UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
SCHEDULE 14A(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
__________________________
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Filed by the Registrant | ☒ |
Filed by a Party other than the Registrant | ☐ |
Check the appropriate box: | ||
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
MSC INDUSTRIAL DIRECT CO., INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): | ||
☒ | No fee required. | |
☐ | Fee computed on table below 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: |
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☐ | Check 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. | |
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Notice of 20192022 Annual Meeting
and 20182021 Proxy Statement
Date and Time: | Wednesday, January 26, 2022 | |
9:00 a.m., Eastern Time | ||
Virtual: | Participate online at www.virtualshareholdermeeting.com/MSM2022 |
Tuesday, January 29, 2019
9:00 a.m., local time
The Hilton Long Island/Huntington
598 Broad Hollow Road
Melville, New York 11747
Notice of 20192022 Annual Meeting of Shareholders
To the shareholders of MSC Industrial Direct Co., Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting2022 Annual Meeting of shareholdersShareholders (the “Annual Meeting”) of MSC Industrial Direct Co., Inc., a New York corporation, will be held on January 29, 2019 at 9:00 a.m., local time,Eastern Time, on Wednesday, January 26, 2022 via live audio webcast at the Hilton Long Island/Huntington, 598 Broad Hollow Road, Melville, New York 11747,www.virtualshareholdermeeting.com/MSM2022, for the following purposes:purposes, as more fully described in the accompanying Proxy Statement:
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Only shareholdersThe Board of record atDirectors recommends that you vote “FOR” Items 1, 2 and 3. The proxy holders will use their discretion to vote on other matters that may properly come before the Annual Meeting or any adjournment or postponement thereof.
Shareholders as of the close of business on December 11, 20188, 2021, the record date, are entitled to receive notice of, and to vote at, the annual meeting andAnnual Meeting or any adjournmentsadjournment or postponementspostponement thereof.
All shareholders are cordially invitedThe Annual Meeting will be held entirely online via live audio webcast at www.virtualshareholdermeeting.com/MSM2022. There will not be an option to attend the annual meeting. However,Annual Meeting in person.
Shareholders as of the record date may participate in, submit questions and vote at the Annual Meeting by visiting www.virtualshareholdermeeting.com/MSM2022. To log in, you must enter the unique 16-digit control number included on your Notice of Internet Availability of Proxy Materials, proxy card or voting instructions. If you are a beneficial shareholder, you may contact the shareholder of record (e.g., your bank, broker or other nominee) if you have questions about obtaining your control number. If you do not have a control number, you may still access the live audio webcast of the Annual Meeting as a guest, but you will not be able to submit questions or to vote online during the meeting.
Whether or not you expect to participate in the Annual Meeting, your vote is important. To assure your representation at the annual meeting,Annual Meeting, you are urged to cast your vote, onas instructed in your Notice of Internet Availability of Proxy Materials, proxy card or voting instructions as promptly as possible. If you received a copy of the proxy materials by mail, you may complete, sign, date and mail the proxy card in the envelope provided. Shareholders as of the record date participating in the live audio webcast of the Annual Meeting may vote via the Internet during the meeting, even if they have voted via the Internet or by telephone or by completing, signingreturned a completed proxy card. You may revoke your proxy at any time prior to the Annual Meeting. If you participate in and datingvote during the enclosedAnnual Meeting, your proxy card as promptly as possible,will be revoked automatically and returning it inyour vote at the postage-paid envelope provided. Any shareholder attending the annual meeting may vote in person even if he or she has already voted on the Internet, by telephone or by returning a proxy.will be counted.
By Order of the Board of Directors, | ||
Kristen Actis-Grande | ||
Executive Vice President and | ||
Melville, New York | ||
December 16, 2021 |
Steve Armstrong
Senior Vice President, General Counsel andCorporate Secretary
Melville, New York
December 19, 2018
Review the Proxy Statement and Vote in One of Four Ways | |||
Via the Internet Visit www.proxyvote.com | By Mail
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By Telephone Call the telephone number on your proxy card or voting instruction form |
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IMPORTANT: The prompt returnYour vote is very important. Whether or not you plan to participate in the live audio webcast of proxies will ensure thatthe Annual Meeting, we encourage you to read this Proxy Statement and vote your shares will be voted. A self-addressed envelope is enclosed for your convenience. No postage is required if mailed within the United States.as soon as possible.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY
The Notice of 2022 Annual Meeting and 2021 Proxy Statement and the 2021 Annual Report to Shareholders are available
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We are furnishing this proxy statementProxy Statement to you in connection with the solicitation of proxies by our Board of Directors (the “Board of Directors” or the “Board”) to be used at our 2019 annual meetingthe 2022 Annual Meeting of shareholders,Shareholders (the “Annual Meeting”), or at any adjournmentsadjournment or postponementspostponement thereof. This proxy statementProxy Statement describes the matters to be presented at the meetingAnnual Meeting and related information that will help you vote at the meeting. References in this proxy statementProxy Statement to “the company,“MSC,” the “Company,” “we,” “us,” “our” and similar terms mean MSC Industrial Direct Co., Inc.
We have elected to take advantage of the “notice and access” rule of the United States Securities and Exchange Commission (which we refer to as the SEC)(the “SEC”) that allows us to furnish proxy materials to shareholders online. We believe that electronic delivery expedites the receipt of proxy materials, while significantly lowering costs and reducing the environmental impact of printing and mailing full sets of proxy materials. As a result, on or about December 19, 201816, 2021, we mailed to our shareholders of record as of the close of business on December 11, 2018,8, 2021, either (i) a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials online and how to request paper copies of our proxy materials or (ii) a printed set of proxy materials, which includes the noticeNotice of annual meeting,2022 Annual Meeting of Shareholders, this proxy statement,Proxy Statement, our 2018 annual report2021 Annual Report to shareholdersShareholders and a proxy card. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you specifically request one. If your shares are held in the MSC Industrial Direct 401(k) Plan, you will receive a printed set of proxy materials and the enclosed proxy will serve as a voting instruction card for the trustee of the MSC Industrial Direct 401(k) Plan, T. Rowe Price Trust Company, who will vote all shares of Class A common stock of the company allocated to your 401(k) account in accordance with your instructions. If you hold your shares through a bank, broker bank or other nominee, rather than directly in your own name, your intermediary will either forward to you a printed copiescopy of the proxy materials or will provide you with instructions on how you can access the proxy materials electronically.
MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement i
20182021 Proxy Statement Summary
This summary highlights information contained elsewhere in our proxy statement.this Proxy Statement. This summary does not contain all of the information that you should consider. You should read the entire proxy statementProxy Statement carefully before voting.
2022 Annual Meeting of Shareholders
Meeting Agen
MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement 1
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| Committee Memberships |
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Name |
| Age |
| Director |
| Principal Occupation |
| Independent |
| AC |
| CC |
| N&CGC |
| Age |
| Director |
| Principal Occupation |
| Independent |
| AC |
| CC |
| N&CGC |
Jonathan Byrnes |
| 70 |
| 2010 |
| Senior Lecturer at Massachusetts Institute of Technology |
| ✓ |
| ✓ |
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Roger Fradin |
| 65 |
| 1998 |
| Operating Executive with The Carlyle Group |
| ✓ |
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| ✓ |
| ✓ | ||||||||||||||
Erik Gershwind |
| 47 |
| 2010 |
| President and Chief Executive Officer of the company |
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| 50 |
| 2010 |
| President and Chief Executive Officer of MSC |
| No |
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Louise Goeser |
| 65 |
| 2009 |
| Chief Executive Officer of LKG Enterprises |
| ✓ |
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| ✓ |
| ✓C |
| 68 |
| 2009 |
| Chief Executive Officer of LKG Enterprises |
| Yes |
| ✓ |
| ✓C |
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Mitchell Jacobson |
| 67 |
| 1995 |
| Non-executive Chairman of the Board of Directors of the company |
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Mitchell Jacobson |
| 70 |
| 1995 |
| Non-Executive Chairman of the Board of Directors of MSC |
| No |
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Michael Kaufmann |
| 56 |
| 2015 |
| Chief Executive Officer of Cardinal Health, Inc. |
| ✓ |
| ✓ |
| ✓ |
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| 59 |
| 2015 |
| Chief Executive Officer of Cardinal Health, Inc. |
| Yes |
| ✓ |
| ✓ |
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Denis Kelly |
| 69 |
| 1996 |
| Investment Banker at Scura Paley Securities LLC |
| ✓ |
| ✓ |
| ✓C |
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Steven Paladino |
| 61 |
| 2015 |
| Executive Vice President and Chief Financial Officer of Henry Schein, Inc. |
| ✓ |
| ✓ |
| ✓ |
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| 64 |
| 2015 |
| Executive Vice President and Chief Financial Officer of Henry Schein, Inc. |
| Yes |
| ✓ |
| ✓ |
| ✓C |
Philip Peller |
| 79 |
| 2000 |
| Independent Director; Retired Partner of Arthur Andersen LLP |
| ✓ |
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Philip Peller |
| 82 |
| 2000 |
| Retired Partner of Arthur Andersen LLP |
| Yes |
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Rudina Seseri |
| 49 |
| 2020 |
| Founder and Managing Partner of Glasswing Ventures, LLC |
| Yes |
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| ✓ |
_____________________________
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AC | Audit Committee |
CC | Compensation Committee |
N&CGC | Nominating and Corporate Governance Committee |
✓ | Member |
C | Chairperson |
2 MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement
Corporate Governance Highlights
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| The independent directors meet regularly in private executive sessions without management. | |
| We have an independent Lead Director, who serves as the presiding director at the executive sessions of the independent directors. | |
| All committees of | |
Board Oversight of Risk Management | |
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Stock Ownership Requirements | | Each of our non-executive directors must own a minimum number of shares equal to five times his or her |
| Our Chief Executive Officer must own at least six times his annual base salary in our common stock. | |
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Evaluation | |
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Annual Election of Directors | | All directors stand for election annually. |
Board | |
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MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement3
Regular Board Reviews of Executive Succession | |
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Other Corporate Governance Practices | | We maintain a clawback policy to recoup incentive compensation in the event of a significant financial restatement (whether or not a covered officer engaged in misconduct), as well as in cases of breach of non-competition and other covenants. |
| | We are committed to shareholder engagement and maintain a formal investor relations outreach program. |
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| The Nominating and Corporate Governance Committee oversees our |
Responding to COVID-19 | | Management formed a |
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MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement3
Fiscal Year 2018 Company Performance
In fiscal year 2018, we generated strong operating results in a strengthening macro-economic environment. At the same time, we completed the company’s transition from a spot buy supplier to a mission critical partner on manufacturing floors across North America. By focusing on products and services that are technical and high-touch, we have cemented our leadership in metalworking and gained solid traction in the Class C VMI space. We also established a new platform in OEM fasteners. Most recently, we transitioned our sales force to deliver upon the new, more complex and high-touch role that we play for our customers to enable our customers to achieve higher levels of growth, productivity and profitability. Our operating performance in fiscal 2018 was highlighted by the following achievements:
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Net sales increased 10.9% to $3.20 billion in fiscal 2018 from $2.89 billion in fiscal 2017. Average daily sales (ADS), including acquisitions, increased 10.5% in fiscal 2018, as compared to fiscal 2017. Even as our operating expenses increased due to the acquisitions of DECO Tool Supply in our fourth quarter of fiscal 2017 and All Integrated Solutions in our third quarter of fiscal 2018, our operating expenses as a percentage of sales decreased to 30.4% of net sales for fiscal 2018, compared to 31.4% of net sales for fiscal 2017, with productivity and leverage contributing to this favorable outcome. Operating income in fiscal 2018 was $420.6 million, representing an increase of 11.0% from operating income of $379.0 million in fiscal 2017. For fiscal 2018, the company achieved diluted earnings per share of $5.80 versus $4.05 in fiscal 2017.
4 MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement
Fiscal Year 20182021 Compensation Decisionsany Performance
In fiscal year 2021, we made significant progress on our ambitious plan to transform MSC from a leading spot-buy distributor to an essential partner on the plant floors of our customers. Despite the unprecedented challenges related to the global COVID-19 pandemic that continued through the first half of fiscal year 2021, we have been able to align our strategy with our pay-for-performance compensation philosophy,operations and make significant progress in reorganizing our cost structure to emerge a stronger, more resilient Company. We continue to execute on our initiatives, supporting our business strategy to serve as a mission-critical partner to our customers, which we believe will further expand our market share capture to deliver on our growth targets, as well as improve our returns on invested capital.
While we began the Compensation Committeeyear against a challenging backdrop, positive signs in the operating environment turned into tangible business drivers as customers began to rebuild backlog and manufacturing end markets grew stronger. Additionally, product scarcity, freight delays and labor shortages drove significant inflationary pressures, and we leveraged the scale of our Board tookbusiness, strong balance sheet and long-standing supplier relationships to navigate those challenges, deliver for our customers and extend our leadership position in our core business of metalworking.
Throughout the following key actions with respectyear, our long-term transformation strategy remained one of our top areas of focus. We continued to NEO compensation forgrow share in metalworking through investment and innovation, driving improvements in eCommerce and launching MSC MillMax®, which uses impact-testing software to reduce the milling optimization process to just a few minutes. We are working to transform our cost structure and are encouraged by the momentum that is building inside the Company as evidenced by improving operating results and solid execution. Our operating performance in fiscal 2018:year 2021 was highlighted by the following:
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· | our operating expenses increased 1.9% to $994.5 million in fiscal year |
· | we incurred $31.4 million in restructuring and other related costs, comprised of $18.3 million in operating lease asset impairment loss, net and other exit-related costs related to the |
· | our operating income in fiscal year 2021 was |
· | our diluted earnings per share was $3.87 in fiscal year 2021 versus $4.51 in fiscal year 2020. |
Please see “Compensation Discussion and Analysis” beginning on page 35 of this proxy statement.
MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement 5
Fiscal Year 2021 Compensation Decisions
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee of the Board took the following key actions with respect to named executive officer compensation for fiscal year 2021:
· | Bonus Payouts Below Target. Based on Company and individual performance, payouts under our performance bonus plan were 75% of target for Messrs. Gershwind, Jones and Armstrong and 86% of target for Mses. Actis-Grande and Heerdt. |
The table below illustrates how our compensation is aligned with our performance by showing the total cash compensation and total direct compensation for each of our named executive officers in fiscal year 2021 against the competitive market data:
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Named Executive Officer |
| Fiscal 2021 Total Cash Compensation ($)(1) |
| Competitive Positioning(2) of Total Cash Compensation |
| Fiscal 2021 Total Direct Compensation ($)(3) |
| Competitive Positioning(2) of Total Direct Compensation |
Erik Gershwind |
| 1,895,889 |
| approx. 25th percentile |
| 5,145,814 |
| between 25th & 50th percentiles |
Kristen Actis-Grande |
| 681,170 |
| <25th percentile |
| 1,231,101 |
| <25th percentile |
Douglas E. Jones |
| 597,560 |
| between 25th & 50th percentiles |
| 1,147,491 |
| between 50th & 75th percentiles |
Steve Armstrong |
| 584,398 |
| <25th percentile |
| 1,084,369 |
| approx. 25th percentile |
Kari Heerdt |
| 516,684 |
| between 25th & 50th percentiles |
| 916,661 |
| between 25th & 50th percentiles |
____________________________
(1) | Total cash compensation is calculated as the sum of (i) base salary in effect as of the fiscal year end and (ii) actual annual performance bonus. |
(2) | Please see “―Competitive Positioning” on page 49 for information about our peer companies and our competitive market data. |
(3) | Total direct compensation is calculated as the sum of (i) base salary (see Footnote 1 above), (ii) actual annual performance bonus (see Footnote 1 above) and (iii) long-term equity awards granted in fiscal year 2021. |
Please see “Compensation Discussion and Analysis” beginning on page 35 of this Proxy Statement.
6MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
The following table shows the compensation for the following individualsour named executive officers for the fiscal years ended September 1, 20182021 and September 2, 2017.2020. For an explanation of the amounts in the table below, please see “Summary Compensation Table” on page 5755 of this proxy statement.Proxy Statement.
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Name and Principal Position | Year |
| Salary |
| Bonus |
| Stock |
| Option |
| Non-Equity |
| All Other Compensation |
| Total |
Erik Gershwind | 2021 |
| 771,151 |
| 500 |
| 3,249,925 |
| — |
| 1,124,738 |
| 23,789 |
| 5,170,103 |
President and | 2020 |
| 697,002 |
| — |
| 3,249,858 |
| — |
| 375,000 |
| 22,575 |
| 4,344,435 |
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Kristen Actis-Grande (1) | 2021 |
| 408,654 |
| 150,000 |
| 749,871 |
| — |
| 256,170 |
| 14,808 |
| 1,579,503 |
Executive Vice President and |
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Douglas E. Jones | 2021 |
| 423,080 |
| 500 |
| 549,931 |
| — |
| 174,480 |
| 22,378 |
| 1,170,369 |
Executive Vice President and | 2020 |
| 398,672 |
| — |
| 549,886 |
| 54,924 |
| 116,347 |
| 11,170 |
| 1,130,999 |
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Steve Armstrong | 2021 |
| 425,044 |
| 500 |
| 499,971 |
| — |
| 159,354 |
| 24,035 |
| 1,108,904 |
Senior Vice President, | 2020 |
| 400,523 |
| — |
| 499,896 |
| 11,938 |
| 53,131 |
| 17,975 |
| 983,463 |
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Kari Heerdt (1) | 2021 |
| 361,182 |
| 500 |
| 399,977 |
| — |
| 155,502 |
| 21,359 |
| 938,520 |
Senior Vice President, |
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New Business Innovation and Transformation |
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Name and Principal Position |
| Year |
| Salary |
| Stock |
| Option |
| Non-Equity |
| All Other |
| Total |
Erik Gershwind |
| 2018 |
| 740,723 |
| 1,099,992 |
| 899,995 |
| 1,700,063 |
| 20,746 |
| 4,461,519 |
President and |
| 2017 |
| 719,148 |
| 825,003 |
| 675,002 |
| 1,723,180 |
| 19,442 |
| 3,961,775 |
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Rustom Jilla |
| 2018 |
| 505,169 |
| 412,487 |
| 337,500 |
| 389,083 |
| 21,462 |
| 1,665,701 |
Executive Vice President |
| 2017 |
| 490,510 |
| 443,316 |
| 362,700 |
| 322,654 |
| 20,956 |
| 1,640,136 |
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Douglas Jones |
| 2018 |
| 414,647 |
| 302,480 |
| 247,499 |
| 243,417 |
| 14,129 |
| 1,222,172 |
Executive Vice President and |
| 2017 |
| 388,430 |
| 338,818 |
| 277,204 |
| 201,272 |
| 13,196 |
| 1,218,920 |
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Steve Armstrong |
| 2018 |
| 410,264 |
| 261,247 |
| 213,738 |
| 220,635 |
| 20,469 |
| 1,126,353 |
Senior Vice President, |
| 2017 |
| 398,359 |
| 242,308 |
| 198,221 |
| 161,009 |
| 20,366 |
| 1,020,263 |
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Steven Baruch(1) |
| 2018 |
| 348,668 |
| 219,935 |
| 179,989 |
| 227,665 |
| 11,628 |
| 987,885 |
Executive Vice President |
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_________________________________________________________
(1) |
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MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement7 6MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018
Ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 2)
OurThe Audit Committee has appointed the firm of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2019. Our2022. The Board considers it desirable for shareholders to pass upon the selection of the independent registered public accounting firm. OurThe Board of Directors recommends that you vote “FOR” the ratification of the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2019.2022. Please see “Ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 2)” beginning on page 3231 of this proxy statement.Proxy Statement.
Approval, on an Advisory Basis, of the Compensation ofVote to Approve Named Executive OfficersOfficer Compensation (Proposal No. 3)
As required by Section 14A of the Dodd-Frank Wall Street Reform and Consumer ProtectionSecurities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our shareholders with the opportunity to vote to approve, on a non-binding,an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC.officers. This vote is advisory, which means that this vote on executive compensation is not binding on the company, ourCompany, the Board or ourthe Compensation Committee. Based on companyCompany and individual performance, ourthe Compensation Committee believes that compensation levels for fiscal year 20182021 were appropriate and consistent with the philosophy and objectives of the company’sCompany’s compensation programs. OurThe Board of Directors recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this proxy statement.officers. Please see “Approval, on an Advisory Basis, of the Compensation ofVote to Approve Named Executive OfficersOfficer Compensation (Proposal No. 3)” on page 7268 of this proxy statement.Proxy Statement.
8MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement7
Proxy Statement for the Annual Meetingof Shareholders to be held on January 29, 2019
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
NineThe Board of Directors currently consists of seven members and has no vacancies. On the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the seven persons listed below for election as directors will beat the Annual Meeting. If elected, at our 2019 annual meeting of shareholders for a term of one year expiring at our 2020 annual meeting, andeach nominee will serve until their respective successors have been elected,his or her term expires at the 2023 Annual Meeting of Shareholders or until their earlier resignationhis or removal. Eachher successor is duly elected and qualified. All of the nominees for director was previouslyare currently serving as directors and were elected as a directorto the Board at the 2021 Annual Meeting of the company by our shareholders.
Shareholders. Each nominee has indicated that he or she is willingagreed to be named in this Proxy Statement and to serve as a memberif elected.
Although the Company knows of our Board, if elected, and our Board has no reason why any of the nominees would not be able to believe thatserve, if any nominee may become unable or unwilling to serve. In the event that a nominee should become unavailable for election for any reason, the shares represented by a properly executed and returned proxy will be voted for any substitute nominee who shall be designated by the current Board. There are no arrangements or understandings between any director or nominee for director and any other person pursuant to which such person was selected as a director or nominee for director of the company.
Our Nominating and Corporate Governance Committee has reviewed the qualifications and independence of the nominees for director and, with each member of the Nominating and Corporate Governance Committee abstaining as to himself or herself, has recommended each of the other nominees for election to our Board.Company.
Board and Committee Evaluations; Qualifications of Nominees
OurThe Nominating and Corporate Governance Committee annually reviews the composition and performance of ourthe Board and Board committees, and considers, among other factors, Board diversity and director tenure, age, skills, background and experience. The Nominating and Corporate Governance Committee is responsible for recruiting, evaluating and recommending candidates to be presented for appointment, election or reelectionre-election to serve as members of ourthe Board. OurThe Board and each Board committee conduct annual written self-evaluations to help ensure that ourthe Board and Board committees have the appropriate number and mix of members, skills and experience and the appropriate scope of activities. These self-evaluations also provide Board and Board committee members with insight for enhancing the effectiveness of their meetings. In evaluating ourthe Board, ourthe Nominating and Corporate Governance Committee has considered that our directors have a wide range of experience as senior executives of large publicly traded companies, and in the areas of investment banking, accounting, business education and business management consulting. In these positions, they have also gained industry experience and knowledge in core management skills that are important to their service on ourthe Board, such as business-to-business distribution, supply chain management, mergers and acquisitions, strategic and financial planning, financial reporting, compliance, risk management, intellectual property matters and leadership development. Several of our directors also have experience serving on the boards of directors and board committees of other public companies, which provides them with an understanding of current corporate governance practices and trends and executive compensation matters. OurThe Nominating and Corporate Governance Committee also believes that our directors have other key attributes that are important to an effective board of directors, including the highest professional and personal ethics and values, a broad diversity of business experience and expertise, an understanding of our business, a high level of education, broad-based business acumen and the ability to think strategically.
In furtherance of our ongoing self-evaluations by our Board and Board committees and in order to ensure that our Board continues to be comprised of board members with diverse and critical skills, we elected two new independent directors, Messrs. Kaufmann and Paladino, on September 24, 2015. In addition, with the election of Messrs. Kaufmann and Paladino, we reviewed and changed our Board committee composition so that each of our independent directors is a member of no more than two of our Board committees, thereby enhancing committee member focus on committee matters.
In addition to the qualifications described above, ourthe Nominating and Corporate Governance Committee also considered the specific skills and attributes described in the biographical details that follow in determining whether each individual nominee should serve on ourthe Board.
8MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement
2019Director Nominees for Director
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| President and Chief Executive Officer of |
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Louise Goeser |
| 68 | Chief Executive Officer of LKG Enterprises |
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Mitchell Jacobson |
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| Non-Executive Chairman of the Board of Directors of |
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| October 1995 | ||
Michael Kaufmann | 59 |
| Chief Executive Officer of Cardinal Health, Inc. |
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Steven Paladino |
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| Executive Vice President and Chief Financial Officer of Henry Schein, Inc. |
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Philip Peller |
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Rudina Seseri |
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| Founder and Managing Partner of Glasswing Ventures, LLC | September 2020 |
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MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement 9
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Erik Gershwind | |
Business Experience | Mr. Gershwind |
Specific Skills and Attributes | Mr. Gershwind has held senior management positions responsible for key business functions of the |
Family | Mr. Gershwind is the nephew of Mitchell Jacobson, our |
10MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement
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Louise Goeser | |
Business Experience | Ms. Goeser is the Chief Executive Officer of LKG Enterprises, a private advisory firm that she founded in October 2018. Ms. Goeser previously served as President and Chief Executive Officer of Grupo Siemens S.A. de C.V., where she was responsible for Siemens Mesoamérica, from March 2009 until her retirement in May 2018. Siemens Mesoamérica is the Mexican, Central American and Caribbean unit of multinational Siemens AG, a global engineering company operating in the industrial, energy and healthcare sectors. Ms. Goeser previously served as President and Chief Executive Officer of Ford of Mexico from January 2005 to November 2008. Prior to this position, she served as Vice President, Global Quality for Ford Motor Company from 1999 to 2005. Prior to 1999, Ms. Goeser served as General Manager, Refrigeration and Vice President, Corporate Quality at Whirlpool Corporation and held various leadership positions with Westinghouse Electric Corporation. |
Specific Skills and Attributes | Ms. Goeser has extensive experience in senior executive positions and as a director of large public companies, and she possesses the knowledge and expertise necessary to contribute an important viewpoint on a wide variety of governance and operational issues, as well as the reporting and other responsibilities of a public company. |
Other Directorships | Ms. Goeser |
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10MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Mitchell Jacobson | |
Business Experience | Mr. Jacobson was |
Specific Skills and Attributes | Mr. Jacobson has been instrumental to our past and ongoing growth, which reflects the values, strategy and vision that Mr. Jacobson contributes. His leadership as Chairman, experience in industrial distribution and strategic input are critically important to |
Family | Mr. Jacobson is the uncle of Erik Gershwind, our President and Chief Executive Officer and a director of the |
Other Directorships | Mr. Jacobson |
MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement11
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Michael Kaufmann | |
Business Experience | Mr. Kaufmann has served as Chief Executive Officer of Cardinal Health, Inc., a globally integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices and patients in the home, since January 2018. He previously served as Chief Financial Officer of Cardinal Health, Inc. from November 2014 to December 2017 and as Chief Executive Officer of the Pharmaceutical Segment of Cardinal Health, Inc. from August 2009 to November 2014. Previously, he was Group President for the |
Specific Skills and Attributes | Mr. Kaufmann’s operational expertise and broad experience as a senior executive of a major healthcare services and products company |
Other Directorships | Mr. Kaufmann is also a director of Cardinal Health, Inc. |
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12MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement11
Steven Paladino | |||
Business Experience | Mr. Paladino has served as Executive Vice President and Chief Financial Officer of Henry Schein, Inc., a solutions company for healthcare professionals, since 2000. Prior to his current position, | ||
Specific Skills and Attributes | Mr. Paladino brings to the Board extensive financial, accounting and distribution industry expertise. Mr. Paladino’s skills in corporate finance and accounting provide the Board with expertise and depth in public company accounting issues, and his distribution-related experience | ||
Other Directorships | Mr. Paladino |
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| PHILIP PELLER | ||
Business Experience | Mr. Peller | ||
Specific Skills and Attributes |
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RUDINA SESERI | |
Business Experience | Ms. Seseri is the founder and managing partner of Glasswing Ventures, LLC, an early stage venture capital firm dedicated to investing in the next generation of Artificial Intelligence-powered technology companies. Prior to launching Glasswing Ventures, LLC, Ms. Seseri was a partner at Fairhaven Capital, a technology venture capital firm, from 2007 to 2015. She also worked in the Corporate Development Group at Microsoft Corporation from 2005 to 2007, where she was responsible for leading acquisitions and strategic investments for the company. Ms. Seseri also worked as an investment banker in the Technology Group at Credit Suisse Group AG from 2000 to 2003, where she led public market transactions. |
Specific Skills and Attributes | Ms. Seseri brings to the Board extensive investment, technology and operational experience. She has more than 17 years of investing and transactional experience, including experience building successful technology companies in innovative fields such as artificial intelligence, machine learning, Internet of Things, robotics, block chain, enterprise software, and digital media technologies. Ms. Seseri provides both vision and practical expertise to help advance our business transformation initiatives. |
Other Directorships | Ms. Seseri is also a director of M&T Bank Corporation. |
12MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement13
The chart below demonstrates how ourthe Board’s nominees for election at our 2019 annual meeting of shareholdersthe Annual Meeting provide the skills, experiences and perspectives that ourthe Nominating and Corporate Governance Committee and ourthe Board consider important for an effective board of directors.
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Louise Goeser |
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Mitchell Jacobson |
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Michael Kaufmann |
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Steven Paladino |
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Philip Peller |
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Rudina Seseri | ✓ | ✓ | ✓ | ✓ |
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The Board OF DIRECTORS recommends |
14MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement13
Pursuant to the New York Stock Exchange (the “NYSE”) listing standards, a majority of the members of ourthe Board must be independent. The Board must determineNYSE listing standards provide that each independenta director does not qualify as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). The Board follows the criteria set forth in Section 303A of the New York Stock ExchangeNYSE listing standards to determine director independence. Our independence criteria are also set forth in Section 1.12 of our Corporate Governance Guidelines, a copy of which is available on our website at www.mscdirect.com/corporategovernance. In addition to applying these guidelines, the Board will consider all of the relevant facts and circumstances in making an independence determination.
The Board undertakes a review of director independence on an annual basis and as events arise which may affect director independence. Based upon this review, the Board determined that Ms.Mses. Goeser and Seseri and Messrs. Byrnes, Fradin, Kaufmann, Kelly, Paladino and Peller are independent, and Messrs. Jonathan Byrnes and Denis Kelly (who did not stand for re-election at our 2021 Annual Meeting of Shareholders and ceased to be directors effective as of the conclusion of that meeting) were independent during the period that they served as directors, in accordance with Section 303A.02 of the New York Stock ExchangeNYSE listing standards and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, as well as under our Corporate Governance Guidelines. The Board also determined that each member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee (see membership information below under “―Board Committees”) is independent, including that each member of the Audit Committee is “independent” as that term is defined under Rule 10A-3(b)(1)(ii) of the Exchange Act.
In evaluating the independence of Ms. Goeser, the Board considered that Ms. Goeser (i) served as President and Chief Executive Officer of Grupo Siemens S.A. de C.V., an affiliate of Siemens AG, which is a customer and supplier of our company, until her retirement in May 2018 and (ii) is a director of Watts Water Technologies, Inc., which is a customer and a supplier of our company.the Company. Sales to and purchases from such companiesWatts Water Technologies, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of Watts Water Technologies, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the recipient company’sindependence of Ms. Seseri, the Board considered that Ms. Seseri is the founding partner of Glasswing Ventures, of which NormShield Inc. d/b/a Black Kite, Inc. is a portfolio company. Black Kite, Inc. is a supplier of the Company. Purchases from Black Kite, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of Black Kite, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Byrnes, the Board considered that Mr. Byrnes is a Senior Lecturer at MIT, which is a customer of our company.the Company. Sales to MIT in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of our gross revenues during our most recent fiscal year.
In evaluating the independence of Mr. Fradin, the Board considered that Mr. Fradin (i) served as a director of Signode Industrial Group, which was a customer and supplier of our company, until it was acquired by Crown Holdings, Inc. in April 2018, (ii) is a director of Pitney Bowes Inc., which is a customer of our company and (iii) is a director of Harris Corporation, which is a customer of our company. Sales to and purchases from such companies were made in the ordinary course of business and amounted to significantly less than 0.5% of the recipient company’sMIT’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Kaufmann, the Board considered that Mr. Kaufmann is the Chief Executive Officer of Cardinal Health, Inc., which is a customer and a supplier of our company.the Company. Sales to and purchases from Cardinal Health, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of ourCardinal Health, Inc.’s gross revenues during ourits most recent fiscal year.
In evaluating the independence of Mr. Kelly, the Board considered that Mr. Kelly is a director of WW International, Inc., which is a supplier of the Company. Purchases from WW International, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of WW International, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Paladino, the Board considered that Mr. Paladino is the Executive Vice President and Chief Financial Officer of Henry Schein, Inc., which is a customer and supplier of our company.the Company. Sales to and purchases from Henry Schein, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of the recipient company’sHenry Schein, Inc.’s gross revenues during its most recent fiscal year.
14MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement15
Board Committees and Attendance
The standing committees of ourthe Board are the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The table below provides the current membership of ourthe Board and each of these committees and the number of meetings held by ourthe Board and each of these committees during fiscal year 2018.2021.
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Lead Director Chairperson Audit Committee Financial Expert Member
During fiscal year 2018, each of our current directors attended at least 75% of the aggregate number of meetings of our Board and of the committees of our Board on which he or she is a member.
16MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement15
Principal Functions
The principal functions of the Audit Committee are to:
· | appoint (and be responsible for terminating) our independent registered public accounting firm; |
· | recommend to the Board that the audited financial statements be included in our Annual Report on Form 10-K for filing with the SEC; |
· | oversee risk management practices for our major financial risk exposures and the steps that have been taken to monitor and mitigate such exposures; |
· | assist the Board in overseeing and managing risks associated with the COVID-19 pandemic, and overseeing risk management and responses with respect to the financial risks posed by the COVID-19 pandemic; |
· | oversee cybersecurity risks and the |
· | prepare an |
· | undertake an annual evaluation of its performance. |
Composition and Charter
The Audit Committee is currently comprised of Ms. Goeser and Messrs. Byrnes, Kaufmann, Kelly, Paladino and Peller, each of whom the Board has determined to be independent under both the rules of the SEC and the listing standards of the New York Stock ExchangeNYSE and to meet the financial literacy requirements of the New York Stock Exchange.NYSE. Mr. Peller is the Chairperson of the Audit Committee. The Board has determined that each of Messrs. Peller, Kaufmann and Paladino qualifies as an “audit committee financial expert” within the meaning of the rules of the SEC.
The Audit Committee is directly responsible for the appointment, termination, compensation, retention and oversight of the work of our independent auditors.registered public accounting firm. The Audit CommitteeBoard has adoptedapproved a written charter for the Audit Committee, a copy of which is available on our website at www.mscdirect.com/corporategovernance. The Audit Committee has the authority to engage independent counsel and other advisors as it deems necessary to carry out its duties. We are obligated to provide appropriate funding for the Audit Committee for these purposes.
Policy on Service on Other Audit Committees
Under our corporate governance guidelines,Corporate Governance Guidelines, members of the Audit Committee may not serve as members of an audit committee for more than three public companies, including the Audit Committee of ourthe Board.
16MSC Industrial Direct Co., Inc. Notice of 20192022 Annual Meeting and 20182021 Proxy Statement17
Principal Functions
The principal functions of the Compensation Committee are to:
· | review and approve corporate goals and objectives relevant to the compensation of our Chief Executive Officer; |
· | evaluate our Chief Executive Officer’s performance in light of those goals and objectives; |
· | determine and approve our Chief Executive Officer’s compensation level based on its evaluation of his performance; |
· | set the compensation levels of all of our other executive officers, including with respect to our incentive compensation plans and equity-based plans; |
· | review and recommend to the Board for approval any change in control agreements or severance plans or agreements with our Chief Executive Officer and our other executive officers; |
· | recommend to |
· | have the sole responsibility to retain and terminate the compensation consultant; |
· | administer our equity incentive plans; |
· | assist the Board in overseeing and managing risks associated with the COVID-19 pandemic, and overseeing compensation actions taken in response to the COVID-19 pandemic; |
· | oversee risk management practices for risks relating to our overall compensation structure, including review of our compensation practices, in each case with a view toward assessing associated risks; |
· | prepare a |
· | undertake an annual evaluation of its performance. |
Composition and Charter
OurThe Compensation Committee is currently comprised of Ms.Mses. Goeser and Seseri and Messrs. Fradin, Kaufmann Kelly and Paladino, each of whom is an independent director. Mr. KellyMs. Goeser is the Chairperson of the Compensation Committee. The Compensation CommitteeBoard has adoptedapproved a written charter for the Compensation Committee, a copy of which is available on our website at www.mscdirect.com/corporategovernance.
Delegation of Authority
The Compensation Committee does not delegate its responsibilities to any other directors or members of management. Under our 2015 Omnibus Incentive Plan, the Compensation Committee is permitted to delegate its authority under such plan to a committee of one or more directors or one or more officers, in all cases to the extent permitted under applicable law, including New York Stock Exchange listing requirements. However, as a matter of policy, the Compensation Committee authorizes all grants of awards under the 2015 Omnibus Incentive Plan.
18MSC Industrial Direct Co., Inc.Notice of 2019 Annual MeetingNominating and 2018 Proxy StatementCorporate Governance Committee
✓
TABLE OF CONTENTSMember
C
Chairperson
Compensation Processes and Procedures
The Compensation Committee makes all compensation decisions for our executive officers. In fiscal year 2018, the views and recommendations of Mitchell Jacobson, our Chairman of the Board, and Erik Gershwind, our President and Chief Executive Officer, were considered by the members of the Compensation Committee in its review of the performance and compensation of individual executives. The views and recommendations of Mr. Jacobson and Mr. Gershwind will continue to be considered by the members of the Compensation Committee in its review of the performance and compensation of individual executives. In fiscal year 2018, Mr. Jacobson also provided input on Mr. Gershwind’s compensation. In addition, the Compensation Committee obtains input from Mr. Gershwind on the compensation of the other named executive officers and other executive officers and senior officers. Our Human Resources department and our Senior Vice President and Chief People Officer, Kari Heerdt, assist the Chairperson of the Compensation Committee in developing the agenda for Compensation Committee meetings and work with the Compensation Committee in developing agenda materials for the committee’s review, including coordinating and presenting management’s proposals and recommendations to the Compensation Committee with respect to executive and non-executive director compensation. Ms. Heerdt and Mr. Gershwind regularly attend Compensation Committee meetings, excluding portions of meetings where their own compensation is discussed. The Compensation Committee considers, but is not bound by, management’s proposals and recommendations with respect to executive compensation.
The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisors. In connection with compensation decisions made by the Compensation Committee for fiscal year 2018, the Compensation Committee relied on competitive market data and analysis prepared by its independent compensation consultant, Frederic W. Cook & Co., Inc., a compensation consulting firm that we refer to in this proxy statement as FW Cook. FW Cook provides research, market data and survey information and makes recommendations to the Compensation Committee regarding our executive compensation programs and our non-executive director compensation programs. FW Cook advises the Compensation Committee on the competitiveness of our compensation arrangements and provides input, analysis and recommendations for the compensation paid to our named executive officers, other executives and non-management directors. FW Cook provides data and analysis with respect to public companies having similar characteristics (including size, profitability, geography, business lines and growth rates) to those of our company. As discussed under “Compensation Risk Assessment” on page 55 of this proxy statement, FW Cook also updated and confirmed the comprehensive risk assessment of our incentive-based compensation plans which FW Cook conducted in 2016 (and prepares on a triennial basis) to assist the Compensation Committee in its compensation risk assessment. The Compensation Committee considers, but is not bound by, the consultant’s recommendations with respect to executive and non-executive director compensation.
During fiscal year 2018, the Compensation Committee reviewed the independence of FW Cook, its other advisors and the individuals employed by such advisors who furnish services to us, which included a consideration of the factors required by New York Stock Exchange listing standards. Based on its review, the Compensation Committee determined that FW Cook, its other advisors and the individuals employed by such advisors who furnish services to us are independent and that their service does not raise any conflicts of interest that would prevent them from providing independent and objective advice to the committee.
2MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Corporate Governance Highlights
| 5 out of our 7 director nominees are independent. | |
| The independent directors meet regularly in private executive sessions without management. | |
| We have an independent Lead Director, who serves as the presiding director at the executive sessions of the independent directors. | |
| All committees of the Board are composed exclusively of independent directors. | |
Board Oversight of Risk Management | | The Board is responsible for the oversight of the Company’s risk management and
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| | Each of our non-executive directors must own a minimum number of shares equal to five times his or her annual cash retainer on his or her first year of service on the Board within five years of joining the Board. |
| Our Chief Executive Officer must own at least six times his annual base salary in our common stock. | |
| Each of our Executive Vice Presidents must own at least three times his or her annual base salary in our common stock, each of our Senior Vice Presidents must own at least two times his or her annual base salary in our common stock, and each of our Vice Presidents (who are executive officers) must own at least one time his or her annual base salary in our common stock. | |
Annual Performance Evaluation | | The Nominating and Corporate Governance Committee annually reviews the performance of the Board and Board committees. |
| The Board and each Board committee conduct annual written self-evaluations to help ensure that the Board and each Board committee have the appropriate scope of activities. | |
Annual Election of Directors | | All directors stand for election annually. |
Board and Board Committee Evaluation and Composition | | The Nominating and Corporate Governance Committee annually reviews the composition of the Board and Board committees. |
| The annual written self-evaluations conducted by the Board and each Board committee also ensure that the Board and Board committees have the appropriate number and mix of members, skills and experience. | |
| The Nominating and Corporate Governance Committee assesses the Board’s composition in the context of the Board’s needs and objectives, including consideration of Board diversity and director tenure, age, skills, background and experience. | |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement3
Regular Board Reviews of Executive Succession | | The Board regularly reviews senior level promotion and succession plans and is responsible for succession planning for the Chief Executive Officer position. |
| The Board has contingency plans in place for emergencies such as the departure, death or disability of the Chief Executive Officer or other executive officers. | |
Other Corporate Governance Practices | | We maintain a clawback policy to recoup incentive compensation in the event of a significant financial restatement (whether or not a covered officer engaged in misconduct), as well as in cases of breach of non-competition and other covenants. |
| We are committed to shareholder engagement and maintain a formal investor relations outreach program. | |
| The Nominating and Corporate Governance Committee oversees our ESG efforts and initiatives. | |
Responding to COVID-19 | | Management formed a COVID-19 task force to manage our response to the COVID-19 pandemic. Our number one priority is the health and safety of our associates and their families, our customers and our other partners. |
4MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Fiscal Year 2021 Company Performance
In fiscal year 2021, we made significant progress on our ambitious plan to transform MSC from a leading spot-buy distributor to an essential partner on the plant floors of our customers. Despite the unprecedented challenges related to the global COVID-19 pandemic that continued through the first half of fiscal year 2021, we have been able to align our strategy with our operations and make significant progress in reorganizing our cost structure to emerge a stronger, more resilient Company. We continue to execute on our initiatives, supporting our business strategy to serve as a mission-critical partner to our customers, which we believe will further expand our market share capture to deliver on our growth targets, as well as improve our returns on invested capital.
While we began the year against a challenging backdrop, positive signs in the operating environment turned into tangible business drivers as customers began to rebuild backlog and manufacturing end markets grew stronger. Additionally, product scarcity, freight delays and labor shortages drove significant inflationary pressures, and we leveraged the scale of our business, strong balance sheet and long-standing supplier relationships to navigate those challenges, deliver for our customers and extend our leadership position in our core business of metalworking.
Throughout the year, our long-term transformation strategy remained one of our top areas of focus. We continued to grow share in metalworking through investment and innovation, driving improvements in eCommerce and launching MSC MillMax®, which uses impact-testing software to reduce the milling optimization process to just a few minutes. We are working to transform our cost structure and are encouraged by the momentum that is building inside the Company as evidenced by improving operating results and solid execution. Our operating performance in fiscal year 2021 was highlighted by the following:
· | our net sales increased 1.6% to $3.2 billion; |
· | we generated $224.5 million of cash from operations in fiscal year |
· | we paid out $362.7 million in cash dividends, comprised of special and |
· | our operating expenses increased 1.9% to $994.5 million in fiscal year 2021, as |
· | we incurred $31.4 million in restructuring and other related costs, comprised of |
· | our operating income in fiscal year 2021 was $301.8 million, representing a decrease of 14.0% from operating income of $350.7 million in fiscal year 2020; and |
· | our diluted earnings per share was $3.87 in fiscal year 2021 versus $4.51 in fiscal year 2020. |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement5
Fiscal Year 2021 Compensation Decisions
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee of the Board took the following key actions with respect to named executive officer compensation for fiscal year 2021:
· | Bonus Payouts Below Target. Based on Company and individual performance, payouts under our performance bonus plan were 75% of target for Messrs. Gershwind, Jones and Armstrong and 86% of target for Mses. Actis-Grande and Heerdt. |
The table below illustrates how our compensation is aligned with our performance by showing the total cash compensation and total direct compensation for each of our named executive officers in fiscal year 2021 against the competitive market data:
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Named Executive Officer |
| Fiscal 2021 Total Cash Compensation ($)(1) |
| Competitive Positioning(2) of Total Cash Compensation |
| Fiscal 2021 Total Direct Compensation ($)(3) |
| Competitive Positioning(2) of Total Direct Compensation |
Erik Gershwind |
| 1,895,889 |
| approx. 25th percentile |
| 5,145,814 |
| between 25th & 50th percentiles |
Kristen Actis-Grande |
| 681,170 |
| <25th percentile |
| 1,231,101 |
| <25th percentile |
Douglas E. Jones |
| 597,560 |
| between 25th & 50th percentiles |
| 1,147,491 |
| between 50th & 75th percentiles |
Steve Armstrong |
| 584,398 |
| <25th percentile |
| 1,084,369 |
| approx. 25th percentile |
Kari Heerdt |
| 516,684 |
| between 25th & 50th percentiles |
| 916,661 |
| between 25th & 50th percentiles |
____________________________
(1) | Total cash compensation is calculated as the sum of (i) base salary in effect as of the |
(2) | Please see “―Competitive Positioning” on page 49 for information about our peer companies and our competitive market data. |
(3) | Total direct compensation is calculated as the sum of |
Please see “Compensation Discussion and Analysis” beginning on page 35 of this Proxy Statement.
6MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
The following table shows the compensation for our named executive officers for fiscal years 2021 and 2020. For an explanation of the amounts in the table below, please see “Summary Compensation Table” on page 55 of this Proxy Statement.
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Name and Principal Position | Year |
| Salary |
| Bonus |
| Stock |
| Option |
| Non-Equity |
| All Other Compensation |
| Total |
Erik Gershwind | 2021 |
| 771,151 |
| 500 |
| 3,249,925 |
| — |
| 1,124,738 |
| 23,789 |
| 5,170,103 |
President and | 2020 |
| 697,002 |
| — |
| 3,249,858 |
| — |
| 375,000 |
| 22,575 |
| 4,344,435 |
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Kristen Actis-Grande (1) | 2021 |
| 408,654 |
| 150,000 |
| 749,871 |
| — |
| 256,170 |
| 14,808 |
| 1,579,503 |
Executive Vice President and |
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Douglas E. Jones | 2021 |
| 423,080 |
| 500 |
| 549,931 |
| — |
| 174,480 |
| 22,378 |
| 1,170,369 |
Executive Vice President and | 2020 |
| 398,672 |
| — |
| 549,886 |
| 54,924 |
| 116,347 |
| 11,170 |
| 1,130,999 |
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Steve Armstrong | 2021 |
| 425,044 |
| 500 |
| 499,971 |
| — |
| 159,354 |
| 24,035 |
| 1,108,904 |
Senior Vice President, | 2020 |
| 400,523 |
| — |
| 499,896 |
| 11,938 |
| 53,131 |
| 17,975 |
| 983,463 |
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Kari Heerdt (1) | 2021 |
| 361,182 |
| 500 |
| 399,977 |
| — |
| 155,502 |
| 21,359 |
| 938,520 |
Senior Vice President, |
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New Business Innovation and Transformation |
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(1) | No compensation information for fiscal year 2020 appears in this table for Ms. Actis-Grande or |
MSC Industrial Direct Co., Inc. Notice of |
Ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 2)
The Audit Committee has appointed the firm of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2022. The Board considers it desirable for shareholders to pass upon the selection of the independent registered public accounting firm. The Board of Directors recommends that you vote “FOR” the ratification of the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2022. Please see “Ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 2)” beginning on page 31 of this Proxy Statement.
Advisory Vote to Approve Named Executive Officer Compensation (Proposal No. 3)
As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers. This vote is advisory, which means that this vote on executive compensation is not binding on the Company, the Board or the Compensation Committee. Based on Company and individual performance, the Compensation Committee believes that compensation levels for fiscal year 2021 were appropriate and consistent with the philosophy and objectives of the Company’s compensation programs. The Board of Directors recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers. Please see “Advisory Vote to Approve Named Executive Officer Compensation (Proposal No. 3)” on page 68 of this Proxy Statement.
8MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
The Board of Directors currently consists of seven members and has no vacancies. On the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the seven persons listed below for election as directors at the Annual Meeting. If elected, each nominee will serve until his or her term expires at the 2023 Annual Meeting of Shareholders or until his or her successor is duly elected and qualified. All of the nominees are currently serving as directors and were elected to the Board at the 2021 Annual Meeting of Shareholders. Each nominee has agreed to be named in this Proxy Statement and to serve if elected.
Although the Company knows of no reason why any of the nominees would not be able to serve, if any nominee should become unavailable for election for any reason, the shares represented by a properly executed and returned proxy will be voted for any substitute nominee who shall be designated by the Board. There are no arrangements or understandings between any director or nominee for director and any other person pursuant to which such person was selected as a director or nominee for director of the Company.
Board and Committee Evaluations; Qualifications of Nominees
The Nominating and Corporate Governance Committee annually reviews the composition and performance of the Board and Board committees, and considers, among other factors, Board diversity and director tenure, age, skills, background and experience. The Nominating and Corporate Governance Committee is responsible for recruiting, evaluating and recommending candidates to be presented for election or re-election to serve as members of the Board. The Board and each Board committee conduct annual written self-evaluations to help ensure that the Board and Board committees have the appropriate number and mix of members, skills and experience and the appropriate scope of activities. These self-evaluations also provide Board and Board committee members with insight for enhancing the effectiveness of their meetings. In evaluating the Board, the Nominating and Corporate Governance Committee has considered that our directors have a wide range of experience as senior executives of large publicly traded companies, and in the areas of accounting, business education and business management consulting. In these positions, they have also gained industry experience and knowledge in core management skills that are important to their service on the Board, such as business-to-business distribution, supply chain management, mergers and acquisitions, strategic and financial planning, financial reporting, compliance, risk management, intellectual property matters and leadership development. Several of our directors also have experience serving on the boards of directors and board committees of other public companies, which provides them with an understanding of current corporate governance practices and trends and executive compensation matters. The Nominating and Corporate Governance Committee also believes that our directors have other key attributes that are important to an effective board of directors, including the highest professional and personal ethics and values, a broad diversity of business experience and expertise, an understanding of our business, a high level of education, broad-based business acumen and the ability to think strategically.
In addition to the qualifications described above, the Nominating and Corporate Governance Committee also considered the specific skills and attributes described in the biographical details that follow in determining whether each individual nominee should serve on the Board.
Nominee | Age | Principal Occupation | Director Since | |||
Erik Gershwind | 50 | President and Chief Executive Officer of MSC | October 2010 | |||
Louise Goeser | 68 | Chief Executive Officer of LKG Enterprises | January 2009 | |||
Mitchell Jacobson | 70 | Non-Executive Chairman of the Board of Directors of MSC | October 1995 | |||
Michael Kaufmann | 59 | Chief Executive Officer of Cardinal Health, Inc. | September 2015 | |||
Steven Paladino | 64 | Executive Vice President and Chief Financial Officer of Henry Schein, Inc. | September 2015 | |||
Philip Peller | 82 | Retired Partner of Arthur Andersen LLP | April 2000 | |||
Rudina Seseri | 49 | Founder and Managing Partner of Glasswing Ventures, LLC | September 2020 |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement9
Erik Gershwind | |
Business Experience | Mr. Gershwind has served as our President and Chief Executive Officer since January 2013. From October 2009 to October 2011, Mr. Gershwind served as our Executive Vice President and Chief Operating Officer and, from October 2011 to January 2013, he served as our President and Chief Operating Officer. Mr. Gershwind was elected by the Board to serve as a director in October 2010. Previously, Mr. Gershwind served as our Senior Vice President, Product Management and Marketing from December 2005 to October 2009 and as our Vice President of Product Management from April 2005 to December 2005. From August 2004 to April 2005, Mr. Gershwind served as Vice President of MRO and Inventory Management of the Company. Mr. Gershwind has held various positions of increasing responsibility in product, eCommerce and marketing. Mr. Gershwind joined the Company in 1996 as manager of our acquisition integration initiative. |
Specific Skills and Attributes | Mr. Gershwind has held senior management positions responsible for key business functions of the Company and is a key contributor to our current strategy and success. In addition, as our Chief Executive Officer, he brings critical perspectives to the Board on our strategic direction and growth strategy. |
Family Relationships | Mr. Gershwind is the nephew of Mitchell Jacobson, our Non-Executive Chairman of the Board, and the son of Marjorie Gershwind Fiverson, Mr. Jacobson’s sister. Mr. Jacobson and Ms. Gershwind Fiverson are also our principal shareholders. There are no other family relationships among any of our directors or executive officers. |
Louise Goeser | |
Business Experience | Ms. Goeser is the Chief Executive Officer of LKG Enterprises, a private advisory firm that she founded in October 2018. Ms. Goeser previously served as President and Chief Executive Officer of Grupo Siemens S.A. de C.V., where she was responsible for Siemens Mesoamérica, from March 2009 until her retirement in May 2018. Siemens Mesoamérica is the Mexican, Central American and Caribbean unit of multinational Siemens AG, a global engineering company operating in the industrial, energy and healthcare sectors. Ms. Goeser previously served as President and Chief Executive Officer of Ford of Mexico from January 2005 to November 2008. Prior to this position, she served as Vice President, Global Quality for Ford Motor Company from 1999 to 2005. Prior to 1999, Ms. Goeser served as General Manager, Refrigeration and Vice President, Corporate Quality at Whirlpool Corporation and held various leadership positions with Westinghouse Electric Corporation. |
Specific Skills and Attributes | Ms. Goeser has extensive experience in senior executive positions and as a director of large public companies, and she possesses the knowledge and expertise necessary to contribute an important viewpoint on a wide variety of governance and operational issues, as well as the reporting and other responsibilities of a public company. |
Other Directorships | Ms. Goeser is also a director of Watts Water Technologies, Inc. and a member of its Compensation and Nominating and Corporate Governance Committees. During the last five years, Ms. Goeser served as a director and a member of the Audit Committee and the Compensation, Governance and Nominating Committee of Talen Energy Corporation and as a director and a member of the Compensation, Governance and Nominating Committee of PPL Corporation. |
10MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Mitchell Jacobson | |
Business Experience | Mr. Jacobson was elected our President and Chief Executive Officer in October 1995 and held both positions until November 2003. He continued to serve as our Chief Executive Officer until November 2005. Mr. Jacobson was elected our Chairman of the Board in January 1998 and became Non-Executive Chairman of the Board in January 2013. Previously, Mr. Jacobson was President and Chief Executive Officer of Sid Tool Co., Inc., our predecessor company and current wholly owned and principal operating subsidiary from June 1982 to November 2005. |
Specific Skills and Attributes | Mr. Jacobson has been instrumental to our past and ongoing growth, which reflects the values, strategy and vision that Mr. Jacobson contributes. His leadership as Chairman, experience in industrial distribution and strategic input are critically important to the Board. In addition, as one of our principal shareholders, Mr. Jacobson provides critical insight and perspective relating to the Company’s shareholders. |
Family Relationships | Mr. Jacobson is the uncle of Erik Gershwind, our President and Chief Executive Officer and a director of the Company, and the brother of Marjorie Gershwind Fiverson, Mr. Gershwind’s mother. There are no other family relationships among any of our directors or executive officers. |
Other Directorships | Mr. Jacobson is a director of Ambrosia Holdings, L.P. (the holding company of TriMark USA), and serves as a director, Chairman of the Nominating Committee and a member of the Audit and Compensation Committees of Juniper Industrial Holdings, Inc. Mr. Jacobson previously served as a director of HD Supply Holdings, Inc. from October 2007 to December 2013. Mr. Jacobson is also a Trustee of the New York University School of Law, and serves as a member of the Board of Trustees of New York Presbyterian Hospital, as well as of the hospital’s Executive, Investment and Patient Experience Committees. |
Michael Kaufmann | |
Business Experience | Mr. Kaufmann has served as Chief Executive Officer of Cardinal Health, Inc., a globally integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices and patients in the home, since January 2018. He previously served as Chief Financial Officer of Cardinal Health, Inc. from November 2014 to December 2017 and as Chief Executive Officer of the Pharmaceutical Segment of Cardinal Health, Inc. from August 2009 to November 2014. Previously, he was Group President for the medical distribution businesses of Cardinal Health, Inc. from April 2008 to August 2009. Mr. Kaufmann served in other executive positions with Cardinal Health, Inc. from 1990 through 2008, and, prior to that, he worked for almost six years in public accounting with Arthur Andersen LLP. |
Specific Skills and Attributes | Mr. Kaufmann’s operational expertise and broad experience as a senior executive of a major healthcare services and products company make him a valued asset to the Board. His knowledge of the distribution business and supply chain management expertise provide the Board with critical insights. In addition, having previously served as a chief financial officer of a large public company, Mr. Kaufmann brings additional finance and accounting expertise to the Board. Mr. Kaufmann qualifies as an “audit committee financial expert” as defined by applicable SEC rules. |
Other Directorships | Mr. Kaufmann is also a director of Cardinal Health, Inc. |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement11
Steven Paladino | ||
Business Experience | Mr. Paladino has served as Executive Vice President and Chief Financial Officer of Henry Schein, Inc., a solutions company for healthcare professionals, since 2000. Prior to his current position, Mr. Paladino served in other key roles with Henry Schein, Inc., including Senior Vice President and Chief Financial Officer from 1993 to 2000, Vice President and Treasurer from 1990 to 1992, and Corporate Controller from 1987 to 1990. Before joining Henry Schein, Inc., Mr. Paladino was employed as a Certified Public Accountant for seven years, most recently with the international accounting firm of BDO Seidman LLP (now known as BDO USA, LLP). | |
Specific Skills and Attributes | Mr. Paladino brings to the Board extensive financial, accounting and distribution industry expertise. Mr. Paladino’s skills in corporate finance and accounting provide the Board with expertise and depth in public company accounting issues, and his distribution-related experience provides the Board with critical knowledge and perspectives. Further, his experience as a public company director provides the Board with additional knowledge and perspectives on corporate governance matters. Mr. Paladino qualifies as an “audit committee financial expert” as defined by applicable SEC rules. | |
Other Directorships | Mr. Paladino also serves as a director of Henry Schein, Inc. and a member of its Executive Management Committee, and as a director of Covetrus, Inc. and a member of its Strategy Committee. | |
PHILIP PELLER | ||
Business Experience | Mr. Peller has served as our Lead Director since December 2007. Mr. Peller was a partner of Andersen Worldwide S.C. and Arthur Andersen LLP from 1970 until his retirement in 1999. He served as Managing Partner of Practice Protection and Partner Affairs for Andersen Worldwide S.C. from 1998 to 1999 and as Managing Partner of Practice Protection from 1996 to 1998. He also served as the Managing Director of Quality, Risk Management and Professional Competence for Arthur Andersen’s global audit practice. | |
Specific Skills and Attributes | Mr. Peller’s extensive experience in global audit, financial, risk and compliance matters provides invaluable expertise to the Board. In addition, Mr. Peller’s accounting background and experience allow him to provide the Board with unique insight into public company accounting issues and challenges, and also qualify him as an “audit committee financial expert” as defined by applicable SEC rules. |
RUDINA SESERI | |
Business Experience | Ms. Seseri is the founder and managing partner of Glasswing Ventures, LLC, an early stage venture capital firm dedicated to investing in the next generation of Artificial Intelligence-powered technology companies. Prior to launching Glasswing Ventures, LLC, Ms. Seseri was a partner at Fairhaven Capital, a technology venture capital firm, from 2007 to 2015. She also worked in the Corporate Development Group at Microsoft Corporation from 2005 to 2007, where she was responsible for leading acquisitions and strategic investments for the company. Ms. Seseri also worked as an investment banker in the Technology Group at Credit Suisse Group AG from 2000 to 2003, where she led public market transactions. |
Specific Skills and Attributes | Ms. Seseri brings to the Board extensive investment, technology and operational experience. She has more than 17 years of investing and transactional experience, including experience building successful technology companies in innovative fields such as artificial intelligence, machine learning, Internet of Things, robotics, block chain, enterprise software, and digital media technologies. Ms. Seseri provides both vision and practical expertise to help advance our business transformation initiatives. |
Other Directorships | Ms. Seseri is also a director of M&T Bank Corporation. |
12MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
The chart below demonstrates how the Board’s nominees for election at the Annual Meeting provide the skills, experiences and perspectives that the Nominating and Corporate Governance Committee and the Board consider important for an effective board of directors.
Industry Knowledge | Business Management Experience | Financial/Accounting | ||||||||||||
Name | Business to | Supply | Senior | Public | Mergers and |
| Financial | |||||||
Erik Gershwind | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||
Louise Goeser | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Mitchell Jacobson | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||
Michael Kaufmann | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||
Steven Paladino | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||
Philip Peller | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Rudina Seseri | ✓ | ✓ | ✓ | ✓ |
The Board OF DIRECTORS recommends THAT YOU vote “FOR” the election of each of |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement13
Pursuant to the New York Stock Exchange (the “NYSE”) listing standards, a majority of the members of the Board must be independent. The NYSE listing standards provide that a director does not qualify as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). The Board follows the criteria set forth in Section 303A of the NYSE listing standards to determine director independence. Our independence criteria are also set forth in Section 2 of our Corporate Governance Guidelines, a copy of which is available on our website at www.mscdirect.com/corporategovernance. In addition to applying these guidelines, the Board will consider all of the relevant facts and circumstances in making an independence determination.
The Board undertakes a review of director independence on an annual basis and as events arise which may affect director independence. Based upon this review, the Board determined that Mses. Goeser and Seseri and Messrs. Kaufmann, Paladino and Peller are independent, and Messrs. Jonathan Byrnes and Denis Kelly (who did not stand for re-election at our 2021 Annual Meeting of Shareholders and ceased to be directors effective as of the conclusion of that meeting) were independent during the period that they served as directors, in accordance with Section 303A.02 of the NYSE listing standards as well as under our Corporate Governance Guidelines. The Board also determined that each member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee (see membership information below under “―Board Committees”) is independent, including that each member of the Audit Committee is “independent” as that term is defined under Rule 10A-3(b)(1)(ii) of the Exchange Act.
In evaluating the independence of Ms. Goeser, the Board considered that Ms. Goeser is a director of Watts Water Technologies, Inc., which is a customer and a supplier of the Company. Sales to and purchases from Watts Water Technologies, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of Watts Water Technologies, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the independence of Ms. Seseri, the Board considered that Ms. Seseri is the founding partner of Glasswing Ventures, of which NormShield Inc. d/b/a Black Kite, Inc. is a portfolio company. Black Kite, Inc. is a supplier of the Company. Purchases from Black Kite, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of Black Kite, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Byrnes, the Board considered that Mr. Byrnes is a Senior Lecturer at MIT, which is a customer of the Company. Sales to MIT in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of MIT’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Kaufmann, the Board considered that Mr. Kaufmann is the Chief Executive Officer of Cardinal Health, Inc., which is a customer and a supplier of the Company. Sales to and purchases from Cardinal Health, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of Cardinal Health, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Kelly, the Board considered that Mr. Kelly is a director of WW International, Inc., which is a supplier of the Company. Purchases from WW International, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of WW International, Inc.’s gross revenues during its most recent fiscal year.
In evaluating the independence of Mr. Paladino, the Board considered that Mr. Paladino is the Executive Vice President and Chief Financial Officer of Henry Schein, Inc., which is a customer and supplier of the Company. Sales to and purchases from Henry Schein, Inc. in fiscal year 2021 were made in the ordinary course of business and amounted to significantly less than 0.5% of Henry Schein, Inc.’s gross revenues during its most recent fiscal year.
14MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
The standing committees of the Board are the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The table below provides the current membership of the Board and each of these committees and the number of meetings held by the Board and each of these committees during fiscal year 2021.
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Name |
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| Board |
| Audit |
| Compensation |
| Nominating |
Erik Gershwind |
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Louise Goeser |
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Mitchell Jacobson |
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Michael Kaufmann |
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Steven Paladino |
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Philip Peller |
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Rudina Seseri |
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Fiscal Year 2021 Meetings |
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| 7 |
| 6 |
| 7 |
| 4 |
Lead Director Chairperson Audit Committee Financial Expert Member
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement15
Principal Functions
The principal functions of the Audit Committee are to:
· | appoint (and be responsible for terminating) our independent registered public accounting firm; |
· | recommend to the Board that the audited financial statements be included in our Annual Report on Form 10-K for filing with the SEC; |
· | oversee risk management practices for our major financial risk exposures and the steps that have been taken to monitor and mitigate such exposures; |
· | assist the Board in overseeing and managing risks associated with the COVID-19 pandemic, and overseeing risk management and responses with respect to the financial risks posed by the COVID-19 pandemic; |
· | oversee cybersecurity risks and the Company’s overall cybersecurity risk management program; |
· | prepare an audit committee report to be included in our annual proxy statement; and |
· | undertake an annual evaluation of its performance. |
Composition and Charter
The Audit Committee is currently comprised of Ms. Goeser and Messrs. Kaufmann, Paladino and Peller, each of whom the Board has determined to be independent under both the rules of the SEC and the listing standards of the NYSE and to meet the financial literacy requirements of the NYSE. Mr. Peller is the Chairperson of the Audit Committee. The Board has determined that each of Messrs. Peller, Kaufmann and Paladino qualifies as an “audit committee financial expert” within the meaning of the rules of the SEC.
The Audit Committee is directly responsible for the appointment, termination, compensation, retention and oversight of the work of our independent registered public accounting firm. The Board has approved a written charter for the Audit Committee, a copy of which is available on our website at www.mscdirect.com/corporategovernance. The Audit Committee has the authority to engage independent counsel and other advisors as it deems necessary to carry out its duties. We are obligated to provide appropriate funding for the Audit Committee for these purposes.
Policy on Service on Other Audit Committees
Under our Corporate Governance Guidelines, members of the Audit Committee may not serve as members of an audit committee for more than three public companies, including the Audit Committee of the Board.
16MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Principal Functions
The principal functions of the Compensation Committee are to:
· | review and approve corporate goals and objectives relevant to the compensation of our Chief Executive Officer; |
· | evaluate our Chief Executive Officer’s performance in light of those goals and objectives; |
· | determine and approve our Chief Executive Officer’s compensation level based on its evaluation of his performance; |
· | set the compensation levels of all of our other executive officers, including with respect to our incentive compensation plans and equity-based plans; |
· | review and recommend to the Board for approval any change in control agreements or severance plans or agreements with our Chief Executive Officer and our other executive officers; |
· | recommend to the Board the compensation of our non-executive directors; |
· | have the sole responsibility to retain and terminate the compensation consultant; |
· | administer our equity incentive plans; |
· | assist the Board in overseeing and managing risks associated with the COVID-19 pandemic, and overseeing compensation actions taken in response to the COVID-19 pandemic; |
· | oversee risk management practices for risks relating to our overall compensation structure, including review of our compensation practices, in each case with a view toward assessing associated risks; |
· | prepare a compensation committee report on executive compensation to be included in our annual proxy statement; and |
· | undertake an annual evaluation of its performance. |
Composition and Charter
The Compensation Committee is currently comprised of Mses. Goeser and Seseri and Messrs. Kaufmann and Paladino, each of whom is an independent director. Ms. Goeser is the Chairperson of the Compensation Committee. The Board has approved a written charter for the Compensation Committee, a copy of which is available on our website at www.mscdirect.com/corporategovernance.
Nominating and Corporate Governance Committee
✓
Member
C
Chairperson
2MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Corporate Governance Highlights
| 5 out of our 7 director nominees are independent. | |
| The independent directors meet regularly in private executive sessions without management. | |
| We have an independent Lead Director, who serves as the presiding director at the executive sessions of the independent directors. | |
| All committees of the Board are composed exclusively of independent directors.
| |
Board Oversight of Risk Management | | The |
Stock Ownership Requirements | | Each of our non-executive directors must own a minimum number of shares equal to five times his or her annual cash retainer on his or her first year of service on the Board within five years of joining the Board. |
| Our Chief Executive Officer must own at least six times his annual base salary in our common stock. | |
| Each of our Executive Vice Presidents must own at least three times his or her annual base salary in our common stock, each of our Senior Vice Presidents must own at least two times his or her annual base salary in our common stock, and each of our Vice Presidents (who are executive officers) must own at least one time his or her annual base salary in our common stock. | |
Annual Performance Evaluation | | The Nominating and Corporate Governance Committee annually reviews the performance of the Board and Board committees. |
| The Board and each Board committee conduct annual written self-evaluations to help ensure that the Board and each Board committee have the appropriate scope of activities. | |
Annual Election of Directors | | All directors stand for election annually. |
Board and Board Committee Evaluation and Composition | | The Nominating and Corporate Governance Committee annually reviews the composition of the Board and Board committees. |
| The annual written self-evaluations conducted by the Board and each Board committee also ensure that the Board and Board committees have the appropriate number and mix of members, skills and experience. | |
| The Nominating and Corporate Governance Committee assesses the Board’s composition in the context of the Board’s needs and objectives, including consideration of Board diversity and director tenure, age, skills, background and experience. | |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement3
Regular Board Reviews of Executive Succession | | The Board regularly reviews senior level promotion and succession plans and is responsible for succession planning for the Chief Executive Officer position. |
| The Board has contingency plans in place for emergencies such as the departure, death or disability of the Chief Executive Officer or other executive officers. | |
Other Corporate Governance Practices | | We maintain a clawback policy to recoup incentive compensation in the event of a significant financial restatement (whether or not a covered officer engaged in misconduct), as well as in cases of breach of non-competition and other covenants. |
| We are | |
| The Nominating and Corporate Governance Committee oversees our ESG efforts and initiatives. | |
Responding to COVID-19 | | Management formed a COVID-19 task force to manage our response to the COVID-19 pandemic. Our number one priority is the health and safety of our associates and their families, our customers and our other partners. |
4MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Fiscal Year 2021 Company Performance
In fiscal year 2021, we made significant progress on our ambitious plan to transform MSC from a leading spot-buy distributor to an essential partner on the plant floors of our customers. Despite the unprecedented challenges related to the global COVID-19 pandemic that continued through the first half of fiscal year 2021, we have been able to align our strategy with our operations and make significant progress in reorganizing our cost structure to emerge a stronger, more resilient Company. We continue to execute on our initiatives, supporting our business strategy to serve as a mission-critical partner to our customers, which we believe will further expand our market share capture to deliver on our growth targets, as well as improve our returns on invested capital.
While we began the year against a challenging backdrop, positive signs in the operating environment turned into tangible business drivers as customers began to rebuild backlog and manufacturing end markets grew stronger. Additionally, product scarcity, freight delays and labor shortages drove significant inflationary pressures, and we leveraged the scale of our business, strong balance sheet and long-standing supplier relationships to navigate those challenges, deliver for our customers and extend our leadership position in our core business of metalworking.
Throughout the year, our long-term transformation strategy remained one of our top areas of focus. We continued to grow share in metalworking through investment and innovation, driving improvements in eCommerce and launching MSC MillMax®, which uses impact-testing software to reduce the milling optimization process to just a few minutes. We are working to transform our cost structure and are encouraged by the momentum that is building inside the Company as evidenced by improving operating results and solid execution. Our operating performance in fiscal year 2021 was highlighted by the following:
· | our net sales increased 1.6% to $3.2 billion; |
· | we generated $224.5 million of cash from operations in fiscal year 2021; |
· | we paid out $362.7 million in cash dividends, comprised of special and regular cash dividends of approximately $195.4 million and $167.3 million, respectively, compared to special and regular cash dividends of approximately $277.6 million and $166.5 million, respectively, in the prior fiscal year; |
· | our operating expenses increased 1.9% to $994.5 million in fiscal year 2021, as compared to $975.6 million in fiscal year 2020; |
· | we incurred $31.4 million in restructuring and other related costs, comprised of $18.3 million in operating lease asset impairment loss, net and other exit-related costs related to the Company’s enhanced customer support model, $8.6 million in consulting costs related to the optimization of the Company’s operations and $4.5 million in severance and separation benefits charges and other related costs associated primarily with sales workforce realignment; |
· | our operating income in fiscal year 2021 was $301.8 million, representing a decrease of 14.0% from operating income of $350.7 million in fiscal year 2020; and |
· | our diluted earnings per share was $3.87 in fiscal year 2021 versus $4.51 in fiscal year 2020. |
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement5
Fiscal Year 2021 Compensation Decisions
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee of the Board took the following key actions with respect to named executive officer compensation for fiscal year 2021:
· | Bonus Payouts Below Target. Based on Company and individual performance, payouts under our performance bonus plan were 75% of target for Messrs. Gershwind, Jones and Armstrong and 86% of target for Mses. Actis-Grande and Heerdt. |
The table below illustrates how our compensation is aligned with our performance by showing the total cash compensation and total direct compensation for each of our named executive officers in fiscal year 2021 against the competitive market data:
| Named Executive Officer Fiscal 2021 Total Cash Compensation ($)(1) Competitive Positioning(2) of Total Cash Compensation Fiscal 2021 Total Direct Compensation ($)(3) Competitive Positioning(2) of Total Direct Compensation Erik Gershwind 1,895,889 approx. 25th percentile 5,145,814 between 25th & 50th percentiles Kristen Actis-Grande 681,170 <25th percentile 1,231,101 <25th percentile Douglas E. Jones 597,560 between 25th & 50th percentiles 1,147,491 between 50th & 75th percentiles Steve Armstrong 584,398 <25th percentile 1,084,369 approx. 25th percentile Kari Heerdt 516,684 between 25th & 50th percentiles 916,661 between 25th & 50th percentiles ____________________________
Please see “Compensation Discussion and Analysis” beginning on page 35 of this Proxy Statement. 6MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement The following table shows the compensation for our named executive officers for fiscal years 2021 and 2020. For an explanation of the amounts in the table below, please see “Summary Compensation Table” on page 55 of this Proxy Statement.
Ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 2) The Audit Committee has appointed the firm of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2022. The Board considers it desirable for shareholders to pass upon the selection of the independent registered public accounting firm. The Board of Directors recommends that you vote “FOR” the ratification of the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2022. Please see “Ratification of the Appointment of Independent Registered Public Accounting Firm (Proposal No. 2)” beginning on page 31 of this Proxy Statement. Advisory Vote to Approve Named Executive Officer Compensation (Proposal No. 3) As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers. This vote is advisory, which means that this vote on executive compensation is not binding on the Company, the Board or the Compensation Committee. Based on Company and individual performance, the Compensation Committee believes that compensation levels for fiscal year 2021 were appropriate and consistent with the philosophy and objectives of the Company’s compensation programs. The Board of Directors recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers. Please see “Advisory Vote to Approve Named Executive Officer Compensation (Proposal No. 3)” on page 68 of this Proxy Statement. 8MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement ELECTION OF DIRECTORS (PROPOSAL NO. 1) The Board of Directors currently consists of seven members and has no vacancies. On the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the seven persons listed below for election as directors at the Annual Meeting. If elected, each nominee will serve until his or her term expires at the 2023 Annual Meeting of Shareholders or until his or her successor is duly elected and qualified. All of the nominees are currently serving as directors and were elected to the Board at the 2021 Annual Meeting of Shareholders. Each nominee has agreed to be named in this Proxy Statement and to serve if elected. Although the Company knows of no reason why any of the nominees would not be able to serve, if any nominee should become unavailable for election for any reason, the shares represented by a properly executed and returned proxy will be voted for any substitute nominee who shall be designated by the Board. There are no arrangements or understandings between any director or nominee for director and any other person pursuant to which such person was selected as a director or nominee for director of the Company. Board and Committee Evaluations; Qualifications of Nominees The Nominating and Corporate Governance Committee annually reviews the composition and performance of the Board and Board committees, and considers, among other factors, Board diversity and director tenure, age, skills, background and experience. The Nominating and Corporate Governance Committee is responsible for recruiting, evaluating and recommending candidates to be presented for election or re-election to serve as members of the Board. The Board and each Board committee conduct annual written self-evaluations to help ensure that the Board and Board committees have the appropriate number and mix of members, skills and experience and the appropriate scope of activities. These self-evaluations also provide Board and Board committee members with insight for enhancing the effectiveness of their meetings. In evaluating the Board, the Nominating and Corporate Governance Committee has considered that our directors have a wide range of experience as senior executives of large publicly traded companies, and in the areas of accounting, business education and business management consulting. In these positions, they have also gained industry experience and knowledge in core management skills that are important to their service on the Board, such as business-to-business distribution, supply chain management, mergers and acquisitions, strategic and financial planning, financial reporting, compliance, risk management, intellectual property matters and leadership development. Several of our directors also have experience serving on the boards of directors and board committees of other public companies, which provides them with an understanding of current corporate governance practices and trends and executive compensation matters. The Nominating and Corporate Governance Committee also believes that our directors have other key attributes that are important to an effective board of directors, including the highest professional and personal ethics and values, a broad diversity of business experience and expertise, an understanding of our business, a high level of education, broad-based business acumen and the ability to think strategically. In addition to the qualifications described above, the Nominating and Corporate Governance Committee also considered the specific skills and attributes described in the biographical details that follow in determining whether each individual nominee should serve on the Board.
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement9
10MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Composition and Charter The Audit Committee is currently comprised of Ms. Goeser and Messrs. Kaufmann, Paladino and Peller, each of whom the Board has determined to be independent under both the rules of the SEC and the listing standards of the NYSE and to meet the financial literacy requirements of the NYSE. Mr. Peller is the Chairperson of the Audit Committee. The Board has determined that each of Messrs. Peller, Kaufmann and Paladino qualifies as an “audit committee financial expert” within the meaning of the rules of the SEC. The Audit Committee is directly responsible for the appointment, termination, compensation, retention and oversight of the work of our independent registered public accounting firm. The Board has approved a written charter for the Audit Committee, a copy of which is available on our website at www.mscdirect.com/corporategovernance. The Audit Committee has the authority to engage independent counsel and other advisors as it deems necessary to carry out its duties. We are obligated to provide appropriate funding for the Audit Committee for these purposes. Policy on Service on Other Audit Committees Under our Corporate Governance Guidelines, members of the Audit Committee may not serve as members of an audit committee for more than three public companies, including the Audit Committee of the Board. 16MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement Principal Functions The principal functions of the Compensation Committee are to:
Composition and Charter The Compensation Committee is currently comprised of Mses. Goeser and Seseri and Messrs. Kaufmann and Paladino, each of whom is an independent director. Ms. Goeser is the Chairperson of the Compensation Committee. The Board has approved a written charter for the Compensation Committee, a copy of which is available on our website at www.mscdirect.com/corporategovernance. Delegation of Authority The Compensation Committee does not delegate its responsibilities to any other directors or members of management. Under the MSC Industrial Direct Co., Inc. 2015 Omnibus Incentive Plan (the “2015 Omnibus Incentive Plan”), the Compensation Committee is permitted to delegate its authority under such plan to a committee of one or more directors or one or more officers, in all cases to the extent permitted under applicable law, including NYSE listing requirements. However, as a matter of policy, the Compensation Committee authorizes all grants of awards under the 2015 Omnibus Incentive Plan. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement17 Compensation Processes and Procedures The Compensation Committee makes all compensation decisions for our executive officers. In fiscal year 2021, the views and recommendations of Mitchell Jacobson, our Non-Executive Chairman of the Board, and Erik Gershwind, our President and Chief Executive Officer, were considered by the members of the Compensation Committee in its review of the performance and compensation of individual executives and will continue to be considered in the foreseeable future. In fiscal year 2021, Mr. Jacobson also provided input on Mr. Gershwind’s compensation. In addition, the Compensation Committee obtains input from Mr. Gershwind on the compensation of the other named executive officers and other executive officers and senior officers. Our Human Resources department and our Senior Vice President and Chief People Officer, Elizabeth Bledsoe, assisted the Compensation Committee Chair in developing the agenda for Compensation Committee meetings and worked with the Compensation Committee in developing agenda materials for the committee’s review, including coordinating and presenting management’s proposals and recommendations to the Compensation Committee with respect to executive and non-executive director compensation. Ms. Bledsoe and Mr. Gershwind regularly attend Compensation Committee meetings, excluding portions of meetings where their own compensation is discussed. The Compensation Committee considers, but is not bound by, management’s proposals and recommendations with respect to executive compensation. The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisors. In connection with compensation decisions made by the Compensation Committee for fiscal year 2021, the Compensation Committee relied on competitive market data and analysis prepared by its independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”). FW Cook provides research, market data and survey information and makes recommendations to the Compensation Committee regarding our executive compensation programs and our non-executive director compensation programs. FW Cook advises the Compensation Committee on the competitiveness of our compensation arrangements and provides input, analysis and recommendations for the compensation paid to our named executive officers, other executives and non-management directors. FW Cook provides data and analysis with respect to public companies having similar characteristics (including size, profitability, geography, business lines and growth rates) to those of the Company. As discussed under “Compensation Risk Assessment” beginning on page 52 of this Proxy Statement, FW Cook also updated and confirmed the comprehensive risk assessment of our incentive-based compensation plans which FW Cook conducted in 2019 (and prepares on a triennial basis) to assist the Compensation Committee in its compensation risk assessment. The Compensation Committee considers, but is not bound by, consultant recommendations with respect to executive and non-executive director compensation. During fiscal year 2021, the Compensation Committee reviewed the independence of FW Cook, which included a consideration of the factors required by the NYSE listing standards, and determined that FW Cook is independent and that their service does not raise any conflicts of interest that would prevent them from providing independent and objective advice to the committee. Compensation Committee Interlocks and Insider Participation During fiscal year 2021, Mses. Goeser and Seseri and Messrs. Kaufmann, Kelly and Paladino served as members of the Compensation Committee. None of the members of the Compensation Committee were, during or prior to fiscal year 2021, an officer of the Company or any of its subsidiaries or had any relationship with the Company other than serving as a director and as a de minimis shareholder. In addition, none of our directors has or had interlocking or other relationships with other boards or compensation committees or our executive officers that would require disclosure under Item 407(e)(4) of Regulation S-K. 18MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement Nominating and Corporate Governance Committee Principal Functions The principal functions of the Nominating and Corporate Governance Committee are to:
Composition and Charter The Nominating and Corporate Governance Committee is currently comprised of Ms. Seseri and Messrs. Paladino and Peller, each of whom is an independent director. Mr. Paladino is the Chairperson of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has adopted a written charter, a copy of which is available on our website at www.mscdirect.com/corporategovernance. Policy Regarding Shareholder Nominations for Director The Nominating and Corporate Governance Committee of the Board believes that the best director candidates will be those who have a number of qualifications, including independence, knowledge, judgment, integrity, character, leadership skills, education, experience, financial literacy, standing in the community and an ability to foster a diversity of backgrounds and views and to complement the Board’s existing strengths. There are no specific, minimum or absolute criteria for Board membership. The Nominating and Corporate Governance Committee seeks to achieve a balance and diversity of knowledge, experience and capability on the Board, while maintaining a sense of collegiality and cooperation that is conducive to a productive working relationship within the Board and between the Board and management. The Nominating and Corporate Governance Committee also believes that it is important for directors to have demonstrated an ethical and successful career. Such a career may include: MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement19
At all times, the Nominating and Corporate Governance Committee will make every effort to ensure that the Board and its committees include at least the required number of independent directors, as that term is defined by applicable standards promulgated by the NYSE and the SEC. In addition, prior to nominating an existing director for re-election to the Board, the Nominating and Corporate Governance Committee will consider and review such existing director’s attendance and performance, independence, experience, skills and contributions as an existing director to the Board. The Nominating and Corporate Governance Committee may employ third-party search firms to identify director candidates, if so desired. The Nominating and Corporate Governance Committee will review and consider recommendations from a wide variety of contacts, including current executive officers, directors, community leaders and shareholders, as a source for potential director candidates. The Nominating and Corporate Governance Committee will consider qualified director candidates recommended by shareholders in compliance with our procedures and subject to applicable inquiries. The Nominating and Corporate Governance Committee uses the same standards for evaluating nominees regardless of whether they are proposed by our directors, our management or our shareholders. Any shareholder may recommend a nominee for director at least 120 calendar days prior to the one-year anniversary of the date on which our proxy statement was released to shareholders in connection with the previous year’s annual meeting, by writing to Assistant Corporate Secretary, MSC Industrial Direct Co., Inc., 515 Broadhollow Road, Suite 1000, Melville, New York 11747, and providing the following information:
All of these communications will be reviewed by our Assistant Corporate Secretary and forwarded to Mr. Paladino, the Chairperson of the Nominating and Corporate Governance Committee, for further review and consideration in accordance with this policy. Any such shareholder recommendation should be accompanied by a written statement from the candidate of his or her consent to be named as a candidate and, if nominated and elected, to serve as a director. 20MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement Each incumbent director attended, or participated by means of remote communication in, 75% or more of the aggregate number of meetings of the Board and committees of the Board on which the director served during fiscal year 2021. We encourage attendance by the directors at our annual meeting of shareholders. All nine of the Company’s directors in office at the time, including all of the Company’s current directors, participated in the Company’s 2021 Annual Meeting of Shareholders, which was held virtually via live audio webcast due to the COVID-19 pandemic. Board Leadership Structure; Executive Sessions of the Independent Directors The Board functions collaboratively and emphasizes active participation and leadership by all of its members. The Board currently consists of seven directors, each of whom, other than Messrs. Gershwind and Jacobson, is independent under our Corporate Governance Guidelines and the applicable rules of the NYSE and the SEC. Mr. Gershwind has served as our President and Chief Executive Officer since January 2013 and as a member of the Board since 2010. Mr. Jacobson, who is one of our principal shareholders, was elected Chairman of the Board in January 1998 and became Non-Executive Chairman of the Board in January 2013. Mr. Jacobson previously served as our President from October 1995 through November 2003, and as our Chief Executive Officer from October 1995 through November 2005. The Board has separated the roles of Chairman and Chief Executive Officer since 2005 and has appointed a non-management, Lead Director since 2007. The Board of Directors believes that the most effective Board leadership structure for the Company at the present time is for the roles of Chief Executive Officer and Chairman of the Board to be separated. Under this structure, our Chief Executive Officer is generally responsible for setting the strategic direction for the Company and for providing the day-to-day leadership over our operations, and our Chairman of the Board sets the agenda for meetings of the Board and presides over Board meetings. In addition, our independent directors meet at regularly scheduled executive sessions without members of management present. Mr. Peller, who has served as our Lead Director since 2007, presides at the executive sessions of the independent directors. The Lead Director also has such other duties and responsibilities as determined by the Board from time to time. Those additional duties and responsibilities include:
The Board retains the authority to modify this leadership structure as and when appropriate to best address our unique circumstances at any given time and to serve the best interests of our shareholders. Role of the Board in Risk Oversight The Board’s role in risk oversight involves both the full Board and its committees. The full Board is responsible for the oversight of the Company’s risk management and reviews our major financial, operational, compliance, cybersecurity, ESG, reputational and strategic risks and risks posed by the COVID-19 pandemic, including steps to monitor, manage and mitigate such risks. In addition, each of the Board committees is responsible for oversight of risk management practices for categories of risks relevant to their functions. For example, the Audit Committee discusses with management our major financial risk exposures and the steps that have been taken to monitor and mitigate such exposures, including with respect to risk assessment and risk management, as well as financial and other risks posed by the COVID-19 pandemic. The Audit Committee is also responsible for oversight of cybersecurity risks, as well as the Company’s overall cybersecurity risk management program. Similarly, the Nominating and Corporate Governance Committee has oversight responsibility over ESG, governance and compliance matters and the Compensation Committee has oversight responsibility for our overall compensation structure, including review of our compensation practices as well as compensation actions taken in response to the COVID-19 pandemic, in each case with a view to assessing associated risks. Please see “Compensation Risk Assessment” beginning on page 52 of this Proxy Statement. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement21 The Board as a group is regularly updated on specific risks in the course of its review of corporate strategy, business plans and reports to the Board by management and its respective committees. The Board believes that its leadership structure supports its risk oversight function by providing a greater role for the independent directors in the oversight of the Company. Our number one priority is the health and safety of our associates and their families, our customers and our other partners. We have taken and will continue to take measures to reduce the risk of COVID-19 infection and to protect our associates and our business, in line with guidelines issued by the authorities in the jurisdictions in which we operate, including federal, state and local governments and the Centers for Disease Control and Prevention. We have instituted enhanced safety procedures to safeguard the health and safety of our associates, including the use of additional protective equipment and the frequent cleaning of our facilities. We have restricted non-associate access to our sites, reorganized our workflows where permitted to maximize social distancing, implemented extensive restrictions on associate travel, utilized remote working strategies where possible and adopted a requirement that all of our associates get vaccinated. The Board is responsible for overseeing the risks posed by COVID-19 and our response to the COVID-19 pandemic. In fiscal year 2020, management formed a COVID-19 task force to coordinate our response to COVID-19. The COVID-19 task force continues to meet regularly and reports directly to senior management and the Board. Corporate Governance Guidelines We have adopted Corporate Governance Guidelines, which are available on our website at www.mscdirect.com/corporategovernance. 22MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement Non-Executive Director Stock Ownership Guidelines To more closely align the interests of our non-executive directors with those of our shareholders, the Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, adopted stock ownership guidelines for our non-executive directors. The ownership guidelines provide for each of our non-executive directors to own a minimum number of shares having a value equal to five times his or her base annual cash retainer on his or her first year of service on the Board (i.e., a value equal to $210,000 for directors whose tenure began before the adoption of the guidelines, a value equal to $250,000 for Messrs. Kaufmann and Paladino, and a value equal to $275,000 for Ms. Seseri). All shares held by our non-executive directors, including unvested restricted stock units (“RSUs”), count toward this guideline. The guidelines provide for our non-executive directors to reach this ownership level within the later of five years from the date on which the guidelines were adopted or five years from the date on which the director is first elected. Once a non-executive director has attained his or her minimum ownership requirement, he or she must maintain at least that level of ownership. If a non-executive director has not satisfied his or her proportionate minimum stock ownership guideline, the director must retain an amount equal to 100% of the net shares received as a result of the vesting of RSUs. All of our non-executive directors are in compliance with their current stock ownership guidelines. Overview of Director Compensation The Compensation Committee is responsible for reviewing and making recommendations with respect to the compensation of our non-executive directors. The key objective of our non-executive directors’ compensation program is to attract and retain highly qualified directors with the necessary skills, experience and character to oversee our management. In addition, our compensation program is designed to align the interests of the Board with the long-term interests of our shareholders. The compensation program is also designed to recognize the time commitment, expertise and potential liability required of active Board membership. We compensate our non-executive directors with a mix of cash and equity-based compensation. Directors who are also executives of the Company do not receive any compensation for their service on the Board. The Compensation Committee’s policy generally is to engage a compensation consultant every year to conduct a full review and benchmarking (using the same peer group used to benchmark executive compensation) of our non-executive directors’ compensation in order to ensure that our directors’ compensation is in line with peer companies competing for director talent. In fiscal year 2021, the Compensation Committee engaged FW Cook as its compensation consultant. In August 2021, FW Cook conducted a competitive analysis of our non-executive directors’ compensation using the same peer group used to benchmark executive compensation. Based on the peer data from its August 2021 analysis, FW Cook concluded that the average total annual compensation per non-executive director (excluding our Non-Executive Chairman) in fiscal year 2021 was below the median of the peer group. Based on its review and the analysis provided by FW Cook, the Compensation Committee recommended to the Board changes to our non-executive director compensation program beginning in fiscal year 2022, which include adjustments to the annual retainer amounts and the elimination of meeting attendance fees. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement23 Fiscal Year 2021 Director Compensation For fiscal year 2021, we paid each non-executive director the following compensation:
In the event that a director ceases to provide services to the Company by virtue of his or her death, disability or retirement (which means cessation of services with approval of the Board), the vesting of outstanding RSUs will accelerate and the shares underlying the RSUs will become fully vested. In addition, in the event of a change in control of the Company, the vesting of all outstanding RSUs held by the director will accelerate, and all shares underlying RSUs will become fully vested. A change in control of the Company for purposes of the 2015 Omnibus Incentive Plan is described below under the section entitled “Executive Compensation – Potential Payments Upon Termination or Change in Control –Change in Control Arrangements” on page 61 of this Proxy Statement. In October 2014, the Compensation Committee recommended, and the Board approved, a change in the non-executive chairman compensation for Mr. Jacobson. Due to the level of his stock ownership, Mr. Jacobson and the Company would have needed to make a filing and he would have needed to pay a filing fee under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with the annual equity grant. Under these circumstances, the Board, upon the recommendation of the Compensation Committee, decided that it was appropriate to pay Mr. Jacobson cash in lieu of the annual equity grant, such amount to be paid quarterly in arrears. Director compensation is paid quarterly in arrears. The cash compensation of directors who serve less than a full quarter is pro-rated for the number of days actually served. Directors who are elected between annual meetings of shareholders receive a pro-rated equity award upon election to the Board. In addition, we reimburse our non-executive directors for reasonable out-of-pocket expenses incurred in connection with attending in-person Board or Board committee meetings and for fees incurred in attending continuing education courses for directors that are approved in advance by the Company. 24MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement Non-Executive Director Summary Compensation in Fiscal Year 2021 The following table presents the compensation paid to our non-executive directors in respect of fiscal year 2021 for their services as directors. Mr. Gershwind, as an executive officer of the Company, did not receive compensation for his services as a director of the Company in fiscal year 2021.
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MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement25 Code of Ethics and Code of Business Conduct We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and senior financial officers and a Code of Business Conduct that applies to all of our directors, officers and associates. The Code of Ethics and the Code of Business Conduct are available on our website at www.mscdirect.com/corporategovernance. We intend to disclose on our website, in accordance with all applicable laws and regulations, amendments to, or waivers from, our Code of Ethics and our Code of Business Conduct. Corporate Social Responsibility Our purpose is to provide greater value to our stakeholders, which include our associates, customers, owners, suppliers and communities, by helping them achieve their potential and greater success. We express that purpose through our “Built to Make You Better” brand promise, and we sum up our values and guiding principles in four simple words: Do the right thing. The Nominating and Corporate Governance Committee has oversight responsibility for our ESG efforts and initiatives. During fiscal year 2021, we undertook a variety of ESG efforts and initiatives, including:
26MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Information about our sustained corporate social responsibility and ESG efforts is contained in our 2020 CSR Report, which is focused on the following stakeholder categories frequently used by investors and other organizations to evaluate corporate social responsibility commitment and performance: (i) environment, (ii) community and society, (iii) associates, (iv) suppliers, (v) customers and (vi) shareholders. Our 2020 CSR Report is available on our website at http://investor.mscdirect.com/download/Corporate_Social_Responsibility_Report_FY20.pdf. For more information on our corporate social responsibility and ESG initiatives, please visit our website at www.mscdirect.com/corporate/community-relationsand www.mscdirect.com/corporategovernance. Shareholder Communications Policy Shareholders and other interested parties can communicate directly with any of the Company’s directors by sending a written communication to a director at MSC Industrial Direct Co., Inc., c/o Assistant Corporate Secretary, 515 Broadhollow Road, Suite 1000, Melville, New York 11747. Shareholders and other interested parties wishing to communicate with our Non-Executive Chairman of the Board, Lead Director or non-management members of the Board may do so by sending a written communication to Philip Peller, our Lead Director, at the above address. Communications may be addressed to the Non-Executive Chairman of the Board, the Lead Director, an individual director, a Board committee, the non-management directors or the full Board. All communications received in accordance with these procedures will be promptly reviewed by the Company’s Assistant Corporate Secretary before being forwarded to the appropriate director or directors. The Company generally will not forward to directors a communication that the Assistant Corporate Secretary determines to be primarily commercial in nature, relates to an improper or irrelevant topic or requests general information about the Company. Related Party Transactions Policy We have adopted a written Related Party Transactions Policy detailing the policies and procedures relating to transactions that may present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of the Company and our shareholders. The Nominating and Corporate Governance Committee must review and approve any related party transaction proposed to be entered into and, if appropriate, ratify any such transaction previously commenced and ongoing. The Nominating and Corporate Governance Committee may delegate its authority under the policy to the Chairperson of the Nominating and Corporate Governance Committee, who may act alone. The Chairperson will report to the Nominating and Corporate Governance Committee at the next meeting any approval made pursuant to such delegated authority. Based on its consideration of all of the relevant facts and circumstances, the Nominating and Corporate Governance Committee will decide whether or not to approve any related party transaction. Under our Related Party Transactions Policy, any relationship, arrangement or transaction between the Company and (i) any director, executive officer or any immediate family member of either a director or an executive officer, (ii) any beneficial owner of more than 5% of any class of our securities or (iii) any entity in which any of the foregoing is employed or is a partner, principal or owner of a 5% or more ownership interest, is deemed a related person transaction, subject to certain exceptions, including (a) transactions available to all associates generally, (b) transactions involving less than $25,000 in any 12-month period when aggregated with all similar transactions during such period, (c) transactions involving executive compensation approved by the Compensation Committee or director compensation approved by the Board and (d) certain charitable contributions. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement27 Other than compensation arrangements, including those described under the sections entitled “Executive Compensation” beginning on page 55 of this Proxy Statement and “Overview of Director Compensation” on page 23 of this Proxy Statement, since the beginning of fiscal year 2021, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we have been or will be a participant:
Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s executive officers and directors and persons who beneficially own more than 10% of the outstanding shares of the Company’s Class A Common Stock (collectively, the “reporting persons”) to file with the SEC initial reports of their beneficial ownership of the Company’s Class A Common Stock and reports of changes in their beneficial ownership of the Company’s Class A Common Stock. Based solely on a review of such reports and written representations made by the Company’s executive officers and directors with respect to the completeness and timeliness of their filings, the Company believes that the reporting persons complied with all applicable Section 16(a) filing requirements on a timely basis during fiscal year 2021, except for Louise Goeser, a director of the Company, who filed a late Form 4 to report the acquisition of shares of the Company’s Class A Common Stock as a result of the reinvestment of dividends on shares of the Company’s Class A Common Stock held in a brokerage account in eight separate transactions occurring from November 2019 to April 2021. 28MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is a description of the names and ages of the executive officers of the Company, indicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during at least the past five years. Each executive officer of the Company is elected annually by the Board of Directors and holds office until the meeting of the Board following the next annual meeting of shareholders and until his or her successor has been duly elected and qualified.
Erik Gershwind Please refer to the section entitled “Election of Directors (Proposal No. 1)” beginning on page 9 of this Proxy Statement for the biographical information for Mr. Gershwind. Kristen Actis-Grande Ms. Actis-Grande was elected our Executive Vice President and Chief Financial Officer in August 2020. Prior to joining the Company, Ms. Actis-Grande held various positions of increasing responsibility during her 17-year career at Trane Technologies plc (NYSE: TT; formerly known as Ingersoll-Rand plc) and Ingersoll Rand Inc. (NYSE: IR; formerly known as Gardner Denver Holdings, Inc.; formed following Gardner Denver’s acquisition of Ingersoll-Rand plc’s Industrial segment in February 2020), including serving as Vice President of Investor Relations and Financial Planning & Analysis at Ingersoll Rand Inc. from June 2020 through August 2020, Vice President of Finance, Industrial Technologies and Services EMEIA at Ingersoll Rand Inc. from February 2020 to June 2020, Vice President of Finance, Compression Technologies and Services at Ingersoll-Rand plc from August 2018 to February 2020, Vice President of Finance, Residential HVAC and Supply at Ingersoll-Rand plc from May 2016 to August 2018, and Director of Selling Finance and Business Initiatives, Residential HVAC and Supply at Ingersoll-Rand plc from April 2014 to May 2016. Steven N. Baruch Mr. Baruch was elected our Executive Vice President and Chief Strategy & Marketing Officer in August 2017. Previously, he served as our Senior Vice President, Strategy and Marketing, a position he held from July 2015 to August 2017. Prior to that, he served as our Vice President of Digital & Strategy, a position he held from May 2014 to July 2015, and as our Vice President of eCommerce from November 2010 to May 2014. Mr. Baruch joined the Company in May 2008. Prior to joining the Company, Mr. Baruch served as Senior Vice President of Sales and Managed Services for Adecco where he was responsible for leading B2B sales and marketing with focus on digital, web and eCommerce strategy and execution. Previously, he held various executive positions at global electronics distributor Arrow Electronics, including Director of Sales, Marketing and Public Relations for arrow.com. Douglas E. Jones Mr. Jones was elected our Executive Vice President and Chief Supply Chain Officer in October 2014, having previously served as our Executive Vice President, Global Supply Chain Operations since October 2009. Previously, he was our Senior Vice President, Supply Chain Management from April 2008 to October 2009 and our Senior Vice President of Logistics from December 2005 to April 2008. Mr. Jones joined the Company in July 2001, as Vice President of Fulfillment. Prior to joining the Company, he served as Vice President, Distribution Operations for the Central Region of the United States, at Fisher Scientific from 1998 to 2001. Prior to his role at Fisher Scientific, Mr. Jones was part of the management team at McMaster-Carr Supply Company, based in Chicago. During his tenure with McMaster-Carr, Mr. Jones held various managerial positions of increasing responsibility in fulfillment, finance, purchasing and inventory management. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement29 Elizabeth Bledsoe Ms. Bledsoe was elected our Senior Vice President and Chief People Officer in November 2020. Previously, she served as our Vice President and Chief People Officer from January 2019 to November 2020, and as our Director, Human Resources – Corporate Functions from February 2015 to January 2019. Prior to joining MSC, Ms. Bledsoe served in various human resources leadership roles of increasing responsibility at Ingersoll-Rand plc. Gregory Polli Mr. Polli was elected our Senior Vice President, Supplier Enablement in May 2019. Previously, he served as our Senior Vice President, Category Management from July 2015 to May 2019, as our Vice President, Product Management from November 2005 to July 2015, as our Vice President, Metalworking from November 2002 to November 2005, as our Vice President, Metalworking Merchandising from April 2002 to November 2002 and as our Vice President, Product from October 1999 to April 2002. Prior to that, Mr. Polli held various positions of increasing responsibility at the Company in product management and merchandising since joining the Company in 1988. 30MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL NO. 2) The Audit Committee has appointed the firm of Ernst & Young LLP, which has been our independent registered public accounting firm since 2002, to serve as our independent registered public accounting firm for fiscal year 2022. Although shareholder ratification of the Audit Committee’s action in this respect is not required, the Board considers it desirable for shareholders to pass upon the selection of the independent registered public accounting firm. If the shareholders fail to ratify the appointment, the Audit Committee intends to reconsider its appointment of Ernst & Young LLP as our independent registered public accounting firm. Even if this appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the fiscal year if the Audit Committee determines that such a change would be in the best interests of the Company and its shareholders. Ernst & Young LLP has advised us that neither it nor any of its members has any direct or material indirect financial interest in the Company. We expect that a representative from Ernst & Young LLP will participate in the Annual Meeting. This representative will have the opportunity to make a statement if he or she so desires and is expected to be available to respond to appropriate questions from shareholders. Fees Paid to Independent Registered Public Accounting Firm For fiscal years 2021 and 2020, Ernst & Young LLP billed us for their services the fees set forth in the table below. All audit and permissible non-audit services reflected in the fees below were pre-approved by the Audit Committee in accordance with established procedures.
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Audit Committee Pre-Approval Policy The Audit Committee is required to pre-approve all audit and non-audit services provided by our independent registered public accounting firm and is not permitted to engage the independent registered public accounting firm to perform any non-audit services proscribed by law or regulation. The Audit Committee may delegate pre-approval authority to the Chairperson of the Audit Committee, in which case decisions taken are to be presented to the full Audit Committee at its next meeting. The Audit Committee of the Board has considered whether, and has determined that, the provision of non-audit services by Ernst & Young LLP is compatible with maintaining auditor independence. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement 31
32MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement The information contained under this “Audit Committee Report” shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing. The Audit Committee oversees the Company’s financial accounting and reporting processes and systems of internal controls on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is available on our website at www.mscdirect.com/corporategovernance. The Audit Committee is directly responsible for the appointment, termination, compensation, retention and oversight of the work of our independent registered public accounting firm. The Audit Committee consists of the four directors named below, each of whom is an independent director as defined by applicable SEC rules and NYSE listing standards. Each year, the Audit Committee evaluates the qualifications, performance and independence of our independent registered public accounting firm and determines whether to reengage the current firm. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered public accounting firm, its capabilities, its technical expertise, its knowledge of our operations and the appropriateness of its fees for audit and non-audit services. Part of that process includes the solicitation of feedback from members of management and the Chairperson of the Audit Committee. Based on this evaluation, the Audit Committee appointed Ernst & Young LLP as our independent registered public accounting firm to examine our consolidated financial statements and internal controls over financial reporting for fiscal year 2021. Ernst & Young LLP has served as the Company’s independent registered public accounting firm since 2002. The Audit Committee also oversees the periodic required rotation of the lead audit partner, as required by SEC rules. It is directly involved in that process through interviews with prospective candidates, assessment of their professional experiences and input received from their audit firm and management, and the Audit Committee selected a new Ernst & Young LLP audit partner commencing for the 2021 fiscal year audit. Our financial and senior management supervise our systems of internal controls and the financial reporting process. Our independent registered public accounting firm performs an independent audit of our consolidated financial statements in accordance with generally accepted auditing standards and expresses an opinion on these consolidated financial statements. In addition, our independent registered public accounting firm expresses its own opinion on the Company’s internal control over financial reporting. The Audit Committee monitors these processes. The Audit Committee has reviewed and discussed with both the management of the Company and our independent registered public accounting firm our audited consolidated financial statements for fiscal year 2021, as well as management’s assessment and our independent registered public accounting firm’s evaluation of the effectiveness of our internal controls over financial reporting. Our management represented to the Audit Committee that our audited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee also inquired about significant business and financial reporting risks, reviewed the Company’s policies for risk assessment and risk management and assessed the steps management is taking to address these risks. In addition to reviewing the Company’s assessment and management of regular, ongoing risks, such as cybersecurity risk, the Audit Committee reviewed the effects of the COVID-19 pandemic on the Company, including the effect of remote working on the Company’s accounting and reporting processes and internal controls. The Audit Committee discussed with our internal auditors and our independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee met with the Company’s Director of Internal Audit and the independent registered public accounting firm, with and without management present, to discuss the results of their audits, their evaluations of our internal controls, including internal control over financial reporting, and the overall quality of our financial reporting. MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement33 The Audit Committee also discussed with our independent registered public accounting firm the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board and the SEC. The Audit Committee also received the written disclosures and the letter from our independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independence of that firm. The Audit Committee has also considered whether the provision of non-audit services by our independent registered public accounting firm is compatible with maintaining the independence of the auditors. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. All audit and permissible non-audit services performed by our independent registered public accounting firm during fiscal years 2021 and 2020 were pre-approved by the Audit Committee in accordance with established procedures. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited consolidated financial statements of the Company be included in its Annual Report on Form 10-K for the fiscal year ended August 28, 2021, which was filed with the SEC on October 20, 2021. Submitted by the Audit Committee of the Board, Philip Peller (Chairperson) Louise Goeser Michael Kaufmann Steven Paladino 34MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS In this section, we discuss the material elements of our compensation programs and policies, including the objectives of our compensation programs and the reasons why we pay each element of our executives’ compensation. Following this discussion, you will find a series of tables containing more specific details about the compensation earned by or awarded to the following individuals, whom we refer to as the “named executive officers” or “NEOs.” This discussion focuses principally on compensation and compensation practices relating to the NEOs for fiscal year 2021. Our NEOs for fiscal year 2021 were:
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Fiscal Year 2021 Performance Highlights In fiscal year 2021, we made significant progress on our ambitious plan to transform MSC from a leading spot-buy distributor to an essential partner on the plant floors of our customers. Despite the unprecedented challenges related to the global COVID-19 pandemic that continued through the first half of fiscal year 2021, we have been able to align our strategy with our operations and make significant progress in reorganizing our cost structure to emerge a stronger, more resilient Company. We continue to execute on our initiatives, supporting our business strategy to serve as a mission-critical partner to our customers, which we believe will further expand our market share capture to deliver on our growth targets, as well as improve our returns on invested capital. While we began the year against a challenging backdrop, positive signs in the operating environment turned into tangible business drivers as customers began to rebuild backlog and manufacturing end markets grew stronger. Additionally, product scarcity, freight delays and labor shortages drove significant inflationary pressures, and we leveraged the scale of our business, strong balance sheet and long-standing supplier relationships to navigate those challenges, deliver for our customers and extend our leadership position in our core business of metalworking. Throughout the year, our long-term transformation strategy remained one of our top areas of focus. We continued to grow share in metalworking through investment and innovation, driving improvements in eCommerce and launching MSC MillMax®, which uses impact-testing software to reduce the milling optimization process to just a few minutes. We are working to transform our cost structure and are encouraged by the momentum that is building inside the Company as evidenced by improving operating results and solid execution. Our operating performance in fiscal year 2021 was highlighted by the following:
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Fiscal Year 2021 Compensation Highlights
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee of the Board (referred to in this discussion as the “Committee”) took the following key actions with respect to NEO compensation for fiscal year 2021:
MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement35
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The table below illustrates how our compensation is aligned with our performance by showing the total cash compensation and total direct compensation for each of our NEOs in fiscal year 2021 against the competitive market data:
Fiscal 2018 Compensation Highlights
Consistent with our pay-for-performance compensation philosophy, the Compensation Committee of our Board (referred to in this discussion as the Committee) took the following key actions with respect to NEO compensation for fiscal 2018:
Named Executive Officer Fiscal 2021 Total Cash Compensation ($)(1) Competitive Positioning(2) of Total Cash Compensation Fiscal 2021 Total Direct Compensation ($)(3) Competitive Positioning(2) of Total Direct Compensation Erik Gershwind 1,895,889 approx. 25th percentile 5,145,814 between 25th & 50th percentiles Kristen Actis-Grande 681,170 <25th percentile 1,231,101 <25th percentile Douglas E. Jones 597,560 between 25th & 50th percentiles 1,147,491 between 50th & 75th percentiles Steve Armstrong 584,398 <25th percentile 1,084,369 approx. 25th percentile Kari Heerdt 516,684 between 25th & 50th percentiles 916,661 between 25th & 50th percentiles ____________________________
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(2) | Please see “―Competitive Positioning” on page 49 for information about our |
(3) | Total direct compensation |
36MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
COVID-19-Related Executive Compensation Reductions
In light of the uncertainty created by the COVID-19 pandemic and the Company’s initiatives to reduce costs, Mr. Gershwind voluntarily agreed to reduce his base salary by 12.5% for the period from June 28, 2020 through November 14, 2020. Our other executive officers agreed to reduce their base salaries by 7.5% over such period.
The Committee did not make any adjustments to the target levels under our annual performance bonus plan or under the fiscal year 2021 performance share units (“PSUs”) to reflect the impact of COVID-19 on our business.
Compensation Philosophy and Objectives
We believe that the quality, skills and dedication of our executive officers are critical factors affecting the Company’s performance and, therefore, long-term shareholder value. Our key compensation goals for our associates, including the NEOs, are to:
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| Competitive |
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Erik Gershwind |
| 2,448,753 |
| approx. 75th |
| 4,448,740 |
| <25th |
Rustom Jilla |
| 893,010 |
| approx. 50th |
| 1,742,993 |
| approx. 50th |
Douglas Jones |
| 656,702 |
| approx. 50th |
| 1,206,681 |
| between 50th & |
Steve Armstrong |
| 632,699 |
| approx. 25th |
| 1,107,684 |
| approx. 25th |
Steven Baruch |
| 579,065 |
| approx. 50th |
| 978,989 |
| approx. 50th |
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36MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement·
Compensation Philosophy and Objectives
We believe that the quality, skills and dedication of our executive officers are critical factors affecting the company’screate a performance and, therefore, long-term shareholder value. Our key compensation goals for our associates, including the NEOs, are to:
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Accordingly, in determining the amount and mix of compensation, the Committee seeks to provide a market competitive compensation package, structure annualopportunity to enable the Company to attract, retain and long-term incentive programs that reward achievement of performance goals that directly correlate to the enhancement of sustained, long-term shareholder value,motivate highly talented associates; and promote executive retention.
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Accordingly, in determining the amount and mix of compensation, the Committee seeks to provide a market competitive compensation package, structure annual and long-term incentive programs that reward achievement of performance goals that directly correlate to the enhancement of sustained, long-term shareholder value, and promote executive retention.
The following table provides information about the key elements of our fiscal year 2021 compensation programs:
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MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement37
The Committee does not maintain policies for allocating among short-term and long-term compensation or among cash and non-cash compensation. Instead, the Committee maintains flexibility and adjusts different elements of compensation based upon its evaluation of the company’s key compensation goals. As a general matter, the Committee seeks to utilize equity-based awards to motivate executives to enhance long-term shareholder value and manage the dilutive effects of equity compensation through the company’s share repurchase program.
While compensation levels may differ among NEOs based on competitive factors and the role, responsibilities and performance of each NEO, there are no material differences in the compensation philosophies, objectives or policies for our NEOs. However, as an executive assumes more responsibility, a greater percentage of total target cash compensation is allocated to annual performance bonus compensation, and a greater percentage of total direct compensation is allocated to equity compensation. The Committee does not maintain a policy regarding internal pay equity, but the Committee considers internal pay equity as part of its overall review of our compensation programs.
38MSC Industrial Direct Co., Inc.Notice of 2019 Annual Meeting and 2018 Proxy Statement
Alignment with Compensation Best Practices
The Committee reviews our compensation programs, competitive market data and best practices in the executive compensation area. In past years, the Committee has recommended, and our Board has approved, changes in our compensation policies and practices to align with best practices. Key features of our compensation programs that the Committee believes align with best practices in executive compensation are as follows:
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Compensation Element
Description
Key Objectives
Base Salary
Fixed Annual Cash
Attract and retain highly talented executives
Recognize day-to-day contributions and responsibilities
Targeted at or below the median of our competitive market data
Competitive positioning may vary based upon executive’s experience and individual performance
Annual Performance Bonus
Variable Annual Cash
Pay-for-performance program that rewards achievement of two key short-term Company financial metrics (organic revenue growth and adjusted operating margin) and meaningful individual goals and objectives (“G&Os”)
“At risk” since there is no payout for any measure when the Company or the individual fails to achieve the threshold level for such measure
Maximum payout of 158% of target realized only if Company and executive achieve superior performance for all Company financial and individual measures
The Committee retains discretion to modify annual bonus payouts
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement37
Long-Term Incentive Compensation | Variable Equity (PSUs and RSUs) | | Aligns our executives’ interests with our shareholders | |||
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| RSUs vest 25% on each of the 1st through 4th anniversaries of grant | |||||
| PSUs cliff vest after three years, with payouts ranging from 0% to 200% of target based upon our average annual adjusted operating profit growth over the three-year performance cycle, subject to grantee’s continued employment | |||||
| “At risk” since there is no payout on the PSUs if performance is below the threshold level of performance | |||||
| Dividend equivalents on PSUs vest at the same time as the underlying PSUs, subject to the same performance vesting requirements | |||||
| Beginning with fiscal year 2020, PSUs represented 25% of the grant date value of equity awards to executive officers, with 75% of the grant date value represented by RSUs | |||||
| For fiscal year 2022, PSUs will represent 50% of the grant date value of equity awards to executive officers, with 50% of the grant date value represented by RSUs | |||||
Welfare Benefits and Perquisites | Generally Track Broad-Based Benefits | | No supplemental life insurance, financial planning, country club memberships or special health benefits | |||
Retirement | MSC Industrial Direct | | Executives participate on the same basis as our associates | |||
| No pension or supplemental retirement plans; no deferred compensation arrangements |
The Committee does not maintain policies for allocating among short-term and long-term compensation or among cash and non-cash compensation. Instead, the Committee maintains flexibility and adjusts different elements of compensation based upon its evaluation of the Company’s key compensation goals. As a general matter, the Committee seeks to utilize equity-based awards to motivate executives to enhance long-term shareholder value and to manage the dilutive effects of equity compensation through the Company’s share repurchase program.
While compensation levels may differ among NEOs based on competitive factors and the role, responsibilities and performance of each NEO, there are no material differences in the compensation philosophies, objectives or policies for our NEOs. However, as an executive assumes more responsibility, a greater percentage of total target cash compensation is allocated to annual performance bonus compensation, and a greater percentage of total direct compensation is allocated to equity compensation. The Committee does not maintain a policy regarding internal pay equity, but the Committee considers internal pay equity as part of its overall review of our compensation programs.
38MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement39
Alignment with Compensation Best Practices
The Committee reviews our compensation programs, competitive market data and best practices in the executive compensation area. In past years, the Committee has recommended, and the Board has approved, changes in our compensation policies and practices to align with best practices. Beginning with fiscal year 2020, we discontinued granting stock options, and PSUs represented 25% of the grant date value of equity awards to executive officers, with 75% of the grant date value represented by RSUs. For fiscal year 2022, PSUs will represent 50% of the grant date value of equity awards to executive officers, with 50% of the grant date value represented by RSUs. Key features of our compensation programs that the Committee believes align with best practices in executive compensation are as follows:
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Benchmark executive compensation against market data developed by FW Cook, the Committee’s independent compensation consultant. Peer companies are | Provide employment agreements. No NEO has an employment agreement. | |||||||
Generally target executive compensation at the median of the market data. | Provide unusual or excessive perquisites. | |||||||
Use a pay-for-performance executive compensation model with a significant portion at-risk and/or long-term. | Our executive change in control severance plan does not provide for tax “gross-ups.” | |||||||
Grant RSUs and PSUs, which promotes retention and aligns executive compensation with the creation of long-term shareholder value. Beginning with fiscal year 2020, PSUs represented 25% of the grant date value of equity awards to executive officers, with 75% of the grant date value represented by RSUs. For fiscal year 2022, PSUs will represent 50% of the grant date value of equity awards to executive officers, with 50% of the grant date value represented by RSUs. | Provide “single trigger” accelerated vesting of equity awards upon a change in control. | |||||||
Regularly review senior level promotion and succession plans, including for the Chief Executive Officer or “CEO” position. | Maintain executive pension plans or supplemental executive retirement plans, nor do we provide our | |||||||
Maintain a reasonable share burn rate. During fiscal year 2021, our burn rate was 0.48%; our 3-year average burn rate for fiscal year 2019 through fiscal year 2021 was 0.68%. | Allow option repricing (including cash buyouts) of underwater options and share recycling for options and stock appreciation rights. | |||||||
Maintain a clawback policy to recoup incentive compensation in the event of a significant financial restatement as well as in cases of breach of non-competition and other covenants. | Allow associates and Board members to engage in short-selling, margin transactions, trading in exchange-traded options or hedging or monetization transactions, or pledging Company shares in margin accounts. We | |||||||
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MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement39
Shareholder Engagement and “Say-on-Pay” Vote
We are committed to engaging with our shareholders. We maintain a formal investor relations outreach program to solicit the views of institutional shareholders on a variety of topics, including executive compensation. As part of this program, and during fiscal year 2021, our senior management and investor relations team met with many institutional investors, including all of our top 25 investors with actively managed funds, through investor conferences, investor roadshows, virtual meetings and telephone conferences.
We are also committed to continued engagement between shareholders and the Company through the formal “say-on-pay” advisory vote on executive compensation. At our 2021 Annual Meeting of Shareholders held on January 27, 2021, the advisory vote received the support of 97.86% of the votes cast at the meeting. In its review of our executive compensation programs, the Committee carefully considered the results of the 2021 advisory vote on executive compensation. As previously disclosed, we plan to hold the “say-on-pay” advisory vote on an annual basis. In addition, we continually monitor the views of our major institutional shareholders to assure alignment of our compensation practices with our institutional shareholders’ standards. The Committee will consider feedback from our shareholders along with the results of the “say-on-pay” advisory vote as it completes its annual review of each pay element and the total compensation packages for our NEOs with respect to the next fiscal year.
The Committee is directly responsible for determining, in consultation with the Board, the G&Os of our executive compensation programs and for the ongoing review and evaluation of our compensation programs to determine whether our compensation programs are achieving their intended objectives. The Committee also evaluates the design and mix of our compensation programs and makes adjustments, as appropriate, to achieve our compensation philosophy. In consultation with the Board, the Committee has primary responsibility for overseeing and approving all compensation matters relating to, and setting the compensation levels of, the NEOs and our other executive officers and senior officers. The Committee also administers our equity compensation plans. Members of management and independent consultants provide input and recommendations to the Committee, but decisions are ultimately made by the Committee.
How Compensation Decisions Are Made
Each August, the Committee receives a formal presentation from FW Cook, its independent compensation consultant, on the competitiveness of the Company’s compensation programs, as well as its alignment with the Company’s compensation objectives. Based on the benchmarking data prepared by the Committee’s independent compensation consultant and the consultant’s evaluation of the Company’s compensation programs, our Human Resources department, with input from our Chief Executive Officer and Chief Financial Officer, compiles management’s recommendations for our annual performance bonus plan and equity award grants for the upcoming fiscal year. The Committee meets in September to review and consider the preliminary management recommendations. At its October meeting, when the Company’s fiscal year financial results are being considered by the Board, the Committee reviews achievement of the prior fiscal year’s annual performance bonus plan financial metrics and each NEO’s individual G&Os, and approves the annual bonus payouts. Equity grants are approved in early November, after the Company’s Annual Report on Form 10-K has been filed with the SEC. Depending on Company or individual circumstances, base salary adjustments are made for our executive officers and other senior officers at the time of their individual performance reviews, and the Committee also may make other compensation decisions during the year.
40MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Role of Executive Officers in Compensation Decisions
As part of its process, the Committee meets with our Chief Executive Officer and our Chairman to obtain recommendations with respect to the structure of our compensation programs and compensation decisions, including the performance of individual executives. The Committee obtains our Chairman’s input on the compensation of our Chief Executive Officer, and our Chief Executive Officer provides the Committee with input on the compensation of the other NEOs and other executive officers and senior officers. Our Human Resources department collects and analyzes relevant data, including comparative compensation data prepared by FW Cook, which is used by the Committee to inform compensation decisions.
The Committee has the sole authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisors. Since 2009, the Committee has relied on competitive market data and analysis prepared by its independent compensation consultant, FW Cook. To assist the Committee with its compensation decisions, FW Cook recommends to the Committee peer companies and general industry survey data for benchmarking, and provides competitive compensation data, benchmarking and analysis relating to the compensation of our Chief Executive Officer and other executives and senior officers based on such market data. Please see the section below “―Competitive Positioning” on page 49 for information about our peer companies and our competitive market data. FW Cook also furnishes the Committee with competitive compensation data and analysis for non-executive directors. In addition, FW Cook assists the Committee with its risk assessment of our compensation programs, and advised on the methodology used for our 2021 CEO pay ratio disclosure. FW Cook has not provided any other services to the Company and will not provide any other services to the Company without the approval of the Committee.
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement41
Fiscal Year 2021 Executive Compensation
Summary of Fiscal Year 2021 Compensation Decisions
The Committee believes that management continued to effectively execute the Company’s transformation from a spot-buy supplier to a mission-critical partner to our customers, where we are positioned as experts who provide highly technical solutions to support our customers across all areas of the plant floor. In a difficult manufacturing environment, management took swift cost containment measures and continued implementing structural changes to reduce operating expenses as a percentage of sales. As discussed earlier, our executive officers agreed to voluntary reductions in their base salaries.
Our results in fiscal year 2021 reflected organic revenue growth, as computed for purposes of our annual performance bonus plan, at approximately the target level, while our adjusted operating margin was between the threshold and target level. As a consequence, bonus payouts for financial performance were approximately 79% of target for our NEOs. In addition, the Committee determined that each of Messrs. Gershwind, Jones and Armstrong achieved aggressive targets in respect to their individual G&Os, resulting in a performance multiplier of 100% of their target awards based on G&Os performance and Mses. Actis-Grande and Heerdt were significantly above target in respect to their individual G&Os, resulting in a performance multiplier of 150% of target.
Based on Company and individual G&O performance, the Committee believes that compensation levels for fiscal year 2021 were appropriate and consistent with the philosophy and objectives of the Company’s compensation programs. The following summarizes fiscal year 2021 compensation results:
· | base salaries were within 10% of the median of the competitive market data, with the exception of Mr. Gershwind and Ms. Actis-Grande, whose base salaries were more than 20% below the market median; |
· | based on Company financial performance against target performance goals and achievement levels of each NEO’s G&Os under our performance bonus plan, and |
· | Mr. Gershwind’s total cash compensation and total direct compensation were between the 50
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· | total cash compensation
Elements of Compensation We allocate compensation among the following components for our NEOs:
Base salaries for our executive officers are established based on the scope of their responsibilities and considering competitive market compensation paid by other companies for similar positions, as well as salaries paid to the executives’ peers within the 42MSC Industrial Direct Co., Inc. Notice of
considerations. In fiscal year 2021, all NEO base salaries were maintained at the prior year’s levels. Mr. Gershwind’s base salary remained below the market 25th percentile, Mr. Jones’ base salary was between the market median and 75th percentile, Mr. Armstrong’s and Ms. Heerdt’s base salaries were between the market 25th percentile and median and Ms. Actis-Grande’s base salary was below the market 25th percentile. Annual Performance Bonus Program For fiscal year plan. As in previous years, the remaining 25% of the target bonus opportunity was based on the achievement of individual G&Os. In addition, award opportunities were subject to an individual performance multiplier. Maximum bonus payouts are capped at Bonus award opportunities are designed to provide market based, competitive award opportunities with target amounts designed to result in total cash compensation approximating the median of the market data and payouts at stretch performance designed to result in total cash compensation approximating the 75th percentile of the market data. The Committee retains discretion to Company Financial Metrics Company financial metrics are established by the Committee based on the
The Committee continued with the same financial metrics as in prior fiscal years because these two financial metrics remain two of the most important drivers of value creation for our shareholders and the Committee believes there is a benefit in keeping consistency in metrics year to year. In setting award opportunities, the plan provides for four payout levels based on achievement of
The following table sets forth the payout level opportunities available for our NEOs in fiscal
Actual Financial Performance vs. Target Goals The table below shows the actual performance for the
In calculating year-over-year organic revenue growth, we Individual Achievement of individual G&Os has a 25% weighting in our performance bonus plan. Individual G&Os are established annually and include strategic initiatives with both financial and non-financial goals. Executives are evaluated based upon achievement of these meaningful goals. At the end of each year, our CEO evaluates performance against the pre-established individual objectives for officers other than himself and submits a recommendation to the Committee. The Committee evaluates our CEO’s performance against his pre-established individual objectives. Based on the Committee’s evaluation of the CEO and the CEO’s recommendations, the Committee determines and approves the achievement and payout level of the G&Os for each executive officer.
Payout levels based on achievement of the
Achievement of Individual G&Os For fiscal year 2021, the Committee determined that each of Messrs. Gershwind, Jones and Armstrong achieved aggressive targets in respect to their individual G&Os, resulting in a performance multiplier of 100% of target; Mses. Actis-Grande and Heerdt were significantly above target in respect to their individual G&Os, resulting in a performance multiplier of 150% of target. The Committee considered each NEO’s individual performance goals and performance, including the following:
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement45 Fiscal The following table summarizes the computations for the
The Committee retains discretion to
The Committee believes that bonuses awarded under our annual performance bonus program appropriately reflected the
Long-Term Stock-Based Compensation The Committee grants RSUs vest 25% ratably over four years for associates at the director and above levels, including executive officers. The 46MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement In granting equity awards, the Committee takes into consideration the dilutive effect on earnings to our shareholders once the shares are issued or vested, and we seek to mitigate this effect by repurchasing shares from time to time under the As discussed below under Equity Grants During Fiscal Year 2021
The number of Administration of Equity Award Grants
Grants for associates other than officers also are approved by the Committee, and the Committee does not delegate authority for making grants to any member of management. Our current policy provides that off-cycle grants and promotion and new hire grants may be approved at regularly scheduled or special Committee meetings. We do not time our equity award grants relative to the release of material non-public information. Under our insider trading policy, executive officers and Board members may not engage in short-selling, margin transactions, trading in exchange-traded options
MSC Industrial Direct Co., Inc. Notice of
Benefits and Perquisites We provide our executives with certain health and insurance benefits, as well as travel and other perquisites. Our executives can participate in We do not provide any other executive perquisites such as supplemental life insurance, financial planning, country club membership, or special health benefits. Change of Control Arrangements Our We believe that
MSC Executive Severance Plan Under
In
surveys. Peer companies and the The proxy peer group composition is reviewed and approved by the Committee each fiscal
The Committee generally seeks to set base salary, total target cash compensation (the sum of base salary and target annual performance bonus) and total target direct compensation (the sum of total target cash compensation and long-term equity compensation) at the median, or 50th percentile, of the market data. Total cash compensation based on achievement of stretch performance goals under our performance bonus plan generally is targeted to approximate the 75th percentile of the market data. Long-term equity compensation in the form of
Executive Incentive Compensation Recoupment Policy
The Board may only seek recoupment in cases of a Restatement if either the Restatement shall have occurred within 36 months of the publication of the audited financial statements that have been restated, or the Audit Committee of the Board shall have taken steps to consider a Restatement prior to the end of such 36 months and the Restatement occurs within 48 months of the publication of the audited financial statements. In addition, our equity award documents provide for forfeiture of awards in cases where a grantee violates a confidentiality, non-competition or non-solicitation covenant or agreement and for recoupment in cases where, following a termination of employment, the In the event of a change in control, as defined in 50MSC Industrial Direct Co., Inc. Notice of
Executive Stock Ownership Guidelines To more closely align the interests of our management with those of our shareholders,
All shares held by our executives, including unvested Federal Income Tax Deductibility of Executive Compensation
The Compensation Committee
52MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
In addition to the design and mix of our compensation programs, to further align our executive officers’ interests with our shareholders and mitigate risk relating to our compensation programs, we have adopted an Executive Incentive Compensation Recoupment Policy, which is described in the section entitled “Compensation Discussion and Analysis — Executive Incentive Compensation Recoupment Policy,” and stock ownership guidelines for all of our executive officers, which is described in the section entitled “Compensation Discussion and Analysis — Executive Stock Ownership Guidelines.” MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement53 The information contained under this “Compensation Committee Report” shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing. The Compensation Committee of Submitted by the Compensation Committee of the Board,
Louise Goeser (Chairperson) Michael Kaufmann Steven Paladino Rudina Seseri
The table below sets forth the compensation of the following named executive officers for services rendered to the
A detailed description of the plans and programs under which our named executive officers received the following compensation can be found in the section entitled “Compensation Discussion and Analysis” beginning on page 35 of this
MSC Industrial Direct Co., Inc. Notice of
Fiscal Year
Fiscal Year The following table shows the
_____________________________
Dividends are not paid on unvested
Outstanding Equity Awards at The following table shows the The market value of the stock awards is based on the closing price of a share of our Class A $83.35.
_______________________
58MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
Fiscal Year The following table shows (i) the number of shares of our Class A
Pension Benefits and Nonqualified Deferred Compensation Our named executive officers do not receive any compensation in the form of pension benefits or nonqualified deferred compensation. 60MSC Industrial Direct Co., Inc. Notice of
Potential Payments Upon Termination or Change in Control Change in Control Arrangements Each of our Under the terms of these arrangements, “cause” is generally defined to include (i) the willful and continued failure by the executive to substantially perform his or her duties (other than any such failure resulting from his or her incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the executive by the A change in control of the
In addition, if the executive’s employment is terminated after the occurrence of a change in control as described above, we are obligated to provide the executive with outplacement services for up to six months and Under
The number of outstanding equity awards held by each named executive officer under In connection with their long-term incentive awards, the named executive officers are required to sign an agreement containing confidentiality and non-competition provisions designed to protect the MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement61 2015 Omnibus Incentive
Under MSC
62MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement Severance benefits consist of a severance allowance, a benefits credit payment, a vesting acceleration benefit and, at the discretion of the plan administrator, outplacement services. The severance allowance generally will be (i) 18 months of base pay for As a condition of receiving any severance benefit under the MSC Executive Severance Plan, a participant will be required to execute and not revoke a severance and release agreement in favor of the Under the MSC Executive Severance Plan, no participant will be entitled to receive severance benefits in the event that the plan administrator determines, in its sole discretion, among other things, that at the time of the participant’s qualifying termination, we had cause to terminate the participant due to failure to meet our established performance criteria, the participant’s misconduct, or the participant’s violation of any applicable
Potential Payments Upon Termination or Change in Control Table as of August The following table sets forth the estimated amounts that would be payable to each of our named executive officers upon the termination of his or her employment under certain circumstances or upon a change in control in limited circumstances, assuming that the termination of employment or change in control had occurred on August
64MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement
MSC Industrial Direct Co., Inc. Notice of
Indemnification Agreements; Directors and Officers Liability Insurance We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements clarify and enhance the rights and obligations of the
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median associate and the annual total compensation of our Chief Executive Officer. For fiscal year
Based on this information, the ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of our median associate for fiscal year To identify the median of the annual total compensation of all of our associates for our fiscal year 2021 CEO pay ratio, as well as to determine the annual total compensation of our median associate, the methodology and the material assumptions, adjustments and estimates that we used were as follows:
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. We believe this pay ratio is a reasonable estimate calculated in a manner consistent with applicable rules of the SEC. This information is being provided for compliance purposes. Neither MSC Industrial Direct Co., Inc. Notice of
(PROPOSAL NO. 3)
As described in greater detail in the section entitled “Compensation Discussion and Analysis,” our key compensation goals are to: create a performance driven culture based on personal accountability by linking rewards to
This vote is advisory, which means that
Accordingly, we
As previously disclosed, we plan to hold the “
EQUITY COMPENSATION PLAN INFORMATION Information for our equity compensation plans in effect as of follows:
MSC Industrial Direct Co., Inc. Notice of
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth in the following tables is furnished as of October 31,
Beneficial ownership is determined in accordance with the rules of the SEC that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to such shares. Shares of Class A In the tables below, percentage ownership is based on
Security Ownership of Certain Beneficial Owners
_____________________________
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement71
Security Ownership of Management The address of each individual named below is as follows: c/o MSC Industrial Direct Co., Inc.,
_____________________________ *Less than 1%
SHAREHOLDER PROPOSALS FOR Proposals of shareholders submitted under
When and where is the
How do I participate in the live audio webcast of the Annual Meeting? You are entitled to participate in the Annual Meeting if you were a shareholder as of the close of business on December 8, 2021, the record date, or hold a valid proxy for the meeting. To participate in the Annual Meeting online at www.virtualshareholdermeeting.com/MSM2022, you must enter the unique 16-digit control number included on your Notice of Internet Availability of Proxy Materials, proxy card or voting instructions. If you are a beneficial shareholder, you may contact the shareholder of record (e.g., your bank, broker or other nominee) if you have questions about obtaining your control number. If you do not have a control number, you may still access the live audio webcast of the Annual Meeting as a guest, but you will not be able to submit questions or to vote at the meeting. The question and answer session will include questions submitted live during the Annual Meeting. Questions may be submitted during the Annual Meeting through www.virtualshareholdermeeting.com/MSM2022. We encourage you to access the Annual Meeting before it begins. Online check-in will start approximately 15 minutes before the Annual Meeting on January 26, 2022. The agenda and rules of conduct for the Annual Meeting will be available atwww.virtualshareholdermeeting.com/MSM2022. What if I have technical difficulties or trouble accessing the live audio webcast of the Annual Meeting? If you encounter any difficulties accessing the live audio webcast of the Annual Meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page at www.virtualshareholdermeeting.com/MSM2022. How do I vote? If you are a shareholder of record, you may vote your shares in advance of the Annual Meeting via the Internet at www.proxyvote.com, by telephone or by completing, signing, dating and mailing your proxy card. You may request a printed proxy card by following the instructions included on the Notice of Internet Availability of Proxy Materials that you received. Detailed instructions for Internet voting are provided in the Notice of Internet Availability of Proxy Materials and instructions for Internet voting and telephone voting are provided in the printed proxy card. You may also participate in the live audio webcast of the Annual Meeting at www.virtualshareholdermeeting.com/MSM2022and vote during the meeting. If you are a beneficial shareholder, you must follow the voting procedures provided by your bank, broker or other nominee included with your proxy materials or with the instructions on how to access the proxy materials electronically. Shareholders will need their unique 16-digit control number which appears on the Notice of Internet Availability of Proxy Materials, the proxy card and the instructions that accompanied the proxy materials in order to vote shares or ask 74MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement questions prior to or at the Annual Meeting. If you are a beneficial owner and you do not have your control number, you must contact your bank, broker or other nominee to obtain a control number or voting instructions. If you are a shareholder of record and you sign your proxy card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (“FOR” all seven of our nominees to the Board, “FOR” the ratification of the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2022 and “FOR” the approval, on an advisory basis, of the compensation of our named executive officers). If your shares are held in the MSC Industrial Direct 401(k) Plan, you may vote via the Internet by following the instructions on your Notice of Internet Availability of Proxy Materials or proxy card. The trustee of the MSC Industrial Direct 401(k) Plan, T. Rowe Price Trust Company, will vote all shares of Class A Common Stock of the Company allocated to your 401(k) account in accordance with your instructions. If the voting instructions are returned without choices marked, and if not otherwise directed, the shares in your 401(k) account that are represented by the voting instruction form will not be voted. If your shares are held in the MSC Industrial Direct 401(k) Plan, you must deliver your voting instructions to the trustee no later than 11:59 p.m., Eastern Time, on January 23, 2022. What am I voting on? You are voting on the following proposals:
What are the voting recommendations of the Board of Directors?
Who is entitled to vote? Only shareholders of record of our Class A MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement75 What is a shareholder of record? You are a shareholder of record if you are registered as a shareholder with our transfer agent, Computershare Trust Company, N.A. What is a beneficial shareholder? You are a beneficial shareholder if a What is a broker non-vote? If you hold shares beneficially in street name and you do not provide the organization that holds your If you are a beneficial owner whose shares are held in the name of a broker, and you do not provide your broker with voting instructions, the broker has the authority to vote your shares for or against certain “routine” matters. The proposal to ratify the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year We encourage you to provide instructions to your bank, broker or other nominee so that your shares may be voted. If you do not provide instructions to your bank, broker or other nominee, your shares will not be voted in the What is a quorum? A quorum is the minimum number of shares required to hold a shareholders meeting. Under New York law and our What is the vote required for each proposal? The election of each nominee for director requires the affirmative vote of a plurality of the votes cast in person or by proxy at the On all matters to be voted upon at the
Can I ask questions if I participate in the live audio webcast of the Annual Meeting? Shareholders as of the record date who participate in the live audio webcast of the Annual Meeting will have an opportunity to submit questions live via the Internet during a designated portion of the meeting. Shareholders must have available their control number provided on their Notice of Internet Availability of Proxy Materials or proxy card. What will happen if another matter properly comes before the
If I plan to All shareholders are cordially invited to to vote online. You will need your unique 16-digit control number which appears on the Notice of Internet Availability of Proxy Materials, the proxy card (printed in the box marked by the arrow) and the instructions that accompanied the proxy materials in order to vote your shares online during the Annual Meeting. If you Who pays the cost for the solicitation of proxies? We will pay any expenses for the solicitation of proxies for the How Shareholders of record may revoke their Beneficial shareholders may revoke or change their How may I obtain a separate set of proxy materials or request a single set for my household? For registered shareholders who receive paper copies of this MSC Industrial Direct Co., Inc. Notice of
If you are the beneficial owner, but not the record holder, of shares of our Class A We will deliver promptly, upon written or oral request, a separate copy of this What is the address of your principal executive The mailing address of our principal executive 78MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement We will provide without charge to each It is important that your shares be represented at the Cautionary Note Regarding Forward-Looking Statements Statements in this document may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about the impact of COVID-19 on our business operations, are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this document does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material. Factors that could cause actual results to differ materially from those in forward-looking statements include the following: the impact of the COVID-19 pandemic on our sales, operations and supply chain; general economic conditions in the markets in which we operate, including conditions resulting from the COVID-19 pandemic; changing customer and product mixes; competition, including the adoption by competitors of aggressive pricing strategies and sales methods; industry consolidation and other changes in the industrial distribution sector; our ability to realize the expected benefits from our investment and strategic plans, including our transition from being a spot-buy supplier to a mission-critical partner to our customers; our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; the retention of key personnel; volatility in commodity and energy prices; the credit risk of our customers, including changes in credit risk as a result of the COVID-19 pandemic; the risk of customer cancellation or rescheduling of orders; difficulties in calibrating customer demand for our products, in particular PPE products, which could cause an inability to sell excess products ordered from manufacturers resulting in inventory write-downs or could conversely cause inventory shortages of such products; work stoppages, labor shortages or other business interruptions (including those due to extreme weather conditions or as a result of the COVID-19 pandemic) at transportation centers, shipping ports, our headquarters or our CFCs; disruptions or breaches of our information technology systems, or violations of data privacy laws; the retention of qualified sales and customer service personnel and metalworking specialists; the risk of loss of key suppliers or contractors or key brands or supply chain disruptions, including due to import restrictions resulting from the COVID-19 pandemic; changes to governmental trade policies, including the impact from significant import restrictions or tariffs; risks related to opening or expanding our CFCs; our ability to estimate the cost of healthcare claims incurred under our self-insurance plan; litigation risk due to the nature of our business; risks associated with the integration of acquired businesses or other strategic transactions; financial restrictions on outstanding borrowings; our ability to maintain our credit facilities; the interest rate uncertainty due to the London InterBank Offered Rate reform; the failure to comply with applicable environmental, health and safety laws and regulations, including government action in response to the COVID-19 pandemic, and other laws applicable to our business; the outcome of government or regulatory proceedings or future litigation; goodwill and intangible assets recorded resulting from our acquisitions could be impaired; our common stock price may be volatile due to factors outside of our control; and our principal shareholders exercise significant control over us, which may result in our taking actions or failing to take actions which our other shareholders do not prefer. Additional information concerning these and other risks is described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the reports on Forms 10-K and 10-Q that we file with the SEC. We assume no obligation to update any of these forward-looking statements, except to the extent required by applicable law.
MSC Industrial Direct Co., Inc.Notice of 2022 Annual Meeting and 2021 Proxy Statement79
MSC BUILT TO MAKE YOU BETTER MSC INDUSTRIAL DIRECT CO., INC. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice of 2022 Annual Meeting and 2021 Proxy Statement and the 2021 Annual Report
Shareholders and at any adjournments or postponements thereof. All shareholders are cordially invited to attend the
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