SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A14-A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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| ☐ | Preliminary Proxy Statement |
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| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Under Rule l4a-l2 |
STANDARD MOTOR PRODUCTS, INC.
(Name of Registrant as Specified in its Charter)
N/A |
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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20192021 Proxy Statement
and
Notice of Annual Meeting of StockholdersShareholders
To Be Held on May 16, 201921, 2021
STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
April 16, 201921, 2021
To Our StockholdersShareholders:
YouWe are cordially invitedpleased to invite you to attend the Annual Meeting of StockholdersShareholders of Standard Motor Products, Inc. toThe Annual Meeting will be held online at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178,www.virtualshareholdermeeting.com/SMP2021 on Thursday,Friday, May 16, 201921, 2021 at 2:00 p.m. (Eastern Daylight Time).
At the Annual Meeting, you will be asked to: (a) elect ten directors; (b) ratifyto vote on the appointment of KPMG LLP asproposals described in the Company’s independent registered public accounting firm for our 2019 fiscal year; and (c) consider and vote upon a non-binding, advisory resolution approving the compensation of our named executive officers.
The formalenclosed Notice of Annual Meeting of Stockholders, theShareholders and Proxy Statement and the Proxy Card are enclosed. We haveStatement. You will also find enclosed a copyform of proxy to facilitate voting your shares and our Annual Report to Stockholders,Shareholders, which includes our Form 10-K for our 20182020 fiscal year.
YOUR VOTE IS IMPORTANT! The Board of Directors appreciates and encourages stockholdershareholder participation in the Company’s affairs and invites you to attendparticipate remotely in the Annual Meeting in person. It is important, however,Meeting. If you cannot participate remotely, we encourage you to ensure that your shares beare represented at the Annual Meeting and for that reason, we ask that whether or not you expect to attend the Annual Meeting, you takeby taking a moment to complete, sign date and return the enclosed proxy using the accompanying proxy in the enclosed postage-paidpostage-prepaid envelope, or to transmit your voting instructions via the Internetonline or by telephone. Unless you provide specifictelephone by following the instructions as to how to vote, brokers may not vote your shares in connection with the election of directors or the advisory voteprinted on the compensation of our named executive officers.enclosed proxy.
On behalf of the Board of Directors, I would like to thank you for your continued support of the Company. I look forward to seeing you at the Annual Meeting.
| Sincerely, |
| |
| /s/ Lawrence I.Eric P. Sills |
| |
| Lawrence I. Sills |
| Chief Executive Chairman of the BoardOfficer & President |
Important Notice Regarding the Availability of Proxy Materials for the StockholderShareholder Meeting to Be Held on May 16, 2019—21, 2021—this Proxy Statement and the Annual Report are available at www.smpcorp.comir.smpcorp.com under “Investor Relations—Financial Reporting—“Financial Reports—Proxy Statements” and “—Annual Reports.”
STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
Notice of Annual Meeting of StockholdersShareholders
To Be Held on May 16, 201921, 2021
To Our StockholdersShareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of StockholdersShareholders of STANDARD MOTOR PRODUCTS, INC. (the “Company”) will be held online at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178, www.virtualshareholdermeeting.com/SMP2021on Thursday,Friday, May 16, 201921, 2021 at 2:00 p.m. (Eastern Daylight Time). The Annual Meeting will be held for the following purposes:
| 1. | To elect tennine directors of the Company, all of whom shall hold office until the next annual meeting of stockholdersshareholders and until their successors are duly elected and qualified; |
| 2. | To approve the Standard Motor Products, Inc. Amended and Restated 2016 Omnibus Incentive Plan;
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| 3. | To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019;2021; |
| 3.4. | To consider and vote upon a non-binding, advisory resolution approving the compensation of our named executive officers; and |
| 4.5. | To transact such other business as may properly come before the Annual Meeting. |
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors has fixed the close of business on April 5, 20199, 2021 as the record date for the determination of stockholdersshareholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof.
Whether or not you plan to attend the Annual Meeting remotely, please vote your shares online or by usingtelephone by following the Internet or telephone to transmit your voting instructions printed on the enclosed proxy, or by completing, signing and datingreturning the proxy in the enclosed postage-prepaid envelope. The enclosed proxy which is solicited by the Board of Directors of the Company, and return the proxy in the pre-addressed envelope, to which no postage need be affixed if mailed within the United States.
Company.
| By Order of the Board of Directors |
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| /s/ Carmine J. Broccole |
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| Carmine J. Broccole |
| Senior Vice President General Counsel |
| and & Secretary |
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Long Island City, New York | |
April 16, 201921, 2021 | |
STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
Shareholders | 1 |
| 1 |
| 4 |
| 4 |
| 9 |
| 10
|
Ratification of the Appointment of KPMG LLP (Proposal No. 2)3) | 1018 |
| 1019 |
4) | 1119 |
| 1220 |
Corporate Governance | 1422 |
| 14 |
| 1523 |
| 1826 |
| 27 |
The Board’s Role in Risk Oversight | 1927 |
| 1928 |
and Corporate Social Responsibility | 2028 |
Prohibition on Hedging or Pledging of Company Stock | 2029 |
Independence | 2029 |
| 30
|
Policy on Poison Pills | 2232 |
| 2332 |
| 2332 |
| 2534 |
| 2534 |
| 2534 |
| 2635 |
| 2636 |
| 2736 |
| 2737 |
| 28 |
| 29 |
| 32 |
| 36 |
| 37 |
Compensation Process | 38 |
| 3841 |
Actions in 2020 | 3944 |
Clawback Policy | 3947 |
Stock Ownership Guidelines | 47 |
Termination-Based Compensation | 3947 |
| 48 |
Perquisites and Other Benefits | 48 |
Cautionary Statement | 48 |
Report of the Compensation and Management Development Committee | 4049 |
| 4049 |
| 4049 |
2020 | 4049 |
2020 | 4251 |
2020 | 4352 |
2020 | 4453 |
2020 | 4454 |
| 4554 |
| 4554 |
| 4655 |
| 4856 |
| 4857 |
| 4958 |
| 5058 |
| 5159 |
| 5160 |
| 60 |
Other Matters | 5260 |
Appendix A: Standard Motor Products, Inc. Amended and Restated 2016 Omnibus Incentive Plan | A-1 |
STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
Proxy Statement for Annual Meeting of StockholdersShareholders To Be Held on May 16, 201921, 2021
This Proxy Statement is furnished in connection with the solicitation of proxies by our Board of Directors for use at our Annual Meeting of
StockholdersShareholders to be held on May
16, 201921, 2021 or at any adjournment thereof. This Proxy Statement is being distributed to shareholders on or about April
16, 2019,21, 2021, along with a proxy and our
20182020 Annual Report.
Frequently Asked Questions About the Annual Meeting
Where and when is the Annual Meeting?
OurDue to the public health impact of the COVID-19 pandemic, and our concern for the health and safety of our shareholders, meeting participants and communities, the Annual Meeting will be held in a virtual-only format. The Annual Meeting will be held online at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178, www.virtualshareholdermeeting.com/SMP2021on Thursday,Friday, May 16, 201921, 2021 at 2:00 p.m. (Eastern Daylight Time).
Shareholders who participate remotely will be able to listen to a broadcast of the meeting, submit questions and vote their shares during the course of the meeting. Please refer to the question “How do I vote my shares?” below for information on how to vote.
Instructions on how to attend and participate remotely in our Annual Meeting are available at www.virtualshareholdermeeting.com/SMP2021. To log into the meeting website, you will need to enter the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you encounter any technical difficulties, please call the technical support numbers identified on the meeting website.
Who can vote at the Annual Meeting?
You are entitled tomay vote your shares of Common Stock either by proxy or online at our Annual Meeting if you were a stockholdershareholder at the close of business on April 5, 2019,9, 2021, the record date for our Annual Meeting.
The total number of shares of Common Stock outstanding and entitled to vote on April 5, 20199, 2021 was 23,074,254.22,833,298. Holders of Common Stock have the right to one vote for each share registered in their names as of the close of business on the record date.
What is the quorum requirement for the Annual Meeting?
In order to conduct business at our Annual Meeting, our By-lawsBy-Laws require the presence in person or by proxy of stockholdersshareholders holding a majority of the outstanding shares of Common Stock entitled to vote. Shareholders who participate remotely by means of electronic communication will be deemed to be present in person at the meeting. If a quorum is not present, a vote cannot occur, and our Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum. Proxies voted as “withheld,” abstentions and broker non-votes are counted for the purpose of determining whether a quorum is present.
How do I know whether I am a registered shareholder or a beneficial shareholder?
You are a registered shareholder if your shares of Common Stock are registered directly in your name with our transfer agent, Computershare Investor Services.
You are a beneficial shareholder if your shares are held in an account at a bank, broker or other holder of record (also referred to as holding shares “in street name”).
What is the effect of not casting my vote?
If you are a registered shareholder and you do not vote your shares, your shares will not be taken into consideration in determining the outcome of the matters that are acted upon.
If you are a beneficial shareholder and you do not instruct your bank or broker how to vote your shares, under the rules of the New York Stock Exchange, your bank or broker will only be able to vote your shares on the ratification of KPMG LLP as our independent registered public accounting firm (Proposal No. 2)3). Your bank or broker will not be able to vote your shares on the election of directors (Proposal No. 1), the resolution to approve the Standard Motor Products, Inc. Amended and Restated 2016 Omnibus Plan (Proposal No. 2), or the advisory resolution to approve the compensation of our named executive officers (Proposal No. 3)4), resulting in “broker non-votes” on those items.
How do I vote my shares?
Registered shareholders may vote in one of four ways:
Vote by Mail: Complete, sign date and return your proxy card in the enclosed postage-paid envelope.
Vote in PersonOnline at the Meeting: Attend the Annual Meeting online, or sendappoint a personal representative with an appropriate proxy, to vote by ballot at the meeting.
Vote by InternetOnline before the Meeting: Go to the website listedidentified on your proxy card, to vote by Internet. You will need toand follow the instructions stated on your proxy card and the website.website to vote.
Vote by Telephone: Call the telephone number identified on your proxy card to vote by telephone. You will need to follow the instructions on your proxy card and the voice prompts.
If you vote by Internetonline or by telephone, your electronic vote authorizes the named proxies to vote on your behalf in the same manner as if you completed, signed dated and returned your proxy card. If you vote by Internetonline or by telephone, you do not need to return your proxy card.
If you are a beneficial shareholder, you will receive instructions from your bank, broker or other holder of record that you must follow in order to have your shares voted.If you wish to vote in person at the meeting, you must obtain a legal proxy from the bank, broker or other holder of record that holds your shares, and bring it, or other evidence of stock ownership, with you to the meeting.
Can I change my vote after I have voted?
Proxies are revocable at any time before they are exercised at our Annual Meeting. If you are a registered shareholder and you originally voted by mail, Internet or telephone, you may revoke your proxy by:
| · | completing and returning a timely and later-dated proxy card, or using the Internet or telephone to timely transmit your later voting instructions; |
| · | appearing at our Annual Meeting and voting in person; or |
| · | contacting Carmine J. Broccole, Secretary of the Company, at the following address to notify him that your proxy is revoked: |
voting during the course of the Annual Meeting; orcontacting Carmine J. Broccole, Secretary of the Company, at the following address to notify him that your proxy is revoked:
Standard Motor Products, Inc.
37-18 Northern Blvd.
Long Island City, NY 11101
Email: financial@smpcorp.com
Fax: 718-784-3284
If you are a beneficial shareholder, you must follow the directions provided by your bank, broker or other holder of record to change or revoke any prior voting instructions.
What are my voting options and how does management recommend that I vote?
What are my voting options and how does the Board recommend that I vote? |
Proposal | | Voting Options | | Board of Director’s Recommendation |
| | | | |
1. Election of Directors | | For All, Withhold All or For All Except Any Individual Nominee | | For All |
| | | | |
2. RatificationApproval of the appointment of KPMG LLPStandard Motor Products, Inc. Amended and Restated 2016 Omnibus Incentive Plan | | For, Against or Abstain | | For |
| | | | |
3. Ratification of the appointment of KPMG LLP | | For, Against or Abstain | | For |
| | | | |
4. Advisory Vote on the Compensation of our Named Executive Officers | | For, Against or Abstain | | For |
In the absence of instructions, proxies will be voted in accordance with the recommendation of the Board of Directors of the Company with respect to Proposals No. 1 through 3,4, and in accordance with the best judgment of the individuals named as proxies with respect to any other matter properly brought before the meeting.
What vote is required to approve of each proposal?
Proposal No. 1: Nominees receiving a plurality of the votes cast will be elected as directors.
Proposals No. 2-32-4: The number of votes cast FOR (or in favor of the proposal) must exceed the number of votes cast AGAINST the proposal. Only those votes cast FOR or AGAINST a proposal will be counted to determine the results of the vote. Abstentions and broker non-votes will not count as votes cast.
Your vote on Proposal No. 34 is advisory, meaning it will not be binding on the Board of Directors or the Company; however, the Board will review the voting results and take it into consideration when making future decisions regarding executive compensation.
Who will pay the expenses of this proxy solicitation?
The Company will pay all expenses in connection with the solicitation of proxies by our Board of Directors for use at our Annual Meeting. We will also pay banks, brokers or other holders of record their out-of-pocket and reasonable clerical expenses incurred in sending our proxy materials to beneficial owners for the purpose of obtaining their proxies.
How will the Company solicit proxies?
We will primarily solicit proxies by mail; however, certain of our directors, officers or employees may solicit by telephone, electronically or by other means of communication. Our directors, officers and employees will receive no additional compensation for any such solicitation. We do not expect to engage any paid solicitors to assist us in the solicitation of proxies.
Proposal No. 1
Our Board of Directors recommends that you vote “FOR ALL” of our director nominees.
At our Annual Meeting, tenour shareholders will have the opportunity to vote to elect nine directors are to be elected to hold office until our next annual meeting of stockholdersshareholders and until their successors are duly elected and qualified. All nominees are currently directors of the Company.
Our Board of Directors is currently comprised of eleventen members. In February 2019, Frederick D. Sturdivant elected to2021, Roger M. Widmann, our director and Chair of the Compensation and Management Development Committee (“Compensation Committee”), announced that he will retire at the end of his current term of office. Following Mr. Sturdivant’sWidmann’s decision, upon the recommendation of the Nominating and Corporate Governance Committee (“Governance Committee”), the Board of Directors decreased the size of the Board from eleventen to tennine members, and appointed Alisa C. Norris to serve as Chair of the Compensation Committee, effective as of the date of our 20192021 Annual Meeting.
Information Regarding Nominees
The following paragraphs provide information, as of the date of this Proxy Statement, about each nominee. The information includes each director’s age, all positions they hold, their principal occupation and business experience for at least the past five years, and the names of other publicly held companies of which they currently serve as a director or for which they have served as a director at any time during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. Each nominee has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment to serve the Company and our Board. Finally, we value their significant experience on other public company boards of directors and board committees. Our nominees, collectively, possess diverse professional experiences and skills, including business leadership, automotive, finance and accounting, government and public policy, information technology and cyber security, supply chain management and logistics, and human capital management.
The Governance Committee reviews each candidate’s qualifications to determine whether the candidate possesses any of the specific qualities and skills that are desired in members of the Board, taking into account diversity in professional experience, skills and background, race, gender, disability, ethnicity, nationality, religion, and sexual orientation.
Each person listed below has consented to be named as a nominee and agreed to serve if elected. If any of those named are not available for election at the time of the Annual Meeting, discretionary authority will be exercised to vote for substitutes unless the Board chooses to reduce the number of directors. Management is not aware of any circumstances that would render any nominee listed below unavailable.
You canmay read more about the process our Nominating and Corporate Governance Committee undertook to select our director nominees on page 1624 under the heading “Nominating and Corporate Governance Committee.”
Lawrence I. Sills Executive Chairman of the Board
Age 7981 Director Since 1986 | Mr. Sills has served as our Executive Chairman of the Board since March 2016,January 2021, and as a director of the Company since 1986. Mr. Sills has also served as our Executive Chairman of the Board from March 2016 to January 2021, Chairman of the Board from December 2000 to March 2016, Chief Executive Officer from December 2000 to March 2016, our President and Chief Operating Officer from 1986 to 2000, and our Vice President of Operations from 1983 to 1986. Mr. Sills is the father of Eric P. Sills, a director of the Company and our Chief Executive Officer and President. Mr. Sills holds an MBA from Harvard Business School and a BA from Dartmouth College. |
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| We believe Mr. Sills’ qualifications to serve as a director and our Executive Chairman of the Board include his wealth of experience and the business understanding that Mr. Sills has obtained from over 50 years of working in various capacities at the Company and in the automotive industry. Mr. Sills’ knowledge of all aspects of the Company’s business and its history, position him well to serve as our Executive Chairman. In addition, we believe Mr. Sills’ qualifications to sit on our Board include his and his family’s significant ownership interest in the Company, which serves to align his interests with the interests of our other stockholders,shareholders, and the fact that he represents the third generation of the Sills family which established the Company in 1919. |
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William H. Turner Presiding Independent Director Age 7981 Director Since 1990 | Mr. Turner has served as our Presiding Independent Director since January 2006, and as a director of the Company since May 1990. Formerly, Mr. Turner served as a director of Ameriprise Financial, Inc., Volt Information Sciences, Inc., Franklin Electronic Publishers, Inc. and New Jersey Resources Corporation. In May 2015, Mr. Turner was elected as Chairman of the Board of Trustees of Bloomfield College, and since 1985, he has served as Chairman of the Board of Trustees of the International College, Beirut, Lebanon. From 2008 to 2010, Mr. Turner served as Acting Dean of the Business School at Montclair State University, and from 2004 to 2008, he served as the Dean of the College of Business at Stony Brook University. Mr. Turner served as the Senior Partner of Summus Ltd., a consulting firm, from 2002 to 2004. From 1997 to 2002, he served in various capacities at PNC Bank NJ, including President, Chief Executive Officer and Chairman Northeast Region. He was President and Co-Chief Executive Officer of Franklin Electronic Publishers, Inc. from 1996 to 1997. Prior to that time, he was the Vice Chairman of Chase Manhattan Bank and its predecessor, Chemical Banking Corporation. Mr. Turner completed the Advanced Management Program from Harvard Business School, and he holds an MBA from New York University and a BA from Trinity College. |
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| We believe Mr. Turner’s qualifications to serve as a director and our Presiding Independent Director include his extensive executive leadership and financial and managerial experience. His service as Chief Executive Officer and Vice Chairman at several banking institutions make him a valuable asset to our Board, and has provided him with a wealth of knowledge in dealing with financial and accounting matters. The depth and breadth of his exposure to complex financial issues at other large corporations, as well as the deep understanding of our Company that he has acquired from serving on our Board for more than 2930 years, make him a valuable advisor. |
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John P. Gethin Director Age 7072 Director Since 2016 | Mr. Gethin has served as a director of the Company since March 2016, and as our Chief Operating Officer from 2000 to March 2016, and our President from 2000 to February 2015. From 1997 to 2000, Mr. Gethin served as our Senior Vice President of Operations. From 1998 to 2003, he served as the General Manager of our Temperature Control Division. From 1995 to 1997, Mr. Gethin was our Vice President and General Manager of EIS Brake Parts Division (a former business unit of ours). Mr. Gethin holds a BBA from Texas Christian University. |
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| We believe Mr. Gethin’s qualifications to serve as a director include his extensive knowledge of our Company, and in particular, his experience developing, directing and improving upon our organizational processes and operational efficiencies for more than 19 years. Mr. Gethin has also acquired extensive knowledge of the automotive aftermarket industry, and hishaving worked in the industry for more than 49 years. His ability to leverage his knowledge and experience to provide unique insight to our Board makes him well qualified to serve as a member of the Board. |
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Pamela Forbes Lieberman Director Age 6567 Director Since 2007 | Ms. Forbes Lieberman has served as a director of the Company since August 2007. Ms. Forbes Lieberman also serves as a director and Chair of the Audit Committee of John B. Sanfilippo & Son, Inc., a leading processor and distributor of nut products, and on the strategic advisory board of Morrow Sodali, LLC, a professional services firm. Previously, Ms. Forbes Lieberman served as a director of A.M. Castle & Co. and VWR Corporation. From March 2006 to August 2006, Ms. Forbes Lieberman served as the interim Chief Operating Officer of Entertainment Resource, Inc. Prior to such time, Ms. Forbes Lieberman served as President and Chief Executive Officer and member of the Board of Directors of TruServ Corporation (now known as True Value Company) and prior to that as TruServ’s Chief Operating Officer and Chief Financial Officer. Prior to joining TruServ, Ms. Forbes Lieberman held Chief Financial Officer positions at ShopTalk Inc., The Martin-Brower Company, LLC, and Fel-Pro, Inc. and served as an automotive industry consultant. Ms. Forbes Lieberman, a Certified Public Accountant, began her career at PricewaterhouseCoopers LLP. Ms. Forbes Lieberman holds an MBA from Kellogg School of Management, Northwestern University, and a BS from the University of Illinois. |
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| We believe Ms. Forbes Lieberman’s qualifications to serve as a director include her many years of executive experience, including serving as Chief Executive Officer, Chief Operating Officer and Chief Financial Officer for distribution and automotive companies. She brings demonstrated management ability at senior levels to the Board and insights into the operational requirements of a large company. In addition, her knowledge of public and financial accounting matters, logistics, and business strategy provides valuable insight to our Board. |
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Patrick S. McClymont Director Age 4951 Director Since 2017 | Mr. McClymont has served as a director of the Company since February 2017. Mr. McClymont also serves as the Executive Vice President and Chief Financial Officer of IMAX Corporation, and as a director of Volunteers of America, Greater New York Chapter. Prior to joining IMAX, Mr. McClymont served as the Executive Vice President and Chief Financial Officer of Sotheby’s from October 2013 to December 2015, and as a Partner and Managing Director of Goldman, Sachs & Co., where he was a member of the Investment Banking Division from 1998 to October 2013. Mr. McClymont holds a Master of Business Administration from The Amos Tuck School, Dartmouth College, and a BS, with distinction, from Cornell University. |
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| We believe Mr. McClymont’s qualifications to serve as a director include his expertise in financial matters and corporate strategy, as well as his business experience at public and private institutions in the areas of accounting, tax, treasury, finance, investor relations and risk management. His extensive knowledge in these areas, and his familiarity with the automotive industry, both domestically and abroad, make him a valuable advisor to our Board. |
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Joseph W. McDonnell Director Age 6769 Director Since 2012 | Mr. McDonnell has served as a director of the Company since October 2012. Mr. McDonnell is also a Professor of Public Policy and Management at the University of Southern Maine’s Edmund S. Muskie School of Public Service and a Faculty Fellow and member of the board of the University of Southern Maine’s Confucius Institute. Mr. McDonnell previously served at the University of Southern Maine as Provost and Vice President of Academic Affairs from August 2014 to August 2015, and as Dean of the College of Management and Human Service from July 2011 to August 2015. Prior to his work at the University of Southern Maine, he served as Interim Dean of the College of Business at Stony Brook University and as the President and Chief Executive Officer of the New York International Commerce Group, Inc., which provides services for companies doing business in China. Mr. McDonnell holds an Executive Program Certificate from Harvard Business School, a PhD in Communications from the University of Southern California, and an MA and BA from Stony Brook University. |
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| We believe Mr. McDonnell’s qualifications to serve as a director include his significant experience in academics focusing on business administration and the development of management-level personnel, as well as the various leadership positions he held at foreign and domestic companies prior to becoming an academic administrator. His expertise in doing business in China and in consulting management on various strategic initiatives provides valuable insight to our Board. |
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Alisa C. Norris Director Age 4951 Director Since 2012 | Ms. Norris has served as a director of the Company since October 2012. Ms. Norris also serves as a director of Vita-Mix Corporation and Healthy Bytes, Inc. From 2016 to 2020, Ms. Norris served as the Chief Marketing and Communications Officer at JDRF International.International, where she was responsible for marketing, communications and digital growth, leading the organization’s digital transformation. Prior to joining JDRF International, Ms. Norris served as the Chief Marketing Officer of R.R. Donnelley & Sons Company from April 2013 to January 2015, where she was responsible for all aspects of marketing and communications. Prior to joining R.R. Donnelley, Ms. Norris served as the Chief People Officer of Opera Solutions, LLC, a leading predictive analytics company, where she was responsible for global staff operations and human capital management. Prior to Opera Solutions, Ms. Norris served as a Senior Vice President and was a founding member of Zeborg, Inc., and as a strategy consultant for A.T. Kearney and Mitchell Madison Group. Ms. Norris holds an MBA from Harvard Business School and a BA from Trinity College, where she was Phi Beta Kappa. |
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| We believe Ms. Norris’ qualifications to serve as a director include her significant experience in defining and implementing corporate governance structures and growth strategies, and in developing and managing operational resources in the areas of marketing and communications. Her experience of more than 22 years of providing consulting services to financial services, information technology and media, and office technology firms makes her a valuable advisor to our Board. |
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Eric P. Sills Director, Chief Executive Officer, President & President Member of the Office of Chief Executive Age 5052 Director Since 2016 | Mr. Sills has served as a director of the Company and our Chief Executive Officer since March 2016, and as our President since February 2015. Prior to serving as our President, Mr. Sills served as our Vice President Global Operations from January 2013 to February 2015, and our Vice President Engine Management Division from 2006 to January 2013. From 1991 to 2006, Mr. Sills served in various capacities in our Company, including as General Manager, LIC Operations, Director of Product Management, and Plant Manager, Oxygen Sensor Business Unit. He is the son of Lawrence I. Sills. Mr. Sills has completed an Advanced Management Program at Harvard Business School, and holds an MBA from Columbia University and a BA from Bowdoin College. |
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| We believe Mr. Sills’ qualifications to serve as a director include his extensive knowledge of our business and its operations, and the experience that he has acquired throughout his career, having served in a variety of senior management positions across our organization and as an executive officer. In addition, we believe Mr. Sills’ qualifications to serve as a director include his and his family’s significant ownership interest in the Company, which serves to align his interests with the interests of our other stockholders,shareholders, and the fact that he represents the fourth generation of the Sills family which established the Company in 1919. |
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Richard S. Ward Director Age 7880 Director Since 2004 | Mr. Ward has served as a director of the Company since July 2004. Mr. Ward also serves as a member of the University of Virginia School of Law Business Advisory Council, the American Law Institute, the Association of General Counsel, and the Board of Trustees (Executive Committee) of the International College, Beirut, Lebanon. Mr. Ward is a private investor and legal consultant. In 2000, Mr. Ward served as Chairman of the Large, Complex Case Committee of the American Arbitration Association. From 1969 to 1998, he served in various legal and managerial capacities at ITT Corporation, including Executive Vice President, General Counsel and Corporate Secretary, and as a member of the ITT Management Committee. Previously, he served on the Boards of the American Arbitration Association, STC plc, a British telecommunications company, ITT Sheraton Corporation, First State Insurance Company, Boeing Industrial Technology Group Corporation, and Caesars World, Inc. Mr. Ward completed the Finance for Senior Executives program at Harvard Business School and holds an LLB from University of Virginia School of Law, and a BSME from Yale University. Mr. Ward is a member of the Bars of New York and Virginia, and is admitted to practice before the U.S. Court of International Trade and the U.S. Court of Appeals for the Federal Circuit. |
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| We believe Mr. Ward’s qualifications to serve as a director include his experience as an executive officer of an international engineering and manufacturing company, and his legal and corporate governance expertise. His knowledge of the complex legal and governance issues facing multi-national companies and his understanding of what makes businesses work effectively and efficiently provide valuable insight to our Board. |
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Roger M. Widmann
Director
Age 79
Director Since 2005
| Mr. Widmann has served as a director of the Company since May 2005. Mr. Widmann also serves as Chairman of Cedar Realty Trust, Inc., a real estate investment trust. He is a senior moderator of the Executive Seminar at The Aspen Institute and the Liberty Fellowship (South Carolina), and a senior mentor of the Henry Crown Fellowship Program. Previously, Mr. Widmann served as Chairman of Keystone National Group, as Vice Chair of Oxfam America, as Chairman of the Board of Lydall, Inc., a manufacturing company, as a principal of Tanner & Co., Inc., an investment banking firm, and as the Senior Managing Director of Chemical Securities Inc. (now JPMorgan Chase Corporation). Mr. Widmann holds a JD from the Columbia Law School and an AB from Brown University.
We believe Mr. Widmann’s qualifications to serve as a director include his approximately 30 years’ experience in leading a manufacturing corporation as a director and Chairman and his experience as a principal of an investment banking firm. His demonstrated leadership capability and his extensive knowledge of complex financial and operational issues provide our Board with greater insight into the concerns of stockholders, investors, analysts and those in the financial community. The depth and breadth of his experience at such companies makes him a valuable advisor to our Board.
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Emeritus Directors of the Board of Directors
Arthur S. Sills and Peter J. Sills currently serve as emeritus members of the Board of Directors. Emeritus directors are invited to attend Board of Director meetings but do not have any voting rights. Emeritus directors may receive, at the discretion of the Board of Directors, compensation for their advisory services, reimbursement for meeting travel expenses, and coverage under our medical, dental and vision insurance plans.
Proposal No. 2
Approval of the Standard Motor Products, Inc. Amended and Restated 2016 Omnibus Incentive Plan
Our Board of Directors recommends you vote “FOR” the approval of the Standard Motor Products, Inc. Amended and Restated 2016 Omnibus Incentive Plan.
General
We are asking our shareholders to approve an amendment and restatement of the Standard Motor Products, Inc. 2016 Omnibus Incentive Plan (the “Plan”), which was approved by our Board of Directors on February 18, 2021. The Plan was originally approved by the Company’s shareholders and became effective on May 19, 2016. The Plan is the Company’s only plan for providing stock-based incentive compensation to our employees, directors and other eligible persons. The number of shares authorized for issuance under the Plan on its effective date was anticipated to fund awards for a five-year period, and as of December 31, 2020, there are 173,729 shares remaining for issuance thereunder. We are asking shareholders to approve an amendment and restatement of the Plan to (i) increase the number of shares available for issuance thereunder by 950,000 to fund awards for an additional five-year period, (ii) adjust the number of shares available for issuance to non-employee directors from 250,000 to 300,000, and (iii) revise the Plan in response to changes in applicable federal tax laws.
The following summary of certain material features of the amended and restated Plan, as approved by our Board of Directors, is subject to the specific provisions contained in the full text of the Plan, as set forth in Appendix A attached hereto.
Purpose of Plan
The Plan will allow the Company, under the direction of the Compensation Committee or those persons to whom administration of the Plan has been delegated or permitted by law (the Governance Committee will make recommendations to the Compensation Committee concerning non-employee directors), to make grants of stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance shares, cash-based awards and other stock-based awards to employees, directors, consultants, agents, advisors and independent contractors. The purpose of these stock awards is to attract and retain talented employees, directors and other eligible persons and further align their interests and those of our shareholders by linking a portion of their compensation with the Company’s performance.
Key Terms
The following is a summary of the key provisions of the amended and restated Plan, as approved by our Board of Directors.
Plan Term: | May 19, 2016 to May 19, 2026. |
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Eligible Participants: | All of our employees, directors, consultants, agents, advisors and independent contractors are eligible to receive awards under the Plan, provided they render services to the Company. The Compensation Committee will determine which individuals will participate in the Plan. As of April 9, 2021, there were approximately two hundred and seventy employees and seven non-employee directors who would be eligible to participate in the Plan. |
Shares Authorized: | If our shareholders approve this Proposal No. 2, 950,000 shares will be added to the Plan, and the total number of shares authorized for issuance under the Plan will be 2,050,000, subject to adjustment to reflect stock splits and other corporate events or transactions. Shares related to awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares, which are settled in cash in lieu of shares, or which are exchanged with the Compensation Committee’s approval, prior to the issuance of shares, for awards not involving shares, shall be available again for grant under the Plan. In no event, however, will the following shares again become available for awards or increase the number of shares available for grant under the Plan: (i) shares tendered by the participant in payment of the exercise price of an option; (ii) shares withheld from exercised awards for tax withholding purposes; (iii) shares subject to a SAR that are not issued in connection with the settlement of that SAR; and (iv) shares repurchased by the Company with proceeds received from the exercise of an option. Of the shares available in the pool, the maximum number of shares that may be issued to non-employee directors is three hundred thousand (300,000) shares. |
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Award Types: | (a) Non-qualified and incentive stock options; (b) Stock appreciation rights (“SARs”); (c) Restricted stock and restricted stock units; (d) Performance shares and performance units; (e) Cash-based awards; and (f) Other stock-based awards. |
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Annual Share Limits on Awards: | (a) Options: The annual maximum aggregate number of shares subject to options granted to any one person is twenty-five thousand (25,000). (b) SARs: The annual maximum number of shares subject to SARs granted to any one person is twenty-five thousand (25,000). (c) Restricted Stock or Restricted Stock Units: The annual maximum aggregate grant with respect to awards of restricted stock or restricted stock units to any one person is ten thousand (10,000). (d) Performance Shares or Performance Units: The annual maximum aggregate award of performance units or performance shares that a person may receive is ten thousand (10,000) shares, or equal to the value of ten thousand (10,000) shares determined as of the date of grant, as applicable. (e) Cash-Based Awards: The annual maximum aggregate amount awarded or credited with respect to cash-based awards to any one person is the greater of one million dollars ($1,000,000) or the value of twenty-five thousand (25,000) shares determined as of the date of grant, as applicable. |
| (f) Other Stock-Based Awards: The annual maximum aggregate grant with respect to other stock-based awards to any one person is twenty-five thousand (25,000) shares. (g) Non-employee director limits: The annual maximum aggregate grant with respect to awards to any non-employee director is ten thousand (10,000) shares. |
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Vesting: | Vesting schedules will be determined by the Compensation Committee at the time that each award is granted, subject to the minimum vesting periods described below. (a) Options: The minimum vesting period for the grant of an option is three (3) years following the date of grant, provided that an option may partially vest after no less than one (1) year so long as the entire grant does not fully vest until at least three (3) years following the date of grant, except as the Compensation Committee may provide in the event of death, disability, involuntary termination without cause, retirement, or a change of control. (b) SARs: The minimum vesting period for the grant of a SAR is three (3) years following the date of grant, provided that a SAR may partially vest after no less than one (1) year so long as the entire grant does not fully vest until at least three (3) years following the date of grant, except as the Compensation Committee may provide in the event of death, disability, involuntary termination without cause, retirement, or a change of control. (c) Restricted Stock or Restricted Stock Units: The minimum vesting period for the grant of restricted stock or restricted stock units is three (3) years (which may be a cliff or graded vesting schedule) following the date of grant, provided that grants to non-employee directors or employees receiving long-term retention awards who are aged 65 or older may fully vest after no less than one (1) year. The Compensation Committee may also determine that the vesting schedule may be accelerated due to death, disability, involuntary termination without cause, retirement, or a change of control. (d) Performance Shares or Performance Units: Except as the Compensation Committee may provide in the event of death, disability, involuntary termination without cause, retirement, or a change of control, performance shares or performance units may not vest prior to the expiration of at least one (1) year of a performance period. The Compensation Committee may provide for the accelerated vesting of an award based on achievement of performance goals. (e) Other Stock-Based or Cash-Based Awards: The minimum vesting period for the grant of other stock-based awards is one (1) year, except as the Compensation Committee may provide in the event of death, disability, involuntary termination without cause, retirement, or a change of control. Notwithstanding the foregoing, unless otherwise provided by the Compensation Committee, any such awards granted as full value awards shall not be subject to a vesting schedule. For cash-based awards, the Compensation Committee may determine whether the award is subject to a vesting schedule. |
Award Terms: | Each option granted shall expire at such time as the Compensation Committee shall determine at the time of grant but shall not be exercisable later than the tenth (10th) anniversary date of its grant. The term of any SAR granted shall be determined by the Compensation Committee but shall not be exercisable later than the tenth (10th) anniversary date of its grant. |
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Repricing Prohibited: | Options and SARs granted under the Plan may not be repriced, repurchased (including by cash buyout), replaced or regranted through cancellation or by lowering the option price of a previously granted option or the grant price of a previously granted SAR, without the approval of our shareholders. |
Non-employee Director Awards
If the Plan is approved by shareholders at the Annual Meeting, it is anticipated that each non-employee director will receive on the date of each annual meeting of shareholders an automatic restricted stock award of 1,000 shares and an additional award of Common Stock valued at $55,000, based on the fair market value of the Company’s Common Stock as of the date of the annual meeting of shareholders. The restricted stock awards will vest after one year, so long as the director remains continuously in office. Non-employee directors will also be eligible to receive other types of awards under the Plan, but such awards are discretionary. In the event of a change of control of the Company (as defined in the Plan), all of the shares of restricted stock will accelerate and become vested in full.
New Plan Benefits
Except as described below, the following table sets forth information concerning the benefits or amounts under the Plan that we can determine will be received by all current non-employee directors as a group on an annual basis.
Name and Position | Dollar Value ($) | Number of Shares |
Non-employee directors as a group | Fair market value on date of grant | 7,000 |
Non-employee directors as a group | $385,000 | Fair market value on date of grant |
The information in the above table is limited to the annual automatic restricted stock awards and other stock awards to be granted to our non-employee directors in connection with the Annual Meeting. Future awards under the Plan to executive officers, employees or other eligible participants, and any future discretionary awards to non-employee directors in addition to those granted automatically, are discretionary and cannot be determined at this time. We therefore have not included any such awards in the table above.
Terms applicable to Stock Options and Stock Appreciation Rights
The exercise price of stock options or SARs granted under the Plan may not be less than the fair market value of our Common Stock on the date of grant (or, with respect to incentive stock options in the case of a holder of more than 10% of stock, 110% of fair market value). On the record date, the closing price of the Company’s Common Stock on the New York Stock Exchange was $42.48 per share. The Compensation Committee will determine at the time of grant the other terms and conditions applicable to such award, including exercisability and vesting, subject to the limitations described above.
Terms applicable to Grants of Restricted Stock, Restricted Stock Units, Performance Shares, Performance Share Units and Other Stock-Based or Cash-Based Awards
The Compensation Committee will determine the terms and conditions applicable to the granting of restricted stock, restricted stock units, performance shares, performance units and other stock-based or cash-based awards (including the grant of unrestricted shares). The Compensation Committee may make the grant, issuance, retention and/or vesting of restricted stock, restricted stock units, performance shares, performance units and other stock-based or cash-based awards contingent upon continued employment with the Company, the passage of time, or such performance criteria and the level of achievement as it deems appropriate.
Cash-Based Awards
The Compensation Committee, at any time and from time to time, may grant cash-based awards to participants in such amounts and upon such terms as the Compensation Committee may determine. The Compensation Committee may establish performance goals in its discretion in connection with the grant of any cash-based awards.
Transferability
Awards granted under the Plan are not transferable other than by will or the laws of descent and distribution, and no award shall be subject, in whole or in part, to attachment, execution, or levy of any kind. The Compensation Committee may establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable or shares deliverable in the event of, or following, the participant’s death, may be provided.
Administration
The Compensation Committee will administer the Plan. Except as otherwise provided in the Plan, the Compensation Committee will have full and exclusive discretionary power to interpret the terms and the intent of the Plan and any award agreement or other agreement or document ancillary to or in connection with the Plan, to determine eligibility for awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as it may deem necessary or proper. Such authority shall include, but not be limited to, selecting award recipients, establishing all award terms and conditions, including the terms and conditions set forth in award agreements, granting awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of the Plan or any award agreement, and, except as described below, adopting modifications and amendments to the Plan or any award agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its affiliates, and/or its subsidiaries operate. All actions taken and all interpretations and determinations made by the Compensation Committee shall be final and binding upon the participants, the Company, and all other interested individuals.
The Compensation Committee may delegate such administrative duties or powers as it deems advisable to one or more of its members, the officers of the Company, its subsidiaries or affiliates, or its agents or advisors, and the Compensation Committee and such delegates may employ one or more individuals to render advice with respect to any such administrative duties or powers. In addition, the Compensation Committee may authorize one or more officers of the Company to do one or both of the following: (a) designate employees to be recipients of awards and (b) determine the size of any such awards; provided, however, (i) the Compensation Committee shall not delegate such responsibilities to any such officer for awards granted to an employee who is considered an insider (as defined in the Plan); (ii) the resolution providing such authorization sets forth the total number of awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Compensation Committee regarding the nature and scope of the awards granted pursuant to the authority delegated.
Amendments
The Company’s Board of Directors may alter, amend, modify, suspend, or terminate the Plan and any related award agreement in whole or in part; provided, however, that (i) no options or SARs issued under the Plan will be re-priced, repurchased (including a cash buyout), replaced, or re-granted through cancellation, or by lowering the option price of a previously granted option or the grant price of a previously granted SAR; (ii) any amendment of the Plan must comply with the rules of the New York Stock Exchange; and (iii) no material amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.
Adjustments
In the event of any corporate event or transaction (including, but not limited to, a change in the shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of shares, exchange of shares, dividend in kind, or other like change in capital structure, number of outstanding shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Compensation Committee may approve, in its discretion, an adjustment of the number and kind of shares available for grant under the Plan or under particular forms of awards, the number and kind of shares subject to outstanding awards under the Plan, the exercise price or grant price of outstanding stock options and other awards, the Plan’s annual award limits, and other value determinations applicable to outstanding awards. The Compensation Committee may also make appropriate adjustments in the terms of any awards under the Plan to reflect or relate to such changes or distributions and to modify any other terms of outstanding awards, including modifications of performance goals and changes in the length of performance periods.
Change of Control
The Plan provides that in the event of a change of control of the Company, unless a replacement award (as described below) is provided to the participant, (i) outstanding options and SARs will become exercisable, (ii) outstanding awards subject to time-based vesting conditions shall vest in full and be free of restrictions, and (iii) the treatment of any other awards shall be as determined by the Compensation Committee in connection with the grant thereof, as reflected in the applicable award agreement. Notwithstanding the foregoing, if a replacement award is not provided to the participant, the Compensation Committee may, in its sole discretion, determine that any or all outstanding awards will be cancelled and terminated and a payment of cash made or shares of stock delivered to participants, equal in value to the cancelled award.
Any replacement award must (a) have a value at least equal to the value of the replaced award; (b) relate to publicly traded equity securities of the Company or its successor in the change of control (or a publicly traded affiliate thereof); and (iii) have other terms and conditions that are not less favorable to the participant than the terms and conditions of the replaced award. In addition, a replacement award must provide for accelerated vesting on termination of employment or other service other than for cause within two years after the change of control.
U.S. Tax Consequences
The following is a general summary as of the date of this Proxy Statement of certain United States federal income tax consequences to the Company and participants of awards granted under the Plan. The federal tax laws may change and the federal, state and local tax consequences for any participant will depend upon his or her individual circumstances. Each participant is encouraged to seek the advice of a qualified tax advisor regarding the tax consequences of participation in the Plan.
Non-Qualified Stock Options
A participant will realize no taxable income at the time a non-qualified stock option is granted under the Plan, but generally at the time such non-qualified stock option is exercised, the participant will realize ordinary income in an amount equal to the excess of the fair market value of the shares on the date of exercise over the stock option exercise price. Upon a disposition of such shares, the difference between the amount received and the fair market value on the date of exercise will generally be treated as a long-term or short-term capital gain or loss, depending on the holding period of the shares. The Company will generally be entitled to a deduction for federal income tax purposes at the same time and in the same amount as the participant is considered to have realized ordinary income in connection with the exercise of the non-qualified stock option.
Incentive Stock Options
A participant will realize no taxable income, and the Company will not be entitled to any related deduction, at the time any incentive stock option is granted. If certain employment and holding period conditions are satisfied, then no taxable income will result upon the exercise of such option and the Company will not be entitled to any deduction in connection with the exercise of such stock option. Upon disposition of the shares after expiration of the statutory holding periods, any gain realized by a participant will be taxed as long-term capital gain and any loss sustained will be long-term capital loss, and the Company will not be entitled to a deduction in respect to such disposition. While no ordinary taxable income is recognized at exercise (unless there is a “disqualifying disposition,” see below), the excess of the fair market value of the shares over the stock option exercise price is a preference item that is recognized for alternative minimum tax purposes.
Except in the event of death, if shares acquired by a participant upon the exercise of an incentive stock option are disposed of by such participant before the expiration of the statutory holding periods (i.e., a “disqualifying disposition”), such participant will be considered to have realized as compensation taxed as ordinary income in the year of such disposition an amount, not exceeding the gain realized on such disposition, equal to the difference between the stock option price and the fair market value of such shares on the date of exercise of such stock option. Generally, any gain realized on the disposition in excess of the amount treated as compensation or any loss realized on the disposition will constitute capital gain or loss, respectively. If a participant makes a “disqualifying disposition,” generally in the fiscal year of such “disqualifying disposition” the Company will be allowed a deduction for federal income tax purposes in an amount equal to the compensation realized by such participant. If a participant disposes of shares subject to an incentive stock option before two years after the option was granted, or before one year after the ISO was exercised, this is a disqualifying disposition.
Stock Appreciation Rights
A grant of a SAR (which can be settled in cash or the Company Common Stock) has no federal income tax consequences at the time of grant. Upon the exercise of SARs, the value received is generally taxable to the participant as ordinary income, and the Company generally will be entitled to a corresponding tax deduction.
Restricted Stock
A participant receiving restricted stock may be taxed in one of two ways: the participant (i) pays tax when the restrictions lapse (i.e., they become vested) or (ii) makes a special election to pay tax in the year the grant is made. At either time the value of the award for tax purposes is the excess of the fair market value of the shares at that time over the amount (if any) paid for the shares. The Company generally receives a tax deduction at the same time and for the same amount taxable to the participant. If a participant elects to be taxed at grant, then, when the restrictions lapse, there will be no further tax consequences attributable to the awarded stock until the participant disposes of the stock.
Restricted Stock Units
In general, no taxable income is realized upon the grant of a restricted stock unit award. The participant will generally include in ordinary income the fair market value of the restricted stock units at the time they vest. The Company generally will be entitled to a tax deduction at the time and in the amount that the participant recognizes ordinary income.
Performance Shares
The participant will not realize income when a performance share is granted, but will realize ordinary income when shares are transferred to him or her. The amount of such income will be equal to the fair market value of such transferred shares on the date of transfer. The Company generally will be entitled to a deduction for federal income tax purposes at the same time and in the same amount as the participant is considered to have realized ordinary income as a result of the transfer of shares.
Cash-Based Awards and Other Stock-Based Awards
The participant will recognize, as a general rule, ordinary income at the time of payment of cash or delivery of actual shares of Common Stock. Future appreciation on shares of Common Stock held beyond the ordinary income recognition event will be taxable at capital gains rates when the shares of Common Stock are sold. The Company, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the participant, and the Company will not be entitled to any tax deduction in respect of capital gain income recognized by the participant.
Proposal No. 3
Ratification of the Appointment of KPMG LLP
Our Board of Directors recommends you vote “FOR” the ratification of KPMG as the Company’s independent registered public accounting firm.
The Audit Committee of our Board of Directors plans to appoint KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the 20192021 fiscal year. Although the Company is not required to seek stockholdershareholder approval of this appointment, the Board believes it to be sound corporate governance to do so and is asking stockholdersshareholders to ratify the appointment of KPMG. If the appointment is not ratified, the Audit Committee will investigate the reasons for stockholdershareholder rejection and will reconsider the appointment. Representatives of KPMG are expected to attend the Annual Meeting where they will be available to respond to questions and, if they desire, to make a statement.
Audit and Non-Audit Fees
The following table presents fees for professional services rendered by KPMG in the fiscal years ended December 31, 20182020 and 2017.2019.
| | 2018 | | | 2017 | | | 2020 | | | 2019 | |
Audit fees | | $ | 1,635,000 | | | $ | 1,513,000 | | | $ | 1,554,250 | | | $ | 1,728,600 | |
Audit-related fees(1) | | | 24,500 | | | | 34,700 | | | 21,500 | | | 26,000 | |
Tax fees(2) | | | 319,300 | | | | 292,100 | | | 412,500 | | | 285,800 | |
All other fees | | | | | | | |
| ─ | | |
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Total | | | | | | | | | | $ | 1,988,250 | | | $ | 2,040,400 | |
(1) | Audit-related fees consist principally of audits of payments related to certain employee benefits. |
(2) | Tax fees consist primarily of U.S. and international tax compliance and planning. |
In accordance with its charter, the Audit Committee approves the compensation and terms of engagement of the Company’s independent auditors, including the pre-approval of all audit and non-audit service fees. All of the fees paid to the Company’s independent auditors described above were for services pre-approved by the Audit Committee.
Proposal No. 34
Advisory Vote on the Compensation of Our Named Executive Officers
Our Board of Directors recommends you vote “FOR” the approval of the non-binding, advisory resolution approving the compensation of our named executive officers.
SEC rules adopted pursuant toAt our Annual Meeting, our shareholders will have the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enable our stockholdersopportunity to vote, on an advisory (non-binding) basis, at the Annual Meeting to approve the compensation of our named executive officers, as disclosed in this Proxy Statement (referred to as a “say-on-pay” vote). The say-on-pay vote is being provided pursuant to Section 14A of the Securities Exchange Act of 1934. The say-on-pay vote is an advisory vote only, and itthat is not binding on the Company or the Board of Directors. Although the say-on-pay vote is non-binding,Directors; however, the Board values the opinions of our stockholdersshareholders and will consider the outcome of the vote when making future compensation decisions as it deems appropriate.decisions.
As described more fully in the “Compensation Discussion and Analysis” section, beginning on page 25 of this Proxy Statement, ourOur executive compensation program is designed to attract, motivate and retain individuals with the skills required to formulate and drive the Company’s strategic direction and achieve annual and long-term performance goals necessary to create stockholdershareholder value, while striving to avoid the use of highly leveraged incentives that may encourage overly risky short-term behavior on the part of executives. We believe that our executive compensation program is reasonable, and competitive and focused on pay for performance principles.principles, as described more fully in the “Compensation Discussion and Analysis” section, beginning on page 34 of this Proxy Statement.
Our Compensation and Management Development Committee establishes, recommends and governs all of the compensation and benefits policies and actions for the Company’s named executive officers. We utilize a combination of base pay, annual incentives and long-term incentives. While we have generally targeted base pay to be in the median to 75% range, and each other component of executive compensation to be at or near the median range of similar-type compensation for our peer group, actual compensation of our named executive officers varies depending upon the achievement of pre-established performance goals. The annual cash incentive award is based on the achievement of both company-level financial objectives as well asperformance and management performance, goals (our MBO or management by objective bonus), and it is limitedgoals (“MBO”). Actual award payouts may range from 0% to an annual award of 200% of the target opportunity.award amount, depending upon the level of achievement. Through stock ownership requirements and equity incentives, we also align the interests of our executives with those of our stockholdersshareholders and the Company’s long-term interests. Our executive compensation policies have enabled us to attract and retain talented and experienced executives and have benefited the Company over time. We believe that the fiscal year 20182020 compensation of each of our named executive officers was reasonable and appropriate, and aligned with the Company’s fiscal year 20182020 results and achievement of the objectives of our executive compensation program.
The Company also has several governance policies in place to align executive compensation with stockholdershareholder interests and mitigate risks in its plans. These programs include stock ownership guidelines (including a mandatory post-vesting holding period, as described below), limited perquisites, use of tally sheets, and a claw back policy.
For the reasons discussed above, the Board of Directors unanimously recommends that stockholdersshareholders vote in favor of the following non-binding resolution:
“RESOLVED, that the stockholdersshareholders hereby APPROVE, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K and the other compensation disclosure rules of the Securities and Exchange Commission in the Company’s Proxy Statement for the 20192021 Annual Meeting of StockholdersShareholders (which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table for 20182020 and other related tables and accompanying narrative).”
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of April 5, 20199, 2021 by:
| · | each person who is known to the Company to be the beneficial owner of more than five percent of the Company’s Common Stock; |
| · | each director and nominee for director of the Company; |
| · | our principaleach executive officer principal financial officer, and each of our three other most highly compensated executive officers named in the Summary Compensation Table below; and |
all directors and executive officers as a group.
| · | all directors and executive officers as a group. |
Name and Address | | Amount and Nature of Beneficial Ownership(1) | | | Percentage of Class | | | Amount and Nature of Beneficial Ownership | (1) | | Percentage of Class | |
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | | | 3,000,644 | (2) | | | 13 | % | | | 3,202,510 | (2) | | | 14 | % |
Royce & Associates, LP 745 Fifth Avenue New York, NY 10151 | | | 2,194,525 | (3) | | | 9.5 | % | |
FMR LLC 245 Summer Street Boston, MA 02210 | | | 1,607,767 | (4) | | | 7 | % | |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | | | | 1,327,479 | (3) | | | 5.8 | % |
Dimensional Fund Advisors LP Palisades West, Bldg. One 6300 Bee Cave Road Austin, TX 78746 | | | 1,601,573 | (5) | | | 6.9 | % | | | 1,316,311 | (4) | | | 5.8 | % |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | | | 1,166,186 | (6) | | | 5.1 | % | |
Lawrence I. Sills | | | 681,877 | (7) | | | 3 | % | | | 645,546 | (5) | | | 2.8 | % |
Eric P. Sills | | | 174,050 | | | | * | | | | 172,901 | | | | * | |
Richard S. Ward | | | | 80,297 | | | | * | |
William H. Turner | | | 75,842 | | | | * | | | | 80,124 | | | | * | |
Richard S. Ward | | | 75,842 | | | | * | | |
Roger M. Widmann | | | 64,999 | | | | * | | | | 69,156 | | | | * | |
James J. Burke | | | 62,702 | | | | * | | | | 67,752 | | | | * | |
Carmine J. Broccole | | | 59,475 | | | | * | | | | 67,460 | | | | * | |
Dale Burks | | | | 57,499 | | | | * | |
Pamela Forbes Lieberman | | | 57,471 | | | | * | | | | 41,753 | | | | * | |
Dale Burks | | | 56,184 | | | | * | | |
John P. Gethin | | | 20,987 | | | | * | | | | 23,269 | | | | * | |
Frederick D. Sturdivant | | | 19,118 | | | | * | | |
Joseph W. McDonnell | | | 17,012 | | | | * | | | | 21,294 | | | | * | |
Alisa C. Norris | | | 17,012 | | | | * | | | | 21,294 | | | | * | |
Patrick S. McClymont | | | 8,433 | | | | * | | | | 12,715 | | | | * | |
Nathan R. Iles | | | | 9,090 | | | | * | |
Directors and Officers as a group (18 persons) | | | 1,528,514 | | | | 6.6 | % | | | 1,508,416 | | | | 6.6 | % |
* | Represents beneficial ownership of less than one percent of the outstanding shares of Common Stock. |
(1) | Applicable percentage of ownership is calculated by dividing (a) the total number of shares beneficially owned by the stockholdershareholder by (b) 23,074,25422,833,298 which is the number shares of Common Stock outstanding as of April 5, 2019.9, 2021. Beneficial ownership is calculated based on the requirements of the Securities and Exchange Commission.Commission (“SEC”). Except as indicated in the footnotes to this table, the stockholdershareholder named in the table has sole voting power and sole investment power with respect to the shares set forth opposite such stockholder’sshareholder’s name. Unless otherwise indicated, the address of each individual listed in the table is c/o Standard Motor Products, Inc., 37-18 Northern Blvd., Long Island City, New York 11101. |
(2) | The information for BlackRock, Inc. and certain of its affiliates (“BlackRock”) is based solely on an amendment to its Schedule 13G filed with the SEC on January 31, 2019,26, 2021, wherein BlackRock states that it beneficially owns an aggregate of 3,000,6443,202,510 shares of our Common Stock; BlackRock states that it has sole voting power for 2,948,3223,171,211 shares and sole investment power for 3,000,6443,202,510 shares. |
(3) | The information for Royce & Associates, LPThe Vanguard Group and certain of its affiliates (“Royce”) is based solely on an amendment to its Schedule 13G filed with the SEC on January 16, 2019. |
(4) | The information for FMR LLC and certain of its affiliates (“FMR”Vanguard”) is based solely on an amendment to its Schedule 13G filed with the SEC on February 13, 2019,10, 2021, wherein FMRVanguard states that it beneficially owns an aggregate of 1,607,7671,327,479 shares of our Common Stock; FMRVanguard states that it has soleshared voting power for 23425,924 shares, and sole investment power for 1,607,7671,286,260 shares and shared investment power for 41,219 shares. |
(5)(4) | The information for Dimensional Fund Advisors LP and certain of its affiliates (“Dimensional”) is based solely on an amendment to its Schedule 13G filed with the SEC on February 8, 2019,February16, 2021, wherein Dimensional states that it beneficially owns an aggregate of 1,601,5731,316,311 shares of our Common Stock; Dimensional states that it has sole voting power for 1,538,4091,258,017 shares and sole investment power for 1,601,5731,316,311 shares. |
(6) | The information for The Vanguard Group and certain of its affiliates (“Vanguard”) is based solely on its Schedule 13G filed with the SEC on February 12, 2019, wherein Vanguard states that it beneficially owns an aggregate of 1,166,186 shares of our Common Stock; Vanguard states that it has sole voting power for 20,146 shares and sole investment power for 1,143,650 shares. |
(7)(5) | Includes 2,812 shares of Common Stock owned by Mr. Sills’ wife. For shares of stock held by his wife, Lawrence I. Sills disclaims beneficial ownership of the shares so deemed “beneficially owned” by him within the meaning of Rule 13d-3 of the Exchange Act. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who beneficially own more than ten percent of a registered class of the Company’s Common Stock, to file initial reports of ownership and reports of changes in ownership of the Common Stock of the Company with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors, and greater than ten percent stockholders are required by regulation of the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely upon a review of the copies of such reports furnished to the Company and written representations from our directors and executive officers that no other reports were required during the fiscal year ended December 31, 2018, the Company believes that all Section 16(a) reports required to have been filed by the Company’s directors and executive officers during 2018 were timely filed.
The Company’s Board of Directors has adopted policies and procedures that the Board believes are in the best interests of the Company and its stockholdersshareholders as well as compliant with the Sarbanes-Oxley Act of 2002, the rules and regulations of the Securities and Exchange Commission,SEC, and the listing standards of the New York Stock Exchange. In particular:
| · | The Board has adopted Corporate Governance Guidelines; |
| · | The Board has appointed a Presiding Independent Director, who is independent under the New York Stock Exchange standards and applicable Securities and Exchange CommissionThe Board has appointed a Presiding Independent Director, who is independent under the New York Stock Exchange standards and applicable SEC rules; |
| · | A majority of the Board and all members of the Audit Committee, Compensation and Management Development Committee, and Nominating and Corporate Governance Committee are independent under the New York Stock Exchange standards and applicable Securities and Exchange CommissionA majority of the Board and all members of the Audit Committee, Compensation and Management Development Committee, and Nominating and Corporate Governance Committee are independent under the New York Stock Exchange standards and applicable SEC rules; |
| · | The Board has adopted charters for each of the Committees of the Board and the Presiding Independent Director; |
| · | The Company’s Corporate Governance Guidelines provide that the independent directors meet periodically in executive session without management and that the Presiding Independent Director chairs the executive sessions; |
| · | Interested parties are able to make their concerns known to non-management directors or the Audit Committee by e-mail or by mail (see “Communications to the Board” section below); |
| · | The Company has a Corporate Code of Ethics that applies to all Company employees, officers and directors, and a Whistleblower Policy with a dedicated website and toll-free helpline that is operated by an independent third party and is available to any employee, supplier, customer, stockholderThe Company has a Corporate Code of Ethics that applies to all Company employees, officers and directors, and a Whistleblower Policy with a dedicated website and toll-free helpline that is operated by an independent third party and is available to any employee, supplier, customer, shareholder or other interested third party; and |
The Company has established Stock Ownership Guidelines that apply to its independent directors and executive officers.
| · | The Company has established Stock Ownership Guidelines that apply to its independent directors and executive officers. |
Certain information relating to corporate governance matters can be viewed at www.smpcorp.com ir.smpcorp.comunder “Investor Relations─Governance“Governance Documents.” Copies of the Company’s (1) Corporate Governance Guidelines, (2) charters for the Audit Committee, Compensation and Management Development Committee, Nominating and Corporate Governance Committee, Strategic Planning Committee, and the Presiding Independent Director, and (3) Corporate Code of Ethics and Whistleblower Policy are available on the Company’s website. Copies will also be provided to any stockholdershareholder free of charge upon written request to Carmine J. Broccole, Secretary of the Company, at 37-18 Northern Blvd., Long Island City, NY 11101 or via email at financial@smpcorp.com.financial@smpcorp.com.
Meetings of the Board of Directors and its Committees
In 2018,2020, the total number of meetings of the Board of Directors, including regularly scheduled and special meetings, was eight. All of our directors attended at least 75% of the total number of meetings of the Board and the Committees on which they served during 2018, except for Roger M. Widmann, who attended approximately 70% of such meetings, but missed the 75% threshold due to medical treatment.2020. The Company requires all Board members to attend its Annual Meeting of Stockholders.Shareholders. All directors were present at the 20182020 Annual Meeting of StockholdersShareholders held on May 17, 2018.19, 2020, except for Roger M. Widmann who was absent due to a medical treatment.
The Board currently has four standing committees: (1)an Audit Committee; (2) a Compensationcommittees. The table below lists each committee, its composition and Management Development Committee; (3) a Nominating and Corporate Governance Committee; and (4) a Strategic Planning Committee.current chair. Each committee is comprised only of our independent directors, except that Mr. Gethin, a non-independent director, is a member of the Strategic Planning Committee. The table below describes the composition, and the current chair, of each committee.
Name | Audit Committee | Compensation and Management Development Committee | Nominating and Corporate
Governance Committee | Strategic
Planning Committee |
Lawrence I. Sills | ─ | ─ | ─ | ─ |
| | | | |
William H. Turner | Chair | Member | Member | Member |
| | | | |
John P. Gethin | ─ | ─ | ─ | Member |
| | | | |
Pamela Forbes Lieberman | Member | Member | Member | Co-ChairChair |
| | | | |
Patrick S. McClymont | Member | Member | Member | Member |
| | | | |
Joseph W. McDonnell | Member | Member | Member | Member |
Alisa C. Norris* | Member | Member | Member | Member |
Alisa C. Norris | Member | Member | Member | Member |
| | | | |
Eric P. Sills | ─ | ─ | ─ | ─ |
| | | | |
Frederick D. Sturdivant* | Member | Member | Member | Co-Chair |
| | | | |
Richard S. Ward | Member | Member | Chair | Member |
| | | | |
Roger M. WidmannWidmann* | Member | Chair | Member | Member |
* | Frederick D. Sturdivant will retire on the date of our 2019 Annual Meeting. |
*Roger M. Widmann will retire on the date of our 2021 Annual Meeting. The Board of Directors appointed Alisa C. Norris to become Chair of the Compensation Committee following Mr. Widmann’s retirement.
Audit Committee
The Audit Committee is responsible for: (1) recommending to the Board of Directors the engagement of the independent auditors of the Company; (2) reviewing with the independent auditors the scope and results of the Company’s audits; (3) pre-approving the professional services furnished by the independent auditors to the Company; (4) reviewing the independent auditors’ management letter with comments on the Company’s internal accounting control; and (5) reviewing management policies relating to risk assessment and risk management. The Audit Committee held four meetings in 2018.2020.
The Board of Directors has determined that each Audit Committee member is financially literate and independent. In addition, the Board has determined that at least one member of the Audit Committee meets the New York Stock Exchange standard of having accounting or related financial management expertise. The Board has also determined that William H. Turner (the Audit Committee’s Chair), Pamela Forbes Lieberman, Patrick S. McClymont and Roger M. Widmann meet the Securities and Exchange Commission’sSEC’s criteria for an “audit committee financial expert.”
Compensation and Management Development Committee (“Compensation Committee”)
The Compensation and Management Development Committee’s functions are to: (1) approve the compensation packages of the Company’s executive officers; (2) administer the Company’s equity incentive plans and other benefit plans; (3) review the Company’s overall compensation policies and practices, including compensation-related risk assessments; (4) review the performance, training and development of Company management in achieving corporate goals and objectives; and (5) oversee the Company’s management succession planning.planning; and (6) oversee the Company’s strategies and policies relating to human capital management, including diversity, equity and inclusion. With respect to diversity and inclusion, the Compensation Committee is committed to ensuring that the Company’s management actively seeks candidates who are diverse in terms of race, gender or ethnicity when considering new hires and promotions for all positions, from entry-level to senior leadership. The Compensation and Management Development Committee held threetwo meetings in 2018.2020.
The Compensation and Management Development Committee has the exclusive authority and responsibility to determine all aspects of executive compensation packages. The Compensation Committee may, at its discretion, solicit the input of our executive officers (including our Executive Chairman and our Chief Executive Officer)Officer, or any independent consultant or advisor in satisfying its responsibilities. The Compensation Committee may also, at its discretion, form and delegate authority to subcommittees, or it may delegate authority to one or more designated members of the Board or to our executive officers.
Nominating and Corporate Governance Committee (“Governance Committee”)
The Nominating and Corporate Governance Committee’s functions are to assist the Board in discharging and performing the duties and responsibilities of the Board with respect to corporate governance, including:
| · | the identification and recommendation to the Board of individuals qualified to become or continue as directors; |
the identification and recommendation to the Board of individuals qualified to become or continue as directors, including through succession planning to ensure the desired mix of experience, qualifications, attributes and skills of the individual members of the Board;
| · | the continuous improvement in corporate governance policies and practices; |
the annual assessment of the performance of the Board and each of its committees through questionnaires and one-on-one assessments with individual members of the Board;
the recommendation of members for each committee of the Board;
the compensation arrangements for members of the Board;
overseeing the Company’s commitment to corporate social responsibility matters, including environmental, social, and governance (ESG) matters; and
overseeing the Company’s enterprise risk management policies and procedures, including information security and compliance with applicable laws and regulations concerning privacy.
| · | the annual self-assessment of the performance of the Board and each Committee of the Board; |
| · | the recommendation of members for each committee of the Board; and |
| · | the compensation arrangements for members of the Board. |
The Nominating and Corporate Governance Committee held threefour meetings in 2018.2020. The Nominating and Corporate Governance Committee has the exclusive authority and responsibility to review and recommend to the Board all aspects of director compensation. The Governance Committee may solicit, in its discretion, the input of an independent consultant or advisor in satisfying its responsibilities.
Qualifications for consideration as a director nominee vary according to the particular areas of expertise being sought as ato complement toand enhance the existing board composition. In recommending candidates for election to the Board, the Governance Committee considers nominees recommended by directors, officers, employees, shareholders and others, using the same criteria to evaluate all candidates. The Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. However, inin making nominations, the Nominating and Corporate Governance Committee seeks candidates who possess: (1) the highest level of integrity and ethical character; (2) a strong personal and professional reputation; (3) sound judgment; (4) financial literacy; (5) independence; (6) significant experience and proven superior performance in professional endeavors; (7) an appreciation for Board and team performance; (8) the commitment to devote the time necessary for Board activities; (9) skills in areas that will benefit the Board; and (10) the ability to make a long-term commitment to serve on the Board.
In recommending candidates for election to the Board, the Nominating and CorporateThe Governance Committee considers nominees recommended by directors, officers, employees, stockholders and others, using the same criteria to evaluate all candidates. The Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. The Committee reviews each candidate’s qualifications to determine whether the candidate possesses any of the specific qualities and skills that are desired in members of the Board, taking into account diversity in professional experience, skills and background, race, gender, disability, ethnicity, nationality, religion, and sexual orientation. In particular, the Governance Committee is committed to actively seeking candidates who are diverse in terms of race, gender or ethnicity when developing the pool of candidates to be considered as prospective nominees. Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with selected candidates as appropriate. Upon selection of a qualified candidate, the Governance Committee recommends the candidate for consideration by the Board. The Governance Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees.
StockholdersShareholders may propose director candidates for consideration by the Nominating and Corporate Governance Committee. For stockholdershareholder candidates to be considered, written notice of such stockholdershareholder recommendation (a) must be provided to the Secretary of the Company not less than 45 days nor more than 75 days prior to the first anniversary of the record date for the preceding year’s annual meeting, and (b) must contain the name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve, if elected, and evidence of the nominating person’s ownership of Company stock. Both stockholder-proposedshareholder-proposed candidates and other candidates identified and evaluated by the Nominating and Corporate Governance Committee must comply with the above procedure and meet the qualifications for directors, as outlined in the charter of the Governance Committee and the By-lawsBy-Laws of the Company. To recommend a prospective nominee for the Nominating and Corporate Governance Committee’s consideration, a stockholdershareholder must submit the candidate’s name and qualifications to Carmine J. Broccole, Secretary of the Company, at 37-18 Northern Blvd., Long Island City, NY 11101.
Strategic Planning Committee
The Strategic Planning Committee’s functions are to assist the Board in discharging and performing its oversight role regarding the Company’s long-term strategic planning and to give guidance to management in creating the Company’s long-term strategic plans. The Strategic Planning Committee held two meetings in 2018.2020.
In fulfilling its role, the Strategic Planning Committee shall, among other things, (1) assist in the development, adoption, and modification of the Company’s current and future strategy; (2) review and assess external developments and other factors affecting the automotive aftermarket and their impact on the Company’s strategy; (3) review and assess the Company’s core competencies with regard to expanding their implementation in attractive markets beyond the automobile aftermarket; and (4) review and advise the Board and management on corporate development and growth initiatives, including acquisitions, joint ventures and strategic alliances.
Board Leadership Structure
The business of the Company is managed under the direction of the Board of Directors of the Company in the interest of the stockholders.shareholders. The Board delegates its authority to senior management for managing the everyday affairs of the Company. The Board requires that senior management review major actions and initiatives with the Board prior to implementation.
Lawrence I. Sills serves as our Executive Chairman of the Board. As our Executive Chairman, Lawrence I. Sills provides leadership to the Board, leads discussions of strategic issues for the Company, and works with the Board to define its structure and activities in fulfillment of its responsibilities.
Eric P. Sills serves as our Chief Executive Officer and President. As our Chief Executive Officer and President, Eric P. Sills focuses on the day-to-day operations of our business and the implementation of our business strategy to achieve our annual and long-term strategic, financial, organizational and management goals.
In addition, we believe that the use of aWilliam H. Turner serves as our Presiding Independent Director. As our Presiding Independent Director, (currently William H. Turner) is an important aspect of our board leadership structure as it provides independent oversight of management. The Presiding Independent Director approves Board agendas and meeting schedules to assure that there is sufficient time for discussion of all agenda items, as well as the quality, quantity and timeliness of information sent to the Board. The Presiding Independent Director alsoMr. Turner serves as the principal liaison between the Executive Chairman and the independent directors and presides at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of the independent directors. The Presiding Independent Director has the authority to call meetings of the independent directors and retain outside counsel and other advisors to the extent necessary in the conduct of his duties and responsibilities. The Presiding Independent Director is expected to fosterprovide independent oversight of management, while fostering a cohesive Board that cooperates with the Executive Chairman and Chief Executive Officer towards the ultimate goal of creating stockholdershareholder value. The Presiding Independent Director is nominated by the Nominating and Corporate Governance Committee and approved by the independent directors of the Board every year, but a director may serve for one or more terms as Presiding Independent Director at the discretion of the Nominating and Corporate Governance Committee. A copy of the charter of the Presiding Independent Director can be viewed at www.smpcorp.comir.smpcorp.com under “Investor Relations─Governance“Governance Documents.”
The Board’s Annual Self-Evaluation
The Board of ContentsDirectors conducts a self-evaluation on an annual basis that is designed to enhance the overall effectiveness of the Board and each of its committees. The evaluation covers the processes, structure, culture and performance of the Board and each of its committees, and the experience, qualifications, attributes and skills of the individual members of the Board. Information is gathered for evaluation through the use of a comprehensive written questionnaire distributed annually, and one-on-one assessments between the Presiding Independent Director and each director periodically over the course of the year. The evaluation process is overseen by the Presiding Independent Director and the Chair of the Governance Committee, who review the results of the evaluation with our independent directors in executive sessions at meetings of the Board. In addition, the Board may engage an independent consultant in connection with its self-evaluation process; however, the Board did not elect to do so in 2020.
We believe that the Board’s annual self-evaluation reflects good corporate governance, and has strengthened our Board, each of its committees and individual director performance over time.The Board’s Role in Risk Oversight
Our Board oversees an enterprise-wide approach to risk management. The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company. In addition, the Board (or the appropriate Committee in the case of risks that are under the purview of a particular Committee) receives these reports to enable it to understand our risk identification, risk management and risk mitigation strategies as well as to consider what level of risk is appropriate for the Company.
The involvement of the Board in setting the Company’s business strategy is a key part of its assessment of management’s appetite for risk and also a determination of what constitutes an appropriate level of risk for the Company. As part of its risk oversight function, the Board reviews risk throughout the business, focusing on financial risk, legal/compliance risk and operational/strategic risk.risk, as well as corporate social responsibility matters, including ESG.
While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Audit Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditors. The Governance Committee oversees information security risks and receives briefings from senior management on related matters at least semi-annually, and more frequently as circumstances warrant. In addition to setting compensation, the Compensation and Management Development Committee strives to create incentives that encourage a level of risk-taking behavior that is consistent with the Company’s business strategy.
Communications to the Board
StockholdersShareholders and other interested parties may communicate with the Board or individual directors, including the Presiding Independent Director, pursuant to the procedures established by the Nominating and Corporate Governance Committee from time to time. Correspondence intended for the Board or an individual director should be sent to the attention of the Secretary of the Company at 37-18 Northern Blvd., Long Island City, NY 11101, who will forward it to the members of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will have the discretion to distribute only such correspondence to the Board or individual members of the Board that the Governance Committee determines in good faith has a valid business purpose or is otherwise appropriate for the Board or individual member thereof to receive.
Corporate Code of Ethics and Corporate Social Responsibility
Our Company was founded in 1919 on the values of ethics, integrity, common decency and respect for others. These values continue to this day and are embodied in our Code of Ethics, which has been adopted by the Board of Directors of the Company to: (1)to promote honest and ethical conduct, including fair dealing and propagate a culture of compliance from the ethical handling of actual or apparent conflicts of interest; (2) promote full, fair, accurate, timely and understandable disclosure; (3) promote compliance with applicable laws and governmental rules and regulations; (4) ensure the protection of the Company’s legitimate business interests, including business opportunities, assets and confidential information; and (5) deter wrongdoing.
top down. Through our Code of Ethics, we reinforce our commitment to our Company, our employees, our business partners and the communities within which we operate.
In February 2021, we published our inaugural Corporate Social Responsibility and Sustainability Report, in which we discuss some of the specific actions that we have taken to be environmental and socially responsible. Our sustainability report is available at ir.smpcorp.com under “Governance Documents” and is not incorporated by reference into this Proxy Statement.
We believe that our focus on these commitments have ledissues and our desire to be a good corporate citizen strengthens our culture and our company in several important ways, including through the creation of high employee satisfaction resulting in a skilled workforce with low employee turnover, and high customer satisfaction resulting in decades-long customer relationships. relationships, the assessment and management of risk, the achievement of operating efficiencies and cost reductions, and improved relations with our stakeholders and communities within which we conduct our business.
We had several notable achievements in 2020 relating to environmental, social and governance matters, such as the following:
We formed a multi-disciplinary leadership team comprised of our Chief Executive Officer and other executive officers to lead our efforts in this area.
We launched the SMPCares® initiative with the goal of positively impacting our communities through volunteerism, community outreach and philanthropy. Our efforts included blood drivers with the American Red Cross, fundraising for the March of Dimes, United Way, Salvation Army and many others, organization donations to local community organizations, hospitals, schools, shelters and universities, and scholarship awards, including our Women in Auto Care scholarship, which aims to empower women entering the automotive industry.
We formed a Diversity and Inclusion Taskforce focusing on developing strategies to recruit, train and retain a more diverse and inclusive workforce.
We expanded our product offerings to promote a greener car parc.
We prevented approximately 4,200 tons of waste from entering landfills, and we recycled approximately 18,200 gallons of used oil.
We prioritized employee health and safety, implementing enhanced cleaning procedures and screening protocols, providing protective equipment, establishing remote work arrangements, implementing an emergency employee relief fund, and other operations changes to keep our employees safe.
We established management performance, or management by objective (“MBO”), goals for fiscal year 2020 for all employees participating in our annual cash incentive bonus plan, which were designed to incorporate the same MBO goals of our executive officers and align our focus on environmental, social and governance initiatives, among others, from the top down.
We are especially proud of our remanufacturing initiatives by which previously used automotive products are returned to same-as-new, or better, condition and performance. We remanufacture key product categories within our product portfolio, such as air conditioning compressors, diesel injectors and diesel pumps, resulting in the production of premium automotive products within these categories through processes that we believe save energy and reduce waste. We also endeavormanufacture and distribute components for the emission control systems of motor vehicles, such as evaporative emission pressure sensors, control solenoids and EGR valves. These components play a critical role in these important systems, which are designed to makereduce emissions and improve fuel economy during vehicle operation. You may read more about our environmental initiatives by visiting ir.smpcorp.com under “Environmental & Social Responsibility─Corporate Initiatives”.
We are also proud of the positive contributions toimpact that the Company and its employees have on our local communities through charitable giving and volunteerism. You may read more about our social initiatives, and our efforts to engage on a local level in the communities within which we operate, by among other things, operating our facilities in an environmentally responsible manner, holding charitable drives and being a good neighbor. visiting smpcares.smpcorp.com.
Our Corporate Code of Ethics is available at www.smpcorp.comir.smpcorp.com under “Investor Relations─Governance“Governance Documents.”
Prohibition on Hedging or Pledging of Company Stock
All directors and employees, including officers, are expressly prohibited from hedging or engaging in any derivative transactions, such as “cashless” collars, forward contracts or equity swaps, to offset any decrease in the market value of the Company’s Common Stock. All directors and employees, including officers, are also expressly prohibited from pledging their shares of Common Stock.
Director Independence
The Board has affirmatively determined that each member of the Board and Committees of the Board,its committees, other than Lawrence I. Sills, Eric P. Sills and John P. Gethin, is independent. The Board made such determination based upon the definitions and criteria established by the New York Stock Exchange and the Securities and Exchange CommissionSEC for independent board members. In that regard, the Board considered whether any director has, or has had in the most recent three years, any material relationships with the Company, including any affiliation with our independent auditors. In assessing independence, the Board considers all relevant facts and circumstances. In particular, when assessing the materiality of a director’s relationship with the Company, the Board considers the issue not just from the standpoint of the director, but also from that of the persons or organizations with which the director has an affiliation or family relationship.
Director Compensation
The following table sets forth the compensation paid by the Company to our non-employee directors in 2018.2020.
Name | | Fees Earned or Paid in Cash (1) | | | Stock Awards (2) | | | All Other Compensation (3) | | | Total | | | Fees Earned or Paid in Cash (1) | | | Stock Awards (2) | | | All Other Compensation (3) | | | Total | |
William H. Turner | | $ | 110,000 | | | $ | 92,480 | | | $ ─ | | | $ | 202,480 | | | $ | 123,750 | | | $ | 74,340 | | | $
| ─ | | | $ | 198,090 | |
Frederick D. Sturdivant* | | | 90,000 | | | | 92,480 | | | | 11,892 | | | | 194,372 | | |
Pamela Forbes Lieberman | | | 90,000 | | | | 92,480 | | | | 11,859 | | | | 194,339 | | | 103,750 | | | 74,340 | | | 13,086 | | | 191,176 | |
John P. Gethin4 | | | 80,000 | | | | 92,480 | | | | 14,505 | | | | 186,985 | | | 93,750 | | | 74,340 | | | 13,086 | | | 181,176 | |
Roger M. Widmann | | | 90,000 | | | | 92,480 | | | | 539 | | | | 183,019 | | |
Roger M. Widmann* | | | 103,750 | | | 74,340 | | | 580 | | | 178,670 | |
Richard S. Ward | | | 82,000 | | | | 100,480 | | | ─ | | | | 182,480 | | | 103,750 | | | 74,340 | | | ─ | | | 178,090 | |
Patrick S. McClymont | | ─ | | | | 172,480 | | | ─ | | | | 172,480 | | | 93,750 | | | 74,340 | | | ─ | | | 168,090 | |
Joseph W. McDonnell | | | 80,000 | | | | 92,480 | | | ─ | | | | 172,480 | | | 93,750 | | | 74,340 | | | ─ | | | 168,090 | |
Alisa C. Norris | | | 80,000 | | | | 92,480 | | | ─ | | | | 172,480 | | | 93,750 | | | 74,340 | | | ─ | | | 168,090 | |
* | Frederick D. Sturdivant will retire on the date of our 2019 Annual Meeting. |
| (1) | Includes (a) the cashthat portion of the annual retainercash and equity retainers paid in cash to non-employee directors, and (b) the annual retainer paid to each Chair of our Board Committees and to our Presiding Independent Director. |
| (2) | Represents the grant date fair value of (a) the Company Common Stock awarded to our non-employee directors as part of their annual retainer, and (b) shares of restricted stock granted to each non-employee director. |
The grant date fair value of stock awards is computed in accordance with ASC Topic 718. For a discussion of the valuation assumptions, see Note 1513 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.
2020.
The number of shares of Common Stock covered by outstanding (unvested) stock awards held by each non-employee director at December 31, 20182020 are set forth below:
Name | | Outstanding (Unvested) Restricted Stock Awards | |
William H. Turner | 1,000 |
John P. Gethin | 1,000 | |
Pamela Forbes Lieberman | | | 1,000 | |
Patrick McClymont | | | 1,000 | |
Joseph W. McDonnell | | | 1,000 | |
Alisa C. Norris | | | 1,000 | |
Frederick D. Sturdivant | | | 1,000 | |
Richard S. Ward | | | 1,000 | |
Roger M. Widmann | | | 1,000 | |
John P. Gethin | | | 1,129 | |
No directors held option awards outstanding at December 31, 2018.2020.
| (3) | Represents the applicable COBRA premiums for medical, dental and vision insurance plan coverage provided to any director less contributions paid by such director. |
| (4) | The amounts shown in this table do not reflect compensation earned by Mr. Gethin as a consultant of the Company in 2018.2020. Mr. Gethin’s compensation as a consultant is described on page 4958 under the heading “Certain Relationships and Related Person Transactions.” |
For 2018, each non-employee director received30
Non-employee directors typically receive an annual cash retainer of $80,000. Any portion$80,000, an annual equity retainer comprised of an award of Common Stock valued at $55,000, and a restricted stock award of 1,000 shares of Common Stock under the 2016 Omnibus Incentive Plan. The cash retainer, awarded to our independent directorsor any portion thereof, may be takenpaid in Company Common Stock at the discretion of the director. In 2018, Mr. WardThe cash retainer is typically paid in equal installments on a quarterly basis, and Mr. McClymont elected to receive $8,000the equity retainer and $80,000, respectively,restricted stock award are typically made on the date of their cash retainers in Company Common Stock. These amounts are included in the “Stock Awards” column in the Director Compensation table above.annual meeting of shareholders.
21In April 2020, as part of the cost reduction measures implemented by the Company in response to the impact of the COVID-19 pandemic on our business, the Board of Directors approved to reduce temporarily the non-employee directors’ annual cash and equity retainers, and Committee Chair retainers by 25%. In November 2020, as a result of improvements in the Company’s financial performance, the Board of Directors reinstated the non-employee directors’ annual cash and equity retainers, and Committee Chair retainers, and retroactively restored their compensation.
In addition, in 2018,For the full fiscal year, each non-employee director received an equity retainer comprised of an award of Common Stock valued at $55,000$41,250, based on the fair market value of the Company’s Common Stock as of the date of issuance, and a restricted stock award under the 2016 Omnibus Incentive Plan covering 1,000 shares of Common Stock with a grant date fair market value of $37.48$33.09 per share, for a total of $37,48033,090. These amounts are included in the “Stock Awards” column in the Director Compensation table above. The restricted stock awards granted to our independent directors vest one year after the grant date, so long as the director remains continuously in office. In the event of a merger of the Company or sale of all or substantially all of the Company’s assets, vesting of all of the shares of restricted stock will accelerate, and such shares will become fully vested. Independent directors were also eligible to receive other types of awards under our 2016 Omnibus Incentive Plan, but such awards were discretionary.
In 2018,addition, in 2020, each non-employee director received an annual cash retainer of $80,000, and a cash payment of $13,750 in lieu of Common Stock to restore the director’s equity retainer. In 2020, William H. Turner also received additional annual retainers of $20,000 and $10,000 for his services as our Presiding Independent Director and Chair of the Audit Committee, respectively. Pamela Forbes Lieberman and Frederick D. Sturdivant (Co-Chair(Chair of the Strategic Planning Committee), Richard S. Ward (Chair of the Nominating and Corporate Governance Committee), and Roger M. Widmann (Chair of the Compensation and Management Development Committee) each received an additional annual retainer of $10,000 for their services as Chair or Co-Chair of their respective Committee. In addition, John P. Gethin, Pamela Forbes Lieberman Frederick D. Sturdivant and Roger M. Widmann were covered under the Company’s medical, dental or vision plans.
During fiscal year 2020, Lawrence I. Sills, serving as our former Executive Chairman, and Eric P. Sills, serving as our Chief Executive Officer and President, during fiscal year 2018, received no payment for the fulfillment of their directorial responsibilities (see the Summary Compensation Table for disclosure regarding Lawrence Sills’ and Eric Sills’ executive officer compensation). In January 2021, the Governance Committee approved the payment of a monthly cash retainer of $20,000 to Lawrence Sills for his services as the Chairman of the Board. Mr. Sills will also receive an annual retainer of $25,000 and a monthly allowance for leasing an automobile and reimbursement of related expenses.
In 2018,2020, the Nominating and Corporate Governance Committee engaged the consulting firm, Chernoff Diamond & Co., LLC,USI Consulting Group, to conduct a study of director compensation in 2021 utilizing comparable peer groups to benchmark the Company’s non-employee director compensation program. Prior to the engagement, the Committee considered factors that could affect the independence of Chernoff Diamond & Co., LLC,USI Insurance Services, including any business or personal relationships between the consultant and the members of the Committee, and the fact that the consultant provides no services to the Company other than that which it provides under its engagement with the Committee. Based on this review, the Committee determined that the engagement would not create any conflicts of interest.
The Company does not have a poison pill and is not presently considering the adoption of such a device. If the Company were ever to adopt a stockholdershareholder rights agreement, the Company would seek prior stockholdershareholder approval, unless due to time constraints or other reasons, the Board, in the exercise of its fiduciary responsibilities, determines that it would be in the best interests of stockholdersshareholders to adopt a stockholdershareholder rights agreement before obtaining stockholdershareholder approval. If the Board were ever to adopt a stockholdershareholder rights agreement without prior stockholdershareholder approval, the Board would submit such agreement to stockholdersshareholders for ratification within one year.
Compensation Committee Interlocks and Insider Participation
All members of the Compensation and Management Development Committee during 20182020 were independent directors, and none of them were employeesno member was an employee or former employeesemployee of the Company. During 2018,2020, no executive officer of the Company served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officers served on the Company’s Compensation and Management Development Committee or Board of Directors.
All of our officers are appointed by our Board of Directors. The biography of Eric P. Sills is presented in connection with “Proposal No. 1 – Election of Directors”, beginning on page 4 of this Proxy Statement. The following table sets forth information aboutthe biographies of our other officers as of the date of this Proxy Statement:
Lawrence I. Sills
Executive Chairman of the Board
Age 79
| Mr. Sills has served as our Executive Chairman of the Board since March 2016, and as a director of the Company since 1986. Mr. Sills has also served as our Chair of the Board from 2000 to March 2016, Chief Executive Officer from 2000 to March 2016, our President and Chief Operating Officer from 1986 to 2000, and our Vice President of Operations from 1983 to 1986. Mr. Sills is the father of Eric P. Sills, a director of the Company and our Chief Executive Officer and President. Mr. Sills holds an MBA from Harvard Business School and a BA from Dartmouth College. |
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Eric P. Sills
Director,
Chief Executive Officer,
President &
Member of the Office of Chief
Executive
Age 50
| Mr. Sills has served as our Chief Executive Officer and as a director of the Company since March 2016, and as our President since February 2015. Prior to serving as our President, Mr. Sills served as our Vice President Global Operations from 2013 to February 2015, and our Vice President Engine Management Division from 2006 to 2013. From 1991 to 2006, Mr. Sills served in various capacities in our Company, including as General Manager, LIC Operations, Director of Product Management, and Plant Manager, Oxygen Sensor Business Unit. He is the son of Lawrence I. Sills. Mr. Sills has completed an Advanced Management program at Harvard Business School, and holds an MBA from Columbia University and a BA from Bowdoin College.
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James J. Burke Chief Operating Officer, Chief Financial Officer &
Member of the Office of Chief Executive Age 6365 | Mr. Burke has served as our Chief Operating Officer since January 2019, and as our Chief Financial Officer since 1999. Priorfrom 1999 to his appointment as our Chief Operating Officer,September 2019. Mr. Burke also served as our Executive Vice President Finance from March 2016 to January 2019, our Vice President Finance from 1999 to March 2016, our Director of Finance and Chief Accounting Officer from 1998 to 1999, and our Corporate Controller from 1993 to 1997. Mr. Burke has completed an Executive Education program at Ross School of Business, University of Michigan, and holds an MBA from University of New Haven, and a BBA from Pace University. |
Dale Burks Executive Vice President and Chief Commercial Officer & Member of the Office of Chief Executive Age 5961 | Mr. Burks has served as our Executive Vice President and Chief Commercial Officer since March 2016. Prior to his current appointment, Mr. Burks served as our Vice President Global Sales and Marketing from 2013 to March 2016, our Vice President Corporate Sales and Marketing from 2011 to 2013, our Vice President Temperature Control Division from 2006 to 2011, our General Manager – Temperature Control Division from 2003 to 2006, and in various capacities throughout our Company from 1984 to 2003, including as our Director – Sales & Marketing, Regional Manager and Territory Manager. Mr. Burks has completed Executive Education programs at Ross School of Business, University of Michigan, and Kellogg School of Management, Northwestern University, and holds a BS from Oregon State University. |
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Nathan R. Iles Chief Financial Officer & Member of the Office of Chief Executive Age 44 | Mr. Iles has served as our Chief Financial Officer since September 2019. Prior to his appointment as our Chief Financial Officer, Mr. Iles served as Vice President and Chief Financial Officer at UCI International Holdings, Inc. (“UCI”) from December 2016 to February 2019, Chief Financial Officer of UCI’s ASC/Airtex Performance Pumps business from August 2015 to December 2016, and Vice President Corporate Finance of UCI-FRAM Auto Brands from July 2011 to August 2015. Mr. Iles has also held finance and accounting positions at Sears Holdings Corporation and Deloitte & Touche. Mr. Iles holds an MBA from the University of Chicago Booth School of Business, and a BBA from Eastern Kentucky University. Mr. Iles is a Certified Public Accountant. |
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Carmine J. Broccole Senior Vice President General Counsel & Secretary Age 5355 | Mr. Broccole has served as our Senior Vice President General Counsel since March 2016 and as our Secretary since 2006. Mr. Broccole has also served as our Vice President General Counsel from 2006 to March 2016, and as our General Counsel from 2004 to 2006. Prior to such time, Mr. Broccole was a Partner of Kelley Drye & Warren LLP. Mr. Broccole holds a JD from Stanford Law School and a BA from Cornell University, and is a member of the Bars of New York and California. |
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Thomas S. Tesoro Senior Vice President Human Resources Age 65 | Mr. Tesoro has served as our Senior Vice President Human Resources since January 2020. Prior to his current appointment, Mr. Tesoro served as our Vice President Human Resources from 2006 to January 2020. From 1999 to 2006, Mr. Tesoro served as Senior Vice President of Human Resources for Vertrue Inc. Prior to such time, he served in a variety of senior human resources related positions for a number of Fortune 500 companies. Mr. Tesoro holds a JD from Fordham University School of Law and a BS from Fordham University, and is a member of the Bar of New York. |
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Ray Nicholas Vice President Information Technology & Chief Information Officer Age 5557 | Mr. Nicholas has served as our Vice President Information Technology since 2006 and as our Chief Information Officer since 2013. From 1990 to 2006, Mr. Nicholas served as the Manager and Director of Information Systems for our Temperature Control Division. Mr. Nicholas completed the Automotive Aftermarket Professional program at University of the Aftermarket, Northwood University, and an Executive Education program at University of Virginia, Darden School of Business, and holds a BS from Northeast Louisiana University. |
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Thomas S. Tesoro
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Vice President
Human Resources
Age 64
Mr. Tesoro has served as our Vice President Human Resources since 2006. From 1999 to 2006, Mr. Tesoro served as Senior Vice President of Human Resources for Vertrue Inc. Prior to such time, he served in a variety of senior human resources related positions for a number of Fortune 500 companies. Mr. Tesoro holds a JD from Fordham University School of Law and a BS from Fordham University, and is a member of the Bar of New York.
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William J. Fazio Chief Accounting Officer Age 6466 | Mr. Fazio has served as our Chief Accounting Officer since 2008. From 2007 to 2008, Mr. Fazio served as our Director, Corporate Accounting. From 2001 to 2007, he served as the Corporate Controller and Chief Accounting Officer of Hexcel Corporation. Prior to that time, Mr. Fazio served as Vice President, Controller of Kodak Polychrome Graphics. Mr. Fazio holds an MBA from Hofstra University and a BS from St. John’s University. Mr. Fazio is also a Certified Public Accountant. |
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Erin Pawlish Treasurer Age 4345 | Ms. Pawlish has served as our Treasurer since November 2015. Prior to her appointment as our Treasurer, Ms. Pawlish served as our Financial Director from 2013 to November 2015, and as a Senior Manager at KPMG LLP from September 1998 to December 2012. Ms. Pawlish holds a BBA from Pace University. Ms. Pawlish is also a Certified Public Accountant. |
Office of Chief Executive
The Company has established the Office of Chief Executive to strengthen the executive management structure of the Company. The Office of Chief Executive is primarily responsible for the development of policy, strategy and quality assurance, and the provision of leadership. Its functions also include: (a) supporting and providing timely and quality advice to the Chief Executive Officer; (b) promoting the policies of the Company; and (c) improving communications between management, customers, the Board, stockholdersshareholders and other stakeholders. The Office of Chief Executive is comprised of: (1) Eric P. Sills, our Chief Executive Officer and& President; (2) James J. Burke, our Chief Operating Officer and Chief Financial Officer; and (3) Dale Burks, our Executive Vice President and& Chief Commercial Officer; and (4) Nathan R. Iles, our Chief Financial Officer.
Compensation Discussion and Analysis
In thisThis section of our Proxy Statement we discussdescribes the material components of our compensation program for our “named executive officers.” Under SEC rules, our named executive officers for fiscal year 20182020 were: Lawrence I. Sills, Executive Chairman; Eric P. Sills, Chief Executive Officer and President; James J. Burke, Chief Operating Officer and Chief Financial Officer; Dale Burks, Executive Vice President and Chief Commercial Officer; and Carmine J. Broccole, Senior Vice President General Counsel and Secretary.
Lawrence I. Sills Former Executive Chairman of the Board | Dale Burks Executive Vice President & Chief Commercial Officer |
Eric P. Sills Chief Executive Officer & President |
Nathan R. Iles Chief Financial Officer |
James J. Burke Chief Operating Officer |
Carmine J. Broccole Senior Vice President General Counsel & Secretary |
In this section, of our Proxy Statement, we also discuss: (a) our business strategy; (b) our financial and business performance for fiscal year 20182020 and its impact on the compensation awarded to our decisions relating tonamed executive compensation; (b)officers; (c) the primary responsibilities of our Compensation and Management Development Committee (referred to as our “Compensation Committee”); (c)Committee; (d) our executive compensation philosophy and the overall objectives of our executive compensation program; (d)(e) the process followed by our Compensation Committee in arriving at specific compensation policies and decisions; (e)(f) the various components of our compensation package and the reasons that we provide each component; (f)(g) the factors considered by our Compensation Committee in arriving at its compensation decisions for 2018;2020; and (g)(h) some additional compensation-related topics.
The Compensation Committee is comprised exclusively of independent directors. In performing its duties, the Compensation Committee may in its discretion, solicit the input of any of our executive officers (including our Executive Chairman and our Chief Executive Officer), any of our other employees,Officer or any independent consultant or advisor.
Business Strategy and Summary of 20182020 Financial and Business Performance
Our consolidated net sales for 2018 were $1,092 million, a decreasecore strategy is to be the best full-line, full-service supplier of $24.1 million or 2.2% for the year, compared to $1,116.1 million in 2017. The year-over-year decrease in net sales is due to the lower results achievedpremium engine management and temperature control products. We pursue this strategy by focusing our Engine Management Segment, which reflect large pipeline orders in the first half of 2017 that were not repeated in 2018,efforts on executing our value proposition, growing and the anticipated gradual decline indiversifying our wirebusiness, and cable business due to the lifecycle of these products. Our Temperature Control Segment’s net sales were essentially flat for the full fiscal year 2018 when compared to 2017, which reflect a slow start to the 2018 season, resulting from a mild 2017 summer, higher than normal customer inventory levels going into 2018, and a cool early spring.continuously improving upon our past performance.
Although 2018 was a challenging year,In establishing the management performance objectives (or MBO goals) of the annual cash incentive awards of our named executive officers, the Compensation Committee recognizedselects MBO goals that temporaryare designed to implement this strategy. The MBO goals for fiscal year 2020 covered: (a) margin improvement in certain product categories; (b) the achievement of specific growth and one-time events negatively affecteddiversification initiatives in the automotive aftermarket and original equipment markets; (c) the implementation of the Company’s financial results,risk identification, management and thatmitigation strategies in response to the executives successfully executed certainCOVID-19 pandemic and its impact on our business and operations; and (d) initiatives (e.g.relating to good corporate citizenship and environmental, social and governance (ESG) issues, which included the matters outlined above under the heading “Code of Ethics and Corporate Social Responsibility”, relocation and integrationthe enhancement of certain product lines), which were designed to reduce costour reporting and increase productivity, thereby resulting in the creationdisclosure of long-term value for the Company. The Compensation Committee considered the successful execution of these initiatives as well as the Company’s financial results inESG policies and practices.
In determining the total compensation paid to our named executive officers in 2018,2020, as compared to 2017.2019, the Compensation Committee considered the successful execution of these initiatives and senior management’s skill and resourcefulness in navigating the extraordinary challenges of the COVID-19 pandemic, as well as the Company’s financial results. Our earnings from continuing operations for 2020 were $80.4 million or $3.52 per diluted share, an increase of $11.3 million or approximately 16%, compared to $69.1 million or $3.03 per diluted share for 2019.
We believe that the compensation of each of our named executive officers for 2020 was reasonable and appropriate, and aligned with the Company’s financial and business results in 2020.
2020 Executive Compensation Actions
Our Compensation Committee took into account a number of factors in determining executive compensation for 2018,2020, including our business strategy, financial and business results, management performance and competitive data. In light of these considerations, the Compensation Committee made the following executive compensation decisions infor fiscal year 2018:
2020:
| · | Established fiscal year 2018 management performance, or management by objective (“MBO”), goals under our annual cash incentive bonus plan, including: (a) the achievement of milestones relating to our plant rationalization initiatives, and (b) the execution of the Company’s business strategy relating to growth initiatives. |
Established management performance, or management by objective (“MBO”), goals for fiscal year 2020 under our annual cash incentive bonus plan that were designed to execute the Company’s business strategy. In response to the COVID-19 pandemic, in April 2020, the Compensation Committee approved modifications to the 2020 MBO goals to address the Company’s risk identification, management and mitigation strategies relating to the pandemic.
| · | Established fiscal year 2018 company-level financial objectives based on the Economic Value Added (“EVA”) performance measure, and approved a performance measure for fiscal year 2019Established a company-level financial performance measure for fiscal year 2020 under our annual cash incentive bonus plan, which is based on the year-over-year improvement in the weighted average of our earnings per share over a three-year period. |
| · | Awarded base salary pay modificationsAwarded base salary pay increases to our named executive officers that reflected the individual performance and in some cases, changes in responsibilities of our executives. |
| · | Approved annual cash incentive awards in the amount of 126% of target levels, reflecting the achievement of MBO goals. |
Granted annual awards of restricted stock and performance shares to our named executive officers that were consistent with our compensation philosophy and the Compensation Committee’s assessment of individual performance and expected future contributions.
| · | Granted annual awards of restricted stock and performance shares to our named executive officers that were consistent with our compensation philosophy and the Compensation Committee’s assessment of individual performance and expected future contributions. |
| · | Granted long-term restricted stock to certain of our named executive officers as a long-term retention tool. |
We believe that our executive compensation program is reasonable, competitive and focused on pay for performance principles. We emphasizeIn particular, we believe that our compensation opportunities thatprogram is designed to reward our executives when they successfully achieve strategic objectives. The compensation of our named executive officers varies depending upon thefor their achievement of pre-establishedboth short- and long-term performance goals. goals that effectively carry out the Company’s business strategy and result in the creation of shareholder value.
Through equity incentives and stock ownership requirements, and equity incentives, we also align the interests of our executives with those of our stockholdersshareholders and the long-term interests of the Company. We have not engaged in any of the most frequently criticized pay practices such as re-pricing of stock options or SARs without stockholdershareholder approval, excessive perquisites or tax gross-ups, or agreements with change-in-control provisions unreasonably favorable to our executives. Our executive compensation policies have enabled the Company to attract and retain talented and experienced executives and have benefited the Company over time. We believe that the compensation earned by each of our named executive officers in 2018 was reasonable and appropriate and aligned with the Company’s financial results and achievement of the objectives of our executive compensation program.
In compliance withAt our 2020 Annual Meeting, our shareholders had the Dodd-Frank Act, we included a non-binding,opportunity to vote, on an advisory stockholder vote in our 2018 Proxy Statement(non-binding) basis, to approve the compensation paid to our named executive officers in 20172019 (referred to as a “say-on-pay” vote).
Our say-on-pay proposal was approved by approximately 97%99% of the votes cast at the 2020 Annual Meeting, demonstrating near unanimous support from among the votes cast for our 2018 annual meeting of stockholders.compensation program. The Compensation Committee views this result as confirmation that our compensation program, including our emphasis on pay-for-performance, is structured and designed in alignment with shareholder interests. We will continueAccordingly, we did not make any material changes to emphasize pay-for-performance alignment, and our executive compensation program foras a result of the named executive officers reflects this philosophy.2020 vote.
Because our stockholdersshareholders expressed a preference for an annual say-on-pay vote, our stockholdersshareholders have the opportunity at our 20192021 Annual Meeting to vote on a non-binding, advisory basis, to approve the compensation paid to our named executive officers in 2018.2020.
Primary Responsibilities of our Compensation Committee
Our Compensation Committee is responsible for, among other things:
| · | reviewing the overall goals, policies, objectives and structure of our executive compensation and benefit programs and assessing whether any of the components thereof may present unreasonable risks to the Company; |
| · | approving the compensation packages of the Company’s Chief Executive Officer and our other executive officers; and |
| · | administering our equity incentive plans. |
Compensation Philosophy and Primary Objectives
Philosophy. The Compensation Committee is responsible for establishing and reviewing the overall compensation philosophy of the Company. The Compensation Committee believes that the compensation paid to executives should be structured to provide our executives with meaningful rewards, while maintaining alignment with stockholdershareholder interests, corporate values and management’s strategic initiatives.
In accordance with this philosophy, the Compensation Committee believes that the executive compensation program should consist of a mix of base salary, annual cash incentive compensation, long-term incentive compensation (that may include cash or equity components, in the Compensation Committee’s discretion), perquisites and other benefits.
The Compensation Committee uses its judgment and discretion in establishing compensation and strives to avoid the use of highly leveraged incentives that may drive overly risky short-term behavior on the part of executives. Our equity programs, combined with our executive share ownership requirements, reward long-term stock performance. In particular, our contingent performance share awards, which vest only at the end of a three-year performance period, reward longer-term financial and operating performance.
Objectives. The Compensation Committee generally considers the following objectives in establishing compensation programs and setting pay levels:
providing the Company with the ability to attract, motivate and retain exceptional talent whose abilities and leadership skills are critical to the Company’s long-term success;
maintaining a significant portion of each executive’s total compensation at risk, tied to achievement of annual and long-term strategic, financial, organizational and management performance goals, that are intended to improve shareholder return;
providing variable compensation incentives directly linked to the performance of the Company and improvement in shareholder return so that executives manage from the perspective of owners with an equity stake in the Company;
ensuring that our executives hold Company Common Stock to align their interests with the interests of our shareholders; and
ensuring that compensation and benefit programs are both fair and competitive in consideration of each executive’s level of responsibility and contribution to the Company and reflect the size and financial resources of the Company in order to maintain long-term viability.
| · | providing the Company with the ability to attract, motivate and retain exceptional talent whose abilities and leadership skills are critical to the Company’s long-term success; |
| · | maintaining a significant portion of each executive’s total compensation at risk, tied to achievement of annual and long-term strategic, financial, organizational and management performance goals, that are intended to improve stockholder return; |
| · | providing variable compensation incentives directly linked to the performance of the Company and improvement in stockholder return so that executives manage from the perspective of owners with an equity stake in the Company; |
| · | ensuring that our executives hold Company Common Stock to align their interests with the interests of our stockholders; and |
| · | ensuring that compensation and benefit programs are both fair and competitive in consideration of each executive’s level of responsibility and contribution to the Company and reflect the size and financial resources of the Company in order to maintain long-term viability.
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How We Set Compensation. On an annual basis, the Compensation Committee reviews and approves the compensation of our named executive officers, including the amounts of salary, cash incentive awards and equity-based compensation provided to each executive. In determining total executive compensation packages, the Compensation Committee generally considers various measures of Company and industry performance including revenue, operating income, gross margin and total stockholdershareholder return. The Compensation Committee does not assign these performance measures relative weights. The Compensation Committee considers these performance measures as good indicators of Company performance and exercises its business judgment in determining compensation after considering all of these measures, collectively, as well as taking into account the market data and peer group information discussed below.
The Compensation Committee also evaluates the total compensation of each executive, and each element of compensation separately, to ensure that it will be effective in motivating, retaining and incentivizing the executive. The Compensation Committee’s evaluation takes into consideration, among other factors, each executive’s individual performance, both in general and against specific goals and targets established for the executive, and the desire to maintain internal pay equity and consistency among our executives.
Our named executive officers generally participate in the same executive compensation plans and arrangements available to our other executive officers; however, the contingent annual cash incentive awards and performance share awards utilize targets that are based upon the Company’s achievement of short-term and long-term strategic goals.
officers. The Compensation Committee divides executive officers into three separate categories for the purposes of establishing the levels of cash and equity incentive awards. Each category consists of one or more officers who are grouped together for incentive compensation purposes and receive the same target incentive awards. For example, with respect to our annual restricted stock awards, in 2018, our former Executive Chairman and members of the Office of Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer wereare in the first category; our Senior Vice President General Counsel wasis in the second category; and our other executives wereare in the third category. One purpose of the categories is to equalize incentive opportunities for individuals with similar levels of responsibility. This practice is intended to improve internal pay equity among our executives. Considerations of internal pay equity among executives are also factored into the Compensation Committee’s consideration of the market data and peer group information discussed below with respect to base salary and target bonus compensation.
Benchmarking. In establishing total compensation for our executives, the Compensation Committee generally targets the median of the market, which it considers to be equivalent to the domestic market for executive talent within USU.S. industrial companies with gross revenues in the approximate range of $500 million to $1 billion. Our Senior Vice President Human Resources conducts periodic benchmark reviews within the above-referenced market of the aggregate level of executive compensation, as well as the mix of elements used to compensate executive officers at such companies, and provides this market data to the Compensation Committee for its consideration. The Compensation Committee believes that compensation targeted at the median of the market reflects consideration of our stockholders’shareholders’ interests in paying what is necessary, but not significantly more than necessary, to achieve our corporate goals.
In addition, the Compensation Committee also reviews the practices of specific peer group companies to compare the Company’s compensation programs with other manufacturing companies of comparable size and stature. Our Executive Chairman, our Chief Executive Officer and other members of management provide input on the selection of the peer group companies, and the Compensation Committee makes the final determination of which companies to include. Executive compensation information for the market data and peer group companies is compiled by management from proxy statements and other public filings, as well as surveys and other databases to which we subscribe, such as those from Aon and ADP.The Compensation Committee may, from time to time, engage an independent consultant to establish comparable peer groups to benchmark the Company’s executive compensation program. However, the Compensation Committee did not engage an independent consultant to review executive compensation in 2018.2020.
Our Compensation Committee believes that benchmarking is a useful tool because it is a reflection of the market in which we compete for talent and provides credibility for our compensation programs with both our employees and our stockholders.shareholders. The Compensation Committee also reviews this information for context and a frame of reference for decision-making; but it is not the sole source of information on which executive compensation is determined. Other factors such as internal equity, individual and business performance, and the perceived degree of alignment between the job duties of our executive with the benchmark job description to which his or her compensation is being compared are also considered.
Role of Management. The Compensation Committee seeks and considers input from senior management in many of its decisions. Annually, our Executive Chairman and our Chief Executive Officer reviewreviews with the Compensation Committee annual salary, annual incentive plan targets and long-term incentive compensation for each of our executives (excluding our Executive Chairman and our CEO). In addition, following the end of each fiscal year, our Executive Chairman and our Chief Executive Officer evaluateevaluates each executive officer’s performance for the prior fiscal year (other than his own performance) and discussdiscusses the results of theirhis evaluations with the Compensation Committee. Other members of the Office of Chief Executive also assist in the evaluations for those officers reporting to them. In addition to considering an individual’s attainment of the business goals and objectives established for him or her by the Compensation Committee for the prior year, the Executive Chairman’s and Chief Executive Officer’s evaluations of each executive officer’s performance may be based in part upon subjective factors, including the Executive Chairman’s and Chief Executive Officer’s evaluations of the contributions made by the executive officer to the Company’s overall results and achievement of its strategic goals. These evaluations include consideration of the level of responsibility of each executive officer and the percentage of total Company revenue and/or expense that each individual officer is responsible for, where applicable. The Executive Chairman and the Chief Executive Officer then makemakes specific recommendations to the Compensation Committee for adjustments of base salary and incentive plan targets as part of the compensation package for each executive officer (other than himself) for the next fiscal year.
The Compensation Committee reviews the performance of the Executive Chairman and the Chief Executive Officer and determines the compensation for all executive officers for the next fiscal year, considering the recommendations from the Executive Chairman and the Chief Executive Officer, as well as the benchmark and peer group information described above and any other information available to it that it considers relevant. The Compensation Committee discusses the recommendations of the Executive Chairman and the Chief Executive Officer in executive session without any members of management present and may modify the Executive Chairman’s and the Chief Executive Officer’s recommendations when approving final compensation packages.
Tally Sheets. When reviewing executive compensation, the Compensation Committee has historically reviewed management-provided materials which highlight the base salary, target cash incentive award, and actual cash incentive award to each of our executive officers for prior fiscal years. The Compensation Committee uses this information to review compensation trends, to compare increases or decreases year over year, and to ensure that compensation decisions are made with a view to the total compensation package awarded to each executive officer over time. No specific weight is assigned by the Compensation Committee to the tally sheets or any specific items which may appear on such tally sheets.
Risk Management Considerations. As mentioned earlier, the Compensation Committee strives to avoid the use of highly leveraged incentives that may drive overly risky short-term behavior on the part of executives. The Compensation Committee structures our cash incentive awards and equity incentive awards as highlighted below to promote the creation of long-term value and discourage behavior that may lead to excessive risk:
The Company’s annual cash incentive award (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below) is based in part on company-level financial performance, designed to align executive compensation to year-over-year improvements in corporate performance and increases in shareholder value. This portion of the cash incentive award is structured such that, year-over-year improvements that are favorable for the Company’s shareholders, are also made favorable for our executives whose compensation is based on the achievement of those improvements. In addition, an executive’s actual award is capped on an annual basis at 200% of the applicable target, no matter how much financial performance exceeds the range established for the award, thereby limiting the incentive for excessive risk-taking. However, any award in excess of the 200% target may be carried forward into the following year, subject to the risk of forfeiture depending upon the following year’s performance. In addition, since these awards are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his own compensation through excessive risk taking is constrained.
| · | The Company’s annual cash incentive award (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below) is based in part on company-level financial objectives, designed to align executive compensation to continuous improvements in corporate performance and increases in stockholder value. This portion of the cash incentive award is structured such that, year-over-year improvements that are favorable for the Company’s stockholders, are also made favorable for those executives whose compensation is based on the achievement of those improvements. In addition, an executive’s actual award is capped on an annual basis at 200% of the applicable target, no matter how much financial performance exceeds the range established for the award, thereby limiting the incentive for excessive risk-taking. However, any award in excess of the 200% target may be carried forward into the following year, subject to the risk of forfeiture depending upon the following year’s performance. In addition, since these awards are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his own compensation through excessive risk taking is constrained. |
| · | The target company-level financial performance award represents 70% of an executive’s total target cash incentive award in any year. Management performance, or MBO bonuses (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below), which are based upon the achievement of management goals and objectives, and thus are more susceptible to individual risk taking, represent only 30% of an executive’s total target cash incentive award, thus reducing the incentive for any executive to take excessive risks. |
an executive’s total target cash incentive award in any year. Management performance, or MBO bonuses (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below), which are based upon the achievement of management goals and objectives, and thus are more susceptible to individual risk taking, represent only 30% of an executive’s total target cash incentive award, thus reducing the incentive for any executive to take excessive risks.
| · | The measures used to determine whether performance share awards vest are based on at least three years of financial performance. The Compensation Committee believes that the longer performance period encourages executives to attain sustained performance over several years, rather than performance in a single annual period. |
Restricted stock awards generally vest at the end of a three year or longer period and an executive must hold any vested restricted stock (except long-term retention awards) for an additional two-year period following vesting pursuant to the terms of our Stock Ownership Guidelines, thereby encouraging executives to look to long-term appreciation in equity values.
| · | Restricted stock awards generally vest at the end of a three year or longer period and an executive must hold any vested restricted stock for an additional two-year period following vesting pursuant to the terms of our Stock Ownership Guidelines, thereby encouraging executives to look to long-term appreciation in equity values. |
Base Salary. The Compensation Committee generally reviews base salaries for executive officers at the beginning of each fiscal year. Annual salary is based upon an evaluation of each individual’s performance, an executive’s level of pay compared to that for similar positions at peer group companies, the responsibilities of the position, the experience of the individual, internal pay equity considerations, and Company performance. Base salaries may also be adjusted at the time of a promotion, upon a change in level of responsibilities, or when competitive circumstances may require review.
We believe that our base salaries are an important element of our executive compensation program because they provide our executives with a steady income stream that is not contingent upon our overall performance or stockholdershareholder return. We believe that maintaining base salary amounts generally in the median to 75% range of our peer group minimizes competitive disadvantage, while avoiding paying amounts in excess of what we believe to be necessary to motivate executives to meet corporate goals.
Annual Cash Incentive Awards. The Compensation Committee utilizes annual cash incentive awards to reward each of our executive officers whenbased on the executive officer achieves certainexecutive’s achievement of management performance objectives (or MBO goals), and when we achieve certain company-level financial objectives.the Company’s achievement of year-over-year improvement in the weighted average of our earnings per share over a three-year period. Our annual cash incentive awards are designed to more immediately reward our executives for their performance during the most recent year. We believe that the immediacy of these cash awards, in contrast to our equity awards which vest over a three year or longer period of time, provide a significant incentive to our executives to achieve their respective management objectives and, thus, our company-level objectives. We believe our cash awards are an important motivating factor for our executives, in addition to being a significant factor in attracting and retaining our executives.
Our cash incentive awards utilize a target that is a percentage of each executive officer’s total cash compensation for the fiscal year. The target is set at levels that are approximately 32% - 39% of an executive’s expected total cash compensation for the year. They are set at levels which, assuming achievement of 100% of the applicable target amount, the Compensation Committee believes are likely to result in an annual cash award at or near the median for target cash awards in the market. Actual awards may be higher or lower, however, based upon the degree of achievement of MBO goals and company-level financial objectives.performance.
Management Performance. At the beginning of each year, the Compensation Committee reviews and approves a detailed set of MBO goals for our executives (which are generally aligned with the Company’s short-term and long-term strategic goals) initially prepared by management. At the beginning of the following year, the Compensation Committee determines, in its discretion, with the input of the Executive Chairman and Chief Executive Officer, the level of achievement of each MBO goal by our executives during the prior year and the percentage of the target MBO award earned by such executives. The target MBO award represents 30% of an executive’s total target cash incentive award for the applicable year.
Company-Level Financial Performance. With respect to company-level financial objectives,performance, the Company utilizes performance measures to align closely executive compensation to continuousyear-over-year improvements in corporate performance and increases in stockholdershareholder value. The target company-level financial performance award represents 70% of an executive’s total target cash incentive award for the applicable year. During the three-year period reported in the Summary Compensation Table below, we utilizedFor 2020, the performance measure “Economic Value Added” or “EVA”, which measures the year-over-year difference in net operating profit after tax, less a charge for the cost of capital. EVA recognizes the productive use of capital assets and, therefore, wise, responsible decision-making regarding capital investments.
In October 2018,selected by the Compensation Committee reviewed alternative performance measures, including those utilized by our peer group, and determined that the benefits of an EVA-based measure could be achieved, in addition to others, through the use of a performance measurewas based on athe year-over-year improvement in the weighted average of our earnings per share for theover a three-year period, then ended (“Weighted Average EPS”). The cash incentive award will be based on the year-over-year improvement in Weighted Average EPS, where the most recent year of the three-year period will beis weighted more heavily than the prior two years. The Compensation Committee approved the use of the Weightedyears (referred to as “Weighted Average EPS for 2019.
Depending on the Company’s financial plan for the year, the Board of Directors may modify the target amounts that are used to determine whether our executive officers achieve a threshold 100% payout and a maximum 200% payout of the company-level financial performance award.EPS”).
In addition, in order to promote longer-term stockholdershareholder improvement and to keep part of an executive’s cash incentive award at risk, the company-level financial performance award is capped on an annual basis at 200% of the applicable target. To the extent that an executive could have received an award in excess of the cap, the excess amounts are carried forward into the next year’s calculation of an executive’s award. However, any award that is carried forward is subject to risk of forfeiture depending upon the following year’s performance.
Long-Term Equity Incentive Programs. As part of the Company’s compensation program, the Compensation Committee grants equity awards to the Company’s executive officers. We believe that equity awards provide our executive officers with a strong link to our long-term performance goals, create an ownership culture, and closely align the interests of our executive officers and our stockholders.shareholders. In addition, the vesting feature of our equity awards is designed to aid officer retention because this feature provides an incentive to our executive officers to remain in our employ throughout the vesting period, which is typically three years or longer. In determining the size and type of equity awards granted to our executive officers in 2018,2020, the Compensation Committee awarded different amounts to: (a) our former Executive Chairman and members of the Office of Chief Executive Officer, Chief Operating Officer and Chief Commercial Officer;Executive; (b) our Senior Vice President General Counsel; and (c) our other executives, in recognition of their differing levels of responsibility. The specific amounts awarded were based on recommendations of management, but the Compensation Committee had discretion to award different amounts. The Compensation Committee may also consider our company-level performance, the applicable executive officer’s performance, the amount of equity previously awarded to the applicable executive officer, the vesting of such prior awards, and the recommendations of management and any other advisor that the Compensation Committee may choose to consult.
Our primary form of equity compensation consists of restricted stock awards and performance share awards. We believe that these awards provide a motivating form of incentive compensation, while permitting us to issue fewer shares than stock options. Because shares of restricted stock have a defined value at the time the restricted stock awards are issued, restricted stock awards are often perceived as having more immediate value than stock options, which have a value less easily determinable when issued. In addition, we provide performance shares to our executive officers because we believe that their contributions to the Company have a direct relationship to the achievement of the Company’s strategic goals.
We grant our executive officers two types of restricted stock (standard awards and long-term retention awards) and performance shares generally once per year at a regularly scheduled meeting of the Board. Our 2016 Omnibus Incentive Plan also permits us to grant incentive and nonqualified stock options, stock appreciation rights, restricted stock units, and other stock-based awards to our officers, directors, employees and consultants. However, our Compensation Committee currently intends to grant only restricted stock and performance shares under the 2016 Omnibus Incentive Plan.
Each standard restricted stock award issued under our 2016 Omnibus Incentive Plan is subject to a three-year vesting period. Each long-term retention restricted stock award issued under our 2016 Omnibus Incentive Plan is subject to an incremental vesting period based upon the participant reaching the age of 60 (25% vests), 63 (25% vests) and 65 (balance vests). If an executive officer ceases employment before the end of any vesting period, he or she forfeits the entire unvested portion of the restricted stock award. Restricted stock awards may become immediately vested in full in the event of death, retirement at or after age 65, total disability (as determined by the Compensation Committee in its sole discretion), or upon a “change in control” of the Company. Grants of long-term retention restricted stock awards to participants over the age of 65 are subject to a one-year vesting period.
We also award our executive officers performance shares in amounts comparable to the number of shares of standard restricted stock awards issued to such executives, although the actual number of performance shares ultimately issued to an executive may be higher or lower, depending upon the level of achievement of the applicable performance goals. In order for the performance shares to vest, the Company must achieve a certain level of earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three-year performance period covered by the award. A new performance period begins each January 1 and ends three years later on December 31. As a result, up to three performance periods may overlap in any given year. The level of earnings from continuing operations is tied to financial goals contained in the Company’s three-year strategic plan, which is updated annually and approved by our Board. The Compensation Committee selected this performance measure because improvement in earnings from continuing operations is a key strategic focus for the Company and is believed to help the Company achieve higher margins, stronger cash flow and debt reduction.
The performance share awards are subject to a three-year vesting period. If an officer ceases to be an employee of the Company before the end of the vesting period, the entire performance share award is forfeited. The performance goals are scaled so that the recipient can receive part of an award in the event that acceptable, but not the desired, results are achieved.
It is our policy to ensure that we do not grant equity awards in connection with the release, or the withholding, of material non-public information, and that the grant value of all equity awards is equal to the fair market value on the date of grant.
SERPDefined Contribution Plan. The Company has established a defined contribution Supplemental Executive Retirement Plan (SERP) for our executive officers (and other eligible employees). The purpose of this plan is to enable the executive officers to supplement their benefits under the Company’s Profit Sharing 401(K) Capital Accumulation Plan as well as to provide a means whereby certain amounts payable by the Company to our executive officers may be deferred to some future period. Eligible employees may irrevocably elect to defer receipt of a portion of their annual base salary and annual bonus payments earned in that plan year up to a maximum of 50% of their annual base salary and 100% of their annual bonus payments. In addition, the Company generally makes an annual cash contribution into the SERP on behalf of each participant.
Supplemental SERPDefined Benefit Pension Plan. The Company maintains ana defined benefit unfunded Supplemental SERP.Executive Retirement Plan. The benefits under this plan are in addition to any benefits payable to participants under the Company’s Profit Sharing 401(K) Capital Accumulation Plan and the defined contribution SERP. As of the date of this Proxy Statement, there are no participants in the Supplemental SERP.defined benefit Supplement Executive Retirement Plan.
ESOP. Our executive officers are eligible to receive Company Common Stock pursuant to our Employee Stock Ownership Plan, which is available for all eligible employees. This stock grant plan gives our executives an opportunity to share directly in the growth of the Company through stock ownership. The Company’s stock contributions for a particular calendar year are made in the first quarter of such year. Under the plan, each participant is subject to a six-year vesting schedule.
Compensation Actions in 2018for 2020
After careful analysis, the Compensation Committee determined to use the following companies for peer group comparisons in setting 20182020 compensation:
Altra Industrial Motion Corp. | EnPro Industries, Inc. | Modine Manufacturing Co. |
CIRCOR International, Inc. | Gentherm Inc. | Stoneridge Inc. |
Columbus McKinnon Corp. | LCI Industries, Inc. | SunCoke Energy, Inc. |
Dorman Products, Inc. | NN, Inc. | Tennant Company |
In determining executive compensation for 2018,2020, our Compensation Committee evaluated and made its determinations in the context of the Company’s 20182019 financial and business performance and the business conditions of the automotive aftermarket generally.generally at the time. The Compensation Committee also took into consideration each executive’s performance of their respective prior year’s MBO objectives and the Company’s ability to continue to make changes and introduce strategic initiatives critical to positioning the Company for future long-term growth.
In February 2021, with advice from its independent compensation consultant, USI Consulting Group, the Compensation Committee re-evaluated and updated the composition of its peer group for purposes of benchmarking the Company’s executive compensation program. For 2021, the peer group will be comprised of the following companies:
CIRCOR International, Inc. | EnPro Industries, Inc. | Methode Electronics Inc. |
Columbus McKinnon Corp. | Gentherm Inc. | Modine Manufacturing Co. |
Cooper-Standard Holdings Inc. | Lawson Products Inc. | Shyft Group Inc. |
CTS Corp. | Lydall, Inc. | Stoneridge, Inc. |
Dorman Products, Inc. | Meritor Inc. | |
Base Salary. Based on the foregoing, in February 20182020 the Compensation Committee approved salary modifications for our executives for 2018. 2020. In April 2020, as part of the cost reduction measures implemented by the Company in response to the impact of the COVID-19 pandemic on our business, the Board of Directors approved to reduce temporarily the base salaries of our former Executive Chairman and members of the Office of Chief Executive by 25%, and our other executives by 10%. In November 2020, the Board of Directors reinstated the base salaries of our executives as a result of the Company’s financial performance in 2020.
In addition, in view of the executives contributions to the Company as well as to motivate and assist in the retention of these individuals, in February 20192021 the Compensation Committee set the salaries of the following named executive officers to the levels indicated: Lawrence I. Sills, $412,000, Eric P. Sills, $619,000;$668,000; James J. Burke, $619,000;$655,000; Dale Burks, $510,000;$541,000; Nathan R. Iles, $518,000; and Carmine J. Broccole, $465,000.$495,000.
Annual Cash Incentive Awards. For 2018, theThe Compensation Committee established among other things, the following MBO goals for our named executive officers:officers in 2020 for the purpose of determining the MBO portion of their annual cash incentive award: (a) achieving milestonesmargin improvement in certain product categories; (b) the achievement of specific growth and diversification initiatives in the automotive aftermarket and original equipment markets; (c) the implementation of the Company’s risk identification, management and mitigation strategies in response to the COVID-19 pandemic and its impact on our business and operations; and (d) the achievement of initiatives relating to good corporate citizenship and environmental, social and governance (ESG) issues, which included the matters outlined above under the heading “Code of Ethics and Corporate Social Responsibility”, and the enhancement of our plant rationalization initiatives,reporting and (b) executing the Company’s business strategy relating to growth initiatives.disclosure of ESG policies and practices. In February 2019,2020, the Compensation Committee determined that the named executive officers had successfully attained their MBO goals, and as a result, the Compensation Committee authorized MBO cash incentive awards at percentages of 126%150% of the target amountMBO award for 2018.2020.
The Compensation Committee established a year-over-year improvement in EVA, and set target amounts for payouts, based on the Company’s forecasted financial goals. Due to the year-over-year decrease in net earnings, the Company did not achieve the threshold year-over-year improvement in EVA, resulting in a 0% EVA bonus for our executives for 2018. Despite not achieving the threshold year-over-year improvement in EVA, the Compensation Committeealso approved a 25% EVA bonus for our named executive officers in recognition of their successful execution of certain initiatives in 2018 designed to reduce cost and increase productivity, resulting in the creation of long-term value going forward. The total amount of all cash incentive awards earned in 2018 is reflected in the Summary Compensation Table. For 2019, the Compensation Committee approved year-over-year improvement in our Weighted Average EPS as the performance measure for 2020 for the purpose of determining company-level financial performance awards. Based on the year-over-year improvement in our Weighted Average EPS, and the payout scale established by the Compensation Committee, our named executive officers were entitled to receive cash incentive awards at 189% of the target company-level financial performance award for 2020.
The total amount of all cash incentive awards earned in 2020 is reflected in the Summary Compensation Table. For further discussion of this performance measure, see “Elements of Compensation–Annual Cash Incentive Awards” above.
Restricted Stock Awards. In October 2018,2020, the Compensation Committee awarded the following shares of restricted stock (standard awards): (a) 2,000 shares to each of Lawrence I. Sills, our former Executive Chairman, Eric P. Sills, our Chief Executive Officer, James J. Burke, our Chief FinancialOperating Officer, and Dale Burks, our Chief Commercial Officer, and Nathan R. Iles, our Chief Financial Officer; and (b) 1,500 shares to Carmine J. Broccole, our Senior Vice President General Counsel. These restricted stock awards vest after three years. The amount of these restricted stock awards was based upon the Compensation Committee’s subjective evaluation of each executive’s contribution to the Company during 2018,2020, as well as their respective levels of responsibility.
In addition, in October 20182020 the Compensation Committee granted an additional award of 2,000awarded the following shares of restricted stock (long-term retention awards) 2,500 shares to each of Dale Burks, Nathan R. Iles and Carmine J. Broccole. These awards vest in increments when the executive reaches the ages of 60 (25% vests), 63 (25% vests) and 65 (balance vests), respectively. The Compensation Committee granted these restricted stock awards as a long-term retention tool and to incentivize executive performance through a long-term capital accumulation award.
Performance Share Awards. In October 2018,2020, the Compensation Committee also awarded performance shares to our named executive officers with each receiving a targeted share amount equal to the number of shares of standard restricted stock awards issued to such executive, although actual award payouts may vary from 0% to 200% of the target award amount, depending upon the level of achievement of the performance goal for the three-year measurement period. In order for a named executive officer to receive an actual payout of all or a portion of the performance shares awarded in 2018,2020, the Company must achieve earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three year period from January 1, 20182020 to December 31, 2020,2022, of approximately $226.8$249.5 million (i.e., the threshold amount) or more, with a maximum award resulting from achievement of earnings from continuing operations of approximately $340.2$374.2 million or more during the specified period.
In 2015,2017, performance shares were awarded to each of our named executive officers in accordance with the same practices described above. In order for an executive to receive an actual payout of all or a portion of the 20152017 performance shares, the Company needed to achieve earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three year period from January 1, 20152017 to December 31, 2017,2019, of approximately $227.1$280.3 million (i.e., the threshold amount) or more, with a maximum award resulting from achievement of earnings from continuing operations of approximately $340.7$420.4 million or more during the specified period. AtThe threshold for issuance of performance shares was not met at the end of the three-year period, the Company exceeded the threshold financial goal during the measuring period, resulting in the issuance ofperiod; therefore, no performance shares were issued in 2018 at the payout level of 95.3%.2020.
Clawback Policy
In March 2011, the Compensation Committee instituted a “clawback” policy with respect to incentive-based compensation. The clawback policy provides that, in the event of a restatement of the Company’s financial results due to a material noncompliance with any financial reporting requirements, the Compensation Committee is entitled to recover from current and former executive officers any incentive-based compensation that would not otherwise have been awarded to such persons under the as-restated financials during the three years preceding the date of the restatement. The Compensation Committee will reevaluate and, if necessary, revise the Company’s clawback policy to comply with the Dodd-Frank Act once the rules implementing the clawback requirements have been finalized by the SEC.
Stock Ownership Guidelines
To align directly the interests of executive officers with the interests of our stockholders,shareholders, we established stock ownership guidelines for our executive officers. Our stock ownership guidelines provide that executive officers are expected to own and hold a number of shares of Company Common Stock with a value that represents: (a) six times the base salary, with respect to our Executive Chairman of the Board and our Chief Executive Officer, (b) 100 percent of the base salary, with respect to our Chief Operating Officer, Chief Financial Officer and any Executive Vice President, (c) 50 percent of the base salary, with respect to any Senior Vice President, and (d) 30 percent of their base salary, with respect to each of our other executive officers of the Company. Stock ownership levels are expected to be achieved by each executive officer within a period of time determined at the discretion of the Compensation Committee. We do not allow our directors or executive officers to hedge the economic risk of their stock ownership. We also do not allow our directors or executive officers to pledge their shares of Company Common Stock.
Our stock ownership guidelines also include a mandatory stock holding period policy which requires our executive officers to hold for a period of two years any stock acquired by them upon the exercise of stock options or lapse of restrictions on restricted stock or performance shares, net of the funds necessary to pay the exercise price of stock options or for payment of applicable taxes. The mandatory stock holding period does not apply to long-term retention restricted stock awards.
Termination-Based Compensation
In December 2001, we entered into a change in control or severance agreement with James J. Burke, our Chief Operating Officer and Chief Financial Officer. Neither our Chief Executive Officer nor any of our other executive officers has a change in control or severance agreement. As discussed in more detail under “Severance and Change of Control Arrangements” below, Mr. Burke is entitled to severance payments and continued health and life insurance coverage for a limited period of time, among other benefits, upon the termination of his employment pursuant to his Severance Compensation Agreement.
The Compensation Committee may adopt and maintain such agreements where it believes the arrangement will protect the interests of senior executives when a potential change of control could affect their job security. Since the agreements mitigate any concern these executive officers may have in connection with a termination of their employment by us, or a potential loss of employment as a result of a change in control, they promote the interests of stockholdersshareholders by assuring that these executive officers focus on evaluating opportunities that are in our best interests, without concentrating on individual personal interests.
In addition, as discussed in more detail under “Severance and Change of Control Arrangements” below, our executive officers are eligible to receive termination-related benefits under the Company’s Supplemental Executive Retirement Plan. Our 2006 Omnibus Incentive Plan and 2016 Omnibus Incentive Plan also contain provisions that would accelerate the vesting of restricted stock upon certain events, including a change of control of the Company. We believe these severance and change of control benefits are an essential element of our executive compensation package and assist us in recruiting and retaining talented individuals.
Limitations on Tax Deductibility of Executive Compensation
The Compensation Committee has considered the potential impact of Section 162(m) of the Internal Revenue Code on the compensation paid to the Company’s executive officers. Section 162(m) generally limits our ability to claim a tax deduction for individual compensation exceedingpaid to our executive officers that exceeds $1 million in any taxable yearyear. In approving the amount and form of compensation for any of ourthe Company’s executive officers. For 2017 and prior years, performance-based compensation meeting certain requirements under Section 162(m) was fully deductible; however, the Tax Cuts and Jobs Act eliminated the exemption for performance-based compensation beginning in 2018, subject to certain transitional relief.
In general,officers, the Compensation Committee structured its executives’ compensationconsiders the potential impact of Section 162(m), in addition to avail itself of the benefits of deductibility under applicable tax laws, but deductibility was only one of manythose factors taken into consideration. Other factors include those discussed more fully in our “Compensation Discussion and Analysis” section above, under the heading “Compensation Philosophy and Primary Objectives”.
In approving the amount and form of compensation for the Company’s executive officers, the Compensation Committee will continue to consider all elements of the cost to the Company of providing such compensation, including the potential impact of Section 162(m).
Perquisites and Other Benefits
We provide our executive officers certain perquisites and other benefits. We provide these benefits as an additional incentive for our executives and to remain competitive in the general marketplace for executive talent. The primary perquisite for our executive officers is an allowance for leasing an automobile and reimbursement of related expenses. In addition, our executives are also offered broad-based benefits that are provided to all employees, including health insurance, life and disability insurance, accidental death and dismemberment insurance, Profit Sharing 401(K) Capital Accumulation Plan, and ESOP.
The information appearing in this Compensation Discussion and Analysis, and elsewhere in this Proxy Statement, as to performance metrics, objectives and targets relates only to incentives established for the purpose of motivating executives to achieve results that will help to enhance stockholdershareholder value. This information is not related to the Company’s expectations of future financial performance, and should not be mistaken for or correlated with any guidance that may be issued by the Company regarding its future earnings, free cash flow or other financial measures.
Report of the Compensation and Management Development Committee
The Compensation and Management Development Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended that the Board of Directors include the Compensation Discussion and Analysis in this Proxy Statement and that it be incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2020.
Compensation and Management Development Committee
Roger M. Widmann (Chair) | | Alisa C. Norris |
Pamela Forbes Lieberman | | Frederick D. Sturdivant |
Patrick S. McClymont | |
William H. Turner | Richard S. Ward |
Joseph W. McDonnell | | Richard S. Ward |
Executive Compensation and Related Information
The following table sets forth the annual compensation paid by the Company during fiscal years 2018, 20172020, 2019 and 20162018 to our “named executive officers.” Under SEC rules, our named executive officers were: Lawrence I. Sills, former Executive Chairman; Eric P. Sills, Chief Executive Officer and& President; James J. Burke, Chief Operating Officer and Chief Financial Officer; Dale Burks, Executive Vice President and& Chief Commercial Officer; Nathan R. Iles, Chief Financial Officer; and Carmine J. Broccole, Senior Vice President General Counsel and& Secretary.
Summary Compensation Table for 20182020
Name and Principal Position | | Year | | Salary | | | Bonus (1) | | | Stock Awards (2) | | | Non-Equity Incentive Plan Compensation (3) | | | All Other Compensation (4) | | | Total | | Year | | Salary (1) | | | Bonus (2) | | | Stock Awards (3) | | | Non-Equity Incentive Plan Compensation (4) | | | All Other Compensation (5) | | | Total | |
Lawrence I. Sills | | 2018 | | $ | 400,000 | | | $ | ─ | | | $ | 146,520 | | | $ | 138,025 | | | $ | 48,706 | | | $ | 733,251 | | 2020 | | $ | 425,000 | | | $
| ─ | | | $ | 144,280 | | | $ | 470,031 | | | $ | 62,349 | | | $ | 1,101,660 | |
Executive Chairman of the | | 2017 | | | 400,000 | | |
| ─ | | | | 158,800 | | | | 169,000 | | | | 75,316 | | | | 803,116 | | |
Board | | 2016 | | | 437,500 | | |
| ─ | | | | 160,640 | | | | 487,250 | | | | 56,809 | | | | 1,142,199 | | |
Former Executive Chairman | | 2019 | | 412,000 | | |
| ─ | | | 157,520 | | | 303,924 | | | 45,519 | | | 918,963 | |
of the Board | | 2018 | | 400,000 | | |
| ─ | | | 146,520 | | | 138,025 | | | 48,706 | | | 733,251 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eric P. Sills | | 2018 | | $ | 600,000 | | | $ | ─ | | | $ | 146,520 | | | $ | 212,006 | | | $ | 85,831 | | | $ | 1,044,357 | | 2020 | | $ | 647,000 | | | $
| ─ | | | $ | 144,280 | | | $ | 739,633 | | | $ | 107,655 | | | $ | 1,638,568 | |
Chief Executive Officer & | | 2017 | | | 580,000 | | |
| ─ | | | | 158,800 | | | | 253,500 | | | | 120,892 | | | | 1,113,192 | | 2019 | | 619,000 | | |
| ─ | | | 157,520 | | | 465,310 | | | 82,185 | | | 1,324,015 | |
President | | 2016 | | | 532,500 | | |
| ─ | | | | 160,640 | | | | 691,895 | | | | 65,206 | | | | 1,450,241 | | 2018 | | 600,000 | | |
| ─ | | | 146,520 | | | 212,006 | | | 85,831 | | | 1,044,357 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James J. Burke | | 2018 | | $ | 590,000 | | | $ | 963,000 | | | $ | 146,520 | | | $ | 207,590 | | | $ | 77,548 | | | $ | 1,984,658 | | 2020 | | $ | 637,000 | | | $
| ─ | | | $ | 144,280 | | | $ | 721,896 | | | $ | 100,134 | | | $ | 1,603,310 | |
Chief Operating Officer & | | 2017 | | | 573,000 | | |
| ─ | | | | 158,800 | | | | 246,740 | | | | 115,772 | | | | 1,094,312 | | |
Chief Financial Officer | | 2016 | | | 555,000 | | |
| ─ | | | | 160,640 | | | | 691,895 | | | | 68,754 | | | | 1,476,289 | | |
Chief Operating Officer | | 2019 | | 619,000 | | |
| ─ | | | 157,520 | | | 465,310 | | | 74,843 | | | 1,316,673 | |
| | 2018 | | 590,000 | | | 963,000 | | | 146,520 | | | 207,590 | | | 77,548 | | | 1,984,658 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dale Burks | | 2018 | | $ | 495,000 | | | $ | ─ | | | $ | 222,560 | | | $ | 172,807 | | | $ | 67,825 | | | $ | 958,192 | | 2020 | | $ | 525,000 | | | $
| ─ | | | $ | 234,480 | | | $ | 590,642 | | | $ | 76,247 | | | $ | 1,426,369 | |
Executive Vice President & | | 2017 | | | 480,000 | | |
| ─ | | | | 262,425 | | | | 205,504 | | | | 78,905 | | | | 1,026,834 | | 2019 | | 510,000 | | |
| ─ | | |
| 237,840 | | | 380,494 | | | 64,684 | | | 1,193,018 | |
Chief Commercial Officer | | 2016 | | | 475,000 | | |
| ─ | | | | 328,560 | | | | 438,525 | | | | 48,679 | | | | 1,290,764 | | 2018 | | 495,000 | | |
| ─ | | | 222,560 | | | 172,807 | | | 67,825 | | | 958,192 | |
| | | | | | | | | | | | | | | | | | | | |
Nathan R. Iles | | 2020 | | $ | 503,000 | | | $
| ─ | | | $ | 234,480 | | | $ | 571,131 | | | $ | 224,537 | | | $ | 1,533,148 | |
Chief Financial Officer | | 2019 | | 148,333 | | |
| ─ | | | 257,920 | | | 94,240 | | | 61,472 | | | 561,965 | |
The following table summarizes the equity awards that we have made to our named executive officers, which awards were outstanding as of December 31, 2018.2020.
The following table provides additional information relating to the vesting of standard restricted stock and performance shares previously granted to the named executive officers during the year ended December 31, 2018.2020. None of the named executive officers has outstanding options to purchase shares of Company Common Stock.