upon the funds, other than the Hexcel stock fund, available under the 401(k) Plan.
See “Executive Compensation – Non-Qualified Deferred Compensation in 2022” on page 53 below for additional information.
Other Benefits for Named Executive Officers
Supplemental Retirement Benefits
We entered into a supplemental executive retirement agreement (“SERP”) with Mr. Stanage and an executive deferred compensation agreement (“EDCA”) with Mr. Hennemuth that provide additional retirement benefits.
The SERP provides benefits to Mr. Stanage based on a formula relating to years of service (subject to a maximum accrual once he attains the age of 65) and specified percentages of his “final average pay”, subject to offset for contributions we have made to certain other retirement plans. Final average pay is calculated using Mr. Stanage’s average compensation for the highest paid 36 months out of his final 120 months of employment.
The EDCA generally provides benefits to Mr. Hennemuth based on a formula related to salary and cash incentive awards he has earned subsequent to the effective date of the EDCA. Payments under the EDCA were triggered upon Mr. Hennemuth’s involuntary termination by the company without “cause” on May 31, 2022 and are described under “Executive Compensation – Pension Benefits in 2022,” below.
These agreements are described in more detail under “Executive Compensation – Pension Benefits in 2022,” below. We initially entered into these agreements in 2006 (with respect to the EDCA) and 2009 (with respect to the SERP). We have not entered into similar agreements with other named executive officers, and we would consider several factors, including the competitive compensation environment for executive talent, before we enter into such an agreement in the future.
Supplemental Death Benefit
Under an agreement with Mr. Stanage, and in accordance with our executive life insurance program for Mr. Winterlich, Ms. Lehman and Ms. Fitzsimons, if one of the currently employed named executive officers dies while employed by us, a death benefit will be provided equal to two times the sum of (i) the executive’s salary on the date of death and (ii) the average of the MICP awards paid to the executive in the three years (two years for Mr. Winterlich, Ms. Lehman and Ms. Fitzsimons) prior to death, up to a maximum of $1,500,000 for the named executive officer. If the named executive officer’s death is accidental, an additional death benefit will be provided pursuant to our executive accidental death and dismemberment insurance program equal to two times the sum of (i) the executive’s salary on the date of death and (ii) the average of the MICP awards paid to the executive in the two years prior to death, up to a maximum of $1,000,000 for the named executive officer ($1,500,000 for Mr. Stanage). The named executive officers do not participate in our basic life insurance or accidental death and dismemberment insurance programs available to our U.S.-based employees. The death benefits provided under the SERP with Mr. Stanage are described in the discussion of such agreement under “Executive Compensation – Pension Benefits in 2022,” below.
Retirement Plans in which Mr. Merlot Participates
Mr. Merlot’s retirement benefits are governed by the terms of the collective labor agreement for the Textile Industries in France and the Composites Local Company Agreement (together, the “French CLA”) and French social programs. Under the French CLA, Mr. Merlot is entitled to receive a retirement indemnity equal to four months’ salary, plus a six-month notice period (a three-month notice period if Mr. Merlot is under the age of 65) and a payment related to his non-competition obligations, unless such obligations are waived by the company upon his retirement. Mr. Merlot also receives a pension that is funded by contributions from the company and Mr. Merlot as required by French regulations.
Severance Arrangements, Including Change of Control Provisions
We have severance agreements with all of our U.S.-based named executive officers other than Mr. Stanage, whose severance terms are governed by our Executive Severance Policy, coupled with certain terms set forth in his offer of employment letter. We refer to all of the foregoing documents collectively as the “Severance Arrangements.”
The Severance Arrangements generally provide payments and other benefits to a U.S.-based named executive officer if we terminate his or her employment for any reason other than disability or “cause” (as defined in the Severance Arrangement related to the named executive officer) or if he or she terminates employment for “good reason” (also as defined in such Severance Arrangement), except in circumstances related to a change in control, which are described in the next paragraph. With respect to the U.S.-based named executive officers, such payments and other benefits generally include a lump sum payment equal to the sum of (or, in the case of Mr. Stanage, equal to 1.5 times the sum of) annual base salary and average annual bonus (generally with respect to the last three annual bonus amounts paid) under the MICP, as well as continued participation in several Company health, welfare and other plans, or provision of equivalent benefits (“Continued Participation Benefits”) for one year (in the case of Mr. Stanage, 1.5 years).
If we terminate the named executive officer for any reason other than disability or cause, or the named executive officer terminates employment for good reason within two years after a “Change in Control” or during the period of a “Potential Change in Control” (each as defined in the Severance Arrangement relating to the named executive officer), we generally will provide a lump sum payment equal to 1.5 to 3 times the sum of annual base salary and average annual bonus under the MICP, as well as Continued Participation Benefits for 1.5 to 3 years.
See “Executive Compensation—Potential Payments Upon Termination or Change in Control” below for additional information.
We believe that the Severance Arrangements promote management stability and encourage our U.S.-based named executive officers to focus their attention and energies on our business during potential periods of uncertainty. Absent such protections, there is an increased risk that executive officers will seek other employment opportunities if they become concerned about their employment security following or in anticipation of a change in control. We believe that the payments to be made under the Severance Arrangements provide some financial security to a named executive officer in the event that he or she is subject to a specified event of termination in the context of a change in control. Moreover, we believe the Severance Arrangements will facilitate a named executive officer’s support for a corporate transaction involving a change in control that is in the best interest of our stockholders, even though the transaction may have an effect on the named executive officer’s employment with us. We believe that these provisions, together with provisions calling for the lesser payments provided under the Severance Arrangements with respect to specified termination events outside of the context of a change in control, provide an important incentive for our named executive officers to remain with us.
Severance Arrangements we entered into with certain of our named executive officers through 2013 provided for a “modified gross-up.” Under the modified gross-up, subject to the exception described below, if a named executive officer becomes liable for payment of any excise tax under Section 4999 of the Internal Revenue Code with respect to any payment received in connection with a change in control, we will make an additional payment to the named executive officer. This additional payment was designed so that, after payment of all excise taxes and any other taxes payable in respect of the additional payment, the executive would retain the same amount as if no excise tax
2023 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS
Retirement Plans in which Mr. Merlot Participates
Mr. Merlot’s retirement benefits are governed by the terms of the collective labor agreement for the Textile Industries in France and the Composites Local Company Agreement (together, the “French CLA”) and French social programs. Under the French CLA, Mr. Merlot is entitled to receive a retirement indemnity equal to four months’ salary, plus a six-month notice period (a three-month notice period if Mr. Merlot is under the age of 65) and a payment related to his non-competition obligations, unless such obligations are waived by the company upon his retirement. Mr. Merlot also receives a pension that is funded by contributions from the company and Mr. Merlot as required by French regulations.
Severance Arrangements, Including Change of Control Provisions
We have severance agreements with all of our named executive officers employed currently by the company other than Mr. Stanage, whose severance terms are governed by our Executive Severance Policy, coupled with certain terms set forth in his offer of employment letter. We refer to all of the foregoing documents collectively as the “Severance Arrangements.”
The Severance Arrangements generally provide payments and other benefits to a named executive officer if we terminate his or her employment for any reason other than disability or “cause” (as defined in the Severance Arrangement related to the named executive officer) or if he or she terminates employment for “good reason” (also as defined in such Severance Arrangement), except in circumstances related to a change in control, which are described in the next paragraph. Such payments and other benefits generally include a lump sum payment equal to the sum of (or, in the case of Mr. Stanage, equal to 1.5 times the sum of) annual base salary and average annual bonus (generally with respect to the last three annual bonus amounts paid) under the MICP, as well as continued participation in several company health, welfare and other plans, or provision of equivalent benefits (“Continued Participation Benefits”) for one year (or, in the case of Mr. Stanage, 1.5 years).
If we terminate the named executive officer for any reason other than disability or cause, or the named executive officer terminates employment for good reason within two years after a “Change in Control” or during the period of a “Potential Change in Control” (each as defined in the Severance Arrangement relating to the named executive officer), we generally will provide a lump sum payment equal to 1.5 to 3 times the sum of annual base salary and average annual bonus under the MICP, as well as Continued Participation Benefits for 1.5 to 3 years.
As noted above, the company terminated Mr. Hennemuth’s employment on May 31, 2022 and terminated Ms. Pritchett’s employment on April 30, 2022. In each case, the compensation committee determined that the terminations made by the company were involuntary and without “cause” and therefore each of these named executive officers was eligible to receive severance benefits under the terms of his or her Severance Arrangement. In each case, they received the standard severance compensation provided for under the applicable Severance Arrangement, which was not modified or increased in connection with the termination of employment.
See “Executive Compensation—Potential Payments Upon Termination or Change in Control” below for additional information.
We believe that the Severance Arrangements promote management stability and encourage our named executive officers to focus their attention and energies on our business during potential periods of uncertainty. Absent such protections, there is an increased risk that executive officers will seek other employment opportunities if they become concerned about their employment security following or in anticipation of a change in control. We believe that the payments to be made under the Severance Arrangements provide some financial security to a named executive officer in the event that he or she is subject to a specified event of termination in the context of a change in control. Moreover, we believe the Severance Arrangements will facilitate a named executive officer’s support for a corporate transaction involving a change in control that is in the best interest of our stockholders, even though the transaction may have an effect on the named executive officer’s employment with us. We believe that these provisions, together with provisions calling for the lesser payments provided under the Severance Arrangements with respect to specified termination events outside of the context of a change in control, provide an important incentive for our named executive officers to remain with us.
We have determined that no newly hired or promoted executive will be eligible for tax gross-up payments in connection with our change in control arrangements.
Accelerated Vesting of Equity Awards in Connection with a Change in Control
Our equity awards provide that they will vest upon a change in control. This is a so-called “single trigger” vesting provision, in contrast to the “double trigger” provision applicable in our Severance Arrangements, which generally require both a change in control as well as a specified employment termination event before payment is made.
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COMPENSATION DISCUSSION AND ANALYSIS
In adopting the single trigger vesting provision for our equity awards, we considered, among other things, that because our equity awards represent a significant portion of total compensation, the single trigger would provide a strong incentive for executive retention and would provide executives with the same opportunity as stockholders to realize value in connection with the change in control. In this regard, we believe the provision will focus the attention of our executives in pursuing a transaction that is in the best interest of our stockholders.
Stock Ownership Guidelines
had been imposed. However, we will not make the tax gross-up payment if the payment received in connection with the change in control is less than 110% of the amount that would not be subject to the excise tax; in that case, the payment to the named executive officer will be reduced to the extent necessary to avoid imposition of the excise tax.
Messrs. Stanage and Hennemuth previously entered into Severance Arrangements with us that provided for a modified gross-up. However, effective in 2014, Mr. Stanage relinquished his right to a modified gross-up. Mr. Hennemuth continues to have a Severance Arrangement that provides a modified gross-up.
We have determined that no newly hired or promoted executive will be eligible for tax gross-up payments in connection with our change in control arrangements. Accordingly, Severance Arrangements we entered into in October 2017 with our other U.S.-based executive officers, as amended, do not provide for such payments.
Accelerated Vesting of Equity Awards in Connection with a Change in Control
Our equity awards provide that they will vest upon a change in control. This is a so-called “single trigger” vesting provision, in contrast to the “double trigger” provision applicable in our Severance Arrangements, which generally require both a change in control as well as a specified employment termination event before payment is made.
In adopting the single trigger vesting provision for our equity awards, we considered, among other things, that because our equity awards represent a significant portion of total compensation, the single trigger would provide a strong incentive for executive retention and would provide executives with the same opportunity as stockholders to realize value in connection with the change in control. In this regard, we believe the provision will focus the attention of our executives in pursuing a transaction that is in the best interest of our stockholders.
We maintain stock ownership guidelines for our executive officers, other officers and our directors to further align the interests of management and our directors with those of our stockholders. The ownership guidelines require stock ownership having a “target dollar value,” which consists of the value of common stock owned by the executive or director, and specified members of his or her immediate family, as described below, as a multiple of that executive’s base salary or the director’s annual cash retainer fee, as shown in the table below:
Position | Target Dollar Value (as a multiple of | |||||||||||||
Chief Executive Officer | 6x salary | |||||||||||||
Executive Vice Presidents | 3x salary | |||||||||||||
Other Executive Officers | 2x salary | |||||||||||||
Other Officers | 1x salary | |||||||||||||
Directors | 5x annual cash retainer fee |
(1) | Target Dollar Value generally is based on the number of (i) shares of common stock and (ii) shares underlying vested RSUs with respect to which delivery of the shares has been deferred, in each case owned by (a) |
Until the target dollar value is achieved, an executive officer must retain 50%, and a director must retain 100%, of all net shares received under any of our incentive plans or programs. “Net shares” means all shares remaining after the sale of shares by the executive officer or director, to pay any taxes due with respect to the shares received and, in the case(b) a parent, child or grandchild of options, the exercise price.
Once the executive officer or director holdsor (c) a trust or other entity established for the target dollarbenefit of the executive officer or director, or any of such family members if the executive officer or director maintains the power to dispose of such shares. The value as ofis computed on the last day of a calendareach quarter, he or she is deemed to be in compliance withbased on the guidelines so long as he or she continues to hold at least the number of shares he or she held as of that date. If an executive officer is promoted, he or she must again achieve compliance with the guidelines, commencing with the last day of the calendar quarter in which the promotion occurred.
Allclosing price per share of our named executive officers and directors, other than Ms. Lehman and Mr. Winterlich, who first became executive officers in 2017, and Ms. Suever, who first became a director in 2018, were in compliance withcommon stock, as reported by the guidelines as of December 31, 2019.NYSE.
Until the target dollar value is achieved, an executive officer must retain 50%, and a director must retain 100%, of all net shares received under any of our incentive plans or programs. “Net shares” means all shares remaining after the sale of shares by the executive officer or director to pay any taxes due with respect to the shares received and, in the case of options, the exercise price.
Once the executive or director holds the target dollar value as of the last day of a calendar quarter, he or she is deemed to have satisfied the ownership requirement so long as he or she continues to hold at least the number of shares he or she held as of that date. If an executive officer is promoted, he or she must again satisfy the applicable ownership guideline, commencing with the last day of the calendar quarter in which the promotion occurred.
All of our current named executive officers and directors, other than Ms. Fitzsimons who first became an executive officer in 2022, Ms. Lehman and Mr. Winterlich, who first became executive officers in 2017, and Dr. Minus, who first became a director in 2020, had achieved the applicable ownership guidelines as of December 31, 2022.
Our Insider Trading Policy expressly states that our directors, officers and employees are prohibited from engaging in “short sales” or any hedging or monetization transactions, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. In addition, the policy prohibits pledges of company securities.
Clawback Policy
COMPENSATION DISCUSSION AND ANALYSIS
Our Insider Trading Policy expressly states that our directors, officers and employees are prohibited from engaging in “short sales” or any hedging or monetization transactions, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. In addition, the policy prohibits pledges of Company securities.
The Hexcel Corporation Clawback Policy is designed to enable the board of directors to recover incentive compensation that is deemed received by an employee under specified circumstances that are inconsistent with the maintenance of a culture that emphasizes integrity and accountability and that reinforces our pay for performance philosophy. The policy is designed to prevent unjust enrichment based on erroneous determinations of performance or undesirable activities that may cause meaningful harm to the company or its stockholders. The policy applies to incentive-based compensation under awards granted during and after 2017.
Under the Clawback Policy, we may recover incentive-based compensation paid to an executive officer with respect to the three years preceding a year in which we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws. The compensation recoverable is the amount in excess of the amount that would have been payable to the executive officer under the restated financial statements. The clawback may be applied regardless of whether the executive officer was responsible for the error that led to the accounting restatement.
2023 Proxy Statement | 41 |
COMPENSATION DISCUSSION AND ANALYSIS
In addition, the policy provides for recovery, at the board’s discretion, from our current or former employees, including our executive officers, of incentive-based compensation under other specified circumstances, including:
∎ | a material error in the calculation of a performance measure on which incentive-based compensation was received by a current or former employee during the three fiscal years completed before the date on which the material error is discovered; |
∎ | a current employee or former employee engaged in fraudulent or intentional misconduct that causes or might reasonably be expected to cause material reputational, financial or other harm to the |
∎ |
|
These remedies are in addition to any other remedies available to us or imposed by law enforcement agencies, regulators or other authorities, other than amounts with respect to the same compensation that the Chief Executive Officer or Chief Financial Officer has paid to us under Section 304 of the Sarbanes-Oxley Act of 2002.
We will revise this Clawback Policy to comply with the guidance issued by the Securities and Exchange Commission under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 once the applicable listing standards are finalized.
In addition to the remedies above, our equity grants to named executive officers also include a clawback provision in the event the named executive officer violates certain obligations to us, including confidentiality, non-competition and non-solicitation obligations.
Tax Considerations
These remedies are in addition to any other remedies available to us or imposed by law enforcement agencies, regulators or other authorities, other than amounts with respect to the same compensation that the Chief Executive Officer or Chief Financial Officer has paid to us under Section 304 of the Sarbanes-Oxley Act of 2002.
In addition to the remedies above, our equity grants to named executive officers also include a clawback provision in the event the named executive officer violates certain obligations to us, including confidentiality, non-competition and non-solicitation obligations.
Section 162(m) of the Internal Revenue Code generally places a $1 million limitation on the deductibility of compensation paid by a publicly-held company to certain of its executive officers. Nevertheless, as was the case in previous years, our principal consideration in authorizing compensation for our named executive officers is whether we believe such compensation is consistent with our compensation philosophy, described above under “Executive Compensation Overview – Our Compensation Philosophy and Principles.” Accordingly, we believe it is important to retain the flexibility to compensate executives in a manner designed to meet these objectives, even if such compensation is potentially not deductible for tax purposes.
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COMPENSATION DISCUSSION AND ANALYSIS
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally places a $1 million limitation on the deductibility of compensation paid by a publicly-held company to certain of its executive officers. For tax years beginning prior to January 1, 2018 (and specified pre-existing contractual arrangements as described below), certain compensation is exempt from this deduction limitation if it meets the requirements of “performance-based compensation” under Section 162(m). In setting compensation prior to 2018, we structured our annual incentive program and stock options in a manner intended to qualify for this exemption.
As part of the TCJA, the performance-based compensation exemption under Section 162(m) was eliminated for tax years commencing after December 31, 2017. The TCJA also expanded the number of executive officers who are subject to the deductibility limit. As a result, beginning in 2018, all compensation we pay to specified executive officers is subject to the deductibility limit, subject to payments under specified pre-existing contractual arrangements as described below. Nevertheless, as was the case in previous years, our principal consideration in authorizing compensation for our named executive officers is whether we believe such compensation is consistent with our compensation philosophy, described above under “Executive Compensation Overview – Our Compensation Philosophy and Principles.” Accordingly, we believe it is important to retain the flexibility to compensate executives in a manner designed to meet these objectives, even if such compensation is potentially not deductible for tax purposes.
The TCJA provides that its elimination of the performance-based compensation exemption under Section 162(m) does not apply with respect to compensation under a “written binding contract” that was in effect on November 2, 2017 and is not materially modified thereafter. To the extent applicable to existing plans and awards, the company may avail itself of the transition rule. However, due to uncertainties in the interpretation and implementation of the changes to Section 162(m) under the TCJA, including the scope of the regulatory relief for these pre-existing arrangements, we can offer no assurance regarding the extent to which, if any, compensation payable in 2019 and subsequent years under pre-existing arrangements with covered employees will be deductible.
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on its review and discussions with management, the committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. This report is provided by the following independent directors, who comprise the committee:
Guy C. Hachey,Chair
Cynthia M. Egnotovich
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on its review and discussions with management, the committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. This report is provided by the following independent directors, who comprise the committee:
Guy C. Hachey, Chair
Thomas A. Gendron
Dr. Jeffrey A. Graves
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EXECUTIVE COMPENSATION
the grant date in accordance with ASC 718, but without giving effect to estimated forfeitures. The value of each PSA award at the grant date, assuming that (a) the target level of performance will be achieved and (b) the level of performance resulting in the maximum payout will be achieved, is as follows: |
2022 Amount Included in Stock Awards | 2021 Amount Included in Stock Awards | 2020 Amount Included in Stock Awards | ||||||||||||||||||||||||||||
Target | Maximum | Target | Maximum | Target | Maximum | |||||||||||||||||||||||||
Nick L. Stanage | 2,873,367 | 5,746,734 | 4,144,315 | 6,216,472 | 2,762,839 | 5,525,678 | ||||||||||||||||||||||||
Patrick J. Winterlich | 399,309 | 798,618 | 634,796 | 952,194 | 348,662 | 697,324 | ||||||||||||||||||||||||
Gail E. Lehman | 280,622 | 561,245 | 454,388 | 681,582 | 255,985 | 511,969 | ||||||||||||||||||||||||
Thierry Merlot | 227,096 | 454,192 | 349,906 | 524,859 | 189,690 | 379,380 | ||||||||||||||||||||||||
Gina Fitzsimons | 131,781 | 263,563 | — | — | — | — | ||||||||||||||||||||||||
Robert G. Hennemuth | 258,659 | 517,318 | 435,755 | 653,632 | 246,194 | 492,387 | ||||||||||||||||||||||||
Colleen Pritchett | 168,457 | 336,914 | 257,726 | 515,452 | 138,867 | 277,734 |
(2) | For additional information regarding the assumptions made in calculating these amounts, see Note 13, “Stock-Based Compensation,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. |
(3) | Includes the aggregate grant date fair value of all NQOs granted to the named executive officer during the year indicated, computed in accordance with ASC 718. These amounts do not necessarily correspond to the actual value that will be realized by the named executive officer. |
(4) | Reflects amounts earned under the MICP with respect to the indicated year. |
(5) | For each year, represents the difference between the actuarial present value of the executive’s accumulated benefit under his applicable retirement plan arrangement, as of December 31 of the indicated year and December 31 of the prior year. See “Pension Benefits in 2022” on page 51 for information regarding the pension arrangements applicable to Messrs. Stanage and Hennemuth. The 2022 actuarial present value of executive pension benefit for Mr. Stanage was affected by increasing discount rates, partially offsetting the increases due to pay increases and additional service. The amount reported for Mr. Hennemuth under this column for the 2022 fiscal year is reported as zero under applicable SEC regulations because the aggregate change in actuarial present value of his pension benefit was a decrease of $3,208,325. This reflects a distribution of $2,959,717 during 2022 following Mr. Hennemuth’s involuntary termination of service without “cause.” |
These changes in present value do not directly relate to the final potential payout, and can vary significantly year-over-year based on: (a) changes in salary; (b) other one-time adjustments to salary; (c) actual age versus predicted age at retirement; (d) the discount rate used to determine present value of the benefit; and (e) other relevant factors. A decrease in the discount rate results in an increase in the present value of the accumulated benefit and an increase in the discount rate has the opposite effect. See Note 8, “Retirement and Other Postretirement Benefit Plans,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, and the pension benefits table under “Pension Benefits in 2022” on page 52 for a description of the interest rate and mortality assumptions. |
(6) | The amounts for our named executive officers in |
Name | Hexcel Contributions to 401(k) Retirement Savings Plan ($) | Hexcel Contributions to Non-Qualified Deferred Compensation Plan ($) | Premiums for Life, Long-Term Disability, and Accidental Death and Dismemberment Insurance ($) | Perquisites(a) ($) | Severance Payments(c) ($) | ||||||||||||||||||||
Nick L. Stanage | 24,127 | 74,742 | 8,139 | — | — | ||||||||||||||||||||
Patrick J. Winterlich | 23,950 | 33,371 | 7,599 | — | — | ||||||||||||||||||||
Gail E. Lehman | 24,615 | 24,316 | 3,301 | 8,000 | — | ||||||||||||||||||||
Thierry Merlot(b) | — | — | 3,827 | 9,742 | — | ||||||||||||||||||||
Gina Fitzsimons | 23,950 | 5,123 | 2,300 | — | — | ||||||||||||||||||||
Robert G. Hennemuth | 23,950 | 16,515 | 3,028 | 22,707 | 737,428 | ||||||||||||||||||||
Colleen Pritchett | 23,950 | 10,042 | 1,719 | — | 465,554 |
(a) | Ms. Lehman received a monthly automobile allowance through July 2022, a benefit the company has discontinued for U.S. executive officers. Mr. Merlot receives an automobile allowance. For Mr. Hennemuth, the amount includes (i) a monthly automobile allowance through the date of his termination, (ii) an additional amount intended to be used for reimbursement of club membership dues, expenses incurred for financial counseling and tax planning and preparation, and premiums for supplemental life and health insurance, and (iii) the value of a company gift |
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EXECUTIVE COMPENSATION
provided to acknowledge his years of service. The other named executive officers do not receive any perquisites. |
(b) | In addition to the amounts in the table, Hexcel contributed €62,409 ($66,809) to a statutory pension benefit plan for Mr. Merlot, as required under French regulations. |
(c) | For Mr. Hennemuth, pursuant to his severance agreement, includes a lump sum payment of $697,355 representing his base salary plus the average MICP award he received over the prior three years and benefits continuation costs of $40,073. For Ms. Pritchett, pursuant to her severance agreement, includes a lump sum payment of $427,927 representing her annual base salary in effect as of her termination date and benefits continuation costs of $37,627. More detail concerning the severance payments for Mr. Hennemuth and Ms. Pritchett is provided on page 60. |
(7) | For Mr. Merlot, the amounts in the “Salary,” “Non-Equity Incentive Plan Compensation” and “All Other Compensation” columns are paid or determined in the local currency, euros, and converted to an amount in U.S. dollars based on the exchange rate in effect as of December 31 of the year |
(8) | Mr. Hennemuth served as our Executive Vice President, Human Resources and Communications until January 14, 2022 and as our Executive Vice President, Chief of Staff until his involuntary termination without “cause” on May 31, 2022. |
(9) | Ms. Pritchett served as our President, Aerospace, Americas until her involuntary termination without “cause” on April 30, 2022. |
Grants of Plan-Based Awards in 2022
Estimated Future |
Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(6) | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date(3) | Approval Date(3) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||
Nick L. Stanage | — | — | 581,287 | 1,162,574 | 2,325,148 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 27,538 | 55,077 | 110,154 | — | — | — | 2,873,367 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 80,547 | 52.17 | 1,723,706 | |||||||||||||||||||||||||||||||||||||
Patrick J. Winterlich | — | — | 221,853 | 443,706 | 887,412 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 3,827 | 7,654 | 15,308 | — | — | — | 399,309 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | 5,103 | — | — | 266,224 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 18,657 | 52.17 | 399,260 | |||||||||||||||||||||||||||||||||||||
Gail E. Lehman | — | — | 144,853 | 289,706 | 579,412 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 2,689 | 5,379 | 10,758 | — | — | — | 280,622 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | 3,586 | — | — | 187,082 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 13,112 | 52.17 | 280,597 | |||||||||||||||||||||||||||||||||||||
Thierry Merlot | — | — | 129,668 | 259,336 | 518,672 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 2,176 | 4,353 | 8,706 | — | — | — | 227,096 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | 2,902 | — | — | 151,397 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 10,610 | 52.17 | 227,054 | |||||||||||||||||||||||||||||||||||||
Gina Fitzsimons | — | — | 92,500 | 185,000 | 370,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 1,263 | 2,526 | 5,052 | — | — | — | 131,781 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | 1,684 | — | — | 87,854 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 6,158 | 52.17 | 131,781 | |||||||||||||||||||||||||||||||||||||
Robert G. Hennemuth | — | — | 142,723 | 285,445 | 570,890 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 2,479 | 4,958 | 9,916 | — | — | — | 258,659 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | 3,305 | — | — | 172,422 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 12,085 | 52.17 | 258,619 | |||||||||||||||||||||||||||||||||||||
Colleen Pritchett | — | — | 128,379 | 256,757 | 513,514 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | 1,614 | 3,229 | 6,458 | — | — | — | 168,457 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | 2,153 | — | — | 112,322 | |||||||||||||||||||||||||||||||||||||
01/31/2022 | 01/19/2022 | — | — | — | — | — | — | — | 7,872 | 52.17 | 168,461 |
46 | HEXCEL CORPORATION |
EXECUTIVE COMPENSATION
(1) | The amounts shown reflect the threshold, target and maximum payments the named executive officer was eligible to receive based on achievement with respect to performance goals under the MICP. The actual awards we paid for 2022 are shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table above. If the threshold performance for any financial measure under the MICP is not attained, no portion of the MICP award attributable to that measure is paid. More detail concerning the 2022 MICP financial performance measures is provided on pages 30-32. |
(2) | Reflects the number of shares of our common stock underlying PSAs granted under our 2013 Incentive Stock Plan (the “2013 ISP”) for the 2022-2024 performance period; the PSAs will convert into shares of common stock after a three-year performance period based on the level of achievement with respect to specified performance measures. No PSAs will convert with respect to a financial measure if a threshold level of performance is not achieved. The terms of the PSAs are described in more detail on pages 34-37. |
(3) | For our regular annual equity awards, the compensation committee approved a dollar value of the awards (as a percentage of salary) and the performance requirements for conversion of PSAs into shares of common stock at its meeting on January 19, 2022. In accordance with our equity grant policy, the grant date for the 2022 annual equity awards was January 31, 2022, the third trading day following the release of 2021 fourth-quarter and year-end earnings. |
(4) | Reflects RSUs granted under the 2013 ISP. The RSUs granted on January 31, 2022 generally vest and convert into shares at the rate of one-third on each of the first three anniversaries of the grant date, except for the RSUs granted to Mr. Merlot, which will vest and convert at the rate of two-thirds of the underlying shares on the second anniversary of the grant date and the remaining one-third of the underlying shares on the third anniversary of the grant date. The terms of the RSUs are described in more detail on page 34. |
(5) | Reflects NQOs granted under the 2013 ISP, which will vest and become exercisable at the rate of one-third of the underlying shares on each of the first three anniversaries of the grant date. The terms of the NQOs are described in more detail on page 33. |
(6) | Reflects the grant date fair value of PSAs, RSUs and NQOs granted to the named executive officers in 2022, computed in accordance with ASC 718. Generally, the grant date fair value is equal to the amount that we will expense in our financial statements over the award’s vesting schedule, but without giving effect to estimated forfeitures. For RSUs, fair value is calculated using the closing price of our common stock on the grant date. For PSAs, fair value is calculated using the target number of shares of common stock subject to the PSA award and the closing price of our common stock on the grant date. For NQOs, fair value is calculated using the applicable Black-Scholes derived value on the grant date. For additional information on the valuation assumptions used in calculating the fair value of these instruments, see Note 13, “Stock-Based Compensation,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. These amounts, computed in accordance with ASC 718, do not necessarily correspond to the actual value that will be realized by the named executive officers. |
Description of Plan-Based Awards
All NQOs, RSUs and PSAs granted to the named executive officers in fiscal year 2022 were granted under the 2013 ISP and are governed by the terms and conditions of the 2013 ISP and the applicable award agreements. See pages 32-38 for a discussion of NQOs, RSUs and PSAs.
2023 Proxy Statement | 47 |
EXECUTIVE COMPENSATION
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table provides information on the holdings of outstanding stock options and unvested stock awards held by the named executive officers as of December 31, 2022:
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||||||||||||||
Nick L. Stanage | 01/28/2013 | 41,321 | — | — | 28.27 | 01/28/2023 | — | — | — | — | ||||||||||||||||||||||||||||||
01/28/2014 | 34,912 | — | — | 43.01 | 01/28/2024 | — | — | — | — | |||||||||||||||||||||||||||||||
01/27/2015 | 56,578 | — | — | 43.96 | 01/27/2025 | — | — | — | — | |||||||||||||||||||||||||||||||
01/26/2016 | 64,812 | — | — | 41.71 | 01/26/2026 | — | — | — | — | |||||||||||||||||||||||||||||||
01/30/2017 | 61,204 | — | — | 50.50 | 01/30/2027 | — | — | — | — | |||||||||||||||||||||||||||||||
01/29/2018 | 50,121 | — | — | 68.15 | 01/29/2028 | — | — | — | — | |||||||||||||||||||||||||||||||
01/28/2019 | 65,502 | — | — | 65.56 | 01/28/2029 | — | — | — | — | |||||||||||||||||||||||||||||||
02/06/2020 | 46,863 | 23,430 | — | 74.74 | 02/06/2030 | — | — | — | — | |||||||||||||||||||||||||||||||
01/28/2021 | 45,744 | 91,485 | — | 44.90 | 01/28/2031 | — | — | 92,301 | 5,431,914 | |||||||||||||||||||||||||||||||
01/31/2022 | — | 80,547 | — | 52.17 | 01/31/2032 | — | — | 55,077 | 3,241,281 | |||||||||||||||||||||||||||||||
Patrick J. Winterlich | 01/28/2014 | 2,345 | — | — | 43.01 | 01/28/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
01/27/2015 | 3,348 | — | — | 43.96 | 01/27/2025 | — | — | — | — | |||||||||||||||||||||||||||||||
01/26/2016 | 3,413 | — | — | 41.71 | 01/26/2026 | — | — | — | — | |||||||||||||||||||||||||||||||
01/30/2017 | 3,700 | — | — | 50.50 | 01/30/2027 | — | — | — | — | |||||||||||||||||||||||||||||||
01/29/2018 | 9,159 | — | — | 68.15 | 01/29/2028 | — | — | — | — | |||||||||||||||||||||||||||||||
01/28/2019 | 12,621 | — | — | 65.56 | 01/28/2029 | — | — | — | — | |||||||||||||||||||||||||||||||
02/06/2020 | 9,857 | 4,928 | — | 74.74 | 02/06/2030 | 1,036 | 60,969 | — | — | |||||||||||||||||||||||||||||||
01/28/2021 | 11,679 | 23,355 | — | 44.90 | 01/28/2031 | 6,283 | 369,755 | 14,138 | 832,021 | |||||||||||||||||||||||||||||||
01/31/2022 | — | 18,657 | — | 52.17 | 01/31/2032 | 5,103 | 300,312 | 7,654 | 450,438 | |||||||||||||||||||||||||||||||
Gail E. Lehman | 01/29/2018 | 8,829 | — | — | 68.15 | 01/29/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
01/28/2019 | 10,441 | — | — | 65.56 | 01/28/2029 | — | — | — | — | |||||||||||||||||||||||||||||||
02/06/2020 | 7,237 | 3,618 | — | 74.74 | 02/06/2030 | 760 | 44,726 | — | — | |||||||||||||||||||||||||||||||
01/28/2021 | 8,360 | 16,718 | — | 44.90 | 01/28/2031 | 4,497 | 264,648 | 10,120 | 595,562 | |||||||||||||||||||||||||||||||
01/31/2022 | — | 13,112 | — | 52.17 | 01/31/2032 | 3,586 | 211,036 | 5,379 | 316,554 |
48 | HEXCEL CORPORATION |
EXECUTIVE COMPENSATION
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||||||||||||||
Thierry Merlot | 01/28/2014 | 4,192 | — | — | 43.01 | 01/28/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
01/27/2015 | 5,611 | — | — | 43.96 | 01/27/2025 | — | — | — | — | |||||||||||||||||||||||||||||||
01/26/2016 | 5,397 | — | — | 41.71 | 01/26/2026 | — | — | — | — | |||||||||||||||||||||||||||||||
01/30/2017 | 6,340 | — | — | 50.50 | 01/30/2027 | — | — | — | — | |||||||||||||||||||||||||||||||
01/29/2018 | 5,610 | — | — | 68.15 | 01/29/2028 | — | — | — | — | |||||||||||||||||||||||||||||||
01/28/2019 | 7,620 | — | — | 65.56 | 01/28/2029 | — | — | — | — | |||||||||||||||||||||||||||||||
10/24/2019 | — | — | — | — | — | 7,500 | 441,375 | — | — | |||||||||||||||||||||||||||||||
02/06/2020 | 5,364 | 2,681 | — | 74.74 | 02/06/2030 | 565 | 33,250 | — | — | |||||||||||||||||||||||||||||||
01/28/2021 | 6,438 | 12,874 | — | 44.90 | 01/28/2031 | 5,196 | 305,785 | 7,793 | 458,618 | |||||||||||||||||||||||||||||||
01/31/2022 | — | 10,610 | — | 52.17 | 01/31/2032 | 2,902 | 170,783 | 4,353 | 256,174 | |||||||||||||||||||||||||||||||
Gina Fitzsimons | 02/06/2020 | 1,797 | 898 | — | 74.74 | 02/06/2030 | 188 | 11,064 | — | — | ||||||||||||||||||||||||||||||
07/30/2020 | 4,357 | 2,177 | — | 38.94 | 07/30/2030 | 908 | 53,436 | — | — | |||||||||||||||||||||||||||||||
01/28/2021 | 1,173 | 2,344 | — | 44.90 | 01/28/2031 | 630 | 37,076 | 1,419 | 83,508 | |||||||||||||||||||||||||||||||
01/31/2022 | — | 6,158 | — | 52.17 | 01/31/2032 | 1,684 | 99,103 | 2,526 | 148,655 | |||||||||||||||||||||||||||||||
Robert G. Hennemuth | 01/28/2014 | 10,263 | — | — | 43.01 | 01/28/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
01/27/2015 | 13,355 | — | — | 43.96 | 01/27/2025 | — | — | — | — | |||||||||||||||||||||||||||||||
01/26/2016 | 13,533 | — | — | 41.71 | 01/26/2026 | — | — | — | — | |||||||||||||||||||||||||||||||
01/30/2017 | 12,384 | — | — | 50.50 | 01/30/2027 | — | — | — | — | |||||||||||||||||||||||||||||||
01/29/2018 | 9,527 | — | — | 68.15 | 01/29/2028 | — | — | — | — | |||||||||||||||||||||||||||||||
01/28/2019 | 10,439 | — | — | 65.56 | 01/28/2029 | — | — | — | — | |||||||||||||||||||||||||||||||
02/06/2020 | 6,961 | 3,479 | — | 74.74 | 02/06/2030 | 731 | 43,019 | — | — | |||||||||||||||||||||||||||||||
01/28/2021 | 8,018 | 16,033 | — | 44.90 | 01/28/2031 | 4,313 | 253,820 | 9,705 | 571,139 | |||||||||||||||||||||||||||||||
01/31/2022 | — | 12,085 | — | 52.17 | 01/31/2032 | 3,305 | 194,499 | 4,958 | 291,778 | |||||||||||||||||||||||||||||||
Colleen Pritchett | 02/06/2020 | — | — | — | — | — | 12,500 | 735,625 | — | — | ||||||||||||||||||||||||||||||
01/28/2021 | — | — | — | — | — | — | — | 2,551 | 150,126 | |||||||||||||||||||||||||||||||
01/31/2022 | — | — | — | — | — | — | — | 358 | 21,068 |
(1) | All options listed in this table vest in equal increments on each of the first three anniversaries of the grant date and will expire on the tenth anniversary of the grant date. |
(2) | This column includes: (i) unvested RSUs granted on February 6, 2020, January 28, 2021 and January 31, 2022 under the 2013 ISP, (ii) in the case of Mr. Merlot, unvested RSUs granted on October 24, 2019 under the 2013 ISP, and (iii) in the
2013 ISP. The RSUs vest and convert into shares of Hexcel common stock at the rate of one-third per year on each of the first three anniversaries of the grant date, except for grants made to Mr. |
2023 Proxy Statement | 49 |
EXECUTIVE COMPENSATION
(3) | Market values were computed using a price of $58.85 per share, the closing price of Hexcel common stock on December 30, 2022, as reported by the NYSE. |
(4) | This column reflects the shares that each named executive officer would receive based on the target award for the PSAs granted on January 28, 2021 and January 31, 2022, except for Ms. Pritchett, whose target award amounts were pro-rated based on her date of termination. If the PSA awards were to pay out at maximum, the number of shares (and market value of such shares) outstanding as of December 31, 2022 with respect to unvested PSAs granted on January 28, 2021 and January 31, 2022, respectively, would be for Mr. Stanage: 138,451 shares ($8,147,841) and 110,154 shares ($6,482,563); for Mr. Winterlich: 21,207 shares ($1,248,032) and 15,308 shares ($900,876); for Ms. Lehman: 15,180 shares ($893,343) and 10,758 shares ($633,108); for Mr. Merlot: 11,689 shares ($687,898) and 8,706 shares ($512,348); for Ms. Fitzsimons: 2,128 shares ($125,233) and 5,052 shares ($297,310); for Mr. Hennemuth: 14,557 shares ($856,679) and 9,916 shares ($583,557); and for Ms. Pritchett: 3,690 shares ($217,157) and 554 shares ($32,603). Each such named executive officer will receive a number of shares of common stock based on the extent to which the performance criteria for the respective PSAs are attained. Any such shares into which the PSAs will convert will be received by the named executive officer in early 2024 for the PSAs granted in 2021 and early 2025 for the PSAs granted in 2022. |
Option Exercises and Stock Vested in 2022
Option Awards | Stock Awards(2) | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(3) | ||||||||||||
Nick L. Stanage | — | — | — | — | ||||||||||||
Patrick J. Winterlich | — | — | 5,166 | 261,894 | ||||||||||||
Gail E. Lehman | — | — | 3,827 | 193,996 | ||||||||||||
Thierry Merlot | — | — | 9,986 | 561,448 | ||||||||||||
Gina Fitzsimons | — | — | 2,225 | 127,525 | ||||||||||||
Robert G. Hennemuth | — | — | 3,705 | 187,801 | ||||||||||||
Colleen Pritchett | 4,742 | 57,781 | 2,120 | 107,447 |
(1) | The value realized is equal to the difference between the closing price per share of our common stock, as reported by the NYSE on the date of exercise, and the exercise price, multiplied by the number of shares underlying the options exercised. |
(2) | For named executive officers other than Mr. Merlot, reflects RSUs that vested during 2022, including one-third of the RSUs granted in each of 2019, 2020 and 2021. For Mr. Merlot, includes RSUs granted in 2019, which vested in 2022, but remain subject to a holding period for French tax qualification purposes, and RSUs granted in 2020, which vest as to two-thirds of the underlying shares on the second anniversary of the grant date and the remaining one-third of the underlying shares on the third anniversary of the grant date. The RSUs granted to U.S. named executive officers generally vest in equal increments on the first three anniversaries of the grant date, and for Mr. Merlot, vest as to two-thirds of the underlying shares on the second anniversary of the grant date and the remaining one-third of the underlying shares on the third anniversary of the grant date, except (a) the final tranche of the RSUs granted to Mr. Merlot in 2019 vested, subject to an additional one-year holding period for French tax qualification purposes, and (b) the RSUs granted to Mr. Merlot in October 2019 and to Ms. Pritchett in April 2020 vest as to 50% on the third anniversary of the grant date, and the remaining 50% on each of the fourth, fifth and sixth anniversaries of the grant date. No PSAs vested on December 31, 2022, based on the level of achievement with respect to specified performance measures for the 2020-2022 performance period, as determined by the compensation committee in January 2023. The number of shares acquired on vesting of the RSUs granted in 2019 include dividend equivalents that vested in the same proportion as the RSUs
|