UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant X
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)) | |
| X | Definitive Proxy Statement |
| Definitive Additional Materials | |
| Soliciting Material Pursuant to § 240.14a-12 | |
CIRCOR INTERNATIONAL, 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):
| X | No fee required | |
| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 | ||
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30 Corporate Drive, Suite 200
Burlington, MA 01803
+1 (781) 270-1200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 10, 2018June 12, 2020
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Annual Meeting") of Stockholders of CIRCOR International, Inc. (the "Company""Company," "we," "us" or "our") will be held on Thursday, May 10, 2018,June 12, 2020, at 12:00 PM local time. The Annual Meeting will be held as a virtual meeting conducted exclusively via live webcast at the Company’s headquarters at CIRCOR International, Inc., 30 Corporate Drive, Suite 200, Burlington, MA 01803.https://web.lumiagm.com/232370870. The Annual Meeting is being called for the purpose of considering and voting upon the following proposals:
| 1. | To amend the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") to implement a majority voting standard for uncontested director elections to first take effect at the Annual Meeting of Stockholders in 2021; |
| 2. | To amend the Certificate of Incorporation to declassify the Board of Directors of the Company (the "Board"); |
| 3. | To elect |
| To consider an advisory |
The Board of Directors has fixed the close of business on March 20, 2018April 15, 2020 as the record date for determination of stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. Only holders of record of the Company's common stock, par value $0.01 per share, at the close of business on that date will be entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof.
Our Board recommends you vote "FOR" the amendment to the Certificate of Incorporation to implement a majority voting standard for uncontested director elections to first take effect at the Annual Meeting of Stockholders in 2021 (Proposal 1), "FOR" the amendment to the Certificate of Incorporation to declassify the Board (Proposal 2), "FOR" each of the nominees proposed by our Board for Class III director (Proposal 3), and "FOR" the advisory vote approving the compensation of our Named Executive Officers (Proposal 4).
IN LIGHT OF THE PUBLIC HEALTH AND TRAVEL SAFETY CONCERNS RELATED TO THE ONGOING CORONAVIRUS (COVID-19) OUTBREAK AND AFTER CAREFUL CONSIDERATION, THE COMPANY HAS
DETERMINED TO HOLD A VIRTUAL MEETING IN ORDER TO FACILITATE STOCKHOLDER ATTENDANCE AND PARTICIPATION BY ENABLING STOCKHOLDERS TO PARTICIPATE FROM ANY LOCATION AND AT NO COST. YOU WILL BE ABLE TO ATTEND THE MEETING ONLINE, VOTE YOUR SHARES ELECTRONICALLY AND SUBMIT QUESTIONS DURING THE MEETING BY VISITING https://web.lumiagm.com/232370870.
To participate in the virtual meeting, you will need the control number included on your proxy card or voting instruction form. The meeting webcast will begin promptly at 12:00 PM (Eastern Time). We encourage you to access the meeting prior to the start time. Online check-in will begin at 11:30AM (Eastern Time), and you should allow ample time for check-in procedures. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log-in page.
If your shares are held in "street name" through a broker, bank or other nominee, in order to participate in the virtual Annual Meeting you must first obtain a legal proxy from your broker, bank or other nominee reflecting the number of shares of the Company's common stock you held as of the record date, your name and email address. You then must submit a request for registration to American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by facsimile to 718-765-8730 or (3) by email to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Requests for registration must be labeled as "Legal Proxy" and be received by American Stock Transfer & Trust Company, LLC no later than 5:00 PM (Eastern Time) on May 29, 2020. A list of our registered holders will be available to stockholders of record electronically during the Annual Meeting. If you would like to review the list, please email officeofthegeneralcounsel@CIRCOR.com.
Having your shares represented and voted at the Annual Meeting is extremely important. All stockholders are cordially invited to attend the Annual Meeting in person. To assure your representation at the Annual Meeting, we urge you to vote via the Internet or by telephone by following the instructions on the Notice of Internet Availability of Proxy Materials (the "Notice") you received or, if you have requested a proxy card by mail, by signing, voting and returning your proxy card in the enclosed envelope. For specific instructions on how to vote your shares, please review the instructions for each of these voting options that are detailed in your Notice and in the Company's Proxy Statement. If you attend the Annual Meeting, you may vote in person even if you have previously voted via the Internet or by telephone or returned a proxy card.
Scott Buckhout
President & CEO
Burlington, Massachusetts
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,ONLINE, YOU ARE REQUESTED TO COMPLETE YOUR PROXY CARD AS INDICATED ABOVE. YOUR PROXY CARD IS REVOCABLE UNTIL THE TIME SET FORTH IN THE COMPANY'S PROXY STATEMENT AND, IF YOU ATTEND THE ANNUAL MEETING ONLINE, YOU MAY VOTE IN PERSONDURING THE MEETING EVEN IF YOU HAVE PREVIOUSLY COMPLETED YOUR PROXY.PROXY CARD.
If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, Inc., the Company's proxy solicitor, at (800) 322-2885 or (212) 929-5500 or at proxy@mackenziepartners.com.
PROXY STATEMENT
TABLE OF CONTENTS
| Page | |
| PROXY STATEMENT | |
| CORPORATE GOVERNANCE | |
PROPOSAL 1 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO IMPLEMENT A MAJORITY VOTING STANDARD FOR UNCONTESTED DIRECTOR ELECTIONS | |
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS | |
| PROPOSAL 3 - ELECTION OF DIRECTORS | |
| MANAGEMENT | |
| CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | |
| COMPENSATION DISCUSSION AND ANALYSIS | |
| SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION AND OTHER PAYMENTS TO THE NAMED EXECUTIVE OFFICERS | |
| Summary Compensation Table | |
| 2019 All Other Compensation Table | |
| 2019 Grants of Plan-Based Awards | |
| Outstanding Equity Awards at 2019 Fiscal Year-End | |
| 2019 Option Exercises and Stock Vested | |
| 2019 Nonqualified Deferred Compensation | |
| SEVERANCE AND OTHER BENEFITS UPON TERMINATION OF EMPLOYMENT OR CHANGE OF CONTROL | |
| CEO PAY RATIO | |
| DIRECTOR COMPENSATION | |
| COMMITTEE REPORTS | |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |
| PROPOSAL 4 - ADVISORY VOTE ON EXECUTIVE COMPENSATION | |
| INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FEES | |
| EXPENSES OF SOLICITATION | |
| SUBMISSION OF STOCKHOLDER PROPOSALS FOR ANNUAL MEETING IN 2020 | |
| "HOUSEHOLDING" OF ANNUAL MEETING MATERIALS | |
| OTHER MATTERS | |
| EXHIBIT A - AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CIRCOR INTERNATIONAL, INC. | |
| EXHIBIT B - RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GAAP PRINCIPLES | |
Forward-Looking Statements
This Proxy Statement contains certain statements that are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995 (the "Act"). The words "may," "hope," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," "continue," and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements. We believe that it is important to communicate our future expectations to our stockholders, and we, therefore, make forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to differ materially from anticipated future results, performance, or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, changes in the price of and demand for oil and gas in both domestic and international markets, impacts of the current COVID-19 pandemic, our ability to successfully implement our divestiture, restructuring or simplification strategies, our ability to successfully integrate acquired businesses, as contemplated, the possibility that expected benefits related to our acquisition of the fluid handling business of Colfax Corporation ("Fluid Handling") may not materialize as expected, any adverse changes in governmental policies, variability of raw material and component pricing, changes in our suppliers' performance, fluctuations in foreign currency exchange rates, changes in tariffs or other taxes related to doing business internationally, our ability to hire and retain key personnel, our ability to operate our manufacturing facilities at efficient levels, including our ability to prevent cost overruns and reduce costs, our ability to generate increased cash by reducing our working capital, our prevention of the accumulation of excess inventory, fluctuations in interest rates, our ability to continue to successfully defend product liability actions, any actions by activist stockholders and the costs and disruption of responding to those actions, as well as the uncertainty associated with the current worldwide economic conditions and the continuing impact on economic and financial conditions in the United States and around the world, including as a result of health pandemics, natural disasters, terrorist attacks, current Middle Eastern conflicts and related matters. For a discussion of these risks, uncertainties and other factors, see Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
30 Corporate Drive, Suite 200
Burlington, MA 01803
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 10, 2018June 12, 2020
This Proxy Statement (the "Proxy Statement") is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of CIRCOR International, Inc. (the "Company""Company," "CIRCOR," "we," "us" or "CIRCOR""our") for use at the Annual Meeting of Stockholders of the Company to be held on Thursday, May 10, 2018,June 12, 2020, at 12:00 PM local time, and any adjournments or postponements thereof (the "Annual Meeting"). The Annual Meeting will be held as a virtual meeting conducted exclusively via live webcast at the Company’s headquarters at 30 Corporate Drive, Suite 200, Burlington, Massachusetts 01803.https://web.lumiagm.com/232370870. Our annual report to stockholders and our proxy materials (including this proxy statement and a form of proxy) were first sent or given to stockholders on or about April 21, 2020.
At the Annual Meeting, the stockholders of the Company will be asked to consider and vote upon the following matters:
| 1. | To amend the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") to implement a majority voting standard for uncontested director elections to first take effect at the Annual Meeting of Stockholders in 2021; |
| 2. | To amend the Certificate of Incorporation to declassify the Board; |
| 3. | To elect |
| To consider an advisory |
Record Date
This Proxy Statement and the form of proxy were first made available to stockholders on or about March 29, 2018.April 21, 2020. The Board has fixed the close of business on March 20, 2018April 15, 2020 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting (the "Record Date"). Only holders of record of the Company's common stock, par value $0.01 per share (the "Common Stock"), at the close of business on the Record Date will be entitled to notice of, and to vote at, the Annual Meeting.Meeting and any adjournments or postponements thereof. As of the Record Date, there were 19,819,61019,984,704 shares of Common Stock outstanding and entitled to vote at the Annual Meeting. Each holder of our outstanding Common Stock as of
the close of business on the Record Date will be entitled to one vote for each share held of record with respect to each matter submitted at the Annual Meeting.
Voting Requirements
The presence, in person or by proxy, of holders of at least a majority of the total number of outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting. ForShares present virtually during the Annual Meeting will be considered shares of common stock represented in person at the meeting. Each of Proposal 1, the amendment to the Certificate of Incorporation to implement a majority voting standard for uncontested director elections to first take effect at the Annual Meeting of Stockholders in 2021, and Proposal 2, the amendment to the Certificate of Incorporation to declassify the Board, requires the affirmative vote of not less than two-thirds of the outstanding shares entitled to vote. For Proposal 3, the election of threetwo Class IIII directors, each nomineenominees shall be elected as a directordirectors of the Company if such nominee receives the affirmative vote ofbased on a plurality ofvoting standard, meaning the two nominees receiving the most affirmative votes cast.shall be elected. The approval of a majority of the votes cast is necessary to approve each of Proposal 2, the ratification of the selection of PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal year ending December 31, 2018, and Proposal 3,4, the consideration of an advisory resolutionvote approving the compensation of the Company's Named Executive Officers.
Abstentions will be counted for purposes of determining whether a quorum is present for the transaction of business at the Annual Meeting. "Broker non-votes" (i.e., shares represented at the meeting held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to
which the broker or nominee does not have discretionary voting power to vote such shares) will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Annual Meeting. With respect to the election of the directors (Proposal 1)3), votes may be cast "for" or "withheld" from the nominees. Votes cast "for" the nominees will count as "yes" votes; votes that are "withheld" from the nominees will not be voted with respect to the election of the nominees. With respect to Proposals 1, 2 and 3,4, votes may be cast "for," "against" or "abstain." In the case of Proposals 1 and 2, and 3,abstentions will have the same effect as a vote against such matter. In the case of Proposal 4, abstentions are not considered votes cast on such matter and will have the effect of reducing the number of affirmative votes required to achieve a majority for such matters by reducing the total number of shares from which the majority is calculated. Proposals 1, 2, 3 and 34 are each "non-discretionary" items and, therefore, brokers and nominees do not have discretionary voting power with respect to such matters. Broker non-votes will have no effect on Proposal 1, and with respect to Proposal 3, ifIf you do not instruct your broker how to vote with respect to such matter, your broker may not vote with respect to this itemthese items. For Proposals 1 and those2, broker non-votes will have the same effect as a vote against such matter. Broker non-votes will have no effect on Proposal 3. With respect to Proposal 4, broker non-votes will have the effect of reducing the number of affirmative votes required to achieve a majority for such matter by reducing the total number of shares from which the majority is calculated.
How to Vote Your Shares
IN LIGHT OF THE PUBLIC HEALTH AND TRAVEL SAFETY CONCERNS RELATED TO ONGOING CORONAVIRUS (COVID-19) OUTBREAK AND AFTER CAREFUL CONSIDERATION, THE COMPANY HAS DETERMINED TO HOLD A VIRTUAL MEETING IN ORDER TO FACILITATE SHAREHOLDER ATTENDANCE AND PARTICIPATION BY ENABLING STOCKHOLDERS TO PARTICIPATE FROM ANY LOCATION AND AT NO COST. YOU WILL BE ABLE TO ATTEND THE MEETING ONLINE, VOTE YOUR SHARES ELECTRONICALLY AND SUBMIT QUESTIONS DURING THE MEETING BY VISITING https://web.lumiagm.com/232370870.
inappropriate. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.
If your shares are held in "street name" through a broker, bank or other nominee, in order to participate in the virtual Annual Meeting you must first obtain a legal proxy from your broker, bank or other nominee reflecting the number of shares of the Company's common stock you held as of the record date, your name and email address. You then must submit a request for registration to American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by facsimile to 718-765-8730 or (3) by email to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Requests for registration must be labeled as "Legal Proxy" and be received by American Stock Transfer & Trust Company, LLC no later than 5:00 PM (Eastern Time) on May 29, 2020.
Having your shares represented and voted at the Annual Meeting is extremely important. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ONLINE, AND TO FACILITATE TIMELY RECEIPT OF YOUR VOTE GIVEN THE POTENTIAL IMPACT OF COVID-19, PLEASE VOTE AS SOON AS POSSIBLE. YOU ARE URGED TO DATE, SIGN AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED TO YOU, OR TO VOTE BY INTERNET OR BY TELEPHONE AS DESCRIBED IN THIS PROXY STATEMENT, EVEN IF YOU PLAN TO VIRTUALLY ATTEND THE ANNUAL MEETING, SO THAT YOUR SHARES CAN BE VOTED REGARDLESS OF WHETHER YOU ATTEND THE ANNUAL MEETING. VOTING NOW WILL NOT LIMIT YOUR RIGHT TO CHANGE YOUR VOTE OR TO ATTEND THE ANNUAL MEETING ONLINE. IF YOU SHOULD BE PRESENT AT THE ANNUAL MEETING AND DESIRE TO VOTE DURING THE MEETING, YOU MAY WITHDRAW YOUR PROXY CARD AT SUCH TIME. ONLY THE LATEST VALIDLY EXECUTED PROXY CARD THAT YOU TIMELY SUBMIT WILL BE COUNTED. IF YOUR SHARES ARE HELD IN THE NAME OF A BROKER, BANK OR OTHER HOLDER OF RECORD, FOLLOW THE VOTING INSTRUCTIONS YOU RECEIVED FROM THE HOLDER OF RECORD IN ORDER TO VOTE YOUR SHARES.
If you are a stockholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the following methods:
| 1. |
| 2. | Vote by |
| 3. | Vote by telephone by dialing 1-800-776-9437 in the United States and 1-718-921-8500 from foreign countries and following the instructions. You must have the control number that is on your proxy card when voting. |
| 4. | Vote by proxy card |
If you hold your shares in street name, you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares voted. To vote pursuant to the recommendation of the Board, you must follow the instructions on your voting instruction form.
How to Revoke a Previously Submitted Proxy Card
Any properly completed proxy card given by stockholders whose shares are registered in their name pursuant to this solicitation may be revoked by one of the following methods:
| 1. |
unless you properly vote electronically during the Annual Meeting or specifically request that your prior proxy be revoked by delivering a written notice revocation prior to the Annual Meeting to the Secretary of the Company at 30 Corporate Drive, Suite 200, Burlington, MA 01803;
| 2. | Properly casting a new vote via the |
| 3. | Duly completing a later-dated proxy card relating to the same shares and delivering it to the Secretary of the Company before the taking of the vote at the Annual |
To be effective, any written notice of revocation or subsequent proxy cards must be sent so as to be delivered to the Company's Secretary at the Company's corporate headquarters before the taking of the vote at the Annual Meeting. If you hold your shares are held in “street"street name,” contact your bank, broker or other nominee for" you must follow the instructions on changing your vote.voting instructions form to revoke or amend any prior voting instructions.
Except where otherwise incorporated by reference, none of the Annual Report, the letter from the ChairmanChairperson of our Board of Directors to our stockholders, or the letter from our President and Chief Executive Officer to our stockholders is a part of the proxy solicitation material.
If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, Inc., ourthe Company's proxy solicitor, at (800) 322-2885 or (212) 929-5500 or at proxy@mackenziepartners.com.
circor@mackenziepartners.com.
CORPORATE GOVERNANCE
Independence of Directors
The Board, upon consideration of all relevant facts and circumstances and upon recommendation of the Nominating and Corporate Governance Committee, has affirmatively determined that each director, other than our Chief Executive Officer Scott Buckhout, is independent of the Company. In evaluating the independence of each director, the Board applied the standards and guidelines set forth in the applicable SECSecurities and Exchange Commission ("SEC") and New York Stock Exchange ("NYSE") regulations in determining that each director has no material relationship with the Company, directly or as a partner, stockholder, or affiliate of an organization that has a relationship with the Company. The bases for the Board's determination include, but are not limited to, the following:
No director other than Mr. Buckhout is an employee of the Company or its subsidiaries or affiliates.
No director has an immediate family member who is an officer of the Company or its subsidiaries or has any other current or past material relationship with the Company.
No director other than Mr. Buckhout receives, or in the past three years, has received, any compensation from the Company other than compensation for services as a director.
No director has a family member who has received any compensation during the past three years from the Company.
No director, during the past three years, has been affiliated with, or had an immediate family member who has been affiliated with, a present or former internal or external auditor of the Company.
No executive officer of the Company serves on the compensation committee or the board of directors of any corporation that employs a director or a member of any director's immediate family.
No director is an officer or employee (or has an immediate family member who is an officer or employee) of an organization that sells products and services to, or receives products and services from, the Company in excess of the greater of $1 million or 2% of such organization's consolidated gross revenues in any fiscal year.
Board Leadership Structure
The Board has established a leadership structure that separates the roles of ChairmanChairperson of the Board and Chief Executive Officer. In doing so, the Board considered that separating the roles of ChairmanChairperson and Chief Executive Officer would most effectively provide the Company access to the judgments and experience of Mr. David F. Dietz, as ChairmanChairperson of the Board, and Mr. Scott Buckhout, as Chief Executive Officer, while providing a mechanism for the Board’sBoard's independent oversight of management. As ChairmanChairperson of the Board, Mr. Dietz presides over the meetings of the Board and the stockholders, utilizing his extensive experience in corporate governance and legal matters and familiarity with the Company, including his service as a member of the Board of Directors since the Company’sCompany's inception and as the lead independent director from 2004 until he was appointed ChairmanChairperson of the Board in December 2012. Among his responsibilities as Chairman,Chairperson, in addition to presiding over Board meetings, Mr. Dietz approves Board agendas and schedules, monitors activity of the Board’sBoard's committees, communicates regularly with the Chief Executive Officer and other management on behalf of the Board, monitors and participates in communication with major stockholders, leads the annual performance evaluations of the Board and the Chief Executive Officer, and leads the Chief Executive Officer succession planning process.
The Board has adopted a policy for the periodic rotation of the Chairperson of the Board and the Chairperson of each Board committee. Consistent with the policy, Mr. Dietz, who has served as Chairperson of the Board since 2012, will rotate out of this role, and the Board has appointed Helmuth Ludwig to assume the role of Chairperson, effective immediately following the 2020 Annual Meeting.
Principles of Corporate Governance
The Nominating and Corporate Governance Committee of the Board has developed, and the full Board has adopted, a set of Principles of Corporate Governance. The Principles of Corporate Governance are available on the Company's website at www.CIRCOR.com under the "Investors" sub linksub-link and a hardcopy will be provided by the Company free of charge to any stockholder who requests it by writing to the Company's Secretary at the Company's corporate headquarters. An annual review is conducted by the Nominating and Corporate Governance Committee to assess compliance with the guidelines.
In addition, to align the interests of the directors and executive officers of the Company with the interests of the shareholders,stockholders, the Principles of Corporate Governance include Stock Ownership Guidelines for directors and executive officers.
Code of Conduct & Business Ethics / Compliance Training / Reporting of Concerns
The Company has implemented and regularly monitors compliance with a comprehensive Code of Conduct & Business Ethics (the "Code of Conduct"), which applies uniformly to all directors, executive officers, and employees. Among other things, the Code of Conduct addresses conflicts of interest, confidentiality, fair dealing, protection and proper use of Company assets, compliance with applicable laws (including insider trading and anti-bribery laws), and reporting of illegal or unethical behavior. The Code of Conduct is available on the Company's website at www.CIRCOR.com under the "Investors" sub link
sub-link and a hardcopy will be provided by the Company free of charge to any stockholder who requests it by writing to the Company's Secretary at the Company's corporate headquarters.
The Company has undertaken a number of additional steps to further the tenets of the Code of Conduct. Through a third-party provider, the Company maintains an on-line training program pursuant to which all officers and all employees with company-issued email accounts must take a series of courses designed to demonstrate the ways in which certain activities might run afoul of the Code of Conduct. In addition, although all employees are encouraged to personally report any ethical concerns without fear of retribution, the Company, through a third-party provider, maintains the Company's HelpLine (the "HelpLine"), a toll-free telephone and web-based system through which employees may report concerns confidentially and anonymously. The HelpLine facilitates the communication of ethical concerns and serves as the vehicle through which employees may communicate confidentially and anonymously with (i) the Audit Committee of the Board confidentially and anonymously regarding any concerns including anyrelating to accounting or auditing issues.issues and (ii) the Nominating and Corporate Governance Committee regarding any other concerns.
Nomination of Directors/Director Attendance at Annual Meetings
General Criteria
The Nominating and Corporate Governance Committee recognizes that the challenges and needs of the Company will vary over time and, accordingly, believes that the selection of director nominees should be based on skill sets most pertinent to the issues facing or likely to face the Company at the time of nomination. Accordingly, the Nominating and Corporate Governance
Committee does not believe it is in the best interests of the Company to establish rigid criteria for the selection of nominees to the Board. When assessing nominees to serve as director, the Nominating and Corporate Governance Committee believes that the Company will benefit from a diversity of background and experience on the Board and, therefore, will consider and seek nominees who, in addition to general management experience and business knowledge, possess, among other attributes, an expertise in one or more of the following areas: finance, manufacturing, technology, international business, investment banking, business law, corporate governance, risk assessment, business strategy, organizational development, and investor relations. The Nominating and Corporate Governance Committee also believes that the Company benefits from gender and ethnic diversity. In addition, there are certain general attributes that the Nominating and Corporate Governance Committee believes all director candidates must possess, which include:
A commitment to ethics and integrity;
A commitment to personal and organizational accountability;
A history of achievement that reflects superior standards for themselves and others; and
A willingness to express alternate points of view while, at the same time, being respectful of the opinions of others and working collaboratively with colleagues.
Our Principles of Corporate Governance require that a majority of directors must be independent. The Nominating and Corporate Governance Committee, however, also believes that, absent special circumstances, all directors other than the Chief Executive Officer, if he or she is serving on the Board, should be independent. The Nominating and Corporate Governance Committee annually assesses the adequacy of the foregoing criteria for Board membership. We believe that, based on the background and experience as described below of each director as described below,and Bruce M. Lisman, who will be appointed to the currentBoard following the 2020 Annual Meeting, the Board reflects diversity in business and professional experience and skills.
As a matter of good corporate governance, unless otherwise approved by the Nominating and Corporate Governance Committee, we limit the number of public company directorships any director of the Company may hold to three, including that of the Company. We believe this policy assists the Board in continuing to focus on and carry out the Board activities of the Company efficiently. Ms. Tina Donikowski has been granted an exception to this policy so that she can serve on an additional public company board.
Director Candidates
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders, provided that such recommendations are submitted to the Company not less than 120 calendar days prior to the first anniversary date on which the Company's proxy statement was released to stockholders in connection with the previous year's annual meeting.
To be considered by the Nominating and Corporate Governance Committee for nomination and inclusion in the Company's proxy statement for its annual meeting to be held in 2019,2021, stockholder recommendations for directors must be received by the Company's Secretary at the Company’sCompany's corporate headquarters prior to November 29, 2018.February 6, 2021. Any such notice also must include (i) the name and address of record of the stockholder; (ii) a representation that the stockholder is a record holder of the
Identification and Evaluation of Candidates
In evaluating candidates for director, the Nominating and Corporate Governance Committee applies the skills, experience, qualifications and demeanor of the individual against the general criteria set forth above, including the particular needs of and issues facing, or likely to face, the Company at the time of consideration of the individual. In addition, with regard to current directors, the Nominating and Corporate Governance Committee takes into consideration such individuals' performance as directors. The Nominating and Corporate Governance Committee intends to evaluate any stockholderdirector candidates recommended by stockholders in the same manner as candidates from any other sources.
On February 6, 2020, in accordance with the process set forth in our By-Laws, GAMCO Asset Management Inc. (together with its affiliates, "GAMCO") submitted a nomination notice in which it nominated two individuals for election to the Board at the 2020 Annual Meeting. The Board engaged in discussions and negotiations with GAMCO about the nominations. As discussed further below in "Our Board and Committee Structure—Appointment of Bruce M. Lisman to the Board", after an evaluation by the Nominating and Corporate Governance Committee, the Board agreed to appoint to the Board, following the 2020 Annual Meeting, one individual proposed by GAMCO.
Jill D. Smith, who joined the Board in January 2020, was recommended by a third-party search firm retained by the Nominating and Corporate Governance Committee ("Nominating Committee") at the expense of the Company. The third-party search firm was provided guidance as to the particular skills, experience and other characteristics the Nominating Committee was seeking in potential candidates and was specifically requested to include diverse candidates in the search. The firm identified a number of potential candidates, including Ms. Smith, and prepared background materials on the candidates which were provided to the members of the Nominating Committee for review. The firm interviewed those candidates and the Nominating Committee determined several merited further consideration. The firm assisted in arranging interviews of selected candidates with all members of the Board of Directors. The third-party search firm also completed background checks on the candidates.
Board Self-Evaluations
On a periodic basis, the Board solicits and reviews feedback of self-evaluations submitted by the directors, addressing matters such as the composition of the Board, the relationship between the Board and management of the Company, conduct of meetings of the Board, and strategic priorities for the Board. Each of the committees of the Board undertakes a similar self-evaluation process.
Director Attendance at Annual Meetings
To date, our Board has not adopted a formal policy regarding director attendance at annual meetings of our stockholders. However, the Board typically schedules a meeting of the Board either on or the day before the date of the annual meeting of stockholders, and our directors, therefore, are encouraged to (and typically do) attend the annual meeting. At our last annual meeting of stockholders, which was held on May 10, 2017,9, 2019, all of our then-serving directors were in attendance.
Our Board and Committee Structure
The Board
Our Board currently consists of seveneight members who are divided into three classes, with three directors in Class I, twothree directors in Class II, and two directors in Class III. Directors serve for staggered three-year terms, with one classAt the Annual Meeting we are recommending to our stockholders the elimination of directors being elected by the Company's stockholdersclassified board structure and transition to the annual election of directors. If approved, at the Annual Meeting, each of the Class III directors will be elected to a one-year term as a Class I director; at the 2021 Annual Meeting of Stockholders, each of the Class I directors will be elected to a one-year term; and at the 2022 Annual Meeting of Stockholders (and at each annual meeting. meeting thereafter) all directors will be elected to one-year terms. If the declassification proposal is not approved by our stockholders, at the Annual Meeting each Class III director will be elected to a three-year term.
Appointment of Bruce M. Lisman to the Board
Following discussions with GAMCO, the Company will expand the size of the Board from eight to nine directors and will appoint Bruce M. Lisman to the Board as a Class I director following the 2020 Annual Meeting. Mr. Lisman will serve as a Class I director for a one-year term until the Annual Meeting of Stockholders in 2021 and until his successor is duly elected and qualified or until his death, resignation or removal. If Proposal 2 is approved, then if Mr. Lisman is re-elected at the Annual Meeting of Stockholders in 2021, he will serve for an additional one-year term until the 2022 Annual Meeting of the
Stockholders and until his successor is duly elected and qualified or until his earlier death, resignation or removal. If Proposal 2 is not approved, and if Mr. Lisman is re-elected at the Annual Meeting of Stockholders in 2021, he will serve for an additional three-year term until the 2024 Annual Meeting of Stockholders and until his successor is duly elected and qualified or until his death, resignation or removal. Following his appointment, we believe that Mr. Lisman will qualify as an independent director of the Company. Mr. Lisman will receive the same compensation as the other directors of the Company as described in "Director Compensation" below. Mr. Lisman does not currently own beneficially or of record any shares of the Company's Common Stock.
In addition, GAMCO has withdrawn its director nominations for the 2020 Annual Meeting. Mr. Lisman had been one of GAMCO's nominees.
Mr. Lisman, age 73, is a private investor. He serves as a director of two public companies: Myers Industries, Inc. (NYSE: MYE), a material handling and distribution company, and Associated Capital Group, Inc. (NYSE: AC), a financial services company that was spun-off from GAMCO Investors, Inc. He also serves on two private company boards—National Life Group, a mutual life insurance company, and PC Construction, a designer and builder of water treatment plants and commercial buildings. Prior board service includes The Pep Boys-Manny, Moe & Jack (2015-2016), an automotive aftermarket retail chain, Merchants Bancshares (2006-2015), a regional banking company, and Central Vermont Public Service (2004-2009), an electric utility. On those boards he has served in leadership positions that include Chairman of the Board, Compensation and Governance Committees. Before his retirement he was Chairman of JP Morgan's Global Equity Division (2008-2009) and Co-Head of the Global Equity Division at Bear Stearns Companies (1987-2008). He is past Chairman and a current board member of American Forests, America's oldest conservation group. Mr. Lisman's qualifications to sit on the Board include his financial, global business and leadership expertise.
Board Committees
Our Board maintains three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee.
The table below sets forth the name, age, class, and committee membership for each of our directors as of March 29, 2018:
31, 2020:
| Director | Age | Director Class | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Independent |
David F. Dietz (1) | I | X | ||||
| Samuel R. Chapin | 62 | I | M | X | ||
| Tina M. Donikowski | I | M | M | |||
| X | ||||||
| Helmuth Ludwig | II | M | C | X | ||
| Jill D. Smith | 61 | II | M | X | ||
| Peter M. Wilver | II | C | M | X | ||
| John (Andy) O’Donnell | III | M | X | |||
| Scott Buckhout | III | |||||
| C | Director Class Term Expires at Annual Meeting: | I = | ||
| M | Committee Member | II = | ||
| III = 2020 | ||||
| (1) | ||||
Director Qualifications
Following his appointment, we believe Mr. Lisman will add to the extensive experience and qualifications already present on our Board, specifically in light of his financial, global business and leadership expertise.
The biographies of each of the nominees and continuing directors below contain, among other things, information regarding the person's service as a director, business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that, among other things, led the Nominating and Corporate Governance Committee and the Board to the conclusion that such individual should serve as a director for the Company.
Scott Buckhout. Mr. Buckhout joined CIRCOR as President and Chief Executive Officer and was appointed to the Board in April 2013. Prior to joining CIRCOR, Mr. Buckhout had served as President, Fire & Security at United Technologies Corporation (UTC), a diverse, multinational manufacturing company, since March 2011.company. He previously held a number of senior level positions at UTC, including President, Global Fire Products and President, Systems and Firefighting. Before joining UTC, Mr. Buckhout held a number of senior roles at Honeywell International Corporation in the Consumer Products and Friction Materials divisions. He spent five years in Europe for UTC and Honeywell, including as Vice President and General Manager, Consumer Products Group, Honeywell EMEA and Vice President and General Manager, Honeywell Friction Materials - Europe. He also previously worked in general management and strategy consulting roles at Booz Allen & Hamilton and The Boeing Company. Mr. Buckhout’sBuckhout's qualifications to sit on our Board include his extensive experience in leading, improving the operational performance of, and profitably growing large, multi-nationalmultinational manufacturing businesses through both organic and acquisition-related growth.
David F. Dietz. Mr. Dietz has served as a member of the Board since its inception in July 1999. Mr. Dietz was a partner of the law firm of Goodwin Procter from 1984 to his retirement from the firm in October 2016. Mr. Dietz is also a director and Chairman of the Independent Directors and Compensation Committee of theThe Andover Companies, a property and casualty insurance company. Mr. Dietz'Dietz's qualifications to sit on our Board include his experience in corporate acquisitions, corporate finance, and corporate governance and legal matters, including corporate acquisitions and corporate finance.matters.
Samuel R. Chapin. Mr. Chapin has served as a member of the Board since January 2019. Mr. Chapin served as Executive Vice Chairman at the Bank of America Merrill Lynch, a multinational investment bank, from 2010 to his retirement in June 2016. Mr. Chapin joined Merrill Lynch in 1984 as a member of the Mergers and Acquisitions group and he was named a Managing Director in Investment Banking in 1993. Mr. Chapin was named Senior Vice President and head of Merrill Lynch's Global Investment Banking Division in 2001 and was named Vice Chairman in 2003. While at Merrill Lynch and Bank of America Merrill Lynch, Mr. Chapin was responsible for managing relationships with a number of the firm's largest corporate clients. He currently serves on the Board of Directors of PerkinElmer, Inc. and the Board of Trustees at Lafayette College. Mr. Chapin's qualifications to sit on our Board include his experience and significant knowledge of the industrials market with a mastery of strategic M&A accrued over more than 35 years in investment banking.
Tina M. Donikowski. Ms. Donikowski has served as a member of the Board since March 2017. Ms. Donikowski retired from General Electric Company, a diversified industrial company, in October 2015 after 38 years with the company. She served in a number of senior positions during her career at General Electric Company, including most recently as Vice President, Global Locomotive Business, GE Transportation, from January 2013 until her retirement. She currently also serves on the Board of Directors of Atlas Copco AB, a world-leading provider of sustainable productivity solutions based in Stockholm, Sweden,Sweden; TopBuild Corp., a leading installer and distributor of insulation and building material products to the U.S. construction industry based in Daytona Beach, Florida; Advanced Energy Industries, Inc., a designer and manufacturer of highly engineered precision power, measurement, and control solutions for mission-critical applications and processes; and Eriez Magnetics, a privately held manufacturer and designer of magnetic, vibratory, and metal detection applications based in Erie, Pennsylvania. She also serves as a member of the Board of Trustees, Gannon University, and the Board of Trustees, Boys & Girls Club of Erie, Pennsylvania. Ms. Donikowski's qualifications to sit on our Board include her extensive experience in leading technology businesses and her strong operations background.
Helmuth Ludwig. Dr. Ludwig has served as a member of the Board since January 2016. SinceFrom October 2016 until his retirement in December 2019, he has served as Global Head of Information TechnologyCIO for Siemens, a globalleading technology company. He previously served among other roles as Executive Vice President, Digital Enterprise Realization, of Siemens PLM Software from October 2014 to October 2016 and CEO of the Siemens Industry Sector in North America from October 2011 to September 2014. Dr. Ludwig is a known expert2014 and regular speaker at industry conferences on the Internetas President of Things and "Industry 4.0". When Siemens acquired PLM Software infrom August 2007 Dr. Ludwig was appointed President of PLM Software andto September 2010 where he is credited for having successfully led the integration of the organization’sorganization's 50 legal entities and multiple facilities across 26 countries. Earlier in his career, Dr. Ludwig held a number of international assignments at Siemens in Europe, Latin America, and Asia. He teaches as adjunct professorClinical Professor for International Strategy and Entrepreneurship at SMU’sSMU's Cox School of Business in Dallas. Dr. Ludwig’sLudwig is a known expert and regular speaker at industry conferences on the Internet of Things and "Industry 4.0." Dr. Ludwig's qualifications to sit on our Board include his proven manufacturing leadership skills, extensive international experience, and his success in leading the integration and simplification of a complex global enterprise.
John (Andy) O'Donnell. Mr. O'Donnell has served as a member of the Company's Board since November 2011. Until his retirement in January 2014, retirement, Mr. O'Donnell had worked at Baker Hughes, an oilfield services company, since 1975. He served as Vice President of Baker Hughes since 1998 and was appointed to Vice President, Office of the Chief Executive Officer in 2012, a role in which he served until his retirement. From 2009 to 2011, Mr. O'Donnell was President, Western Hemisphere Operations of Baker Hughes. He was President of Baker Petrolite Corporation from 2005 to 2009 and President of Baker Hughes Drilling Fluids from 2004 to 2005. He served as Vice President, Business Process Development at Baker Hughes from 1998 to 2002 and as Vice President of Manufacturing at Baker Oil Tools from 1990 to 1998. Mr. O’DonnellO'Donnell also serves on the Board of Directors of Cactus, Inc., where he is a member of its Audit, Committee.Compensation, and Nominating and Corporate Governance Committees. Mr. O'Donnell's qualifications to sit on theour Board include his experience in international energy markets and leading multi-nationalmultinational sales, marketing, service and manufacturing operations.
Jill D. Smith. Ms. Smith joined the Board in January 2020. Ms. Smith most recently served as President, Chief Executive Officer and Director of Allied Minds plc, an intellectual property commercialization company focused on technology and life sciences from March 2017 to her recent retirement in June 2019. She previously had served as Chairman, Chief Executive Officer and President of DigitalGlobe, Inc., a global provider of satellite imagery products and services, from 2005 to 2011. Ms. Smith started her career as a consultant at Bain & Company where she rose to Partner. She then joined Sara Lee as Vice President and subsequently went on to serve as President and Chief Executive Officer of eDial, a VoIP collaboration company. She was also President and Chief Executive Officer of SRDS, a business-to-business publishing firm. Furthermore, she served as Chief Operating Officer of Micron Electronics, and co-founded and led Treacy & Company, a consulting and boutique investment firm. Ms. Smith currently serves on the Board of Directors of R1 RCM Inc., where she is a member of the Audit and Human Capital Committee. Ms. Smith’s qualifications to sit on our Board includes her extensive experience as a technology executive, including as a CEO focused on growing innovative companies.
Peter M. Wilver. Mr. Wilver has served as a member of the Company's Board since February 2010. Mr. Wilver was Executive Vice President and Chief Administrative Officer of Thermo Fisher Scientific Inc. ("(“Thermo Fisher"Fisher”), a leading provider of laboratory products and services, from August 2015 until his retirement in March 2017. He previously spent 11 years as Chief Financial Officer of Thermo Fisher from October 2004 to July 2015. Before joining Thermo Fisher in 2000, Mr. Wilver worked for General Electric, Grimes Aerospace Company, and Honeywell International (formerly AlliedSignal), where he most recently served as Vice President and Chief Financial Officer of the electronic materials business. He currently also serves on the Board of Directors of Tenet Healthcare, where he is a member of its Audit and Human Resources Committees, and Evoqua Water Technologies, where he is Chairman of its Audit Committee.Committee and a member of the Compensation Committee, and served on the Board of Directors of Tenet Healthcare, where he was a member of its Audit and Human Resources Committee(s) from November 2016 until May 2018. Mr. Wilver is a certified public accountant. Mr. Wilver'sWilver’s qualifications to sit on the Board include his experience in strategic planning and business development as well as in leading the financial, accounting and investor relations functions of large, multi-nationalmultinational manufacturing companies.
Committees
| BOARD COMMITTEE OVERVIEW | |||
| Committee | Function | 2019 Members | Meetings in 2019 |
| Audit | Oversees integrity of financial statements Responsible for appointment, compensation, retention and oversight of work of the independent auditors Reviews scope and results of annual audit with independent auditors Reviews annual/quarterly operating results with independent auditors Considers the adequacy of internal accounting procedures/controls; considers the effect of these on auditors’ independence Oversees internal audit function | Peter M. Wilver (Chair) ± Tina M. Donikowski Helmuth Ludwig | 7 |
| Compensation | Reviews/ determines compensation arrangements for the CEO Reviews recommendations of the CEO regarding/approves compensation arrangements for all other officers and senior level employees Reviews general compensation levels for other employees Determines awards to be granted to eligible persons under the Company's 2019 Stock Option and Incentive Plan | John (Andy) O’Donnell (Chair) Tina M. Donikowski Peter M. Wilver | 6 |
| Nominating and Corporate Governance | Establishes criteria for selection of new directors Identifies individuals qualified to become directors Recommends director candidates to the Board for nomination as directors Makes recommendations regarding director compensation | Helmuth Ludwig (Chair) Samuel R. Chapin John (Andy) O’Donnell Jill D. Smith | 5 |
| ± Determined by our Board to be an audit committee financial expert. | |||
Audit Committee. The Audit Committee, which consists of Mr. Wilver, Ms. Donikowski, and Dr. Ludwig and Ms. Donikowski (each of whom has been affirmatively determined by the full Board to be an independent director)director, as well as meeting the stricter independence standards applicable to audit committee members under NYSE listing standards and the rules of the SEC), oversees the integrity of the Company'sCompany’s financial statements and is directly responsible for the appointment, compensation, retention and oversight of the work of the firm of independent auditors (the "Auditors"“Auditors”) that audits the Company'sCompany’s financial statements and performs services related to the audit. Among other responsibilities, the Audit Committee reviews the scope and results of the audit with the Auditors, reviews with management and the Auditors the Company's annual and quarterly operating results, considers the adequacy of the Company's internal accounting procedures and controls, and considers the effect of such procedures on the Auditors'Auditors’ independence. The Audit Committee also is responsible for overseeing the Company'sCompany’s internal audit function and the Company'sCompany’s compliance with legal and regulatory requirements. To satisfy these oversight responsibilities, the Audit Committee separately meets regularly with the Company's Chief Financial Officer; Director of Internal Audit; Auditors; and management.Auditors. Pursuant to the requirements of the NYSE, the Audit Committee operates in accordance with a charter (the "Audit“Audit Committee Charter"Charter”), which is available on the Company'sCompany’s website at www.CIRCOR.com under the "Investors" sub link.“Investors” sub-link. The Company will provide a hardcopy of the Audit Committee Charter to stockholders free of charge upon written request to the Company'sCompany’s Secretary at the Company'sCompany’s corporate headquarters. Each member of the Audit Committee is "independent," as that term is defined in both the applicable NYSE listing standards and the rules of the SEC. Each member also meets the financial literacy requirements of the NYSE and, in addition, the Board has determined that at least one of the Committee'sCommittee’s members, Mr. Wilver, is an "audit“audit committee financial expert"expert” under the disclosure standards adopted by the SEC.
Compensation Committee. The Compensation Committee, which consists of Mr. Hayes, Mr. O’Donnell, Ms. Donikowski, and Mr. Wilver (each of whom has been affirmatively determined by the full Board to be an independent director, as well as meeting the stricter independence standards applicable to compensation committee members under NYSE listing standards)standards and the rules of the SEC), reviews and determines the compensation arrangements for the Company'sCompany’s Chief Executive Officer; reviews the recommendations of the Chief Executive Officer and approves the compensation arrangements for all other officers and senior
level employees; reviews general compensation levels for other employees as a group; determines the awards to be granted to eligible persons under the Company's 20142019 Stock Option and Incentive Plan (the "Equity“Equity Incentive Plan"Plan”); and takes such other action as may be required in connection with the Company's compensation and incentive plans, including with respect to compensation and risk-management issues. The Compensation Committee has the sole authority from the Board for the appointment, compensation and oversight of the Company's outside compensation consultant.
Since early 2012, the Compensation Committee has engaged Pearl Meyer & Partners (“Pearl Meyer”) as its compensation consultant. In so doing, the Compensation Committee affirmatively determined that Pearl Meyer is independent and has no conflict of interest as contemplated under rules adopted by the SEC and the NYSE, and has conducted annual reviews to confirm that Pearl Meyer remains free of conflict per these rules. Pearl Meyer reports directly to the Compensation Committee and does not provide any additional services to the Company. The executive compensation services provided by Pearl Meyer include assisting in defining the Company'sCompany’s executive compensation strategy, providing market benchmark information, recommending the composition of the compensation peer group used as a benchmark by the Compensation Committee, advising with respect to the design of both short-term and long-term incentive compensation plans, and summarizing regulatory and governance
guidelines. In making its compensation decisions, the Compensation Committee relies significantly on the information provided by Pearl Meyer.
The independent compensation consultant spoke with the chair of the Compensation Committee, as well as with management, in preparing for Committee meetings, regularly attended Committee meetings, and met from time to time in executive session with the Compensation Committee without the presence of management.
The Compensation Committee also receives reports and recommendations from management. Throughout 2017,2019, Mr. Buckhout provided input regarding the compensation of those executives who reported directly to him. In connection with these recommendations, Mr. Buckhout consulted with the Company’sCompany's Chief Human Resources Officer and met periodically with the Compensation Committee’s independent compensation consultant to review the market reference data. In addition, Mr. Buckhout provided recommendations to the Compensation Committee related to the performance measures used in the Company’sCompany's short-term and long-term incentive plans. These recommendations directly aligned with the Company's operating strategy.
Although Mr. Buckhout regularly attended Compensation Committee meetings, any discussions concerning his compensation were held by the Committee in executive sessions without him present. The Compensation Committee also met regularly in executive session without the presence of Mr. Buckhout or any other members of management, to consider, among other things, the compensation recommendations proposed by Mr. Buckhout.
The Compensation Committee operates in accordance with a charter (the "Compensation“Compensation Committee Charter"Charter”), which is available on the Company'sCompany’s website at www.CIRCOR.com under the "Investors" sub link.“Investors” sub-link. The Company also will provide a hardcopy of the Compensation Committee Charter to stockholders free of charge upon written request to the Company'sCompany’s Secretary at the Company's corporate headquarters.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee, which consists of Ms. Smith, Dr. Ludwig, Mr. O’Donnell,Chapin, and Mr. HayesO’Donnell (each of whom has been affirmatively determined by the full Board to be an independent director), is responsible for establishing criteria for selection of new directors, identifying individuals qualified to become directors, and recommending candidates to the Board for nomination as directors. In addition, the Nominating and Corporate Governance Committee is responsible for recommending to the Board a set of corporate governance principles applicable to the Company, overseeing the evaluation of the Board and its committees, recommending to the Board appropriate levels of director compensation and, together with the Audit Committee, monitoring compliance with the Company'sCompany’s Code of Conduct. The Nominating and Corporate Governance Committee operates in accordance with a charter (the "Nominating“Nominating and Corporate Governance Charter"Charter”), which is available on the Company'sCompany’s website at www.CIRCOR.com under the "Investors" sub link.“Investors” sub-link. The Company also will provide a hardcopy of the Nominating and Corporate Governance Charter to stockholders free of charge upon written request to the Company's Secretary at the Company'sCompany’s corporate headquarters.
Ad Hoc Committees. From time to time, the Board may establish ad hoc committees and delegate certain of its authority for the purpose of addressing particular matters (including, for example, the approval of financing or credit agreements or other matters that the Board believes would be appropriate for review by an ad hoc committee).
Except for the availability of this Proxy Statement and the FormCompany's form of Proxyproxy card for the Annual Meeting of stockholders,Stockholders, which are available for viewing, printing and downloading at www.proxy.CIRCOR.com, the information on the Company's website is not part of this Proxy Statement.
Board and Committee Meetings
The following table sets forth the number of meetings held during the year ended December 31, 20172019 by the Board and by each committee thereof. Each of the directors attended at least 75% of the total number of meetings of the Board and of the committees of which such director was a member.
| Number of Meetings | |
| Board of Directors | |
| Audit Committee | |
| Compensation Committee | 6 |
| Nominating and Corporate Governance Committee | |
Board Risk Oversight
We believe that our current Board leadership structure fosters appropriate risk oversight for the Company for a number of reasons, the most significant of which are discussed below. The Board is actively involved in oversight of risks that could affect the Company. This administration is coordinated primarily through the committees of the Board, as disclosed in the descriptions of each of the committees above and in the charters of each of the committees (which are available on the Company's website at www.CIRCOR.com under the "Investors" sub link)sub-link). The full Board, however, retains responsibility for the general oversight of risk. The Board satisfies this responsibility through full reports from each committee chair regarding the committee's considerations and actions under its purview, as well as through regular reports directly from personnel of the Company responsible for oversight of particular risks within the Company. This process enables the Board and its committees to coordinate and supervise risk oversight, particularly with respect to risks that are overseen by different committees of the Board and different personnel within the Company. Executive sessions of the Board without any management present allow the independent directors to review key decisions and discuss matters in a manner that is independent of the Chief Executive Officer. The ChairmanChairperson of the Board leads all such executive sessions. In addition, all key committees of the Board are comprised solely of, and chaired by, independent directors.
In addition, the management of the Company engages in an annual enterprise risk assessment with the Board, assessing, among other concerns, risks associated with the Company's products, customers, supply chain, management, staff, efficiency, and cybersecurity. Management of the Company regularly reports to the Board concerning its risk mitigation initiatives.
Communication with Independent Directors
The Board has established a process through which interested parties, including stockholders, may communicate with the independent directors. Specifically, communications may be sent directly to the ChairmanChairperson of the Board, who, as discussed above, is an independent director, at the following address: P.O. Box 772, Burlington, Massachusetts 01803.
Corporate Responsibility
Our products deliver safety, productivity, and efficiency
CIRCOR's portfolio of flow and motion control products for the world's most severe-service and mission-critical applications-from valves to instrumentation, actuation to pumps, motors to regulators-make our customers' operations safer, and reduce waste, power consumption, and emissions. Our purpose is to: Keep society safe, productive, and moving. Examples of the positive social and environmental benefits our products provide include:
Safety:
The bottom unheading and center feed devices from our Refinery Valves business have directly contributed to reduced fatalities at coking refineries, by automating processes and removing workers from the danger zones.
Our Aerospace & Defense team in the United Kingdom supplies the Royal Navy and all NATO allies with submarine escape systems, the key piece of which is a specialized calibrated valve. This valve adapts to ambient water pressure to deliver enough pressurized air to a submariner to allow him or her to escape from a submarine that may be grounded on the sea-floor.
Our commercial aerospace teams develop and manufacture backup blowdown systems that ensure landing gear doors will open in the event that the primary hydraulic systems fail.
Health & Safety: Our Zenith-brand metering pump is used to extrude the sophisticated fibers and plastics that are used in Kevlar bulletproof vests, surgical tubing, and surgical thread.
Reduced environmental waste: A line of isolation valves from Refinery Valves provides an improved sealing capability as compared to legacy technologies. This reduces the amount of positive-pressure steam required in the process, which in turn drastically reduces both water usage and wastewater runoff for refiners.
Emissions:
The Industrial Pumps team provides a smart engine cooling system, which senses engine temperatures on commercial ships and throttles back the cooling pumps when they are not needed. This allows shippers to save energy and reduce emissions.
Pumps from the Industrial team in Germany enable a reduction in sulfur dioxide pollutants from marine vessels in support of IMO 2020 pollutant reduction standards.
Productivity: Our engineers work every day to enhance the efficiency of our pumps to allow our customers to reduce their carbon footprint and drive productivity in their facilities.
People are at our core
We focus our energy and resources on training and development, and our talent management practices strive to attract, engage, develop and retain a diverse, inclusive, and engaged employee base.
Employee investments and initiatives include:
Employee health and wellness programs for our employees (e.g., tobacco cessation, personal health assessments, and weight loss programs).
An Employee Assistance Program at no cost to employees and their families which offers confidential counseling 24x7.
Formal and informal mentorship programs across CIRCOR.
Leadership and management development programs at all levels of our management structure.
Pro-active career planning and development of critical employees.
Rigorous talent assessment and succession planning and processes to help us build our bench.
A formalized rotational management training program for recent MBA graduates to bring fresh management talent into the organization.
Educational assistance programs encouraging the continuing training of our U.S. employees by providing financial assistance for educational courses related to their jobs and careers
As a result of these initiatives, we successfully filled 59% of senior level roles in 2019 with internal promotions.
In late 2019, we launched a deliberate initiative to improve gender diversity at CIRCOR. We have started from the top, welcoming our second female board member in early 2020. We will continue to execute on our diversity commitments through:
A transparent process based on clear performance criteria for hiring and promotion decisions.
Training on unconscious bias and harassment prevention.
Measuring our success by tracking key criteria: percentage of workforce that is female; percentage of leadership that is female; and female representation by job level and department.
Commitment to safety and environmental protection in our operations
CIRCOR is committed to protecting the environment, health, and safety of our employees, customers and the global communities where we operate. By incorporating Environmental, Health, and Safety (EH&S) management into our business model, CIRCOR can offer high quality, cost-effective, reliable, safe, and innovative products and services while conserving resources for future generations.
To fulfill this commitment, we endeavor to:
Design, manage and operate our facilities in an environmentally responsible and safety-conscious manner in order to maximize safety, promote energy efficiency, and manage our environmental impact throughout the product life cycle.
Set objectives and targets that result in continuous improvement of our environmental, health and safety performance.
Train and inform employees of their responsibilities to protect the environment and the health and safety of themselves and their fellow employees.
Ensure that leadership takes responsibility for taking immediate action to remove safety hazards when they are identified and reported.
We have made good progress with our safety initiatives, improving total recordable incident rate (TRIR) from 1.1 in 2018 to .56 in 2019.
CIRCOR has an Environmental Stewardship Program aimed at reducing greenhouse gas emissions from the use of energy sources (e.g., electricity, natural gas, propane, and gasoline); reducing water consumption, particularly in geographic areas where water scarcity is a concern; and reducing the amount of waste to landfill by promoting waste reduction opportunities and recycling. With a baseline set in 2018, CIRCOR set a five-year target of 20% reduction of energy, water, and waste, as well as a target of 20% increase in recycling over the same period. As of the end of 2019, we were on track to meeting those goals.
PROPOSAL 1
At the Annual Meeting, we are asking stockholders to approve an amendment to the Certificate of Incorporation to implement a majority voting standard for uncontested director elections, which amendment has been approved by the Board. The Board has also approved an amendment to the By-Laws to implement a majority voting standard for the election of directors in uncontested elections, which amendment is conditioned upon the stockholders approving the amendment to the Certificate of Incorporation and the filing of such amendment with the Delaware Secretary of State.
Currently, the Certificate of Incorporation provides for plurality voting in the election of directors, pursuant to which the director nominees who receive the most votes in an election for directors are elected whether or not they receive a majority of the votes cast. By contrast, a majority voting standard requires each nominee standing for election as directors in an uncontested election to receive a majority of the votes cast in favor of such nominee. If approved, this majority voting standard will first take effect at the 2021 Annual Meeting of Stockholders. The amendment is included in Exhibit A to this Proxy Statement.
The Board has determined this majority voting standard is in the best interests of the Company and stockholders and recommends stockholders approve this amendment to the Certificate of Incorporation. Under the amended standard, contested director elections-those in which the number of nominees exceeds the number of open seats-would continue to be decided by plurality voting.
Under Delaware law, a director not receiving a majority of votes in an uncontested election continues to serve as a director as a "holdover director" until the director resigns, is replaced or removed, or dies. In 2016, the Board had adopted a resignation policy requiring each director standing for election to offer to resign in the event that less than a majority of the votes cast were in favor of such director. This proposal is in furtherance of the Board’s goals when it adopted that policy.
The foregoing is a summary of the proposed amendment to the Certificate of Incorporation and is qualified in its entirety by reference to the full text of the amendment to the Certificate of Incorporation included in Exhibit A.
Board Recommendation
THE BOARD RECOMMENDS A VOTE "FOR" THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO IMPLEMENT A MAJORITY VOTING STANDARD FOR UNCONTESTED DIRECTOR ELECTIONS.
Vote Required For Approval; Effect of Abstentions and Broker Non-Votes
A quorum being present, the affirmative vote of two-thirds of the outstanding shares entitled to vote at the Annual Meeting is necessary to approve this proposal. Abstentions and broker non-votes will have the same effect as a vote against this
Proposal 1.
PROPOSAL 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS
The Company has a classified board structure in which directors are divided into three classes, and directors in a class are elected each year to serve three-year terms.
After careful consideration, including input received from stockholders during 2019, the Board has determined that it is advisable and in the best interests of the Company and its stockholders to amend the Certificate of Incorporation to declassify the Board, so that, following a two-year transition period, the Company's stockholders will vote on the election of the entire Board on an annual basis. The Board has approved an amendment to the Certificate of Incorporation to phase-out the Company's classified Board. The amendment is included in Exhibit A to this Proxy Statement.
If approved, the declassification process will take place as follows: at the Annual Meeting, the stockholders will approve an amendment to the Certificate of Incorporation eliminating the classified board structure; subsequently, at the Annual Meeting each of the Class III directors will be elected to a one-year term as a Class I director; at the 2021 Annual Meeting of Stockholders, each of the Class I directors will be elected to a one-year term; and at the 2022 Annual Meeting of Stockholders (and at each annual meeting thereafter), each director will be elected to a one-year term. In the event that the declassification proposal is not approved by our stockholders, at the Annual Meeting, each of the Class III directors will be elected to a three-year term. If approved, this phased approach will assure a smooth transition from a classified to a declassified board structure.
The Board has historically believed that a classified board structure promotes continuity and stability of strategy, ensures that a potential acquirer in a takeover situation negotiates with the Board, and facilitates the ability of the Board to focus on creating long-term stockholder value. The Board is aware that the current trend in corporate governance is leading away from classified boards in favor of electing all directors annually and also recognizes that a classified board structure may reduce directors' accountability to stockholders because such a structure does not enable stockholders to express a view on each director's performance by means of an annual vote. Moreover, many institutional investors believe that the election of directors is the primary means for stockholders to influence corporate governance policies and to increase accountability for implementing those policies.
In determining whether to support the declassification of the Board, the Board carefully considered the advantages and disadvantages of the current classified board structure and has determined that it is advisable and in the best interest of CIRCOR and its stockholders to declassify the Board.
The foregoing is a summary of the proposed amendment to the Certificate of Incorporation and is qualified in its entirety by reference to the full text of the amendment to the Certificate of Incorporation included in Exhibit A.
Board Recommendation
THE BOARD RECOMMENDS A VOTE "FOR" THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS.
Vote Required For Approval; Effect of Abstentions and Broker Non-Votes
A quorum being present, the affirmative vote of two-thirds of the outstanding shares entitled to vote at the Annual Meeting is necessary to approve this proposal. Abstentions and broker non-votes will have the same effect as a vote against this
Proposal 2.
PROPOSAL 3
ELECTION OF DIRECTORS
At the Annual Meeting, two Class III directors will be elected to serve until the annual meeting2021 Annual Meeting of Stockholders if the declassification of the Board is approved by the stockholders or until the 2023 Annual Meeting of Stockholders if the declassification of the Board is not approved by the stockholders, and in 2021 andeither case until each such director's successor is duly elected and qualified or until each such director's earlier death, resignation or resignation. removal.
The Nominating and Corporate Governance Committee has recommended, and the full Board has nominated, David F. Dietz, Tina M. Donikowski,John (Andy) O'Donnell and Douglas M. Hayes,Scott Buckhout, the current Class IIII directors, for election as directors at the Annual Meeting. Mr. Dietz has served as a Class I director since July 1999, Ms. Donikowski has served as a Class I director since March 2017, and Mr. Hayes has served as a Class I director since October 2002. In each case, their appointments resulted from extensive searches conducted by the Board utilizing the assistance of independent third-party retained search firms. Unless otherwise specified in the proxy, it is the intention of the
The persons named in the proxyas proxies intend to vote the shares represented by each properly executed proxy forproxies FOR the election of Mr. Dietz, Ms. Donikowski, and Mr. Hayes as directors. Eacheach of Mr. Dietz, Ms. Donikowski, and Mr. Hayes has agreedthe Board’s nominees unless you indicate on your proxy card a vote to stand for election and"WITHHOLD" your vote with respect to serve, if elected, as a director. If, however, any of Mr. Dietz, Ms. Donikowski, or Mr. Hayes fails to stand for election or is unable to accept election, the proxies will be voted for the election of such other person as the Board may recommend.nominees.
Board Recommendation
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES OF THE BOARD AS DIRECTORS OF THE COMPANY.
UNLESS OTHERWISE INSTRUCTED, PROXIESPROXY CARDS SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES OF THE BOARD.
Vote Required For ApprovalApproval; Effect of Abstentions and Broker Non-Votes
A quorum being present, each nominee shall be elected as a director of the Company if hesuch nominee receives the affirmative vote of a plurality of the votes cast.
cast at the meeting. Abstentions and broker non-votes will have no effect on this Proposal 3.
MANAGEMENT
Executive Officers and Key Employees
Our executive officers and key employees, and their respective ages and positions as of March 29, 2018,31, 2020, are as follows:
| Name | Age | Position |
| Scott Buckhout | President and Chief Executive Officer, and Director | |
| Sumit Mehrotra | President, Industrial Group | |
| Tony Najjar | President, Aerospace and Defense Group | |
| | President, Energy Group | |
| | ||
| Andrew Farnsworth | Senior Vice President and Chief Human Resources Officer | |
| Arjun Sharma | Senior Vice President, Business Development | |
| David F. Mullen | Senior Vice President, FP&A, Finance | |
| Gregory C. Bowen | 51 | Senior Vice President, Corporate Controller |
| Drew C. Adams | 50 | Vice President, |
| Tanya Dawkins | Vice President, Corporate Treasurer | |
Scott Buckhout. Mr. Buckhout joined CIRCOR as President and Chief Executive Officer and was appointed to the Board in April 2013. Prior to joining CIRCOR, Mr. Buckhout had served as President, Fire & Security at United Technologies Corporation (UTC), a diverse, multinational manufacturing company, since March 2011.company. He previously held a number of senior level positions at UTC, including President, Global Fire Products and President, Systems and Firefighting. Before joining UTC, Mr. Buckhout held a number of senior roles at Honeywell International Corporation in the Consumer Products and Friction Materials divisions. He spent five years in Europe for UTC and Honeywell, including as Vice President and General Manager, Consumer Products Group, Honeywell EMEA and Vice President and General Manager, Honeywell Friction Materials - Europe. He also previously worked in general management and strategy consulting roles at Booz Allen & Hamilton and The Boeing Company. Mr. Buckhout earned a Master of Business Administration in Operations & Finance from the J.L. Kellogg Graduate School of Management at Northwestern University, and a Bachelor of Science in Aerospace Engineering from Texas A&M University.
Sumit Mehrotra. Mr. Mehrotra was namedhas served as President, Industrial Group insince February 2018. Before assuming his current role, he had served as President, Advanced Flow Solutions Group from October 2016 to February 2018 and Senior Vice President, Global Supply Chain & Product Management from June 2015 to October 2016. Mr. Mehrotra joined CIRCOR in September 2013 as Vice President, Global Supply Chain, a role in which he was responsible for developing the global supply chain function for CIRCOR, including material planning, strategic sourcing, purchasing, and logistics, and continued in that role until June 2015. He had also assumed additional responsibilities for the Company's engineering and product management functions beginning in June 2015. Mr. Mehrotra joined CIRCOR from Honeywell International, a multinational manufacturing company, where, over 12 years, his career spanned multiple leadership roles in Engineering, Six Sigma, Advanced Manufacturing and Strategic Sourcing. Prior to joining CIRCOR, he served as Director, Strategic Sourcing Integration from April 2013 to September 2013 and Director, Sourcing Transformation from May 2011 to April 2013.for Honeywell Aerospace. He holds a Masters of Business Administration from Arizona State University, a Master of Science in Aerospace Engineering from the University of Cincinnati, and a Bachelor of Aeronautical Engineering from Punjab Engineering College, India.
Tony Najjar. Mr. Najjar was namedhas served as President, Aerospace and Defense Group insince February 2018. Before assuming his current role, he had served as Vice President, Aerospace and Defense in the Advance Flow Solutions Group from October 2016 to February 2018 and Vice President, Sales & Marketing, Aerospace and Defense Group, from April 2015 to October 2016. Before joining CIRCOR, Mr. Najjar served as Programs Manager, Business Development and Mergers & Acquisitions at
Rockwell Collins, a multinational manufacturing company, from October 2011 to April 2015. He has spent nearly 30 years in
the aerospace and defense industry in engineering, sales, and general management roles, including leadership positions at Rockwell Collins and Kaiser Aerospace. HeMr. Najjar holds both a Bachelor's Degreebachelor's degree and a Master of Science Degreedegree in Mechanical Engineering from Oklahoma State University and an MBA from Pepperdine University.
Andrew Farnsworth. Mr. Farnsworth was appointedhas served as Senior Vice President and Chief Human Resources Officer since joining CIRCOR in June 2015. Prior to joining CIRCOR, Mr. Farnsworth had acted as a human resources consultant sincefrom July 2014.2014 until May 2015. From October 2009 through June 2014, he served as the Group Human Resources Director of Unibail-Rodamco, a European commercial property company, based in Paris, France.company. He previously served as International Human Resources Director for Brocade Communications, Group Human Resources Director at Temenos, and Emerging Markets Human Resources Director for HP/Compaq covering Eastern Europe, Middle East and Africa. Before that, Mr. Farnsworth held a variety of senior operations and finance positions at Compaq and Digital Equipment Corporation in Europe and the United States. He holds a BA in Psychology and Social Relations from Harvard University and an MBA from the Tuck School of Business at Dartmouth College.
Arjun Sharma. Mr. Sharma has served as Senior Vice President, Business Development of the Company since joining the CompanyCIRCOR in 2009, overseeing the Company's mergers and acquisitions and strategic planning functions. Prior to joining the Company,CIRCOR, Mr. Sharma served as managing director at Global Equity Partners, from January 2009 to September 2009, a venture capital and strategy consulting firm, from January 2009 to September 2009, where he was responsible for executing equity investments and leading client engagements on acquisitions, divestitures, and growth strategy. From 2007 to 2008, he was Director of Mergers and Acquisitions at Textron Inc., a multi-industry company with a global network of aircraft, defense, industrial and finance businesses, where he was responsible for developing the company's M&A strategy and leading acquisition and divestiture transactions. From 2002 to 2007, Mr. Sharma held various positions of increasing responsibility at SPX Corporation, a Fortune 500 multi-industry company, culminating in his appointment as Director of Corporate Development. Mr. Sharma holds a Master of Science degree in Finance from Drexel University and a Bachelor of Commerce degree from Delhi University. Mr. Sharma is a graduate of the PLD program at Harvard Business School.
David F. Mullen. Mr. Mullen was promoted tohas served as Senior Vice President, FP&A, Finance and Investor Relations since September 2019. He previously served as Senior Vice President, Finance and Corporate Controller infrom July 2018 to September 2019, as Vice President, Finance and Corporate Controller from September 2015 afterto July 2018, and as Vice President for Finance Operations upon joining the Company in April 2015 as Vice President for Finance Operations.until September 2015. Prior to joining CIRCOR, Mr. Mullen served as Vice President, Finance, Anatomical Pathology Division of Thermo Fisher Scientific Inc., a leading provider of laboratory products and services, from November 2011 to April 2015. He previously held a number of senior finance positions at Thermo Fisher Scientific Inc. He started his career as an auditor with Deloitte & Touche and is a Certified Public Accountant and a Chartered Global Management Accountant. He continues to oversee the company’scompany's Financial Planning & Analysis function and supports Investor Relations and strategy activities. Mr. Mullen brings over 20 years of financial management experience and technical accounting expertise to the role. He holds a Bachelor of Science degree in Accounting from Fairfield University. Mr. Mullen has informed the Company of his intent to resign as Senior Vice President, FP&A, Finance and Investor Relations effective April 24, 2020.
Gregory C. Bowen. Mr. Bowen joined CIRCOR as Senior Vice President, Corporate Controller and Principal Accounting Officer in September 2019. He served as interim principal financial officer of the Company during March 2020. Prior to joining CIRCOR, Mr. Bowen was a consultant with Randstad Professionals from June 2019 until August 2019. Prior to that, Mr. Bowen served as Vice President, Corporate Controller of Dentsply Sirona, Inc., a dental equipment and consumables company, from April 2018 until January 2019, and as Assistant Corporate Controller of TE Connectivity, a global manufacturer and designer of connectivity and sensor products, from August 2012 until March 2018. Mr. Bowen also held finance leadership positions with Apex Tool Group, LLC and Stanley Black and Decker. Mr. Bowen began his career at Ernst & Young LLP. He
holds a Bachelor of Science degree in Accounting from the University of Maryland and earned his Certified Public Accounting certification from the State of Maryland.
Drew Adams. Mr. Adams joined CIRCOR as Vice President, Tax and Treasury in May 2019. He previously served as Vice President, Global Taxes at PerkinElmer, Inc. a provider of products, services and solutions for the diagnostics, life sciences and applied markets, from August 2009 to May 2019. Prior to PerkinElmer, Inc., Mr. Adams held senior finance positions at Medtronic/Covidien and Dell/EMC. Mr. Adams began his career at Coopers & Lybrand LLP. He is a licensed attorney and holds a Bachelor of Science in Finance and Economics from Boston College, a law degree from Suffolk University Law School, a Master in Science degree from Suffolk Sawyer School of Business, and a Master of Laws degree in Taxation from Boston University Law School.
Tanya Dawkins. TanyaMs. Dawkins was promoted to Vice President, Corporate Treasurer in March 2018. She previously served as Senior Director, Corporate Treasurer from September 2015 to March 2018 and2018. From 2001 to September 2015, Ms. Dawkins held a variety of senior finance positions at CIRCOR including Global Treasury Manager, from 2001 to September 2015.External Reporting Manager, and Corporate Accounting Manager. Prior to joining CIRCOR, Ms. Dawkins served as Director of Finance for GenRad Corporation (now part of Teradyne). Ms. Dawkins previously had spent 10 years at Digital Equipment Corporation in a variety of senior finance positions. She is a Certified Treasury Professional and holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, and an MBA from Simmons Graduate School of Management in Boston, and is a Certified Treasury Professional.Management.
Under the Company's bylaws,By-Laws, each of the officers of the Company holds office until the regular annual meeting of the Board of Directors following the next annual meeting of stockholders and until his or her successor is elected and qualified or until his or her earlier death, resignation or removal.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Review and Approval of Related Person Transactions
The Company's Code of Conduct includes our written policy that any proposed transaction, involving the Company or a subsidiary of the Company, in which a director or executive officer has direct economic or beneficial interest shall be analyzed and reviewed first by the Nominating and Corporate Governance Committee of the Board for potential conflicts, and then by all of the members of the Board.
Related Person Transactions
Compensation Committee Interlocks and Insider Participation
None of the Company's executive officers serves as a member of the board of directorsBoard or compensation committee of any entity that has one or more of its executive officers serving as a member of the Company's Compensation Committee. In addition, none of the Company's executive officers serves as a member of the compensation committee of any entity that has one or more of its executive officers serving as a member of the Board.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
In this section, we describe the executive compensation program for our named executive officersNamed Executive Officers (the "Named Executive Officers""NEOs"). Our intent is to help shareholdersstockholders understand the framework of our overall program, its objectives, and the rationale for the Compensation Committee’s compensation decisions. Our Named Executive OfficersNEOs for Fiscal Year 20172019 were as follows:
| Named Executive Officer | Title |
| Scott Buckhout | President and Chief Executive Officer |
| Sumit Mehrotra | President, Industrial Group |
| Lane Walker | President, Energy Group |
| Arjun Sharma | Senior Vice President, Business Development |
Executive Summary
Our BusinessBusiness: 2019 Performance Overview
CIRCOR designs, manufactures, and marketsis a leading provider of severe service flow control solutions and other highly engineered products and sub-systems for the oilIndustrial, Aerospace & gas, power generation, industrial,Defense and aerospace & defenseEnergy markets. We havedesign, manufacture and market differentiated technology products and sub-systems. CIRCOR has a diversified flow and motion control product portfolio with recognized, market-leading brands that fulfill ourits customers’ unique applicationmission critical needs. We arehave a global company with operationspresence and operate 20 major manufacturing facilities that are located in North America, Western Europe, Morocco, and India, among other locations. OurIndia. We sell our products are sold through over 800 distributors, or representatives, Engineering, Procurement and Construction ("EPC") companies, as well as directly to end-use customers. Ourend-users and original equipment manufacturers ("OEMs").
The Company has the following reportable business segments: Industrial ("Industrial Segment"), Energy ("Energy Segment" or "Energy") and Aerospace and Defense ("Aerospace and Defense Segment"). During 2019, we made the strategic goals include growing both organicallydecision to exit the Upstream Oil & Gas valve market served by our Energy Group. In addition, we sold other non-core Energy and through complementary acquisitions; simplifyingIndustrial businesses. As a result, in 2020 we combined the remaining Energy businesses into the Industrial Group, thus eliminating the Energy Group.
2019 was a mixed year for CIRCOR's end markets. Industrial markets were choppy given international trade tension and overall economic slowdowns during the year. In the Energy Group, the downstream and mid-stream markets served by our operations; achieving world class operational excellence;Refinery Valves and attracting and retaining top industry talent.
In 2017,2019 we operated throughdelivered on our integration and synergy commitments related to the Fluid Handling acquisition, most notably in Selling, General & Administrative synergy and margin expansion in our European Pumps businesses. We simplified CIRCOR with our decision to exit the Upstream Oil & Gas valve market, which included selling our Engineered Valves business and announcing the sale of our Distributed Valves business in our Energy segment, serving the oil & gas market,Segment. In addition, we sold our Reliability Services business in January 2019 and our Advanced Flow Solutions ("AFS") segment, servingInstrumentation and Sampling business in January 2020. Both divestitures were in the aerospaceEnergy group. Finally, in our Industrial Segment, we sold our non-core Spence & defense market as well as the power, process, and industrial markets. BeginningNicholson product lines. The divestitures simplified CIRCOR's portfolio, enabling management to focus on December 11, 2017, we also operated the newly acquired FH business.
Overall, 2019 was a transformational year for CIRCOR which has been expandedwe believe leaves us well-positioned to includedeliver increased shareholder value in the reliability services business we acquiredyears ahead.
2019 Financial Achievements (in thousands, except percentages)
The following table highlights certain metrics that are used as part of the FH acquisition, our Aerospace & Defense wegment, which includes CIRCOR's legacy aerospace and defense business and is expanded to include the navy defense business we acquired as part of the FH acquisition, and our Industrial segment, which includes CIRCOR's legacy industrial, power, and process business, as well as the industrial business we acquired as part of the FH acquisition.
| Business Segment | Net Sales | Free Cash Flow* | Adjusted Operating Margin** |
| CIRCOR (Overall including Corporate) | $964,313 | $11,725 | 11.4% |
| Energy | $240,982 | $(20,038) | 1.7% |
| Aerospace & Defense | $272,625 | $50,513 | 19.2% |
| Industrial | $450,706 | $54,483 | 11% |
* Free Cash Flow, a non-GAAP measure, is defined as net cash provided by declines in power, process,operating activities less cash purchases of property plant and industrial markets. Our restructuring actionsequipment plus proceeds from the sale of property plant and sales discipline significantly contributed to our mitigation ofequipment. Segment Free Cash Flow also excludes the impact of lower sales.cash payments or receipts for interest, income taxes and restructuring and special charges.
| Sales (millions) | Adjusted* Operating Income (millions) | Adjusted* Operating Margin | |
| CIRCOR | $662 | $52 | 7.8% |
| Energy | $348 | $31 | 8.8% |
| AFS | $278 | $37 | 13.4% |
| FH** | $36 | $5 | 15% |
**Adjusted Operating Margin ("AOM"), a non-GAAP measure, is defined as Adjusted Operating Income divided by Net Sales. Adjusted Operating Income is defined as GAAP operating income excluding intangible amortization and amortization of fair value step-ups of inventory and fixed assets from acquisitions completed subsequent toafter December 31, 2011, the impact of restructuring relatedrestructuring-related inventory write-offs, impairment charges and special charges or gains.
A reconciliation of the non-GAAP financial measures included above to the most directly comparable GAAP measures is set forth on Annex A hereto. The sum total of Adjusted Operating Income for the Energy segment, the AFS segment, and the FH segment exceeds CIRCOR Adjusted Operating Income dueExhibit B to corporate expenses totaling $22 million for 2017.
The Company’sCompany's financial results and overall business environment were considered when determining compensation paid for 2017,2019, as discussed below. Please see Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operationsin the Company’sCompany's Annual Report on Form 10-K for Fiscal Year 2019 for a more detailed description of the Company’sCompany's financial results.results
2019 Stockholder Engagement, Say-on-Pay Results & Program Changes
The Company rewardsregularly evaluates its compensation programs and considers the results of its most recent stockholder advisory vote on executive officers for their collective efforts to maintain and increase enterprise value. We have designedcompensation ("say-on-pay"), as well as feedback received directly from stockholders through our compensation program to align with this objective. To promote a collaborative culture,ongoing engagement.
At the Compensation Committee also considers internal pay equity in setting compensation levelsMay 2019 annual meeting of stockholders, we received say-on-pay support of approximately 96.6%. This result indicated continued strong support for the Company's executive officers,compensation program. The Company's shareholders also overwhelmingly approved a new equity incentive plan. Highlights of our executive compensation program include:
"Double-trigger" vesting provisions for equity awards. Beginning in 2019, 100% of equity awards granted to NEOs provide for double trigger vesting.
Annual incentive plans for business segments aligned to critical metrics. Group Presidents in our Energy, Aerospace and Defense, and Industrial segments were each measured on segment-specific performance metrics based 33.3% on each of Free Cash Flow, Net Sales and Adjusted Operating Margin (AOM). Corporate NEOs were measured on adjusted EPS (15% of score) and the incentive scores of the Energy, Aerospace and Defense and Industrial Groups each counting for 25% of the total incentive score. The Compensation Committee agreed to add Corporate Free Cash Flow as a metric for Corporate NEOs in 2019 counting for 10% of the incentive score.
Equity vehicle mix for NEOs aligned with long term objectives. Long-term incentives ("LTI") were granted during 2019 using 50% Performance Share Units ("PSUs"), 25% stock options and 25% Restricted Stock Units ("RSUs"). Mr. Buckhout's LTI awards continue to be granted as a mix of PSUs (50%) and stock options (50%). Maintaining RSUs in the equity mix of our other NEOs allows us to better manage our overall shareholder dilution levels relating to our equity plans while also supporting our leadership retention strategy.
Evolved PSU award program design. The Compensation Committee maintained pre-determined one-, two- and three-year cumulative goals for PSUs. In 2019, the Committee decided to replace Adjusted Return on Invested Capital ("ROIC") with Adjusted Free Cash Flow given the Company's long-term cash management focus. In 2019, Adjusted Free Cash Flow accounted for 50% of the weight and AOM accounted for 50% of the weight over a three-year performance period. Performance is assessed at the end of each year and the NEOs will progressively vest their shares each year based on results.
Going forward, we believe that managingplan to continue to engage with our stockholders and consider their perspectives regarding compensation and governance matters. The Compensation Committee's goal is to continue to win investor support for our compensation practices and policies.
2019 Compensation Highlights
Based on our performance, and consistent with the design of our program, the Compensation Committee made the following executive compensation decisions for fiscal 2019:
Base Salaries: The NEOs, except for Mr. Chahine (whose compensation was set in connection with him joining the Company in 2019), received base salary increases to better align their pay with our peer companies. Mr. Mehrotra received an increase of 18% in recognition of his expanded scope of responsibilities as President of the Industrial Group and to continue to bring his base salary to levels more appropriately aligned with the market. Mr. Sharma received an increase of 11% to more closely align his salary to market benchmarks.
Annual Short-Term Incentives: The Compensation Committee, using its discretion under the Short-Term Incentive Plan, did not award short-term incentive ("STI") payments to the NEOs for 2019.
Long Term Incentives (LTI): The NEOs received LTI awards designed to align with CIRCOR's long term priorities. Mr. Buckhout's LTI award consisted 50% of PSUs (linked 50% to Free Cash Flow generation and 50% to AOM expansion) and 50% of Stock Options. All other NEO LTI awards consisted of 50% of PSUs, 25% of Restricted Stock Units, and 25% of Stock Options.
Base salaries, target annual incentives and the grant date value of LTI awards for the achievementNEOs in 2019 in aggregate approximated the market median for our peer group, although there was variation in market position by executive due to factors including tenure, individual performance, and consideration of operating goals increases collaboration amongpast awards.
CEO Pay At-A-Glance (Target v. Realized)
The chart below shows 2017-2019 target and realized compensation for Mr. Buckhout. Target Total Direct Compensation represents base salary, target annual bonus, and grant date fair value of LTI awards or RSUs purchased under our executives. AttractingManagement Stock Purchase Plan ("MSP") during each year. Realized Compensation represents base salary, annual bonus actually paid in cash, and retaining a teamthe value realized on exercise (in the case of outstanding executives with complementary skills is onestock options) or vesting (in the case of PSUs or RSUs) of LTI awards or MSP RSUs during each year. Realized Compensation has substantially trailed Target Total Direct Compensation in each year, reflecting the rigor of our goal-setting process for annual bonus and PSU awards and the pay for performance nature of our overall executive compensation program.
Good Compensation Governance
The Compensation Committee continually evaluates the Company's constant goals.compensation policies and practices to ensure that they are consistent with good governance principles. Below are highlights of what we do and what we do not do:
| What We Do | What We Do Not Do | ||
| ü | We place the majority of weight on performance-based, at-risk, long-term compensation. | X | We do not provide any compensation-related tax gross-ups (except in connection with relocation expenses). |
| ü | We deliver rewards that are based on achieving long-term objectives and the creation of stockholder value. | X | We do not provide significant perquisites. |
| ü | We target total direct compensation at approximately the market median for our peer group. | X | We do not allow officers or directors to hedge Company stock. |
| ü | We maintain stock ownership guidelines for our directors and our executives, including our CEO and other NEOs. | X | We do not allow officers or directors to pledge Company stock. |
| ü | We have "double-trigger" change of control vesting of cash severance payments and new equity awards. | X | We do not reprice or replace out-of-the-money stock options without stockholder approval. |
| ü | Our Compensation Committee seeks advice from an independent compensation consultant. | X | We do not have contracts that guarantee employment with any executives (all employment is terminable-at-will). |
| ü | We maintain a clawback policy with respect to incentive-based cash and equity compensation. | X | We do not pay dividends on unvested PSUs; dividends accrue and are paid only if and when applicable performance criteria are achieved. |
| ü | We cap annual bonus payouts to eliminate potential windfalls for executives. | ||
| ü | We encourage executives to invest their cash incentives in the Company through the MSP. | ||
What Guides Our Program
Our Compensation Guiding Principles
The philosophy underlying our executive compensation program is one that rewardsto attract, retain, and motivate highly qualified and talented executives and reward the achievement of specific annual, long-term and strategic goals that promote the profitable growth of the Company and enhance shareholderstockholder value. Our pay-for-performance approach is a critical element in aligningTo this end, the compensation program withfollowing principles guide the maximizationstructure of value for stockholders. We also believe that aour program:
Link to business priorities and performance. A significant portion of our Named Executive Officers'an executive's total compensation should be "at risk," subject to the attainment of certain specific and measurable performance goals and objectives. For example, 80%We select performance metrics that are most directly tied to the creation of the target total directenterprise value and that our management team can meaningfully influence. As performance goals are met or exceeded, executives are rewarded commensurately; conversely, if goals are not met, actual earned compensation is lower.
Alignment of executives with stockholders' interests.Our compensation program should encourage our CEO and 59%executives to hold a meaningful amount of the target total directequity. In addition, we believe compensation ofto our other Named Executive Officers isexecutives should be based on achievinga balance of short- and long-term financial performance factors. This approach also supports our retention strategy and operating metrics or increasing the Company's stock price. We compensatepromotes our Named Executive Officers using a balanced combinationachievement-oriented culture.
Competitiveness of compensation elements. Metrics for financial and operating goals are selected with a view toward those that most enhance the enterprise value of the Company over time. We seek to recruit and retain executives who invest themselves in the long-term future of the Company and the interests of the stockholders.
Maintenance of Governance Standards. We believe that maintaining best-practice executive compensation governance standards is in the best interests of our stockholders and executives and critical to the ability to manage risk.
Elements of Compensation
| How It’s Paid | What It Does | How It Links to Performance | |
Cash (Fixed) | Provides a competitive fixed rate of pay relative to similar positions in the market, and enables the Company to attract and retain critical executive talent | Ÿ Based on |
| market levels | |||
Cash (At-Risk) | Focuses executives on achieving annual financial and strategic goals that enhance long-term stockholder value | Ÿ Tied to achievement of targets relating to AOM, Free Cash Flow, Net Sales and, |
| for our Corporate level NEOs, adjusted EPS Ÿ No payouts for performance below threshold Ÿ Award capped at 300% of target value, with the exception of Net Sales (capped at 200%) | |||
Equity (Variable) | Provides incentives for executives to execute on longer-term goals that promote the efficient use of capital and assets, especially when cyclical demand declines | Ÿ Tied to achievement of long-term financial targets and appreciation of CIRCOR's stock price | |
| PSUs | Rewards achievement of pre-determined financial goals measured over a three-year performance period | Ÿ Tied to achievement of targets relating to Free Cash Flow and AOM Ÿ Annual vesting over a three-year period based on the achievement of annual, cumulative goals Ÿ Lookback clause allows payout up to 100% for cumulative performance of 100% or above Ÿ Number of shares is capped at 200% of target | |
| Stock Options | Rewards for stock price appreciation | Ÿ In absence of positive stockholder returns from date of grant, award provides no value to recipient | |
| RSUs | Supports leadership retention strategy | Ÿ Paid in CIRCOR shares at vesting | |
How We Further Foster Stock Ownership and Strengthen Alignment with Stockowners
In order to more closely align the interests of our executives with those of our stockholders, our NEOs are also eligible to participate in the MSP, which is designed to encourage our NEOs to invest up to 100% of their own earned incentive compensation in equity of the Company.
The Compensation Committee approves the participants in the MSP. Participants are entitled to purchase RSUs under the MSP at a discount of 33% to the closing price of the Company's Common Stock the day annual LTI grants are issued using all or a portion of their pre-tax annual cash incentive award. RSUs purchased under the MSP vest in whole after a three-year period. Any NEO who departs the Company prior to vesting may be appropriate.
Total Pay Mix at Target
A significant portion of our NEOs' compensation is designed to be "at risk," subject to the attainment of specific and measurable performance goals and objectives. For example, as shown in the table below, 82% of the target total direct compensation of our CEO and 59% of the target total direct compensation of our other NEOs is allocated to a combination of PSUs, stock options and target bonus, and therefore based on achieving financial and operating metrics or increasing the Company's stock price.
The Company regularly evaluates its compensation programs and considersDecision-Making Process
The Role of the results of its most recent stockholder advisory vote on executive compensation (“say-on-pay”) as well as feedback received directly from stockholders through our ongoing engagement. AtCompensation Committee. The Compensation Committee oversees the May 2017 annual meeting, we received say-on-pay support of approximately 92%.
When making decisions regarding the compensation of the Named Executive Officers,NEOs, the Compensation Committee considers information from a variety of sources. The Compensation Committee also regularly assesses our incentive plan measures in light of current business context, relevance to stockholders, and alignment with peer company practices. The Compensation Committee analyzes both individual elements and total compensation for each of the Named Executive Officers.NEOs. While actual compensation reflects the Company's performance, the Company's goal is for total target compensation, as well as each element of total target compensation, to be at or around the median target compensation for executives with similar positions at our peer group companies (described in further detail below). The Compensation Committee also incorporates flexibility into its compensation programs and into the assessment process to respond to changing business needs, and to take into consideration individual performance, including the relative complexity and strategic importance of specific roles.
In setting meaningful performance goals for both our annual bonus programincentive plan and PSUs, we considerthe Compensation Committee carefully considers a number of factors, including the general economic and industry climate, anticipated customer spending, projected revenue from current contracts and renewals, and deals in the pipeline. Based on these factors, a range of performance scenarios is developed. Goals are then set at the threshold, target, and maximum performance levels with the target goals aligning with the Company’sCompany's operating plan.
Attracting and retaining a team of outstanding executives with stockholders’ interestscomplementary skills is one of the Company's priorities.
The Compensation Committee makes all final compensation and equity award decisions regarding our NEOs, except for the CEO, whose compensation is determined by the independent members of the full Board, based upon recommendations of the Compensation Committee.
The Role of Management. The CEO reviews his recommendations pertaining to other executives (non-NEO) pay with the Committee providing transparency and oversight. Decisions on non-NEO pay are made by the CEO. The CEO does not participate in the deliberations of the Committee regarding his own compensation.
The Role of the Independent Consultant. We believe that,The Compensation Committee engages an independent compensation consultant to alignprovide expertise on competitive pay practices, program design, and an objective assessment of any inherent risks of any programs. Pursuant to authority granted to it under its charter, the interestsCommittee has engaged Pearl Meyer as its independent consultant. Pearl Meyer reports directly to the Committee and does not provide any additional services to management. The Committee has conducted an independence assessment of our executivesPearl Meyer in accordance with thoseSEC rules.
The Role of our stockholders, ourMarket References - Peer Group Companies. Our executive compensation program should encourage our executives to hold a meaningful amountconsiders the compensation practices of equity. In addition, we believe compensation to our executives should be based on a balance of short-term and long-term financial performance factors. This approach also supports our retention strategy and promotes our achievement-oriented culture.
Peer group companies generally have similar business models (e.g., multiple product lines, significant concentration of international sales, manufacturing operations) and are within comparable size ranges (e.g., market capitalization, revenue). For the purposes of setting 2019 compensation, to be at or aroundand with the median target compensation for executives with similar positions at our Peersupport of Pearl Meyer, the Compensation Committee maintained the peer group companies (listed below) (the "Peer Group Companies. The Company incorporates flexibility into its compensation programsCompanies") in recognition of the Company's increased operating size and intocomplexity following the assessment process to respond to changing business needs, and to take into consideration individual performance, including the relative complexity and strategic importance of specific roles.
| Peer Group Companies for Setting 2019 Compensation | |||
| Standex International Corporation | |||
| NN, Inc. | |||
| Watts Water Technologies, Inc. | |||
The Committee also considered supplemental industry market survey data, as necessary to determine 2019 target compensation levels for our NEOs.
2019 Executive Compensation in Detail
As shownset forth above, in Alignment Between CEO Realizable Pay to Total Stockholder Return, CEO realizable pay is aligned with our performance relative to our peers. We believe this demonstrates that performance-basedthe principal elements of ourthe Company's executive compensation program consist of base salary, annual short-term incentives, a Management Stock Purchase Program and long-term incentives.
Base Salary
NEOs' base salaries are determined by evaluating factors such as the responsibilities and complexity of the position, the experience and performance of the individual, market data for similar roles, overall company performance, and internal equity within the Company.
At the beginning of each fiscal year, the Compensation Committee generally reviews and adjusts the base salaries for each of the Company's executives, with any adjustments to become effective on April 1st of the fiscal year. The NEOs received base salary increases for 2019 ranging between approximately 3.0% to 17.6%, to better align their pay with performance.the market.
| NEO | 2018 Year-End Base Salary | 2019 Year-End Base Salary | % Change |
| Scott Buckhout | $745,000 | $767,000 | 3.0% |
Chadi Chahine (1) | N/A | $420,000 | N/A |
| Sumit Mehrotra | $340,000 | $400,000 | 17.6% |
| Lane Walker | $410,000 | $422,300 | 3.0% |
| Arjun Sharma | $278,100 | $310,000 | 11.5% |
(1) Mr. Chahine joined CIRCOR on January 2, 2019.
Annual Incentive Plan
Target Award Opportunities. The 2019 annual incentive plan provided our NEOs the opportunity to earn a performance-based annual cash bonus. Actual bonus payouts depend on the achievement of pre-established performance objectives and can range from 0% to 300% of target award amounts (but not more than 200% for Net Sales performance goals), depending on the financial measure. Target annual award opportunities for the NEOs are approved by the Compensation Committee and are intended to be competitive in the market in which the Company competes for talent and reflect the level of responsibility of the role. They are, therefore, set at or around the median for comparable positions in the market. For 2019, target award amounts, which are stated as a percentage of base salary, were as follows:
| NEO | Target Award Opportunity (as % of base salary) |
| Scott Buckhout | 110% |
| Chadi Chahine | 60% |
| Sumit Mehrotra | 60% |
| Lane Walker | 60% |
| Arjun Sharma | 50% |
Performance Measures, Weightings and Set Goals
. Our incentive plans pay out to participants based on levels of performance against rigorous metrics established by the Board. The performance measures vary depending upon the role and responsibility of the NEO.
For 2019, annual incentive awards for Corporate NEOs (Messrs. Buckhout, Chahine, and Sharma) were based on the achievement of the following performance measures and weightings:
| Performance Measures | Weightings |
Adjusted EPS(1) | 15% |
| Energy Score | 25% |
| A&D Score | 25% |
| Industrial Score | 25% |
| Free Cash Flow | 10% |
(1) Adjusted EPS is defined as GAAP EPS excluding per share amounts related to intangible amortization and amortization of fair value step-ups of inventory and fixed assets from acquisitions completed after December 31, 2011, the impact of restructuring-related inventory write-offs, impairment charges and special charges or gains and the associated tax impacts of these items.
For purposes of calculating each Segment Score (for Energy, A&D and Industrial), segment-specific Free Cash Flow, Net Sales and Adjusted Operating Margin (AOM) are considered.
For 2019, the performance measures and weightings for each Segment Score were the following:
| Performance Measures | Weightings |
| Free Cash Flow | 33.3% |
| Net Sales | 33.3% |
| AOM | 33.3% |
The table below summarizes the Threshold, Target, Stretch and Above Stretch performance levels and the actual results for each performance measure for 2019. For actual performance between Threshold, Target, Stretch, and Above Stretch, bonus pool funding are determined by linear interpolation.
| Measure | Threshold | Target | Stretch | Above Stretch | Achievement Results |
| Adjusted EPS | $1.58 | $2.26 | $2.94 | $3.62 | $1.19 |
Energy Segment Net Sales(1) | $330.2M | $366.9M | $403.6M | N/A | $315.8M |
| Energy Segment Free Cash Flow | $19.0M | $27.2M | $35.3M | $43.4M | $(20.0)M |
| Energy Segment AOM | 6.4% | 9.2% | 12.0% | 14.7% | 1.7% |
A&D Segment Net Sales(1) | $220.1M | $244.5M | $269.0M | N/A | $275.1M |
| A&D Segment Free Cash Flow | $28.6M | $40.8M | $53.1M | $65.3M | $50.5M |
| A&D Segment AOM | 11.6% | 16.6% | 21.6% | 26.5% | 19.2% |
Industrial Segment Net Sales(1) | $434.0M | $482.2M | $530.4M | N/A | $461.4M |
| Industrial Segment Free Cash Flow | $43.6M | $62.3M | $80.9M | $99.62M | $54.5M |
| Industrial AOM | 9.0% | 12.9% | 16.8% | 20.7% | 11.0% |
| Free Cash Flow | $33.5M | $47.8M | $61.1M | $76.5M | $11.7M |
(1) Net Sales are capped at 200% of target.
The above performance measures include non-GAAP financial measures and will differ from amounts shown in the Company's financial statements. For reconciliation to the most comparable GAAP measure see Exhibit B.
Based on the outlook at the time the goals were set and with input from Pearl Meyer, the Compensation Committee concluded that these performance goals struck an appropriate balance in providing both a reasonable probability of attainment and sufficient rigor and motivation of superior performance. The Committee considered the probability of achievement of different levels of performance as well as the uncertainty concerning the Company's performance in 2019. Our track record of past payouts demonstrates that the metrics established for executives are meaningful targets that in many instances have not been met.
Annual Short-Term Incentive Plan:As described above, the Named Executive Officers participated in an annual incentive plan in 2017 that provided forPlan Results
Set forth below is a contingent bonus paid in cash. Targeted amounts were set as a percentagehistory of base salary for each Named Executive Officer and were tied to achievement of performance factors defined by the Company's 2017 operating plan. The plan was not funded on a metric if performance fell below a threshold level.
Management Stock Purchase Plan (MSP)
| 100% | |
Long-term incentives (LTI) are intended to provide executives with a continuing stake in the long-term success of the Company and to align their interests with those of stockholders. LTI awards are also used to attract, retain and motivate executives responsible for the Company's long-term success.
The Compensation Committee evaluates the LTI program annually relative to its objectives as well as practices within the Peer Group Companies. The 2019 program included a combination of PSUs, stock options and time-based RSUs. The Committee believes that using different types of awards provides balance to the Company's LTI program and mitigates risk.
Target LTI awarded to each of our NEOs in 2019 was expressed in dollar amounts based on grant date fair value and varied based on consideration of factors such as role, level of responsibility, performance and past award history:
| NEO | PSUs(2) | Stock Options(3) | RSUs(2) | Total Value | ||||||||
| Scott Buckhout | $ | 1,259,320 | $ | 1,375,000 | $0 | $ | 2,634,320 | |||||
Chadi Chahine(1) | $ | 190,000 | $ | 95,000 | $ | 245,000 | $ | 530,000 | ||||
| Sumit Mehtrotra | $ | 160,000 | $ | 80,000 | $ | 80,000 | $ | 320,000 | ||||
| Lane Walker | $ | 150,000 | $ | 75,000 | $ | 75,000 | $ | 300,000 | ||||
| Arjun Sharma | $ | 125,000 | $ | 62,500 | $ | 62,500 | $ | 250,000 | ||||
(1) Mr. Chahine received $190,000 in PSUs, $95,000 in stock options, and $95,000 in RSUs as part of his regular LTI plus an additional new-hire grant of RSUs with a grant date fair market value of $150,000 as new hire arrangement. The number of units for this award was determined based on the closing price of our Common Stock on the previous trading day before the grant date of January 2, 2019. This award will vest pro-rata over three years. (2) Award amounts for PSUs and RSUs were determined based on the closing price of our Common Stock on the previous trading day before the grant date of March 4, 2019 other than Mr. Chahine's new-hire grant and Mr. Buckhout's PSU grant. Mr. Buckhout's PSU grant was awarded on May 14, 2019 even though the number of units awarded was determined as if the grant had been made on March 4, 2019. (3) Individual share award amounts were calculated based on a Black-Scholes value of $11.84 per share. | ||||||||||||
The 2019 LTI program is outlined in the table below:
| Equity Vehicle | Weight | Payout | Metric | Performance Period | Vesting |
| PSUs | 50% | Below Threshold: 0% of Target Threshold: 0.01% of Target Target: 100% of Target Stretch: 200% of Target | Free Cash Flow: 50% Average AOM: 50% | 2019-2021 | Vests 1/3 annually over three-year performance period |
| Stock Options | 25% | 100% | N/A | N/A | Vests 1/3 annually; seven-year term |
| RSUs | 25% | 100% | N/A | N/A | Vests 1/3 annually |
A Closer Look at PSUs. The actual realizable value of PSUs granted in 2019 is based on cumulative performance over three years. For each performance year in the three-year performance period, cumulative goals are set for each performance metric (50% based on Free Cash Flow and 50% based on AOM). Performance is assessed at the end of each year and shares vest based on performance against the respective cumulative goal.
The PSUs will vest only if pre-established cumulative goals are met. A look-back clause was not applicable for AFS segment Net Sales, forintroduced in the PSU Program in 2019 which payout wasenables retroactive payouts of up to 100% if the cumulative performance in Years 2 and 3 is 100% or above. Maximum units are capped at 200% of Target if Stretch levelstarget.
For the first tranche of the 2019 PSUs (covering 2019), the Company's performance fell below the threshold for Free Cash Flow (0% payout) and came in above threshold for AOM (19.6% payout). Given that each metric weighs 50% in the calculation, only 9.8% of shares vested.
The following table outlines detailed performance targets and degree of achievement related to the first tranche of PSUs granted in 2019.
| Performance Measures | Performance Range | Actual Performance | % Payout | Shares Earned and Vested | ||
| Threshold | Target | Maximum | ||||
| Fiscal Year 2019 Free Cash Flow ($M) | 39.8 | 56.8 | 73.8 | 6.0 | 0% | 0 |
| Fiscal Year 2019 Average Operating Margin (AOM) | 6.5% | 9.3% | 12.1% | 7.1% | 19.6% | 2,141 |
With regard to the second tranche of the 2018 PSUs, the Company overachieved its cumulative target for Average ROIC (covering 2018 and 2019) but fell below its cumulative AOM target for this period. These targets were met.5.4% for Average ROIC and 9.1% for AOM. 90.3% of the second tranche of shares was earned by the Company's NEOs in 2019.
Special Restricted Stock Unit (RSU) Grants
The Compensation Committee approved special RSU grants for Messrs. Buckhout, Mehrotra and Sharma on March 4, 2020. These grants are linked to 2017-2019 Adjusted ROIC and half are linked to 2017-2019 Adjusted Operating Margin. Earned PSUs vest on the third anniversary of grant.
The table below summarizes the special RSU grants that were awarded to our peers.
Special Incentive Compensation - Lane Walker
The incentive compensation was developed using the above methodology:agreement is described below:
Incentive Compensation Agreement - Lane Walker Mr. Walker entered into an incentive agreement on November 14, 2019 in connection with the potential divestiture of CIRCOR's Distributed Valves business. Mr. Walker is eligible for a target bonus of $170,000 upon sale of the business. 50% of the bonus payout is based on achievement of AOI, Cash and Net Sales targets for the Distributed Valves business in 2020. 50% of the bonus is based on qualitative targets tied to supporting the sale of the business. Payout is capped at 100% of target. Should Mr. Walker accept a position with the buyer of the business, he would be entitled to accelerated vesting of his equity incentive awards. |
Long-Term Incentive Granting Practices
Most LTI awards are granted at the time of the annual grant in the first quarter of the year, although awards may be granted as part of the hiring process or in connection with a change in responsibility. Annual LTI grants are approved at a specified, regularly scheduled meeting of the Compensation Committee. The Compensation Committee approves the type and number of awards to be granted and the performance criteria for PSUs.
LTI awards granted during the courseyear have a grant date no earlier than the date of determining 2017 compensation for its Named Executive Officers,approval. Grants that require the committee also considered information compiled by its consultant from the 2017 Towers Watson General Industry Top Management Compensation Survey. This survey aggregated compensation data across a broad spectrumapproval of manufacturing companies and was used to help inform the Compensation Committee regarding market executive compensation levels, particularly for positions other than the CEO, EVPare typically reviewed and CFO, and Group Presidents.
Other Executive Compensation Committee asked Pearl Meyer to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the Compensation Committee does not believe our compensation program creates risks that are reasonably likely to have a material adverse effect on our business.Practices & Policies
The Compensation Committee evaluates the LTI program annually relative to its objectives as well as practices within the Peer Group Companies. The 2019 program included a combination of PSUs, stock options and time-based RSUs. The Committee believes that using different types of awards provides balance to the Company's LTI program and mitigates risk.
Target LTI awarded to each of our NEOs in 2019 was expressed in dollar amounts based on grant date fair value and varied based on consideration of factors such as role, level of responsibility, performance and past award history:
| NEO | PSUs(2) | Stock Options(3) | RSUs(2) | Total Value | ||||||||
| Scott Buckhout | $ | 1,259,320 | $ | 1,375,000 | $0 | $ | 2,634,320 | |||||
Chadi Chahine(1) | $ | 190,000 | $ | 95,000 | $ | 245,000 | $ | 530,000 | ||||
| Sumit Mehtrotra | $ | 160,000 | $ | 80,000 | $ | 80,000 | $ | 320,000 | ||||
| Lane Walker | $ | 150,000 | $ | 75,000 | $ | 75,000 | $ | 300,000 | ||||
| Arjun Sharma | $ | 125,000 | $ | 62,500 | $ | 62,500 | $ | 250,000 | ||||
(1) Mr. Chahine received $190,000 in PSUs, $95,000 in stock options, and $95,000 in RSUs as part of his regular LTI plus an additional new-hire grant of RSUs with a grant date fair market value of $150,000 as new hire arrangement. The number of units for this award was determined based on the closing price of our Common Stock on the previous trading day before the grant date of January 2, 2019. This award will vest pro-rata over three years. (2) Award amounts for PSUs and RSUs were determined based on the closing price of our Common Stock on the previous trading day before the grant date of March 4, 2019 other than Mr. Chahine's new-hire grant and Mr. Buckhout's PSU grant. Mr. Buckhout's PSU grant was awarded on May 14, 2019 even though the number of units awarded was determined as if the grant had been made on March 4, 2019. (3) Individual share award amounts were calculated based on a Black-Scholes value of $11.84 per share. | ||||||||||||
The 2019 LTI program is outlined in the table below:
| Equity Vehicle | Weight | Payout | Metric | Performance Period | Vesting |
| PSUs | 50% | Below Threshold: 0% of Target Threshold: 0.01% of Target Target: 100% of Target Stretch: 200% of Target | Free Cash Flow: 50% Average AOM: 50% | 2019-2021 | Vests 1/3 annually over three-year performance period |
| Stock Options | 25% | 100% | N/A | N/A | Vests 1/3 annually; seven-year term |
| RSUs | 25% | 100% | N/A | N/A | Vests 1/3 annually |
A Closer Look at PSUs. The actual realizable value of PSUs granted in 2019 is based on cumulative performance over three years. For each performance year in the three-year performance period, cumulative goals are set for each performance metric (50% based on Free Cash Flow and 50% based on AOM). Performance is assessed at the end of each year and shares vest based on performance against the respective cumulative goal.
The PSUs will vest only if pre-established cumulative goals are met. A look-back clause was introduced in the PSU Program in 2019 which enables retroactive payouts of up to 100% if the cumulative performance in Years 2 and 3 is 100% or above. Maximum units are capped at 200% of target.
For the first tranche of the 2019 PSUs (covering 2019), the Company's performance fell below the threshold for Free Cash Flow (0% payout) and came in above threshold for AOM (19.6% payout). Given that each metric weighs 50% in the calculation, only 9.8% of shares vested.
The following table outlines detailed performance targets and degree of achievement related to the first tranche of PSUs granted in 2019.
| Performance Measures | Performance Range | Actual Performance | % Payout | Shares Earned and Vested | ||
| Threshold | Target | Maximum | ||||
| Fiscal Year 2019 Free Cash Flow ($M) | 39.8 | 56.8 | 73.8 | 6.0 | 0% | 0 |
| Fiscal Year 2019 Average Operating Margin (AOM) | 6.5% | 9.3% | 12.1% | 7.1% | 19.6% | 2,141 |
With regard to the second tranche of the 2018 PSUs, the Company overachieved its cumulative target for Average ROIC (covering 2018 and 2019) but fell below its cumulative AOM target for this period. These targets were 5.4% for Average ROIC and 9.1% for AOM. 90.3% of the second tranche of shares was earned by the Company's NEOs in 2019.
For the 2017 PSUs, the Company's performance was below threshold for three-year average ROIC and below target for the three-year AOM target. These targets were 10% for average ROIC and 8.8% for AOM. As a result, 0% of PSUs were earned on ROIC and 26% of PSUs were earned related to the AOM metric. Given that the ROIC and AOM metrics are equally weighed at 50%, an average of 13.0% of the PSUs granted in 2017 vested in February 2020.
Special Restricted Stock Unit (RSU) Grants
The Compensation Committee approved special RSU grants for Messrs. Buckhout, Mehrotra and Sharma on March 4, 2020. These grants are in line with the interests ofCompany's 18-month Investor Plan (issued in June 2019) and the stockholders,critical focus the Company has adopted Stock Ownership Guidelines for executive officers.is placing on achieving this plan. These guidelines establishspecial grants have a 1-year vesting period and were awarded as an expectationadditional LTI measure to our NEOs on March 24, 2020.
The table below summarizes the special RSU grants that within a five-year period, each executive officer shall achieve and maintain an equity interestwere awarded to our NEOs in the Company at least equal to a specified multiple of such individual's annual base salary. The applicable multiples are as follows:March 2020.
| Arjun Sharma | $270,000 |
Special Incentive Compensation - Lane Walker
| Name | 2016 Year-End Base Salary | 2017 Year-End Base Salary | % Change | Rationale |
| Buckhout, Scott | $669,500 | $700,000 | 4.6% | Merit |
| Bhalla, Rajeev | $495,644 | $510,513 | 3.0% | Merit |
| Wiik, Erik | $410,000 | $418,200 | 2.0% | Merit |
| Mehrotra, Sumit | $270,000 | $270,000 | n/a | 2016 Promotion |
| Sharma, AJ | $270,000 | $270,000 | n/a | 2016 Promotion |
Mr. Buckhout, Mr. Bhalla, and Mr. Sharma | Mr. Wiik | Mr. Mehrotra | |||
| Measure | Weight | Measure | Weight | Measure | Weight |
| Energy Segment Score* | 35% | Energy Segment Adjusted Operating Income | 40% | AFS Segment Adjusted Operating Income | 40% |
| AFS Segment Score* | 25% | Energy Segment Adjusted Operating Margin | 35% | AFS Segment Net Sales | 35% |
| Adjusted EPS | 40% | Energy Segment Free Cash Flow | 25% | AFS Segment Free Cash Flow | 25% |
Incentive Compensation Agreement - Lane Walker Mr. Walker entered into an incentive agreement on November 14, 2019 in connection with the potential divestiture of | |
| $170,000 upon sale of the business. 50% of the bonus payout is based on achievement of AOI, Cash and Net Sales targets for the Distributed Valves business in 2020. 50% of the bonus is based on qualitative targets tied to supporting the sale of the business. Payout is capped at 100% of | |
Long-Term Incentive Granting Practices
| Measure | Threshold | Target | Stretch | Overachievement | Achievement |
| Adjusted EPS | $1.41 | $2.02 | $2.63 | $3.23 | $1.71M |
| Energy Segment Adjusted Operating Income | $28.1M | $40.2M | $52.3M | $64.3M | $30.1M |
| Energy Segment Adjusted Operating Margin | 7.6% | 10.8% | 14.0% | 17.3% | 8.7% |
| Energy Segment Free Cash Flow | $33.5M | $47.9M | $62.3M | $76.6M | $9.2M |
| AFS Segment Adjusted Operating Income | $34.1M | $42.6M | $51.1M | $59.6M | $39.5M |
| AFS Segment Net Sales | $250.7M | $278.6M | $306.5M | - | $274.5M |
| AFS Segment Free Cash Flow | $37.3M | $53.5M | $69.3M | $85.3M | $41.2M |
| Executive | Total Target Amount | Total Actual Base Incentive Amount Paid | Base Amount Paid as Percent of Target |
| Buckhout, Scott | $700,000 | $297,850 | 42.55% |
| Bhalla, Rajeev | $357,359 | $152,056 | 42.55% |
| Wiik, Erik | $250,920 | $47,825 | 19.06% |
| Mehrotra, Sumit | $148,500 | $93,110 | 62.70% |
| Sharma, AJ | $135,000 | $57,443 | 42.55% |
LTI awards granted during the MSPyear have a grant date no earlier than the date of approval. Grants that require the approval of the Compensation Committee are typically reviewed and approved at a discount of 33% to the closing priceregularly scheduled Compensation Committee meeting or by written consent in advance of the Company’s common stock two trading days afterindividual’s employment commencement or promotion date. For these awards, the announcementgrant date is the date of our annual results using all or a portionthe meeting if the individual receiving the grant has already commenced employment. If the individual has not yet commenced employment, the date of their pre-tax annual cash bonus. RSUs purchased undergrant is the MSP vest in whole after a three-year period. Any Namedbusiness day following the individual’s first day of employment.
Other Executive Officer who departs the Company prior to vesting may lose the benefits associated with the discounted purchase price of RSUs purchased under the MSP, as well as any further appreciation in stock price and accrued dividends associated with such RSUs.
Long-Term Incentive Awards
Long-term incentives (LTI) are intended to provide executives with a continuing stake in the long-term success of the Company and to align their interests with those of stockholders. LTI awards are also used to attract, retain and motivate executives responsible for the Company’sCompany's long-term success.
The Compensation Committee evaluates the LTI program annually relative to its objectives as well as practices within the Peer Group Companies. The 20172019 program included a combination of PSUs, stock options and PSUs.time-based RSUs. The Committee believes that using different types of awards provides balance to the Company’sCompany's LTI program and mitigates risk.
Target LTI awarded to each of our Named Executive OfficersNEOs in 20172019 was expressed in dollar amounts based on grant date fair value and varyvaried based on consideration of factors such as role, level of responsibility, performance and past award history:
| NEO | PSUs(2) | Stock Options(3) | RSUs(2) | Total Value | ||||||||
| Scott Buckhout | $ | 1,259,320 | $ | 1,375,000 | $0 | $ | 2,634,320 | |||||
Chadi Chahine(1) | $ | 190,000 | $ | 95,000 | $ | 245,000 | $ | 530,000 | ||||
| Sumit Mehtrotra | $ | 160,000 | $ | 80,000 | $ | 80,000 | $ | 320,000 | ||||
| Lane Walker | $ | 150,000 | $ | 75,000 | $ | 75,000 | $ | 300,000 | ||||
| Arjun Sharma | $ | 125,000 | $ | 62,500 | $ | 62,500 | $ | 250,000 | ||||
(1) Mr. Chahine received $190,000 in PSUs, $95,000 in stock options, and $95,000 in RSUs as part of his regular LTI plus an additional new-hire grant of RSUs with a grant date fair market value of $150,000 as new hire arrangement. The number of units for this award was determined based on the closing price of our Common Stock on the previous trading day before the grant date of January 2, 2019. This award will vest pro-rata over three years. (2) Award amounts for PSUs and RSUs were determined based on the closing price of our Common Stock on the previous trading day before the grant date of March 4, 2019 other than Mr. Chahine's new-hire grant and Mr. Buckhout's PSU grant. Mr. Buckhout's PSU grant was awarded on May 14, 2019 even though the number of units awarded was determined as if the grant had been made on March 4, 2019. (3) Individual share award amounts were calculated based on a Black-Scholes value of $11.84 per share. | ||||||||||||
The 20172019 LTI program is outlined in the table below:
| Vehicle | Proportion of Target LTI Value | Payout | Metric | Performance Period | Design | |||||
| Equity Vehicle | Weight | Payout | Metric | Performance Period | Vesting | |||||
| PSUs | 50% | Below Threshold: 0% of Target Threshold: 0.01% of Target Target: 100% of Target Stretch: 200% of Target | Free Cash Flow: 50% Average AOM: 50% | 2019-2021 | Vests 1/3 annually over three-year performance period | |||||
| Stock Options | 50% | 100% | N/A | Vest 1/3 annually | 25% | 100% | N/A | Vests 1/3 annually; seven-year term | ||
| PSUs | 50% | Below Threshold: 0% of Target Threshold: 0.01% of Target Target: 100% of Target Stretch: 200% of Target | Average Adjusted ROIC (50%); Average Adjusted Operating Margin (50%) | 2017-2019 | Vesting per achievement of specific performance objectives for each measure | |||||
| RSUs | 25% | 100% | N/A | Vests 1/3 annually | ||||||
A Closer Look at PSUs.The aboveactual realizable value of PSUs granted in 2019 is based on cumulative performance measures include non-GAAP financial measures and will differ from amounts shownover three years. For each performance year in the Company’s financial statements. Additional informationthree-year performance period, cumulative goals are set for each performance metric (50% based on Free Cash Flow and 50% based on AOM). Performance is above in How We Measure Performanceassessed at the end of each year and Set Goals.shares vest based on performance against the respective cumulative goal.
The Company uses Adjusted Operating Margin as a consistent factor leading to higher enterprise values across business cycles. When cyclical demand for our products declines, management is motivated to use price discipline so that when demand recovers, earningsPSUs will vest only if pre-established cumulative goals are maximized. We use Adjusted ROIC as a metric to promote efficient use of our capital and assets. Strict management of working capital, attractive returns from capital expenditures and efficient use of fixed assets are all critical components for ensuring long-term enterprise value. The use of ROIC as a metric incorporates all of these factors.
For the first tranche of the 2019 PSUs (covering 2019), the Company's performance fell below the threshold for Free Cash Flow (0% payout) and came in above threshold for AOM (19.6% payout). Given that each metric weighs 50% in the calculation, only 9.8% of shares vested.
The following table outlines ourdetailed performance targets and degree of achievement for ourrelated to the first tranche of PSUs granted in 2015,2019.
| Performance Measures | Performance Range | Actual Performance | % Payout | Shares Earned and Vested | ||
| Threshold | Target | Maximum | ||||
| Fiscal Year 2019 Free Cash Flow ($M) | 39.8 | 56.8 | 73.8 | 6.0 | 0% | 0 |
| Fiscal Year 2019 Average Operating Margin (AOM) | 6.5% | 9.3% | 12.1% | 7.1% | 19.6% | 2,141 |
With regard to the second tranche of the 2018 PSUs, the Company overachieved its cumulative target for which the performance goals consisted of Fiscal Year 2017 AdjustedAverage ROIC (covering 2018 and 2019) but fell below its cumulative AOM target for this period. These targets were 5.4% for Average ROIC and Fiscal Year 2017 Adjusted Operating Margin, each weighted 50%. We did not achieve our Fiscal Year 2017 threshold performance levels, and none9.1% for AOM. 90.3% of the 2015second tranche of shares was earned by the Company's NEOs in 2019.
For the 2017 PSUs, the Company's performance was below threshold for three-year average ROIC and below target for the three-year AOM target. These targets were 10% for average ROIC and 8.8% for AOM. As a result, 0% of PSUs were earned or vested.on ROIC and 26% of PSUs were earned related to the AOM metric. Given that the ROIC and AOM metrics are equally weighed at 50%, an average of 13.0% of the PSUs granted in 2017 vested in February 2020.
Special Restricted Stock Unit (RSU) Grants
The Compensation Committee approved special RSU grants for Messrs. Buckhout, Mehrotra and Sharma on March 4, 2020. These grants are in line with the Company's 18-month Investor Plan (issued in June 2019) and the critical focus the Company is placing on achieving this plan. These special grants have a 1-year vesting period and were awarded as an additional LTI measure to our NEOs on March 24, 2020.
The table below summarizes the special RSU grants that were awarded to our NEOs in March 2020.
| Performance Metrics | Performance Range | Actual Performance | Payout Factor | Shares Earned and Vested as % of Target | ||
| Threshold | Target | Stretch | ||||
| Fiscal Year 2017 Adjusted ROIC | 14.5% | 16.0% | 17.0% | 5.2% | 0% | 0 |
| Fiscal Year 2017 Adjusted Operating Margin | 11.0% | 12.0% | 13.0% | 7.8% | 0% | 0 |
| NEO | Special RSU Grant Value (dollars) |
| Scott Buckhout | $625,000 |
| Sumit Mehrotra | $150,000 |
| Lane Walker | NA |
| Arjun Sharma | $270,000 |
Special Incentive Compensation - Lane Walker
Mr. Walker entered into a special incentive compensation arrangement with CIRCOR in November of 2019 in connection with the Company's effort to divest CIRCOR's Distributed Valves business. He did not receive a Special RSU grant as a consequence.
The incentive compensation agreement is described below:
Incentive Compensation Agreement - Lane Walker Mr. Walker entered into an incentive agreement on November 14, 2019 in connection with the potential divestiture of CIRCOR's Distributed Valves business. Mr. Walker is eligible for a target bonus of $170,000 upon sale of the business. 50% of the bonus payout is based on achievement of AOI, Cash and Net Sales targets for the Distributed Valves business in 2020. 50% of the bonus is based on qualitative targets tied to supporting the sale of the business. Payout is capped at 100% of target. Should Mr. Walker accept a position with the buyer of the business, he would be entitled to accelerated vesting of his equity incentive awards. |
Long-Term Incentive Granting Practices
Most LTI awards are granted at the time of the annual grant in the first quarter of the year, although awards may be granted as part of the hiring process or in connection with a change in responsibility. Annual LTI grants are approved at a specified, regularly scheduled meeting of the Compensation Committee. The Compensation Committee approves the type and number of awards to be granted and the performance criteria for PSUs.
LTI awards granted during the year have a grant date no earlier than the date of approval. Grants that require the approval of the Compensation Committee are typically reviewed and approved at a regularly scheduled Compensation Committee meeting or by written consent in advance of the individual’s employment commencement or promotion date. For these awards, the grant date is the date of the meeting if the individual receiving the grant has already commenced employment. If the individual has not yet commenced employment, the date of grant is the business day following the individual’s first day of employment.
Other Executive Compensation Practices & Policies
Stock Ownership Guidelines
To further align the interests of the executive officers of the Company with the interests of the stockholders, the Company has adopted Stock Ownership Guidelines for executive officers. These guidelines establish an expectation that, within a five-year period, each NEO shall achieve and maintain an equity interest in the Company at least equal to a specified multiple of such individual's annual base salary. The applicable multiples are as follows:
| Position | Target |
| Chief Executive Officer | 5x annual base salary |
| Chief Financial Officer | 3x annual base salary |
| Other NEOs | 2x annual base salary |
In calculating an individual's equity interest, credit is given for (i) the value of actual shares of Common Stock owned beneficially, (ii) the before-tax value of all vested stock options, and (iii) the before-tax value of all outstanding RSU awards (including those which the individual has received in lieu of bonus compensation). The calculation of an individual's equity interest, however, does not include the value of any outstanding equity awards subject to risk of forfeiture by virtue of performance.
An annual review is conducted by our Nominating and Corporate Governance Committee to assess compliance with the guidelines. As of February 13, 2020, our NEOs met their applicable ownership guidelines, or, for NEOs who have been with the Company for less than five years, were on track to achieve their ownership guidelines by the applicable target compliance date.
Clawback Policy
Under our clawback policy, if our Board of Directors determines that an officer engaged in fraud or willful misconduct that resulted in a restatement of the Company's financial results, then the Board may review all performance-based compensation awarded to or earned by that officer on the basis of performance during the fiscal periods materially affected by the restatement. If, in the view of our Board of Directors, the performance-based compensation would have been lower if it had been based on the restated financial results, the Board of Directors may, to the extent permitted by applicable law, seek recoupment from that officer of any portion of such performance-based compensation as it deems appropriate after a review of all relevant facts and circumstances. Any recoupment under this policy may be in addition to, and shall not otherwise limit, any other remedies that may be available to the Company under applicable law, including disciplinary actions up to and including termination of employment.
Insider Trading, Anti-Hedging & Anti-Pledging Policies
We maintain an insider trading policy that prohibits hedging the economic risk of ownership of our stock by all directors, executive officers and certain designated employees. No person who is considered an "insider" of the Company, which includes each of our NEOs and directors, may directly or indirectly sell any securities of the Company that are not owned by the person at the time of the sale (short sale). Such persons also may not purchase or sell puts, calls, options or other derivative instruments in respect of our securities at any time without the approval of the Company's Clearance Officer. We also do not allow officers or directors to pledge Company stock.
Risk Assessment and Mitigation of Compensation Policies and Practices
The Compensation Committee has reviewed our incentive compensation programs, discussed the concept of risk as it relates to our compensation program, considered various mitigating factors, and reviewed these items with its independent consultant, Pearl Meyer. In addition, our Compensation Committee asked Pearl Meyer to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the Compensation Committee does not believe our compensation program creates risks that are reasonably likely to have a material adverse effect on our business.
Other Benefits
The Company maintains a defined contribution 401(k) plan in which substantially all of our U.S. employees, including our Named Executive Officers,NEOs, are eligible to participate. We also have implementedmaintain a nonqualified 401(k) excessdeferred compensation plan to provide benefits, at the Company's discretion, that would otherwise be provided under the qualified 401(k) plan to certain participants but for the imposition of certain maximum statutory limits imposed on qualified plan benefits (for example, annual limits on eligible pay and contributions). Company employees, including the Named Executive Officers, who reach the maximum limits in the qualified 401(k) plan will generally be eligible for the 401(k) excess plan. In addition, our employees receive enhanced benefits under our 401(k) plan. Although the Company typically makes a discretionary contribution on behalf of each participant equal to a percentage of the participant’s compensation during the recently concluded fiscal year (regardless of whether the participant contributes to the plan), no discretionary contribution was made in 2017. In addition, the Company makes an additional matching contribution on behalf of each participant equal to 50% of the first 5% of compensation contributed to the plan by the participant.
We also provide our executive officersNEOs with a limited number of perquisites as part of their compensation arrangements, which we consider to be reasonable and consistent with competitive practice. These perquisites include annual car allowances and financial counseling/tax preparation services, which, in total, comprise a de minimis part of the Named Executive Officer'sNEO's target total direct compensation.
In order to attract and retain key executives, the Company has entered into severance and change of control agreements with our executive officers.
The agreements are intended to support management continuity and align with market practice. The change of control agreements are intended to maintain focus on stockholder value creation in the event of an actual or threatened change of control. Pursuant to Company policy, the Company does not provide tax gross-ups in connection with any compensatory arrangements. As a result, we do not have any change of control agreements that provide for tax gross-ups. More detail is provided below in "Severance and Other Benefits Uponupon Termination of Employment or Change of Control."
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (Section 162(m)) generally disallows a federal tax deduction to public companies for compensation paid in excess of $1 million for any taxfiscal year to specified executive officers to the extent that the compensation to sucha company's chief executive officer exceeds $1 million. Underor specified other current or former executive officers. However, in the rules in effectcase of tax years commencing before 2018, compensation that qualified as "performance-based compensation" under Section 162(m) ofexempted qualifying performance-based compensation from the Internal Revenue Codededuction limit if certain requirements were met. Section 162(m) was deductible without regard to this limitation. Effective January 1, 2018,amended in December 2017 by the Tax Cuts and Jobs Act of 2017 generally eliminatedto eliminate the exemption for performance-based compensation (other than with respect to payments made pursuant to certain "grandfathered" arrangements entered into prior to November 2, 2017). While the Company's stockholder approved incentive plans were previously structured to provide that certain awards could be made in a manner intended to qualify for the performance-based compensation exemption, under Section 162(m), subjectthat exemption is no longer available (other than with respect to a special rule that grandfathers certain awards and agreements that were in effect at November 2, 2017. To date, the Internal Revenue Service has not issued guidance interpreting the Tax Cuts and Jobs Act of 2017. While"grandfathered" arrangements as noted above). In addition, while the Compensation Committee intended that certain incentive awards granted to our Named Executive OfficersNEOs on or prior to November 2, 2017 be deductible as "performance-based compensation,"compensation" and has assessed the possibility that certain awards will be grandfathered from the changes made by the Tax Cuts and Jobs Act, it cannot be sure ofguarantee that result.
The Compensation Committee believeshas taken the potential impact of the Tax Cuts and Jobs Act into consideration when approving payout amounts for performance periods ending on December 31, 2019. The Committee expects in the future to authorize compensation in excess of $1 million to NEOs that tax deductibility is only one of several relevant considerations in setting compensation, and that the tax deduction limitation shouldwill not be permitted to compromisedeductible under Section 162(m) when it believes doing so is in the Compensation Committee's ability to structure its compensation to provide benefits tobest interests of the Company that outweigh the potential benefit of the tax deduction. Accordingly, the Committee may approve compensation that is not deductible for federal income tax purposes in the future.
and its stockholders.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION AND
OTHER PAYMENTS TO THE NAMED EXECUTIVE OFFICERS
The following sections provide a summary of cash and certain other amounts forearned by the NEOs in Fiscal Year 20172019 (and the preceding two fiscal years) to the Named Executive Officers.. Except where noted, the information in the Summary Compensation Table generally pertains to compensation to the Named Executive OfficersNEOs for Fiscal Year 2017. Therefore, we2019. We encourage you to read the following tables closely. The narratives preceding the tables and the footnotes accompanying each table are important parts of each table. Also, we encourage you to read this section in conjunction with the Compensation Discussion and Analysis above.
Summary Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) (3) | Option Awards ($) (4) | Non-Equity Incentive Plan Compensation ($) (5) | All Other Compensation($) (6) | Total ($) (7) | |||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | |||||||
Scott Buckhout (7) President and Chief Executive Officer | 2017 | 676,539 | — | 1,182,692 | 1,080,000 | 297,850 | 14,267 | 3,251,348 | |||||||
| 2016 | 664,250 | — | 1,093,184 | 952,500 | 408,045 | 16,251 | 3,134,230 | ||||||||
| 2015 | 636,542 | — | 703,207 | 700,000 | 9,302 | 26,999 | 2,076,050 | ||||||||
Rajeev Bhalla (7) Executive Vice President, Chief Financial Officer | 2017 | 499,075 | 50,000 | 341,904 | 272,000 | 202,056 | 22,131 | 1,387,166 | |||||||
| 2016 | 493,027 | — | 481,814 | 375,852 | 211,459 | 21,846 | 1,583,998 | ||||||||
| 2015 | 480,291 | — | 400,480 | 400,000 | 4,868 | 36,855 | 1,322,494 | ||||||||
Erik Wiik (7) President, Energy Group | 2017 | 411,892 | — | 114,278 | 102,500 | 47,825 | 20,512 | 697,007 | |||||||
| 2016 | 407,308 | — | 165,779 | 100,000 | 145,283 | 20,160 | 838,530 | ||||||||
| 2015 | 318,462 | 200,000 | 212,305 | — | 49,966 | 10,877 | 791,610 | ||||||||
Sumit Mehrotra (7) President, Industrial Group | 2017 | 270,000 | — | 115,678 | 74,500 | 93,110 | 136,818 | 690,106 | |||||||
| 2016 | 233,095 | — | 110,485 | 50,000 | 56,859 | 77,878 | 528,317 | ||||||||
Arjun Sharma (7) Senior Vice President, Business Development | 2017 | 270,000 | 50,000 | 167,919 | 65,000 | 107,443 | 14,746 | 675,108 | |||||||
| 2016 | 229,922 | — | 172,431 | 100,083 | 65,676 | 18,782 | 586,894 | ||||||||
| 2015 | 217,457 | — | 96,204 | 65,500 | 1,408 | 22,240 | 402,809 | ||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) (3) | Option Awards ($) (4) | Non-Equity Incentive Plan Compensation ($) (5) | All Other Compensation($) (6) | Total ($) | |||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | |||||||
Scott Buckhout President and Chief Executive Officer | 2019 | 761,077 | — | 1,259,320 | 1,375,000 | — | 13,449 | 3,408,846 | |||||||
| 2018 | 732,885 | — | 1,416,261 | 1,450,000 | 878,152 | 15,361 | 4,492,659 | ||||||||
| 2017 | 676,539 | — | 1,182,692 | 1,080,000 | 297,850 | 14,267 | 3,251,348 | ||||||||
Chadi Chahine (7) Senior Vice President, Chief Financial Officer | 2019 | 402,231 | — | 285,000 | 95,000 | — | 25,117 | 807,348 | |||||||
Sumit Mehrotra President, Industrial Group | 2019 | 383,846 | — | 240,000 | 80,000 | — | 371,533 | 1,075,379 | |||||||
| 2018 | 323,846 | — | 228,681 | 50,000 | 167,290 | 517,725 | 1,287,542 | ||||||||
| 2017 | 270,000 | — | 115,678 | 74,500 | 93,110 | 136,818 | 690,106 | ||||||||
Arjun Sharma Senior Vice President, Business Development | 2019 | 301,412 | — | 187,500 | 62,500 | — | 25,762 | 577,174 | |||||||
| 2018 | 275,919 | — | 294,889 | 40,500 | 149,002 | 20,847 | 781,157 | ||||||||
| 2017 | 270,000 | 50,000 | 167,919 | 65,000 | 107,443 | 14,746 | 675,108 | ||||||||
Lane Walker President, Energy Group | 2019 | 418,989 | — | 225,000 | 75,000 | — | 28,204 | 747,193 | |||||||
| 2018 | 220,769 | 170,000 | 467,510 | — | 142,206 | 60,533 | 1,061,018 | ||||||||
| (1) | |
| (2) | Reflects the grant date fair value of performance-based restricted stock units |
| Named Executive Officer | Grant Date Fair Value of PSUs | Grant Date Fair Value of MSP RSUs | Grant Date Fair Value of Time RSUs | Total |
| Scott Buckhout..................................................... | $1,080,000 | $102,692 | $— | $1,182,692 |
| Rajeev Bhalla....................................................... | $322,000 | $19,904 | $— | $341,904 |
| Erik Wiik.............................................................. | $102,500 | $11,778 | $— | $114,278 |
| Sumit Mehrotra.................................................... | $74,500 | $45,142 | $— | $119,642 |
| Arjun Sharma....................................................... | $115,000 | $52,919 | $— | $167,919 |
| NEO | Grant Date Fair Value of PSUs | Grant Date Fair Value of Time RSUs | Total |
| Scott Buckhout....................................................... | $1,259,320 | $— | $1,259,320 |
| Chadi Chahine....................................................... | $190,000 | $95,000 | $285,000 |
| Sumit Mehrotra...................................................... | $160,000 | $80,000 | $240,000 |
| Arjun Sharma......................................................... | $125,000 | $62,500 | $187,500 |
| Lane Walker........................................................... | $150,000 | $75,000 | $225,000 |
| (3) | Included in this column is the grant date fair value of the target number of PSUs granted to each |
| Named Executive Officer | Target Number of PSUs | Grant Date Fair Value of Target Number of Performance RSUs | Maximum Number of PSUs | Grant Date Fair Value of Maximum Number of Performance RSUs | ||||
| NEO | Target Number of PSUs | Grant Date Fair Value of Target Number of PSUs | Maximum Number of PSUs | Grant Date Fair Value of Maximum Number of PSUs | ||||
| Scott Buckhout.......................... | 17,708 | $1,080,000 | 35,416 | $2,160,000 | 40,887 | $1,259,320 | 81,774 | $2,518,640 |
| Rajeev Bhalla............................ | 5,280 | $322,000 | 10,560 | $644,000 | ||||
| Erik Wiik................................... | 1,681 | $102,500 | 3,362 | $205,000 | ||||
| Chadi Chahine........................... | 5,652 | $190,000 | 11,304 | $380,000 | ||||
| Sumit Mehrotra......................... | 1,222 | $74,500 | 2,444 | $149,000 | 4,758 | $160,000 | 9,516 | $320,000 |
| Arjun Sharma............................ | 1,886 | $115,000 | 3,772 | $230,000 | 3,717 | $125,000 | 7,434 | $250,000 |
| Lane Walker............................... | 4,461 | $150,000 | 8,922 | $300,000 | ||||
| The target value of PSUs awarded in | |
| (4) | Reflects the aggregate grant date fair value of stock options granted under the Equity Incentive Plan. For a discussion of the assumptions related to the calculation of the amounts in this column, please refer to Note 11 |
| (5) | Reflects the amounts earned under our annual cash bonus plan by each |
| NEO | Year | Percentage of Annual Incentive Used to Purchase RSUs | Amount of Bonus for Year | Amount of Bonus Used to Purchase RSUs | Number of Purchased RSUs | ||
| Scott Buckhout | 2019 | 65% | — | — | — | ||
| 2018 | 50% | $878,152 | $439,076 | 19,486 | |||
| 2017 | 70% | $297,850 | $208,495 | 7,301 | |||
| Chadi Chahine | 2019 | 50% | — | — | — | ||
| Sumit Mehrotra | 2019 | 100% | — | — | — | ||
| 2018 | 100% | $167,290 | $167,290 | 7,089 | |||
| 2017 | 100% | $93,110 | $93,110 | 3,209 | |||
| Arjun Sharma | 2019 | 100% | — | — | — | ||
| 2018 | 100% | $149,002 | $149,002 | 6,612 | |||
| 2017 | 100% | $107,443 | $107,443 | 3,762 | |||
| Lane Walker | 2019 | 25% | — | — | — | ||
| 2018 | —% | — | — | — | |||
| Named Executive Officer | Year | Percentage of Annual Incentive Used to Purchase RSUs | Amount of Bonus for Year | Amount of Bonus Used to Purchase RSUs | Number of Purchased RSUs |
| Scott Buckhout | 2017 | 70% | $297,850 | $208,495 | 7,301 |
| 2016 | 70% | $408,045 | $285,632 | 6,989 | |
| 2015 | 70% | $9,302 | $6,512 | 249 | |
| Rajeev Bhalla | 2017 | 20% | $202,056 | $40,411 | 1,415 |
| 2016 | 20% | $211,459 | $42,292 | 1,034 | |
| 2015 | 20% | $4,868 | $974 | 37 | |
| Erik Wiik | 2017 | 50% | $47,825 | $23,913 | 837 |
| 2016 | 50% | $145,283 | $72,642 | 1,777 | |
| 2015 | 50% | $49,966 | $24,983 | 958 | |
| Sumit Mehrotra | 2017 | 100% | $93,110 | $93,110 | 3,209 |
| 2016 | 100% | $56,859 | $51,742 | 1,266 | |
| Arjun Sharma | 2017 | 100% | $107,443 | $107,443 | 3,762 |
| 2016 | 100% | $65,676 | $65,676 | 1,607 | |
| 2015 | 100% | $1,408 | $1,408 | 54 | |
| Under our MSP, the purchase price for RSUs is 67% of the closing price of our | |
| (6) | See |
| (7) | Mr. Chahine served as Senior Vice President, Chief Financial Officer from January 2, 2019 to March 17, 2020. The |
| Name | Perquisites and Other Personal Benefits ($) (1) | Tax Preparation and Financial Planning ($) | Insurance Premiums ($) (2) | Relocation Payments ($) (3) | Payments Relating to Employee Savings Plan ($) (4) | Other ($) (5) | Total ($) | Perquisites and Other Personal Benefits ($) (1) | Tax Preparation and Financial Planning ($) | Insurance Premiums ($) (2) | Relocation Payments ($) (3) | Payments Relating to Employee Savings Plan ($) (4) | Other ($) (5) | Total ($) |
| Scott Buckhout...................... | — | 1,275 | 1,346 | — | 6,750 | 4,896 | 14,267 | — | — | 2,174 | — | 11,200 | 75 | 13,449 |
| Rajeev Bhalla........................ | 12,000 | 1,925 | 1,346 | — | 6,750 | 110 | 22,131 | |||||||
| Erik Wiik............................... | 12,000 | — | 1,346 | — | 6,750 | 416 | 20,512 | |||||||
| Chadi Chahine........................ | 11,539 | 980 | 1,398 | — | 11,200 | — | 25,117 | |||||||
| Sumit Mehrotra...................... | 8,400 | 2,180 | 644 | 78,170 | 5,205 | 42,219 | 136,818 | 8,400 | 2,351 | 1,004 | 351,275 | 8,271 | 231 | 371,532 |
| Arjun Sharma........................ | 8,400 | — | 644 | — | 4,587 | 1,115 | 14,746 | 8,400 | 6,567 | 1,004 | — | 9,672 | 119 | 25,762 |
| Lane Walker............................ | 12,000 | 4,000 | 1,004 | — | 11,200 | — | 28,204 | |||||||
