UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Waters Corporation
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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WatersTM
PROXY STATEMENT
2021
March 29, 2018
April 1, 2021
Dear Stockholder:Shareholders,
On behalf2020 was a challenging but also rewarding year for Waters Corporation. We managed through the COVID-19 pandemic, had a successful CEO transition, and continued the planned succession at the Board and executive management-level. We progressed our goal of building an even more diverse company at all levels, and never lost sight of serving our shareholders and customers, as well as remaining an attractive long-term employment opportunity for our talented employees. As a Board, we were naturally quite busy in 2020, navigating through tumultuous times, overseeing planned and steady refreshment at all levels of the company, and furthermore adding important sustainability goals to guide us forward.
In February 2021, the Drucker Institute published its annual list of the 250 best managed companies. We, at Waters, are pleased to be on the list. This ranking adds to our sixth straight AA score for ESG from MSCI, our second percentile ESG ranking from Sustainalytics, our scores of 1, 2 and 4 from ISS for E, S and G and our 95 on the Corporate Equality Index.
2020 also highlighted the importance of treating all people equitably and inclusively. Waters is a leader in this as well: we have a diverse CEO who is part of an executive team, 33% of whom are diverse by race/ethnicity or gender, that will be overseen by a Board, 4 of Directors9 of whom are female, or ethnically or geographically diverse. We believe our diversity helps us recruit and keep top talent and maintain our innovative edge.
Waters Corporation’s products and services — such as chromatography systems and consumables, mass spectrometry systems, and thermal analysis technologies — contribute directly to the advancement of human health and well-being by playing a vital role in the creation of efficacious medical therapies, a safer food and environmental ecosystem, and higher quality materials we depend upon in many aspects of daily life. The importance of these contributions could never be more clear than during our global battle with COVID-19.
In the following section, “Waters Corporation (“Waters” orat a Glance,” we summarize how our operations, oversight, and governance come together to support our financial, social, and environmental sustainability.
We operate in attractive markets that have demonstrated strong secular growth trends. Our stock price increased 6% and we realized a 38% return on invested capital in 2020.
We thank you for your investment in us and ask for your voting support on the “Company”), I cordiallymatters described in this proxy statement. We also invite you to attendparticipate at our meeting and welcome your input throughout the Annual Meeting of Stockholders (the “Meeting”) of the Company to be held at Waters Corporation, 34 Maple Street, Milford, Massachusetts 01757 on May 9, 2018 at 11:30 a.m., local time.
The notice of Meeting, the Proxy Statement and proxy card from Waters are enclosed. You may also read the notice of Meeting, the Proxy Statement and the Waters Annual Report (“Annual Report”) on the Internet athttp://www.proxydocs.com/wat.
Waters has adopted the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. We believe that thise-proxy process expedites stockholders’ receipt of proxy materials and lowers the costs and reduces the environmental impact of our annual meeting. On March 29, 2018, we mailed to stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and Annual Report and vote by Internet. The Notice contains instructions on how you can (i) receive a paper copy of the Proxy Statement and Annual Report, if you only received a Notice by mail, or (ii) elect to receive your Proxy Statement and Annual Report over the Internet.year.
The matters scheduled to be considered at the Meeting are (i) to elect directors to serve for the ensuing year and until their successors are elected, (ii) to ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018, (iii) to approve, bynon-binding vote, executive compensation, and (iv) to consider and act upon any other matters which may properly come before the Meeting or any adjournment thereof. These matters are more fully explained in the Proxy Statement that you are encouraged to read in its entirety.
The Company’s Board of Directors values and encourages stockholder participation at the Meeting. It is important that your shares be represented, whether or not you plan to attend the Meeting. Please take a moment to vote on the Internet, by telephone, or, if you receive a paper copy of the Proxy Statement and Annual Report, by signing, dating and returning your proxy card in the envelope provided even if you plan to attend the Meeting.
We hope you will be able to attend the Meeting.
Sincerely, |
Chairman of the Board of Waters Corporation |
April 1, 2021
Dear Shareholders,
Health is always essential to happiness and prosperity; its importance is simply more apparent during times of crisis. The pandemic, which began months prior to me joining Waters as its new President and CEO, highlighted the critical role our people and technologies play in protecting and advancing health. Waters’ scientists and technologies have been at the center of the development of diagnostics, therapeutics, and vaccines used in the fight against COVID-19. Our successes have been driven by our teams that universally responded to this difficult year with drive, determination, and an indomitable spirit.
It is a true privilege to lead this organization. Waters has a very strong foundation with a trusted well-known brand, demonstrated by industry-leading profitability and strong financial flexibility. We generated approximately $2.4 billion in revenue annually, and we retained more than $700 million in free cash flow in 2020. Our technology portfolio is strong and continues to evolve. Thanks to our Sales & Services teams, we have a large installed base of more than 100,000 systems and instruments. More than half of recurring revenues comes from services, informatics maintenance and consumables. Additionally, Waters has developed an impressive, strategically diverse geographical footprint and significant exposure to growth areas within highly attractive markets that represent nearly $67 billion in total opportunity.
That same indomitable spirit is also fueling our return to growth. Since 2017, Waters has experienced a sequential decline in revenue growth, which was only exacerbated by the pandemic in 2020. Along with Waters’ leadership team, we have begun an extensive transformation program with an immediate focus on accelerating near-term growth and fostering a culture of focus and urgency as we begin building towards our long-term strategy. We have already begun to see progress, made evident by our fourth quarter results, where sales grew 10% as reported and 7% on a constant currency basis, and our non-GAAP adjusted earnings per diluted share grew 14%.
At the core of our long-term strategy is our purpose to enhance human health and well-being by leaving this world better than we found it. At the very heart of our environmental, social and governance (ESG) program is our 2025 Sustainability Goals, to which we are progressing each year. From reducing our environmental footprint to STEM education programs for children, women, and minorities, we take these commitments very seriously. Others are also recognizing both our progress and commitment to ESG. Waters was recognized on the Newsweek list of America’s Most Responsible Companies 2021; Barron’s 2021 list of the 100 Most Sustainable Companies; and our company also received a score of 95 out of 100 on the 2021 Corporate Equality Index (CEI), the Human Rights Campaign Foundation’s annual scorecard for LGBTQ workplace equality. We will continue to do our part to positively impact the environment and the communities in which we work and live.
The operational progress we are making, our role in the COVID-19 crisis, our team and our capabilities underpin my confidence in Waters and our ability to contribute to advancing human health. We are on our way to regaining our commercial momentum, strengthening our performance management, and aligning our portfolio with growth areas. We have a lot of important work underway, and I am confident we will drive value for our shareholders.
We ask for your voting support on the items described in this proxy statement and thank you for your confidence, support, and investment in Waters.
Sincerely, |
Dr. Udit Batra, Ph.D.
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WATERS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
Date: |
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Time: |
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Place: | The 2021 Annual Meeting (the “Annual Meeting”) of Waters Corporation | |
Record Date: | March | |
Items of Business: | 1. To elect directors to serve for the ensuing year and until their successors are elected; | |
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, | ||
3. To approve, bynon-binding vote, executive compensation; and | ||
4. To consider and act upon any other matters which may properly come before the Annual Meeting or any adjournment thereof. | ||
Voting: | Your vote is extremely important regardless of the number of shares you own. Whether or not you expect to | |
Important Notice Regarding the Availability of Proxy Materials for Annual Meeting of
To be Held on May 11, 2021: The Proxy Statement and the Annual Report http://www.proxydocs.com/ This Proxy Statement (the “Proxy Statement”) is being furnished by the Board of Directors (the “Board”) of
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We are making the Proxy Statement and the form of Proxy first available on or about April 1, 2021.
By order of the Board of Directors |
Keeley A. Aleman |
Senior Vice President, |
General Counsel and Secretary |
Milford, Massachusetts
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PROXY STATEMENT SUMMARYWATERS CORPORATION AT A GLANCE
This summary contains highlights aboutWHAT IS WATERS CORPORATION
Waters is the world’s leading manufacturer of specialty measurement tools, and primarily designs, manufactures, sells, and services instruments, consumables, and software that are used by life science, pharmaceutical, biochemical, industrial, nutritional safety, environmental, academic, and governmental customers working in research and development, quality assurance, and other laboratory applications. Our 14 manufacturing facilities and more than 7,400 employees provide products and services to 40,000 customers in over 100 countries via our Company and the upcoming 2018 Annual Meetingoperations in 35 countries. We generated revenue of Stockholders, or “Annual Meeting”. This summary does not contain all$2.4 billion in 2020 with a market capitalization of the information that you should considerapproximately $15 billion as of December 31, 2020.
WHAT MAKES US UNUSUAL AND SUSTAINABLE
We invest in advance of the meeting and we encourage you to read the entire proxy statement before voting.our people
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Nominee
| Age
| Director
| Independent
| Financial
| Audit
| Compensation
| Finance
| Nominating
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Christopher J. O’Connell | 51 | 2015 | No | |||||||||||||||||||||||||||||||||||||
Michael J. Berendt, Ph.D. | 69 | 1998 | Yes | ✓ | M | C | ||||||||||||||||||||||||||||||||||
Edward Conard | 61 | 1994 | Yes | M | C | |||||||||||||||||||||||||||||||||||
Laurie H. Glimcher, M.D. | 66 | 1998 | Yes | M | ||||||||||||||||||||||||||||||||||||
Christopher A. Kuebler | 64 | 2006 | Yes | ✓ | M | C | ||||||||||||||||||||||||||||||||||
Flemming Ornskov, M.D. | 60 | 2017 | Yes | M | ||||||||||||||||||||||||||||||||||||
JoAnn A. Reed | 62 | 2006 | Yes | ✓ | C | M | ||||||||||||||||||||||||||||||||||
Thomas P. Salice | 58 | 1994 | Yes | M | M |
CApproximately 39% of our employees have been with us for over a decade
The number of women at the VP level and above increased to approximately 28% in 2020, from approximately 8% in 2015, approximating the current 30% female representation on our Board — Chair M — Membersignificant in a STEM-focused company. While there remains more work to do both at Waters and more broadly in STEM-focused industries, Waters remains committed to continuing to strengthen our company through ongoing diversity initiatives
Waters received a score of 95 out of 100 on the 2021 Corporate Equality Index (CEI), the Human Rights Campaign Foundation’s annual scorecard for LGBTQ workplace equality
We invest in research
One in seven of our employees works full-time in research and development
Our STEM Ambassador Initiative, science scholarships, and other programs support our talent pipeline as well as creating opportunities for under-represented populations
We invest in our operations
We are streamlining how we innovate, develop, and deliver our products
We are decreasing our environmental impact by, for instance, increasing natural resource efficiency
We are identifying opportunities in engineering, procurement, and operations to reduce the environmental impact of our products and supply chain
We invest in our communities and the planet
We have a goal to reduce our greenhouse gas (“GHG”) emissions by 35% by 2025, from a 2016baseline.As of December 31, 2020, we have already cut GHG emissions by 9.7% from the 2016 baseline.
Renewable and / or low-carbon electricity accounts for approximately 27% of our electricity usage
We have established and are pursuing a collection of robust 2025 sustainability goals:
Cultivating and Advancing Our Innovation Ecosystem: We will systematically implement measurable, sustainable practices in how we innovate, develop, and deliver our products.
Reducing Our Environmental Impact: We will improve our operational performance by decreasing environmental impact and increasing natural resource efficiency.
Enhancing Our Sustainable Supply Chain: We will advance an end-to-end product and supply chain sustainability program that identifies opportunities in engineering, procurement and operations to reduce the environmental impact of our products and supply chain.
Leading by Example in Our Employee Development and Engagement: We continue to focus on the employees we have today – and the employees we will need tomorrow – through programs and initiatives that drive diversity, inclusion, and development.
Nurturing Our Culture of Health, Safety and Well-being: We will foster an attitude of awareness, preparedness, and responsiveness across our workplace and throughout our supply chain.
We work with non-governmental organizations and governments to create educational opportunities via the Girls STEM Summit, the Ron Burton Training Village, and the U.K. Museum of Science and Technology
We attract investment from long-term shareholders
Approximately 17% of long-term-focused environmental, social, and governance filtered funds that invest in U.S. companies have invested in Waters Corporation
We have strong governance provisions such as an independent board chair and proxy access and have good ESG scores from leading scorecards such as MSCI Inc., Sustainalytics and Institutional Shareholder Services Inc.
HOW WE ARE DOING
Rising global living standards and growing populations — as well as our continual investment in the future — have enabled our growth since our foundation in 1958 as reflected in this stock price chart:
Source: Yahoo Finance
WHAT IS NEW AT WATERS
In March 2020, we enhanced our already strong governance profile by separating our Chairman of the Board possesses(the “Chairman”) and Chief Executive Officer (the “CEO”) positions. During 2020, we continued our steady board refreshment with both a deepdirector retirement and broadthe appointment of a new director, effective January 1, 2021, as described in the pages that follow.
We continued our shareholder engagement efforts, highlighted by participation in five in-person and virtual investor conferences in 2020. In 2020, we had over 400 meetings or calls with more than 350 investors and research analysts at more than 200 firms, including the majority of our top 50 shareholders. The Board and management will continue to demonstrate that we are accountable to shareholders, and we will continue to seek to incorporate feedback to ensure we are acting in the best interests of our stakeholders.
We are proud to continue playing our part in mitigating the COVID-19 pandemic public health crisis.
We activated an Innovation Response Team, consisting of our top research scientists and engineers, to lend Waters’ technologies and expertise by partnering with various other organizations, bringing Waters resources and scientific capabilities to help end the public health crisis
Waters systems used in quality control for therapeutics and vaccine research and development
PROPOSAL 1 — ELECTION OF DIRECTORS
Director Skills, Experience, and Background
At Waters, we believe that tone for excellence and integrity is set at the top — with us, the Board. In this Proxy Statement, we highlight examples of skills and experiences that facilitateour strong oversight actions and the exceptional stature, accomplishments, and diversity amongst our members.
strategic direction for a leading global analytical instrument provider.
Skills and Experience
7 Experienced Current and Former CEO’s
6 Directors with Scientific Research and/or Healthcare Experience
3 Directors with Financial Expertise within the meaning of the SEC rules and within the meaning of New York Stock Exchange rules
In assessing candidates for Director, the Nominating and Corporate Governance Committee considers their diversity of experience, skills and background in the context of the overall composition of the Board. Our Board is currently comprised of ten directors (each, a “Director” and, collectively, the “Directors”) and effective as of the Annual Meeting, the size of our Board will be reduced from ten to nine Directors. JoAnn A. Reed, who has been a Waters Director since 2006, will not be standing for re-election at the Annual Meeting. Waters has a search underway to identify a new director to replace Ms. Reed and is considering candidates with diverse attributes, experiences, skills, and backgrounds.
Our diverse Board is comprised of Directors with extensive industry experience and with a broad set of skills, attributes, and backgrounds critical to providing us with strategic and operational oversight. In addition, our board is comprised of individuals with a diversity of backgrounds. For example,Six of our current Directors seven have served as a chief executive officer, two are women, six have had careers in industries that are relevant to our business, three have technical backgrounds in science and technology, fivesix are experts in finance and capital allocation, twofour have accounting backgrounds in science and technology, and one has served as a chief financial officer.
CORPORATE GOVERNANCE HIGHLIGHTS
Proxy Access | 88% | LEAD | 6 | 7 | ||||
For Director Nominations | Independent Directors | Independent Director |
Scientific Research and/or Healthcare Experience
| Current and Former CEOs |
✓ Proxy Access
Based on stockholder feedback, we adopted a proxy access bylaw that permits a stockholder who has, or a groupOur Board values steady and planned refreshment and given Ms. Reed’s departure this year, our Board, upon recommendation of up to 20 stockholders who have, owned at least 3% of the Corporation’s outstanding common stock for at least three years to nominate and include in the Corporation’s proxy materials the greater of two individuals or up to 20% of the number of directors then serving, provided that the nominating stockholder or stockholder group and the nominees satisfy the requirements specified in the Bylaws.
✓ Majority Voting Standard
Our Bylaws provide for a majority voting standard for uncontested director elections.
✓ Independent Board and Committees
7 of our 8 director nominees (all directors except our Chief Executive Officer), and all members of the Audit Committee, Compensation Committee, Finance Committee and Nominating and Corporate Governance Committee, are independent.
✓ Engaged in Strategy
Our Board is engaged in advising and overseeinghas resolved to waive its director age limit of 72 for current Director Dr. Michael J. Berendt, Ph.D. Accordingly, Dr. Berendt will stand for re-election at the Company’s strategy and strategic priorities.
✓ Director Qualifications and Evaluations
All Directors meetAnnual Meeting. Dr. Berendt will help ensure a smooth transition as the candidate qualifications in our Board of Directors Guidelines for Director Qualifications and Evaluations included in this proxy statement.
✓ Lead Independent Director
The independent membersplanned refreshment of our Board elected Thomas P. Salice ascontinues, bringing valuable experience in the pharmaceutical industry to our lead independent director. We have active participation by all directors, including the 7 independent director nominees.
✓ Regular Executive Sessions of Independent Directors
Our independent directors meet privately on a regular basis. Our lead independent director presides at such meetings.
✓ Stock Ownership Requirements
We have significant stock ownership requirements for our directorsBoard, both from an executive leadership and officers.
✓ Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for identifying and recommending to the Board, candidates qualified for membership, and to review the company’s Corporate Governance providing advice and recommendations on corporate governance matters.
✓ Enterprise Risk Management
We have an Enterprise Risk Management Program to identify, assess, manage, report and monitor enterprise risk and areas that may affect our ability to achieve our objectives.scientific perspective.
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The Audit Committee of the Board has selected PricewaterhouseCoopers LLP, or PwC, as our independent registered public accountants for the fiscal year ending December 31, 2018.
PwC has served as our independent registered public accounting firm since the company’s inception in 1994.
Each year, the Audit Committee evaluates the qualifications and performance of the Company’s independent registered public accountants and determines whether tore-engage the current independent registered public accountants.
Based on this evaluation, the Audit Committee believes that the continued retention of PwC is in the best interests of the Company and its stockholders.
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Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the stockholders of Waters are entitled to cast an advisory vote at the Meeting to approve the compensation of the Company’s named executive officers, as disclosed in this proxy statement. Pursuant to the Dodd-Frank Act, the stockholder vote is an advisory vote only and is not binding on Waters or the Board. Stockholders have elected to conduct this vote annually.
Although the vote isnon-binding, the Compensation Committee and the Board value your opinions and will consider the outcome of the vote in establishing and evaluating the Company’s executive compensation program and making future compensation decisions.
As described more fully in the Compensation Discussion and Analysis, the Summary Compensation Table and the other tables following the Summary Compensation Table, the Company’s named executive officers are compensated in a manner consistent with our business strategy, competitive practice and sound compensation governance principles, and with a focus on short- and long-term performance-based and variable compensation.
Please refer to the “Compensation Discussion and Analysis” for a full description of our executive compensation practices and programs.
We are requesting yournon-binding vote on the following resolution:
“RESOLVED, that the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis, in the Summary Compensation Table and subsequent tables, is approved.”
Required Vote and Recommendation of the Board of Directors
The affirmative vote of a majority of the shares present or represented by Proxy and entitled to vote, is required for approval, on an advisory basis, of this proposal. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal. Abstentions will have the effect of a vote against this proposal. Brokernon-votes will have no effect on this proposal.
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The Board does not know of any other business to be presented at the Meeting. If any other matters properly come before the Meeting, however, it is intended that the persons named in the enclosed form of Proxy will vote said Proxy in accordance with their best judgment.
INFORMATION CONCERNING SOLICITATION AND VOTING
SOLICITATION
This Proxy Statement is being furnished by the Board of Directors (the “Board”) of Waters Corporation (“Waters” or the “Company”), in connection with the Board’s solicitation of proxies (each a “Proxy” and, collectively, “Proxies”), for use at the 2018 Annual Meeting of Stockholders (the “Meeting”) to be held on May 9, 2018 at 11:30 a.m., local time, at the Company’s headquarters located at 34 Maple Street, Milford, Massachusetts 01757. Solicitation of Proxies, which is being made by the Board, may be made through officers and regular employees of the Company by telephone or by oral communications with stockholders following the original solicitation. No additional compensation will be paid to officers or regular employees for such Proxy solicitation. The Company has retained Alliance Advisors, LLC to conduct a broker solicitation for a fee of $10,000, plus reasonableout-of-pocket expenses. Expenses incurred in connection with the solicitation of Proxies will be borne by the Company.
VOTING MATTERS
The representation in person or by Proxy of a majority of the outstanding shares of common stock of the Company, par value $.01 per share, entitled to vote at the Meeting is necessary to provide a quorum for the transaction of business at the Meeting. Shares can only be voted if a stockholder is present in person, has voted via the Internet or by telephone, or is represented by a properly signed Proxy. Each stockholder’s vote is very important. Whether or not you plan to attend the Meeting in person, please vote over the Internet or by telephone or sign and promptly return the Proxy card, which requires no additional postage if mailed in the United States. All signed and returned Proxies will be counted towards establishing a quorum for the Meeting, regardless of how the shares are voted.
Shares represented by Proxy will be voted in accordance with your instructions. You may specify how you want your shares to be voted by voting on the Internet, by telephone, or by marking the appropriate box on the Proxy card. If your Proxy card is signed and returned without specifying how you want your shares to be voted, your shares will be voted as recommended by the Board, or as the individuals named as Proxy holders deem advisable on all other matters as may properly come before the Meeting. The Proxy will be voted at the Meeting if the signer of the Proxy was a stockholder of record on March 15, 2018 (the “Record Date”).
Any stockholder voting by Proxy has the power to revoke the Proxy prior to its exercise either by voting by ballot at the Meeting, by executing a later-dated Proxy or by delivering a signed written notice of the revocation to the office of the Secretary of the Company at 34 Maple Street, Milford, Massachusetts 01757 before the Meeting begins.
Representatives of the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, are expected to be present at the Meeting. They will have the opportunity to make statements if they desire to do so and will be available to respond to appropriate questions.
As of the Record Date, there were 78,293,654 shares of common stock outstanding and entitled to vote at the Meeting. Each outstanding share of common stock is entitled to one vote. There are no cumulative voting rights. This Proxy Statement and form of Proxy is first being made available to the stockholders of record on or about March 29, 2018. A list of the stockholders entitled to vote at the Meeting will be available for inspection at the Meeting and for ten days prior to the Meeting at the Company’s headquarters for proper purposes relating to the Meeting.
VOTING
To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the Meeting in person. Stockholders have three options for submitting their votes: (1) via the Internet, (2) by phone or (3) by mail using a paper proxy card. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient for you, and it saves the Company significant postage and processing costs. In addition, when you vote via the Internet or by telephone prior to the Meeting date, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted. Refer to your Notice, or the email you received for electronic delivery of the Proxy Statement for further instructions on voting.
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If you vote your proxy by Internet or by telephone, please do NOT mail back the proxy card. You can access, view and download this year’s Proxy Statement and Annual Report at http://www.proxydocs.com/wat.
ELECTRONIC DELIVERY OF WATERS STOCKHOLDER COMMUNICATIONS
Notice of Electronic Availability of Proxy Statement and Annual Report
As permitted by Securities and Exchange Commission (“SEC”) rules, Waters is making this Proxy Statement and its Annual Report available to its stockholders electronically via the Internet. On March 29, 2018, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this Proxy Statement and our Annual Report and vote by Internet. If you received the Notice by mail, youwill not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report electronically or to receive a printed version in the mail. The Notice also instructs you on how you may submit your proxy over the Internet or in person at the Meeting.
Important Notice Regarding Availability of Proxy Materials:
The Proxy Statement and Annual Report are available athttp://www.proxydocs.com/wat.
Whether or not you expect to attend the Meeting in person, we urge you to vote your shares by phone, via the Internet, or, if you receive a paper copy of the Proxy Statement and Annual Report, by signing, dating, and returning the proxy card by mail at your earliest convenience. This will ensure the presence of a quorum at the Meeting. Promptly voting your shares will save us the expense and extra work of additional solicitation. Submitting your proxy now will not prevent you from voting your stock at the Meeting if you want to do so, as your vote by proxy is revocable at your option.
Eight members of the Board (the “Directors”) are to be elected at the Meeting, each to hold office until his or her successor is elected and qualified or until his or her earlier resignation, death or removal. It is intended that the Proxies in the form enclosed with this Proxy Statement will be voted for the nominees set forth below unless stockholders specify to the contrary in their Proxies or specifically abstain from voting on this matter.
The following information pertains to the nominees, their ages, principal occupations and other public directorships for at least the last five years, and information regarding their specific experience, qualifications, attributes or skills that led to the conclusion that each such person should serve as a Director of the Company in light of the Company’s business and structure.
Nominee | Age | Director Since | Independent | Financial Expert | Audit | Compensation | Finance | Nominating and Corporate Governance | ||||||||||||||||||||||||||||||||
Christopher J. O’Connell | 51 | 2015 | No | |||||||||||||||||||||||||||||||||||||
Michael J. Berendt, Ph.D. | 69 | 1998 | Yes | ✓ | M | C | ||||||||||||||||||||||||||||||||||
Edward Conard | 61 | 1994 | Yes | M | C | |||||||||||||||||||||||||||||||||||
Laurie H. Glimcher, M.D. | 66 | 1998 | Yes | M | ||||||||||||||||||||||||||||||||||||
Christopher A. Kuebler | 64 | 2006 | Yes | ✓ | M | C | ||||||||||||||||||||||||||||||||||
Flemming Ornskov, M.D. | 60 | 2017 | Yes | M | ||||||||||||||||||||||||||||||||||||
JoAnn A. Reed | 62 | 2006 | Yes | ✓ | C | M | ||||||||||||||||||||||||||||||||||
Thomas P. Salice | 58 | 1994 | Yes | M | M |
C — Chair M — Member
Our Board possesses a deep and broad set of skills and experiences that facilitate strong oversight and strategic direction for a leading global analytical instrument provider.
Skills and Experience
7 Experienced Current and Former CEO’s
6 Directors with Scientific Research and/or Healthcare Experience
3 Directors with Financial Expertise within the meaning of the SEC rules and within the meaning of New York Stock Exchange rules
Director Skills, Experience and Background
Waters is the world’s leading manufacturer of specialty measurement tools, and primarily designs, manufactures, sells and services instruments that are used by life science, pharmaceutical, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications. As we discuss below under “Directors Meetings and Board Committees”, the Nominating and Corporate Governance Committee, together with the Board, is responsible for assessing the appropriate skills, experience and background that we seek in Board members in the context of our business and the existing composition of the Board. Our Board is currently comprised of Directors with extensive industry experience and with a broad set of skills critical to providing us with strategic and operational oversight. In addition, our board is comprised of individuals with a diversity of backgrounds. For example, of our current Directors, seven have served as a chief executive officer, two are women, six have had careers in industries that are relevant to our business, three have technical backgrounds in science and technology, five are experts in finance and capital allocation, two have accounting backgrounds, and one has served as a chief financial officer.
CEO of MilliporeSigma, life sciences business of publicly traded Merck KGaA (March 2014 – July 2020)
Held various leadership roles at Novartis International AG (2006 – 2011) Senior Engagement Manager at McKinsey & Company (2001 – 2004) Research Fellow, Merck & Co., Inc. (1996 – 2001) Qualifications Dr. Batra brings more than two decades of leadership and operational expertise in the healthcare and life sciences industries, including leadership of multi-billion-dollar global organizations. Other Public Company Boards None
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Linda Baddour Director since 2018 Age: 62 Committees • Audit (Chair) (effective • Finance | Experience Executive Vice President and Chief Financial Officer of PRA Health Sciences (June 2007 to September 2018) Chief Financial Officer and Accounting Officer at Pharmaceutical Product Development, Inc. (May 2002 to May 2007); Chief Accounting Officer (1997 to April 2007); Corporate Controller (1995 to 1997) Controller of Cooperative Bank for Savings Inc. (1980 to 1995) Qualifications Ms. Baddour’s extensive experience as a senior financial executive provides the Waters Board with significant accounting, finance, and health care industry expertise. Other Public Company Boards Current Cryoport, Inc. (effective March 15, 2021) |
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Dr. Michael J. Berendt, Ph.D.
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Director since 1998
Committees • Audit • Science & Technology |
Life sciences industry Chief Executive Officer and Chief Scientist of Telesta Life sciences industry consultant (July 2011 to November President and Chief Executive Officer of Aegera Therapeutics Inc. Managing Director of Research Corporation Technologies, Inc. Managing Director of AEA Investors |
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| Qualifications Dr. Berendt’s experience in the pharmaceutical industry, both from a management and a scientific perspective, provides unique technical insight to the Waters Board. In addition, Dr. Berendt’s years of experience as a Chief Executive Officer and as a senior financial executive, affords the Waters Board the benefit of his financial and business strategy skills. | |
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Edward Conard
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Director since 1994
Committees • Compensation • Finance (Chair) |
Independent director and investor Managing Director of Bain Capital, LLC Previously a Director of Wasserstein Perella & Co., Inc., an investment banking firm that specializes in mergers and acquisitions, and a Vice President of Bain & Company, heading up the firm’s operations practice | |
| Qualifications Mr. Conard’s years of experience as a director and a managing director of two large investment firms | |
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Director since 2018 Age: 64 Committees • Audit • Compensation |
Independent director and investor (June 2017 to present) Chief Executive Officer of Qualifications Mr. Hendrickson’s years of experience as a President, Chief Executive Officer, and Chairman afford the Other Public Current Azek Company (Non-Executive Chairman) Polaris Industries Inc. Former (past 5 years) The Valspar Corporation | |
Director since 2021 Age: 63 Committees • Science & Technology (Chair) |
President and Venture Partner at Flagship Pioneering (Jan. 2019-Present) Senior Vice President and Global Head of Therapeutic Modalities. F. Hoffman La-Roche, Ltd. (Dec. 2014 – Dec. 2018) Vice President and Global Head of Discovery Academic Partnerships (DPAc) Alternative Discovery and Development, GlaxoSmithKline plc (2012-2014) Founder and CSO, Beigene LTD (2010-2012) Vice President, Oncology Integrator, Discovery and Early Development, Merck and Co. (2006-2010) Held roles of increasing responsibility at Merck & Co. Inc., GlaxoSmithKline plc, and Bristol Myers Squibb Co. Qualifications Dr. Other Public Company Boards Current None |
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Christopher A. Kuebler
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Director since 2006
Committees • Compensation (Chair) • Science & Technology |
Independent director and investor Chairman and Chief Executive Officer of Covance Inc. and its predecessor companies Spent nearly 20 years in the pharmaceutical industry at Abbott Laboratories, Squibb, Inc., and the Monsanto | |
| Qualifications With 30 years of experience in the pharmaceutical and pharmaceutical service industries, including 10 years as Chairman and Chief Executive Officer of Covance Inc., Mr. Kuebler brings an experienced management perspective to the Waters Board, as well as the expertise in the oversight of financial accounting and business strategy. | |
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Other | Current None Former (past 5 years) Nektar Therapeutics | |
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Chairman of the Board since 2020 Director since 2017 Chief Executive Officer of Galderma Age: 63 Committees • Compensation ��� Nominating & Corporate Governance (Chair) |
Chief Executive Officer of Galderma SA, a Advisor to the CEO of Chief Executive Officer of Shire plc Chief Marketing Officer and Global Head of Strategic Marketing for General & Specialty Medicine at Global President of Pharmaceuticals and OTC at Bausch & Lomb, Inc. Chairman and later as President and Chief Executive Officer of Life-Cycle Pharma A/ President and Chief Executive Officer of Ikaria, Inc. Held roles of increasing responsibility at Merck & Co. Inc. and Novartis | |
| Qualifications Dr. Ornskov brings both operational and medical knowledge along with |
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Other Public Company Boards Current
Karo Pharma AB Former (past 5 years) Shire plc Recordati S.p.A. – left board May 2020
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Thomas P. Salice
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Director since 1994
Committees • Finance • Nominating & Corporate Governance |
Served in a variety of capacities with AEA Investors, Inc., a private equity firm, including Managing Director, President and Chief Executive Officer, and Director of several privately held companies: Filtec and Gerson Lehrman Group, Inc., and | |
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Other | Current Mettler-Toledo International, | |
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Required Vote and Recommendation of the Board of Directors
With respect to the election of Directors of the Company, aA nominee for director shall be elected to the Board by a majority vote (i.e., the votes cast for such nominee must exceed the votes cast against such nominee), except that Directorsdirectors will be elected by plurality vote at any meeting of stockholdersshareholders for which the number of nominees exceeds the number of directors to be elected (a contested election). If an incumbent director fails to bere-elected by a majority vote when such a vote is required and offers to resign, and if that resignation is not accepted by the Board, such director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier resignation or removal. If an incumbent director’s resignation is accepted by the Board, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board, in its sole discretion, may fill any resulting vacancy or may decrease the size of the Board. “Abstentions” and shares with respect to which a broker or representative does not vote on a particular matter because it does not have discretionary voting authority on that matter(so-called “brokernon-votes”) are counted as present for the purpose of determining whether a quorum is present. Abstentions and brokernon-votes will not be treated as sharesvotes cast with respect to any nominee and therefore will not have an effect on the determination of whether a nominee has been elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NOMINEE FOR DIRECTOR SET FORTH ABOVE
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The Audit Committee of the Board has selected PricewaterhouseCoopers LLP, or PwC, an independent registered public accounting firm, to audit the books, records and accounts of the Company for the fiscal year ending December 31, 2018. In accordance with a vote of the Audit Committee and as approved by the Board, this selection is being presented to the stockholders for ratification at the Meeting.
Required Vote and Recommendation of the Board of Directors
The affirmative vote of a majority of the shares present at the Meeting in person or represented by Proxy and entitled to vote is required to approve the proposal. Abstentions will be counted as present for the purpose of determining whether a quorum is present and will be treated as shares present and entitled to vote and therefore will have the effect of a vote against the proposal. Ratification by stockholders is not required. Brokerage firms may vote to ratify the appointment of PwC as it is a “discretionary” or “routine” item. If this Proposal 2 is not approved by the stockholders, the Audit Committee does not intend to change the appointment for fiscal year 2018, but will consider the stockholder vote in selecting an independent registered public accounting firm for fiscal year 2019.
Fees
The aggregate fees for the fiscal years ended December 31, 2017 and December 31, 2016 billed by PwC were as follows:
2017 | 2016 | |||||||
Audit Fees | $ | 4,530,846 | $ | 3,565,768 | ||||
Audit-Related Fees | 21,004 | 115,595 | ||||||
Tax-Related Fees | ||||||||
Tax Compliance | 569,003 | 804,330 | ||||||
Tax Planning | 291,479 | 506,140 | ||||||
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TotalTax-Related Fees | 860,482 | 1,310,470 | ||||||
All Other Fees | -0- | -0- | ||||||
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Total | $ | 5,412,332 | $ | 4,991,833 |
Audit Fees — consists of fees for the audit of the Company’s annual financial statements, statutory audits, review of the interim condensed consolidated financial statements included in quarterly reports, assistance with review of documents filed with the SEC, and services that are normally provided by PwC in connection with statutory and regulatory filings or engagements, and attest services, except those not required by statute or regulation.
Audit-Related Fees — consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, acquisition-related services, attest services not required by statute or regulation, and accounting consultations and reviews for various matters.
Tax-Related Fees — consists of fees for tax compliance and planning services. Tax compliance fees include fees for professional services related to international tax compliance and preparation. Tax planning fees consist primarily of fees including but not limited to, the impact of acquisitions, restructurings and changes in regulations.
All Other Fees — consists of fees for all permissible services other than those reported above.
The Audit Committeepre-approved 100% of the services listed under the preceding captions “Audit Fees,” “Audit-Related Fees,”“Tax-Related Fees” and “All Other Fees.” The Audit Committee’spre-approval policies and procedures are more fully described in its report set forth in this Proxy Statement.
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2017 Performance Highlights and Connection to our Executive Compensation Program
The chart below illustrates how Waters emphasizes key performance metrics in our executive compensation program and how these metrics align with our business priorities and performance.
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Listening to our Stockholders
Our stockholders have favorable views of many of the aspects of our executive compensation program, including our emphasis on performance-based components of compensation and the strength of our performance measures. Our stockholders, however, did provide constructive feedback to the Company in certain areas of our executive compensation program. Key changes made to our executive compensation program in response to stockholder feedback include:
PSUs were incorporated into our long-term incentive (“LTI”) grants
Post-vesting holding periods were implemented for PSU awards
Annual LTI grants arere-oriented around the market median
All excise taxgross-up provisions were eliminated
Compensation Governance and Pay Practices
Waters maintains strong pay and governance practices as outlined below. A full description of these policies and practices can be found in the discussion below under the respective headings in the section entitled “Elements of Executive Compensation.”
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Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the stockholders of Waters are entitled to cast anon-binding vote at the Meeting to approve the compensation of the Company’s named executive officers, as disclosed in this proxy statement. Pursuant to the Dodd-Frank Act, the stockholder vote is an advisory vote only and is not binding on Waters or the Board. Stockholders have elected to conduct this vote annually.
Although the vote isnon-binding, the Compensation Committee and the Board value your opinions and will consider the outcome of the vote in establishing and evaluating the Company’s executive compensation program and making future compensation decisions.
As described more fully in the Compensation Discussion and Analysis, the Summary Compensation Table and the other tables following the Summary Compensation Table, the Company’s named executive officers are compensated in a manner consistent with our business strategy, competitive practice and sound compensation governance principles, and with a focus on short and long-term performance-based and variable compensation.
Please refer to the “Compensation Discussion and Analysis” for a full description of our executive compensation practices and programs.
We are requesting yournon-binding vote on the following resolution:
“RESOLVED, that the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis, in the Summary Compensation Table and subsequent tables, is approved.”
Required Vote and Recommendation of the Board of Directors
The affirmative vote of a majority of the shares present or represented by Proxy and entitled to vote, is required for approval, on an advisory basis, of this proposal. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal. Abstentions will have the effect of a vote against this proposal. Brokernon-votes will have no effect on this proposal.
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The Board does not know of any other business to be presented at the Meeting. If any other matters properly come before the Meeting, however, it is intended that the persons named in the enclosed form of Proxy will vote said Proxy in accordance with their best judgment.
HOW WE ARE SELECTED AND ELECTED
Nine Directors are to be elected at the Annual Meeting, each to hold office until his or her successor is elected and qualified or until his or her earlier resignation, death or removal. It is intended that the Proxies in the form included with this Proxy Statement will be voted for the nominees set forth below unless shareholders specify to the contrary in their Proxies or specifically abstain from voting on this matter.
Majority Voting
The Company’s bylaws (the “Bylaws”) provide for majority voting for Directors in uncontested elections. A further description of the Company’s majority voting provisions can be found above.
Board of DirectorsCandidates
The Nominating and Corporate Governance HighlightsCommittee, together with the Board, is responsible for assessing the appropriate skills, attributes, experiences, and diversity of background, including a candidate’s gender and ethnic and racial background, that we seek in Board members in the context of the existing composition of the Board.
The Nominating and Corporate Governance Committee believes that candidates for service as a Director of the Company should meet certain minimum qualifications. Although the Board has not adopted a formal policy with respect to diversity, in assessing candidates for Director, the Nominating and Corporate Governance Committee considers candidates’ diversity of attributes, experiences, skills, and backgrounds, including a candidate’s gender and ethnic and racial background, and seeks individuals who are highly accomplished in their respective fields, with superior educational and professional credentials. Candidates should satisfy the Company’s independence criteria, which are part of its Corporate Governance Guidelines (the “Guidelines”) and summarized below, and follow the applicable listing standards of the New York Stock Exchange.
The Company has a process for identifying and selecting candidates for Board membership. Initially, the Chairman, the President and Chief Executive Officer, the Nominating and Corporate Governance Committee, or other Board members identify a need either to expand the Board with a new member possessing certain specific characteristics or to fill a vacancy on the Board. A search is then undertaken by the Nominating and Corporate Governance Committee, working with recommendations and input from Board members, members of senior management, professional contacts, external advisors, nominations by shareholders, and/or the retention of a professional search firm, if necessary. Any shareholder wishing to propose a nominee should follow the process described in the Bylaws to submit the candidate’s name and appropriate biographical information to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757.
An initial slate of candidates is identified that will satisfy the criteria for Board membership and is presented to the Nominating and Corporate Governance Committee for review. Upon review by the Nominating and Corporate Governance Committee, a series of interviews of one or more candidates is conducted by the Chairman, the President and Chief Executive Officer, and at least one member of the Nominating and Corporate Governance Committee. During this process, the full Board is informally apprised of the status of the search and its input is solicited.
Upon identification of a final candidate, the entire Nominating and Corporate Governance Committee will meet to consider the credentials of the candidate and thereafter, if approved, will submit the candidate for approval by the full Board.
Proxy Access
The Board has adopted a proxy access bylaw provision that allows eligible shareholders or groups of up to 20 shareholders who have held at least 3% of our common stock continuously for three years to nominate up to two individuals or 20% of the Board, whichever is greater, for election at our annual shareholder meeting, and to have those individuals included in our proxy materials for that meeting.
Board/Director Independence
The Company’s Guidelines include criteria adopted by the Board to assist it in making determinations regarding the independence of its members. The Guidelines include the Company’s categorical standards of independence, which our Board approved. The Guidelines are available on the website www.waters.com under the caption “Corporate Governance.” The criteria, summarized below, are consistent with the New York Stock Exchange listing standards regarding director independence. To be considered independent, the Board must determine that a director does not have a material relationship, directly or indirectly, with the Company. A director will not be considered independent if:
he or she or an immediate family member is, or has been within the last three years, an executive officer of the Company;
he or she or an immediate family member is a current partner of an internal or external auditor of the Company or has been within the last three years a partner or employee of an internal or external auditor of the Company who personally worked on the Company’s audit;
he or she or an immediate family member is, or has been within the last three years, an executive officer of a public company where any of the Company’s present executive officers at the same time serves or served on the compensation committee of that company’s board;
he or she is a paid advisor or consultant to the Company receiving in excess of $100,000 per year in direct compensation from the Company (other than fees for service as a director) within the past three years or has an immediate family member who has been a paid advisor or consultant to the Company; or
he or she or an immediate family member is an employee (or in the case of an immediate family member, an executive officer) of a company that does business with the Company and the annual payments to or from the Company, in any of the last three fiscal years, exceeded the greater of $1 million or 2% of the other company’s annual gross revenues.
In addition, a director will not be considered independent if he or she, or an immediate family member, is or has been an executive officer of a tax-exempt entity that receives contributions in any fiscal year from the Company exceeding the greater of $1 million or 2% of its gross revenues. A director also will not be considered independent if he or she is a current employee of an internal or external auditor of the Company or has an immediate family member who is a current employee of an internal or external auditor of the Company who participates in such firm’s audit, assurance, or tax compliance practice.
The Board has determined that each Director, other than Dr. Batra, the Company’s President and Chief Executive Officer, has no material relationship with the Company and otherwise qualifies as “independent” under these criteria and the applicable listing standards of the New York Stock Exchange.
The Nominating and Corporate Governance Committee conducts an annual evaluation of the Board and each of its committees. In November 2020, the evaluation, in the form of a questionnaire, was circulated to all members of the Board and each committee. The Company’s General Counsel received all of the questionnaires, compiled the results, and circulated them to the Board and each committee for discussion and analysis during January 2021. It is the intention of the Nominating and Corporate Governance Committee to continue to engage in this process annually.
HOW WE GOVERN AND ARE GOVERNED
At Waters, we are dedicated to maintaining the highest standards of business integrity. Over nearly 60 years we’ve built a valuable reputation for integrity and continually take steps to reinforce that commitment. We believe that adherence to sound principles of corporate governance isare essential to protecting Waters’ reputation, assets, investor confidence, customer loyalty, and customer loyalty.
sustainability. Our Corporate Governance Guidelines can be found on our website atwww.waters.com and are available in print upon written request to the Company’sCompany, c/o Secretary, at our headquarters at 34 Maple Street, Milford, MassachusettsMA 01757. The Board’s corporate
We also believe in sound principles of board governance — how we govern ourselves sets the tone for how our company is governed more generally. Our board governance practices include the following:include:
✓Proxy Access
The Amended and Restated Bylaws of Waters Corporation, or Bylaws, permitAs described in the preceding section on how Directors are selected, the Company enables eligible shareholders to nominate director candidates via our proxy access for director nominations. Eligible stockholders with an ownership threshold of 3% who have held their shares for at least 3 years and who otherwise meet the requirements set forth inprocess as governed by our Bylaws may have their nominees (the greater of 20% or two nominees) included in our proxy materials. Up to 20 eligible stockholders may aggregate their holdings to reach the 3% ownership threshold.Bylaws.
✓ Majority Board Candidates The Nominating and Corporate Governance Committee, Approval Required for Director ElectionsVotingIf an incumbent director upThe Company’s bylaws (the “Bylaws”) provide forre-election at a meeting of stockholders fails to receive a majority of affirmative votesvoting for Directors in an uncontested election, the Board will adhere to the director resignation process as provided in our Bylaws.✓ Independent Board and Committees7 of our 8 director nominees (all directors except our Chief Executive Officer), and all memberselections. A further description of the Audit Committee, Compensation Committee, Finance Committee andCompany’s majority voting provisions can be found above.are independent.✓ Engaged in StrategyOurtogether with the Board, is engagedresponsible for assessing the appropriate skills, attributes, experiences, and diversity of background, including a candidate’s gender and ethnic and racial background, that we seek in advising and overseeingBoard members in the Company’s strategy and strategic priorities.✓ Director Qualifications and EvaluationsAll Directors meetcontext of the candidate qualifications in our Boardexisting composition of Directors Guidelines for Director Qualifications and Evaluations included in this proxy statement.
✓ Lead Independent Directorthe Board.
The independent members of the Board elect a lead independent director on an annual basis. The lead independent director has specific responsibilities and authorities as discussed below. Thomas P. Salice currently serves as our lead independent director.
✓ Regular Executive Sessions of Independent Directors
Our independent directors meet privately on a regular basis. Our lead independent director presides at such meetings.
✓ Stock Ownership Requirements
We have significant stock ownership requirements for our directors and officers.
✓ Nominating and Corporate Governance Committee believes that candidates for service as a Director of the Company should meet certain minimum qualifications. Although the Board has not adopted a formal policy with respect to diversity, in assessing candidates for Director, the Nominating and Corporate Governance Committee considers candidates’ diversity of attributes, experiences, skills, and backgrounds, including a candidate’s gender and ethnic and racial background, and seeks individuals who are highly accomplished in their respective fields, with superior educational and professional credentials. Candidates should satisfy the Company’s independence criteria, which are part of its Corporate Governance Guidelines (the “Guidelines”) and summarized below, and follow the applicable listing standards of the New York Stock Exchange.
The Company has a process for identifying and selecting candidates for Board membership. Initially, the Chairman, the President and Chief Executive Officer, the Nominating and Corporate Governance Committee, or other Board members identify a need either to expand the Board with a new member possessing certain specific characteristics or to fill a vacancy on the Board. A search is then undertaken by the Nominating and Corporate Governance Committee, working with recommendations and input from Board members, members of senior management, professional contacts, external advisors, nominations by shareholders, and/or the retention of a professional search firm, if necessary. Any shareholder wishing to propose a nominee should follow the process described in the Bylaws to submit the candidate’s name and appropriate biographical information to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757.
An initial slate of candidates is identified that will satisfy the criteria for Board membership and is presented to the Nominating and Corporate Governance Committee for review. Upon review by the Nominating and Corporate Governance Committee, a series of interviews of one or more candidates is conducted by the Chairman, the President and Chief Executive Officer, and at least one member of the Nominating and Corporate Governance Committee. During this process, the full Board is informally apprised of the status of the search and its input is solicited.
Upon identification of a final candidate, the entire Nominating and Corporate Governance Committee will meet to consider the credentials of the candidate and thereafter, if approved, will submit the candidate for approval by the full Board.
Proxy Access
The Board has adopted a proxy access bylaw provision that allows eligible shareholders or groups of up to 20 shareholders who have held at least 3% of our common stock continuously for three years to nominate up to two individuals or 20% of the Board, whichever is greater, for election at our annual shareholder meeting, and to have those individuals included in our proxy materials for that meeting.
Board/Director Independence
The Company’s Guidelines include criteria adopted by the Board to assist it in making determinations regarding the independence of its members. The Guidelines include the Company’s categorical standards of independence, which our Board approved. The Guidelines are available on the website www.waters.com under the caption “Corporate Governance.” The criteria, summarized below, are consistent with the New York Stock Exchange listing standards regarding director independence. To be considered independent, the Board must determine that a director does not have a material relationship, directly or indirectly, with the Company. A director will not be considered independent if:
he or she or an immediate family member is, or has been within the last three years, an executive officer of the Company;
he or she or an immediate family member is a current partner of an internal or external auditor of the Company or has been within the last three years a partner or employee of an internal or external auditor of the Company who personally worked on the Company’s audit;
he or she or an immediate family member is, or has been within the last three years, an executive officer of a public company where any of the Company’s present executive officers at the same time serves or served on the compensation committee of that company’s board;
he or she is a paid advisor or consultant to the Company receiving in excess of $100,000 per year in direct compensation from the Company (other than fees for service as a director) within the past three years or has an immediate family member who has been a paid advisor or consultant to the Company; or
he or she or an immediate family member is an employee (or in the case of an immediate family member, an executive officer) of a company that does business with the Company and the annual payments to or from the Company, in any of the last three fiscal years, exceeded the greater of $1 million or 2% of the other company’s annual gross revenues.
In addition, a director will not be considered independent if he or she, or an immediate family member, is or has been an executive officer of a tax-exempt entity that receives contributions in any fiscal year from the Company exceeding the greater of $1 million or 2% of its gross revenues. A director also will not be considered independent if he or she is a current employee of an internal or external auditor of the Company or has an immediate family member who is a current employee of an internal or external auditor of the Company who participates in such firm’s audit, assurance, or tax compliance practice.
The Board has determined that each Director, other than Dr. Batra, the Company’s President and Chief Executive Officer, has no material relationship with the Company and otherwise qualifies as “independent” under these criteria and the applicable listing standards of the New York Stock Exchange.
The Nominating and Corporate Governance Committee is responsible for identifying and recommending to the Board, candidates qualified for membership, and to review the company’s Corporate Governance providing advice and recommendations on corporate governance matters.
✓ Enterprise Risk Management
We haveconducts an Enterprise Risk Management Program to identify, assess, manage, report and monitor enterprise risk and areas that may affect our ability to achieve our objectives.
Board of Directors Corporate Governance
Annual Evaluation
During 2017, the Nominating and Corporate Governance Committee of the Board conducted its annual evaluation of the Board and each of its committees. TheIn November 2020, the evaluation, in the form of a questionnaire, was circulated to all members of the Board and each committee in November 2017.committee. The Company’s General Counsel received all of the questionnaires, compiled the results, and circulated them to the Board and each committee for discussion and analysis during January 2018.2021. It is the intention of the Nominating and Corporate Governance Committee to continue to engage in this process annually.
HOW WE GOVERN AND ARE GOVERNED
At Waters, we believe that sound principles of corporate governance are essential to protecting Waters’ reputation, assets, investor confidence, customer loyalty, and sustainability. Our Guidelines can be found on our website at www.waters.com and are available in print upon written request to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757.
We also believe in sound principles of board governance — how we govern ourselves sets the tone for how our company is governed more generally. Our board governance practices include:
Related Party Transactions Policy✓ Proxy Access
The Board has adopted a written Related Party Transactions Policy, which covers “Interested Transactions” between a “Related Party” or parties andAs described in the Company. An Interested Transaction is a transaction or arrangement in which the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year and in whichpreceding section on how Directors are selected, the Company and/or any Related Party may have an interest. A Related Party includes an executive officer,enables eligible shareholders to nominate director or nominee for electioncandidates via our proxy access process as a director of the Company, any holder of more than a 5% beneficial ownership interest in the Company, any immediate family member of any of the foregoing or any firm, corporation or entity in which any of the foregoing persons is employed or is a general partner or principal or in which such person or persons collectively have a 10% or greater beneficial ownership interest.
Pursuant to the policy, the General Counsel is responsible for identifying potential Interested Transactions and determining whether a proposed transaction is an Interested Transaction and accordingly, reportable to the Nominating and Corporate Governance Committee for consideration at its next regularly scheduled meeting. The Nominating and Corporate Governance Committee will review the material facts of all Interested Transactions and report its recommendations to the Board which will either approve or disapprove the Interested Transaction. There were no Interested Transactions during the year ended December 31, 2017.
The Nominating and Corporate Governance Committee and the Board have reviewed and determined that certain categories of Interested Transactions are deemed to bepre-approved or ratified (as applicable)governed by the Board under the terms of the policy. These are: (a) the employment and compensation arrangements of named executive officers (as defined below) required to be reported in the Company’s Proxy Statement; (b) Director compensation required to be reported in the Company’s Proxy Statement; (c) ordinary course charitable contributions periodically reviewed by the Compensation Committee of the Board; and (d) ordinary course business transactions conducted on an “arm’s length” basis with Bristol-Myers Squibb Corporation and GlaxoSmithKline plc (both of which Dr. Glimcher is a director) or Shire plc (of which Dr. Ornskov is a director).
Equity Ownership Guidelines
Increasingly, stockholders of public companies are focusing on the amount of equity ownership by directors and officers of the companies in which they invest. In order to more closely align the interests of the Company’s stockholders with those of management, the Company has minimum stock ownership guidelines for Directors and named executive officers. These guidelines provide for the accumulation by anyone who holds the Chief Executive Officer position of common stock equal to five times his or her base salary over a three-year period. Additionally, the Company’s other named executive officers on December 31, 2017, Ms. Buck and Messrs. Cassis, Harrington, Khanna and King, are each required to accumulate common stock equal to two times their base salary. Pursuant to the guidelines, members of the Board are required to accumulate a minimum of 5,000 shares of common stock of the Company.
If, as the case may be, a named executive officer shall becomenon-compliant with the guidelines, he or she will have a period of twelve months to regain compliance with the guidelines. If, after such twelve month period, the named executive officer remainsnon-compliant, then, with respect to any subsequent exercise of a stock option by such executive officer, 50% of such executive’s netafter-tax profit from such exercise must be retained in shares of common stock until compliance with the guidelines is achieved. Exceptions to these equity ownership guidelines may be considered by the Nominating and Corporate Governance Committee with respect to individual financial situations of current or future executives covered by the guidelines. For purposes of the accumulation of shares of common stock to comply with these guidelines, in addition to any direct ownership of shares of common stock by a named executive officer or Director, any shares of restricted stock and vested“in-the-money” stock options, which either were or will be granted by the Company to such executives or Directors, apply toward the satisfaction of the guidelines. The ownership guidelines have been met by all Directors except for Dr. Ornskov, who is in the process of complying, and all named executive officers except for Ms. Buck, who has until 2022 to meet her ownership guideline.our Bylaws.
Board Leadership Structure
As stated in the Company’s Corporate Governance guidelines, the Board has no set policy
with respect to the separation of the offices of Chairman and Chief Executive Officer. Douglas A. Berthiaume served as both Chairman of the Board and Chief Executive Officer from 1996 until September 2015 at which time Christopher J. O’Connell became President and Chief Executive Officer. Following Mr. O’Connell’s appointment, the offices of Chairman and Chief Executive Officer were separated. Effective January 1, 2018, Mr. O’Connell became Chairman of the Board and the offices were combined. The Board of Directors believes that combining the offices of Chairman of the Board and Chief Executive Officer has served the Company well in fostering strong and consistent leadership. The Lead Independent Director facilitates an appropriate balance between such leadership and independent and effective oversight of the Company’s affairs.
Since 2004, Thomas P. Salice, an independent director, has served as the Board’s “lead independent director”. In that capacity, he has presided over executive sessions of thenon-management Directors of the Board and provided a focal point for and facilitated communication amongnon-management Directors, Company management and Company stockholders.
The lead independent director continues to facilitate independent and effective oversight of the Company’s affairs.
Majority Voting
The Company’s bylaws (the “Bylaws”) provide for majority voting for Directors in uncontested elections. A further description of the Company’s majority voting provisions can be found under “Proposal 1. Election of Directors” herein.
Guidelines and Code of Conduct
The Board has adopted Corporate Governance Guidelines, a Code of Business Conduct and Ethics for employees, executive officers and Directors and a “whistleblower” policy regarding the treatment of complaints on accounting, internal accounting controls and auditing matters. All of these documents are available on the Company’s website athttp://www.waters.com under the caption “Corporate Governance” and copies may be obtained, without charge, upon written request to the Company, c/o Secretary, 34 Maple Street, Milford, MA 01757.
Policy Against Hedging
In 2013, the Board adopted a policy prohibiting Directors, officers and certain key employees from purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset any decrease in market value of equity securities of the Company. This prohibition does not apply to any bona fide pledge of equity securities of the Company, not made for the purpose of hedging.above.
Board Candidates
Selection of Candidates
With respect to potential candidates to serve on the Board, theThe Nominating and Corporate Governance Committee, considers suggestions from a variety of sources, including stockholders. Any nominations of candidates, together with the Board, is responsible for assessing the appropriate biographical information, should be submittedskills, attributes, experiences, and diversity of background, including a candidate’s gender and ethnic and racial background, that we seek in accordance withBoard members in the Company’s bylaws tocontext of the Company, c/o Secretary, 34 Maple Street, Milford, MA 01757.existing composition of the Board.
The Nominating and Corporate Governance Committee believes that candidates for service as a Director of the Company should meet certain minimum qualifications. In selecting Directors,Although the Board has not adopted a formal policy with respect to diversity, in assessing candidates for Director, the Nominating and Corporate Governance Committee considers candidates’ diversity of attributes, experiences, skills, and backgrounds, including a candidate’s gender and ethnic and racial background, and seeks individuals who are highly accomplished in their respective fields, with superior educational and professional credentials. Candidates should satisfy the Company’s independence criteria, which are part of its Corporate Governance Guidelines (the “Guidelines”) and summarized below, and follow the applicable listing standards of the New York Stock Exchange. In assessing candidates for Director, the Nominating and Corporate Governance Committee will consider their skills, experience and diversity in the context of the overall composition of the Board.
The Company has a process for identifying and selecting candidates for Board membership. Initially, the Chairman, the President and Chief Executive Officer, the Nominating and Corporate Governance Committee, or other Board members identify a need either to either expand the Board with a new member possessing certain specific characteristics or to fill a vacancy on the Board. A search is then undertaken by the Nominating and Corporate Governance Committee, working with recommendations and input from Board members, members of senior management, professional contacts, external advisors, nominations
by stockholdersshareholders, and/or the retention of a professional search firm, if necessary. Any shareholder wishing to propose a nominee should follow the process described in the Bylaws to submit the candidate’s name and appropriate biographical information to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757.
An initial slate of candidates is identified that will satisfy the criteria for Board membership and is presented to the Nominating and Corporate Governance Committee for review. Upon review by the Nominating and Corporate Governance Committee, a series of interviews of one or more candidates is conducted by the Chairman, the President and Chief Executive Officer, and at least one member of the Nominating and Corporate Governance Committee. During this process, the full Board is informally apprised of the status of the search and its input is solicited.
Upon identification of a final candidate, the entire Nominating and Corporate Governance Committee will meet to consider the credentials of the candidate and thereafter, if approved, will submit the candidate for approval by the full Board.
Diversity
As noted above, in assessing candidates for Director, the Nominating and Corporate Governance Committee considers their diversity of experience, skills and background in the context of the overall composition of the Board. Our Board is currently comprised of Directors with extensive industry experience and with a broad set of skills critical to providing us with strategic and operational oversight. In addition, our board is comprised of individuals with a diversity of backgrounds. For example, of our current Directors, seven have served as a chief executive officer, two are women, six have had careers in industries that are relevant to our business, three have technical backgrounds in science and technology, five are experts in finance and capital allocation, two have accounting backgrounds, and one has served as a chief financial officer.
Proxy Access
In 2017, theThe Board has adopted a proxy access bylaw provision that allows eligible stockholdersshareholders or groups of up to 20 stockholdersshareholders who have held at least 3% of our common stock continuously for three years to nominate up to two individuals or 20% of the Board, whichever is greater, for election at our annual stockholdershareholder meeting, and to have those individuals included in our proxy materials for that meeting. The adoption of this bylaw followed months of outreach to our largest stockholders, who together hold more than half of our outstanding common stock, as well as consultation with the proponent of thenon-binding stockholder proposal that was approved by our
stockholders at our 2017 Annual Meeting of Stockholders. The parameters of our proxy access bylaw reflect our consideration of the input of the stockholders who responded to our outreach initiatives regarding the features of proxy access that will best align the Company’s interests with those of our stockholders, as well our review of prevailing market practice. On this basis we believe that the proxy access bylaw adopted by the Board strikes an appropriate balance between providing meaningful proxy access for our stockholders and limiting the potential for abuse.
Board/Director Independence
The Company’s Corporate Governance Guidelines include criteria adopted by the Board to assist it in making determinations regarding the independence of its members. Our Categorical StandardsThe Guidelines include the Company’s categorical standards of Independenceindependence, which our Board approved. The Guidelines are also available on the websitewww.waters.com under the caption “Corporate Governance”.Governance.” The criteria, summarized below, are consistent with the New York Stock Exchange listing standards regarding director independence. To be considered independent, the Board must determine that a director does not have a material relationship, directly or indirectly, with the Company. A director will not be considered independent if if:
he or she or an immediate family member is, or has been within the last three years:
years, an executive officer of the Company;
he or she or an immediate family member is a current partner or employee of an internal or external auditor of the Company or has been within the last three years a partner or employee of an internal or external auditor of the Company who personally worked on the Company’s audit;
he or she or an immediate family member is, or has been within the last three years, an executive officer of a public company that waswhere any of the Company’s present executive officers at the same time serves or served on the compensation committee of itsthat company’s board;
he or she is a paid advisor or consultant to the Company receiving in excess of $100,000 per year in direct compensation from the Company (other than fees for service as a director) within the past three years or has an immediate family member who has been a paid advisor or consultant to the Company; andor
he or she or an immediate family member is an employee (or in the case of an immediate family member, an executive officer) of a company that does business with the Company and the annual payments to or from the Company, in any of the last three fiscal years, exceeded the greater of $1 million or 2% of the other company’s annual gross revenues.
In addition, a director will not be considered independent if he or she, or an immediate family member, is or has been an executive officer of atax-exempt entity that receives contributions in any fiscal year from the Company exceeding the greater of $1 million or 2% of its gross revenues. A director also will not be considered independent if he or she is a current employee of an internal or external auditor of the Company or has an immediate family member who is a current employee of an internal or external auditor of the Company who participates in such firm’s audit, assurance, or tax compliance practice.
The Board has determined that each Director, other than Mr. Berthiaume, who served asDr. Batra, the Company’s Chairman until his retirement in December 2017, and Mr. O’Connell, the Company’s current ChairmanPresident and Chief Executive Officer, has no material relationship with the Company and otherwise qualifies as “independent” under these criteria and the applicable listing standards of the New York Stock Exchange.
StockholderHOW WE ARE EVALUATED
The Nominating and Board Communications
With respect to communications withCorporate Governance Committee conducts an annual evaluation of the Board and each of its committees. In November 2020, the evaluation, in the form of a questionnaire, was circulated to all members of the Board and each committee. The Company’s General Counsel received all of the questionnaires, compiled the results, and circulated them to the Board and each committee for discussion and analysis during January 2021. It is the intention of the Nominating and Corporate Governance Committee to continue to engage in this process annually.
HOW WE GOVERN AND ARE GOVERNED
At Waters, we believe that sound principles of corporate governance are essential to protecting Waters’ reputation, assets, investor confidence, customer loyalty, and sustainability. Our Guidelines can be found on general matters, stockholdersour website at www.waters.com and interested parties may communicate directly withare available in print upon written request to the lead director or with thenon-management Directors as a group by writing to Waters Corporation,Company, c/o Secretary, at 34 Maple Street, Milford, MassachusettsMA 01757. Any such communication should include
We also believe in sound principles of board governance — how we govern ourselves sets the nametone for how our company is governed more generally. Our board governance practices include:
✓ Proxy Access
As described in the preceding section on how Directors are selected, the Company enables eligible shareholders to nominate director candidates via our proxy access process as governed by our Bylaws.
✓ Majority Approval Required for Director Elections
If an incumbent Director up for re-election at a meeting of shareholders fails to receive a majority of affirmative votes in an uncontested election, the Board will adhere to the director resignation process as provided in our Bylaws.
✓ Independent Board and return addressCommittees
All Directors except our President and Chief Executive Officer, and all members of the stockholder,Audit Committee, Compensation Committee, Finance Committee, Nominating and Corporate Governance Committee, and Science and Technology Committee are independent.
✓ Engaged in Strategy
Our Board is engaged in advising and overseeing the specific Company’s strategy and strategic priorities.
✓ Director Qualifications and Evaluations
All independent Directors meet the candidate qualifications set forth in our Guidelines and as summarized in the following sections of this Proxy Statement: “— How We Are Selected and Elected — Board Candidates” and “— How We Are Selected and Elected — Board/Director Independence”.
✓ Regular Executive Sessions of Independent Directors
Our independent Directors meet privately on a regular basis. Our Chairman presides at such meetings.
✓ Stock Ownership Requirements
We have robust stock ownership requirements for our Directors and executive officers.
✓ Enterprise Risk Management
We have an enterprise risk management framework to identify, assess, manage, report, and monitor enterprise risk, including information security risk, and areas that may affect our ability to achieve our objectives.
✓ Human Capital Management
Our Board dedicates a meeting session to talent review, diversity, and succession.
Related Party Transactions Policy
The Board has adopted a written Related Party Transactions Policy, which covers “Interested Transactions” between a “Related Party” or parties and the Company. An Interested Transaction is a transaction or arrangement in which the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year and in which the Company and/or any Related Party may have an interest. A Related Party includes an executive officer, director or nominee for election as a director of the Company, any holder of more than a 5% beneficial ownership interest in the Company, any immediate family member of any of the foregoing, or any firm, corporation or entity in which any of the foregoing persons is employed or is a general partner or principal or in which such person or persons collectively have a 10% or greater beneficial ownership interest.
Pursuant to the policy, the General Counsel is responsible for identifying potential Interested Transactions and determining whether a proposed transaction is an Interested Transaction and accordingly, reportable to the Nominating and Corporate Governance Committee for consideration at its next regularly scheduled meeting. The Nominating and Corporate Governance Committee will review the material facts of all Interested Transactions and report its recommendations to the Board which will either approve or disapprove the Interested Transaction.
The Nominating and Corporate Governance Committee and the Board have reviewed and determined that certain categories of Interested Transactions are deemed to be pre-approved or ratified (as applicable) by the Board under the terms of the policy. These are: (a) the employment and compensation arrangements of named executive officers required to be reported in the Company’s proxy statement; (b) Director compensation required
to be reported in the Company’s proxy statement; (c) ordinary course charitable contributions periodically reviewed by the Compensation Committee of the Board; and (d) ordinary course business transactions conducted on an “arm’s length” basis with Polaris, Inc. (of which Mr. Hendrickson is a director) or Galderma S.A. (of which Dr. Ornskov is Chief Executive Officer).
In addition, Senior Vice President, General Counsel, and Secretary Ms. Keeley A. Aleman’s husband, Mr. Patrick Maiella, is a current employee of the Company. Mr. Maiella received approximately $150,000 in compensation from the Company during 2020. He also participated in our employee benefit plans on the same basis as other similarly situated employees in 2020.
Stock Ownership Guidelines
In order to closely align Directors’ and executive officers’ interests with those of the Company’s shareholders, the Company has minimum stock ownership guidelines for its executive officers and non-employee Directors. These guidelines require the accumulation by anyone who holds the Chief Executive Officer position of common stock equal to five times his or her base salary over a three-year period and the accumulation by our other executive officers of common stock equal to two times their base salary over a five-year period. The stock ownership guidelines for non-employee Directors require the accumulation of a minimum of five times the annual cash Board retainer over a five-year period.
If an executive officer or Director shall become non-compliant with the guidelines, he or she will have a period of twelve months to regain compliance with the guidelines. If, after such twelve-month period, the executive officer or Director remains non-compliant, then, 50% of the net after-tax profit from any subsequent stock option exercise must be retained in shares of common stock until compliance with the guidelines is achieved. Exceptions to these stock ownership guidelines may be considered by the Compensation Committee. For purposes of these guidelines, in addition to any direct ownership of shares of common stock by an executive officer or Director, any shares of restricted stock and vested “in-the-money” stock options granted by the Company to such executives or Directors to whomapply toward the contact is addressed and the nature or subject mattersatisfaction of the contact. guidelines.
All communications will be sent directlyof our currently employed named executive officers and current Directors have satisfied the requirements of the ownership guidelines, except for Dr. Batra, who joined the Company in September 2020, Mr. Pratt, who joined the Company in September 2019, and Dr. Huang, who was appointed to the appropriate Board member.effective as of January 1, 2021, who have until 2023, 2024 and 2026, respectively, to meet the requirements of the ownership guidelines.
Risk OversightGuidelines and Code of Conduct
The Board has adopted the Guidelines, a Global Code of Business Conduct and Ethics for employees, executive officers, and Directors, and a Global Complaint Reporting Policy, the Company’s “whistleblower” policy, regarding the treatment of potential legal and compliance concerns, including those relating to accounting, internal accounting controls, and auditing matters. All of these documents are available on the Company’s website at http://www.waters.com under the caption “Corporate Governance” and copies may be obtained, without charge, upon written request to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757.
Policy Against Hedging
In 2013, the Board adopted a policy prohibiting Directors, executive officers, and certain key employees designated by the Company based on their access to material non-public information from making short sales of Company stock or trading in options on Company stock and purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed to hedge or offset any decrease in market value of equity securities of the Company. This prohibition does not apply to any bona fide pledge of equity securities of the Company not made for the purpose of hedging.
Risk Oversight
Board’s Role in Risk Oversight Generally
Included in the Company’s Annual Report on Form10-K for the year ended December 31, 20172020 (the “Annual Report”) are the risk factors affecting the Company which are periodically reviewed by the Board and the Audit Committee and updated or expanded as warranted. The Board is responsible for overseeing the management and operations of the Company, including its risk assessment and risk management functions. The Board has delegated responsibility to reviewing the Company’s policy with respect to risk assessment and management to the Audit Committee.
Additionally, the Company has an Enterprise Risk Management programenterprise risk management framework under the directionoversight of the
Vice President, Internal Audit and Chief Compliance Officer, which includes an information security risk management framework under the specific oversight of the Vice President and Chief Information Officer. This program seeks to identify risks, develop and implement risk mitigation plans, and monitor the results affecting the Company’s business and operations on an ongoing basis. Management of the Company actively participates in this program and briefs the Audit Committee on the strategic, operational, compliance, and financial risks affecting the Company and efforts undertaken to mitigate them.them; in addition, management of the Company provide a similar briefing to the Board annually. The Compensation Committee has responsibility for oversight of risk related to compensation matters as more fully described below.
Compensation-Related Risk
The Compensation Committee conducted a review to determine if any compensation plans and practices would be reasonably likely to have a material adverse effect on the Company. The Compensation Committee reviewed various components of the Company’s compensation plans, including their size, scope, and design. The Compensation Committee also reviewed whether the compensation plans promote unnecessary risk takingrisk-taking and the policies in place to mitigate compensation risk.risk associated with these plans. The review included an assessment of design features that could encourage excessive risk-taking and the potential magnitude of such risks, including design features such as a short-term oriented pay mix, overly aggressive goal setting, and over-weighting of annual incentives as compared to long-term incentives. Several features of the Company’s annual incentive plan the Management Incentive Plan,(the “AIP”) mitigate compensation-related risk including the use of payout caps, a clear link between payouts under the plan and the Company’s financial performance, and the Compensation CommitteeCommittee’s oversight in determining payouts under the Plan.plan. The policies that exist to mitigate compensation-related risk include, among others, (1) the Company’s Recoupment Policy for Management Incentive Plan awards;Policy; (2) stock ownership guidelines for named executive officers; (3) a five-year vesting provisionperiod for long-term incentive awards;stock options and three- to five-year vesting periods for Restricted Stock Units (“RSU”); (4) a three-year performance period and a maximum payout cap for Performance Share Units (“PSU”); (5) a prohibition on hedging; (6) a post-vesting holding period for PSUs; and (5)(7) the independent oversight of compensation programs by the Compensation Committee, with input from an independent compensation consultant. Based on this review, the Compensation Committee and the Company do not believe that there are any compensation relatedcompensation-related risks arising from the Company’s compensation plans that would have a material adverse effect on the Company.
Board Leadership Structure
As stated in the Company’s Guidelines, the Board has no set policy with respect to the separation of the offices of Chairman and Chief Executive Officer. From January 2018 until March 2020, Christopher J. O’Connell served as President and Chief Executive Officer of the Company and Chairman of the Board. In March 2020, the roles of Chairman and Chief Executive Officer were separated and Dr. Flemming Ornskov became Chairman of the Board, a role in which he continues to serve. The Board continues to believe that separating the offices of Chairman and Chief Executive Officer facilitates an appropriate balance between strong and consistent leadership and independent and effective oversight of the Company’s business by the Board.
Role of Compensation Consultant, Compensation Committee, and Management in Decision-Making
The Compensation Committee engaged Pearl Meyer as its outside independent compensation consultant during fiscal year 2017.2020. Pearl Meyer participates in Compensation Committee meetings and executive sessions and advises the Compensation Committee on a range of executive officer and directorDirector compensation matters, including annual and long-term incentive plan design, competitive market assessments, trends, best practices, and technical and regulatory developments. Pearl Meyer provides services to the Compensation Committee related only to executive officer and directorDirector compensation, including defining peer groups,group compositions, comparing executive officer and directorDirector compensation arrangements to those of the peer groups and the broader market, and providing market data and advice regarding executive and directorDirector compensation plans. The Compensation Committee has the authority to engage and terminate independent legal, accounting, and other advisors as it deems necessary or appropriate to carry out its responsibilities.
The Compensation Committee regularly reviews the services provided by its outside consultantsPearl Meyer and believes that Pearl Meyer is independent in providing executive compensation consulting services.services to the Compensation Committee. The Compensation Committee conducted a specific review of its relationship with Pearl Meyer in 2017,2020 and determined that Pearl Meyer’s work for the Compensation Committee did not raise any conflicts of interest, considering the factors set forth in the applicable SECrules of the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange rules. The Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis.Exchange.
The Compensation Committee approves all compensation decisions for the named executive officers, after consulting with Pearl Meyer, as appropriate. The Senior Vice President of Global Human Resources and the Vice President, Total Rewards also providesprovide the Compensation Committee with information and analysis on the Company’s executive compensation programs, as requested. During 2017,In the beginning of 2020, our former President and Chief Executive Officer, Mr. O’Connell, provided the Compensation Committee with his assessment of the performance of the Company and the other named executive officers who were then employed, and made compensation recommendations for thesuch other named executive officers. The Compensation Committee, however, makes all final decisions with respect to the compensation of the CEOChief Executive Officer and the other named executive officers. No named executive officer
makes any decision or recommendation to the Compensation Committee on any element of his or her own compensation.
Directors Meetings and Board CommitteesDIRECTOR MEETINGS AND BOARD COMMITTEES
Meetings
The Board held seventhirteen (13) meetings during the year ended December 31, 2017.2020. The Board has determined that each Director other than Mr. Berthiaume, who served asDr. Batra, the Company’s Chairman until his retirement in December 2017, and Mr. O’Connell, the Company’s current ChairmanPresident and Chief Executive Officer, has no material relationship with the Company and otherwise qualifies as “independent” under applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under “Corporate Governancethe section “— How We Are Selected and Elected — Board/Director Independence” below.above. The Board meetings held in 2020 included sessions on annual operating plan; enterprise risk management; talent review, diversity, and succession; strategy; and innovation.
During 2017, each2020, all but one of the Company’s current Directors attended in excess of 75% of the aggregate100% of the meetings of the Board andheld during the period for which he or she was a Director, with one incumbent Director missing one meeting. During 2020, each of the Company’s current Directors attended at least 75% of the meetings of the committees of the Board ofon which such Director was a member.he or she served. During fiscal year 2017, the Compensation Committee met five times,2020, the Audit Committee met eight (8) times, the Compensation Committee met eight times (8) and the Nominating and Corporate Governance Committee met twice.six (6) times. In 2017,addition, during 2020, the Board of Directors formed an Ad Hoc Finance Committee which became a formal standing committee of the Board in February 2018. During the fiscal year 2017, the Ad Hoc Finance Committee met twice.four (4) times and the Science and Technology Committee met two (2) times.
The Company encourages Director attendance at annual shareholder meetings but does not have a formal policy but encourages Director attendance at annual stockholder meetings.requiring attendance. All Directors except one, attended the 20172020 annual meeting of stockholders.shareholders.
Audit Committee
The Audit Committee, which currentlyas of the date of the Annual Meeting, consists of Ms. JoAnn A. ReedLinda Baddour (Chair), Dr. Michael J. Berendt, and Mr. Christopher A. Kuebler,Gary E. Hendrickson, oversees the activities of the Company’s independent
registered public accounting firm, PwC,PricewaterhouseCoopers LLP (“PwC”), and provides oversight with respect to accounting and financial reporting and audit functions. The Audit Committee meets the definition of “Audit Committee” as defined in Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee engages the independent registered public accounting firm, and performs certain other
functions pursuant to its charter, a copy of which is available on the Company’s website athttp://www.waters.com under the caption “Corporate Governance”.Governance.” Each member of the Audit Committee is independent under SEC rules and the applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under “Corporate Governancethe section “— How We Are Selected and Elected — Board/Director Independence”.Independence.” The Board has determined that each of the three membersmember of the Audit Committee — Ms. Reed, Dr. Berendt and Mr. Kuebler — is an “audit committee financial expert” within the meaning of the SEC rules and has “accounting or related financial management expertise” within the meaning of New York Stock Exchange rules.
Compensation Committee
The Compensation Committee, which currently consists of Mr. Christopher A. Kuebler (Chair), Mr. Edward Conard, Mr. Gary E. Hendrickson, and Dr. Flemming Ornskov, approves the compensation of executivesexecutive officers of the Company, makes recommendations to the Board with respect to standards for settingDirector compensation, levels and administers the Company’s incentive plans. The Compensation Committee’s charter is available on the Company’s website athttp://www.waters.com under the caption “Corporate Governance”.Governance.” Each member of the Compensation Committee is independent under the applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under “Corporate Governancethe section “— How We Are Selected and Elected — Board/Director Independence”.Independence.”
Finance Committee
The Finance Committee, which currentlyas of the date of the Annual Meeting, consists of Mr. Edward Conard (Chair), Ms. JoAnn A. ReedLinda Baddour, and Mr. Thomas P. Salice, oversees the Company’s financial activities and financial condition. Among other things, it reviews and makes recommendations to the Board with respect to financing plans and strategies, investment policies, and capital markets activities. When finalized, the Finance Committee’s charter will be available on the Company’s website at http://www.waters.com under the caption “Corporate Governance”. Each member of the Finance Committee is independent under the Company’s independence criteria, which are summarized under “Corporate Governancethe section “— How We Are Selected and Elected — Board/Director Independence”.Independence.”
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee currently consists of Dr. Michael J. BerendtFlemming Ornskov (Chair), Dr. Laurie H. Glimcher and Mr. Thomas P. Salice. The responsibilities of the Nominating and Corporate Governance Committee include the recruitment and recommendation of candidates for the Board. The Nominating and Corporate Governance Committee may, as it deems appropriate, give consideration toconsider any candidates suggested by the stockholdersshareholders of the Company. The Nominating and Corporate Governance Committee also develops and recommends to the Board the Corporate Governance Guidelines for the Company. The charter of the Nominating and Corporate Governance Committee charter, which sets forth all of the Nominating and Corporate Governance Committee’s functions, is available on the Company’s website athttp://www.waters.com under the caption “Corporate Governance”.Governance.” Each member of the Nominating and Corporate Governance Committee is independent under the applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under “Corporate Governancethe section “— How We Are Selected and Elected — Board/Director Independence”.Independence.”
Science and Technology Committee
The Science and Technology Committee, which currently consists of Dr. Pearl S. Huang (Chair), Dr. Michael J. Berendt, and Mr. Christopher A. Kuebler, reviews current and emerging scientific technologies applicable to the Company’s business. Among other things, it reviews scientific technology strategies and potential investments both internally and externally and provides updates to the Board. Each member of the Science and Technology Committee is independent under the Company’s independence criteria, which are summarized under the section “— How We Are Selected and Elected — Board/Director Independence.”
Report of the Audit Committee of the Board of DirectorsREPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The information contained in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Waters specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.
During 20172020, the Audit Committee of the Board, in conjunction with management and PricewaterhouseCoopers LLP, or PwC, the Company’s independent registered public accounting firm, focused on the following items:
1. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Act”) and the adequacy of Company internal controls;
2. The appropriateness of Company financial reporting and accounting processes;
3. The independence and performance of the Company’s independent registered public accounting firm;
4. Company compliance with laws and regulations, including compliance with applicable provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and
5. Review of the Company’s independent registered public accounting firm’s quality control procedures.
The Company retains Ernst &Young LLP to assist in elements of continuing compliance with Section 404 of the Act. The Company’s compliance with Section 404 of the Act is managed primarily by the Company’s Vice President, Internal Audit and Chief Compliance Officer in conjunction with the Company’s Senior Vice President,chief financial officer (including its Interim Chief Financial Officer since January 1, 2021) and its Vice President, Corporate Finance and Corporate Controller. During 2017,2020, the Audit Committee received regular and detailed briefings from the Company’s Vice President, Internal Audit and Chief Compliance Officer and PricewaterhouseCoopers LLPPwC regarding the Company’s compliance with Section 404 of the Act. On February 26, 2018,22, 2021, the Company’s Vice President, Internal Audit and Chief Compliance Officer and PricewaterhouseCoopers LLPPwC reported to the Audit Committee that no material weaknesses had been identified in the Company’s internal control over financial reporting as of December 31, 2017.2020.
The Board has adopted a written charter setting out more specifically the functions that the Audit Committee is to perform. The charter is reviewed on an annual basis by the Audit Committee and the Audit Committee is advised as to any corporate governance developments which may warrant charter amendments. The charter is available on the Company’s website athttp://www.waters.com under the caption “Corporate Governance”.Governance.” A discussion of the Audit Committee’s role in risk oversight can be found under the heading “Risk“— Risk Oversight — Board’s Role in Risk Oversight Generally” below.above.
As stated in its charter, the Audit Committee is tasked with, among other things, reviewing with management the Company’s guidelines and policies with respect to its approach to risk assessment and risk management. In addition, major financial risk exposures and means of monitoring and controlling these exposures, is to be discussed with management.
The Audit Committee held eight meetings during the fiscal year ended December 31, 2017.2020. The Audit Committee reviewed on a quarterly basis, with
members of the Company’s management team, the Company’s quarterly and annual financial results prior to the release of earnings and the filing of the Company’s quarterly and annual financial statements with the SEC. The Board has determined that each of the three currentfour members of the Audit Committee as of February 22, 2021 — Ms. Reed (Chair), Ms. Baddour, Dr. Berendt, and Mr. KueblerHendrickson — is an “audit committee financial expert” as defined under the applicable rules and regulations of the SEC and has “accounting or related financial management expertise” within the meaning of the New York Stock Exchange rules. Company management has primary responsibility for the financial statements and reporting processes. The Company’s independent registered public accounting firm, PwC, audits the annual financial statements and is responsible for expressing an opinion on their conformity with generally accepted accounting principles.
The Audit Committee has adopted the following guidelines regarding the engagement of PwC to performnon-audit services for the Company:
Company management will submit to the Audit Committee for approval a list ofnon-audit services that it recommends the Audit Committee engage its independent registered public accounting firm to provide from time to time during the fiscal year and an estimated amount of fees associated with such services. Company management and the Company’s independent registered public accounting firm will each confirm to the Audit Committee that eachnon-audit service on the list is permissible under all applicable legal requirements. The Audit Committee will, in its discretion, either approve or disapprove both the list of permissiblenon-audit services and the estimated fees for such services. The Audit Committee will be informed routinely as to thenon-audit services actually provided by the Company’s independent registered public accounting firm pursuant to thispre-approval process and the actual expenditure of fees associated therewith as well as newnon-audit services being requested for approval.
To ensure prompt handling of unexpected matters, the Audit Committee delegates to its Chair the authority to amend or modify the list of approved permissiblenon-audit services and fees. The ChairmanChair will report action taken to the Audit Committee at the next Audit Committee meeting.
PwC and the Company ensure that all audit andnon-audit services provided to the Company have beenpre-approved by the Audit Committee.
The Audit Committee hereby reports for the fiscal year ended December 31, 20172020 that:
1. It has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 20172020 with Company management;
2. It has reviewed and discussed with PwC those matters required to be communicated by PwC to the Audit committee, including under Auditing Standard No. 16, as adopted by the Public Company Accounting Oversight Board (“PCAOB”);
3. It has received from PwC written disclosures and a letter required by the applicable requirements of the PCAOB regarding PwC’s
communications with the Audit Committee concerning independence, and has discussed with PwC its independence;
4. It has considered whether, and determined that, the provision ofnon-audit services to the Company by PwC as set forth below, was compatible with maintaining auditor independence; and
5. It has reviewed and discussed with PwC its internal quality control procedures, and any material issues raised by the most recent internal quality control review, or peer review, or by any inquiry or investigation by governmental or professional authorities within the preceding five years.
Based on the items reported above, on February 26, 2018,22, 2021, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 20172020 for filing with the SEC. The recommendation was accepted by the Board on the same date.
Ms. JoAnn A. Reed (Chair) Ms. Linda Baddour Dr. Michael Berendt Mr. Edward Conard Mr. Thomas P. SaliceGary E. Hendrickson
Compensation Committee Interlocks and Insider ParticipationCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Christopher A. Kuebler (Chair), Mr. Edward Conard, Mr. Gary E. Hendrickson, and Dr. Flemming Ornskov. During fiscal year 2017,2020, no member of the Compensation Committee was an officer or employee of the Company or served as a member of the Boardboard of directors or
Compensation Committee compensation committee of any entity that has one or more executive officers serving as members of the WatersCompany’s Board or its Compensation Committee and no executive officer of the Company served on the Compensation Committeecompensation committee or Boardboard of Directorsdirectors of any entity that has one or more executive officers serving on the WatersCompany’s Board or Compensation Committee.
The Board of Directors seeks input from a wide variety of shareholders and stakeholders to inform its work. We describe elsewhere in this Proxy Statement the Board’s and the Company’s shareholder engagement activities. We also enable communication via:
participating in our annual meeting;
calling our investor and customer service line at (508) 478-2000;
• | using our ethics reporting email ethics@waters.com or our internal audit email internal_audit@waters.com. Our internal audit function has a direct reporting line to us, the Board; or |
participating in our various investor relations communications opportunities.
In addition, we enable shareholders and other interested parties to communicate with the Chairman or with the non-employee Directors, individually or as a group, by writing to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757. Any such communication should include the name and return address of the shareholder or other party, the specific Director or Directors to whom the contact is addressed, and the nature or subject matter of the contact. All communications will be sent directly to the appropriate Board member.
PROPOSAL 2 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected PricewaterhouseCoopers LLP, an independent registered public accounting firm, to audit the books, records, and accounts of the Company for the fiscal year ending December 31, 2020. In accordance with a vote of the Audit Committee and as approved by the Board, this selection is being presented to the shareholders for ratification at the Annual Meeting. A representative of PwC is expected to be present at the Annual Meeting to respond to appropriate questions and will be given the opportunity to make a statement if the representative desires to do so.
Fees
The aggregate fees for the fiscal years ended December 31, 2020 and 2019 billed by PwC were as follows:
2020 | 2019 | |||||||
Audit Fees | $ | 4,398,720 | $ | 4,406,969 | ||||
Audit-Related Fees | 60,540 | 70,073 | ||||||
Tax-Related Fees | ||||||||
Tax Compliance | 620,277 | 965,472 | ||||||
Tax Planning | 409,721 | 880,767 | ||||||
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|
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| |||||
Total Tax-Related Fees | 1,029,998 | 1,846,239 | ||||||
All Other Fees | 900 | 900 | ||||||
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|
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| |||||
Total | $ | 5,490,158 | $ | 6,324,181 |
Audit Fees — consists of fees for the audit of the Company’s annual financial statements, statutory audits, review of the interim condensed consolidated financial statements included in quarterly reports, assistance with review of documents filed with the SEC, and services that are normally provided by PwC in connection with statutory and regulatory filings or engagements, and attest services, except those not required by statute or regulation.
Audit-Related Fees — consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, acquisition-related services, attest services not required by statute or regulation, and accounting consultations and reviews for various matters.
Tax-Related Fees — consists of fees for tax compliance and planning services. Tax compliance fees include fees for professional services related to international tax compliance and preparation. Tax planning fees consist primarily of fees including but not limited to, the impact of acquisitions, restructurings, and changes in regulations.
All Other Fees — consists of fees for all permissible services other than those reported above.
The Audit Committee pre-approved 100% of the services listed under the preceding captions “Audit Fees,” “Audit-Related Fees,” “Tax-Related Fees,” and “All Other Fees.” The Audit Committee’s pre-approval policies and procedures are more fully described in its report set forth in this Proxy Statement.
Required Vote and Recommendation of the Board of Directors
Approval of the proposal requires a majority of the votes cast in person or by Proxy by the shareholders entitled to vote thereon. Abstentions and broker non-votes will be counted as present for the purpose of determining whether a quorum is present, but will not be treated as votes cast with respect to the proposal and therefore will not have an effect on the determination of whether the proposal has been approved. Ratification by shareholders is not required. Brokerage firms may vote to ratify the appointment of PwC as it is a “discretionary” or “routine” item. If this Proposal 2 is not approved by the shareholders, the Audit Committee does not intend to change the appointment for fiscal year 2021 but will consider the shareholder vote in selecting an independent registered public accounting firm for fiscal year 2022.
THE BOARD OF DIRECTORS |
PROPOSAL 3 — NON-BINDING VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the shareholders of Waters are entitled to cast a non-binding vote at the Annual Meeting to approve the compensation of the Company’s named executive officers, as disclosed in this Proxy Statement. Pursuant to the Dodd-Frank Act, the shareholder vote is an advisory vote, only, and is not binding on Waters or the Board. Shareholders have elected to conduct this vote annually.
Although the vote is non-binding, the Compensation Committee and the Board value your opinions and will consider the outcome of the vote in establishing and evaluating the Company’s executive compensation program and making future compensation decisions.
As described more fully in the Compensation Discussion and Analysis, the Summary Compensation Table, and the other tables following the Summary Compensation Table, we believe the Company’s named executive officers are compensated in a manner consistent with our business strategy, competitive practice, and sound compensation governance principles, and with a focus on short- and long-term performance-based compensation.
Please refer to the section “— Compensation Discussion and Analysis” for a full description of our executive compensation practices and programs.
We are requesting your non-binding vote on the following resolution:
“RESOLVED, that the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis and in the Summary Compensation Table and subsequent tables is approved.”
Required Vote and Recommendation of the Board of Directors
Approval, on an advisory basis, of the proposal requires a majority of the votes cast in person or by Proxy by the shareholders entitled to vote thereon. Abstentions and broker non-votes will be counted as present for the purpose of determining whether a quorum is present, but will not be treated as votes cast with respect to the proposal and therefore will not have an effect on the determination of whether the proposal has been approved on an advisory basis. If you own shares through a bank, broker, or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RESOLUTION. |
Compensation DiscussionCOMPENSATION DISCUSSION AND ANALYSIS
Our Business
From the everyday consumer to scientists in the laboratory, we all rely on accurate information to make critical decisions. Waters Corporation is the world’s leading specialty measurement company focused on improving human health and Analysiswell-being through the application of high-value analytical technologies and industry leading scientific expertise.
Our decisions and actions are guided by two simple words — Deliver Benefit. Our founder, Jim Waters, used these words to encapsulate the idea that we should positively impact our customers, employees, shareholders, and society at every opportunity.
Driven by that ethos for over sixty years, Waters has continually pioneered chromatography, mass spectrometry, and thermal analysis innovations. Whether it’s discovering new pharmaceuticals, assuring the safety of the world’s food and water supplies, or ensuring the integrity of a chemical entity in production, we are constantly working with our 40,000+ customers to change the world.
With a global workforce of over 7,400 employees, Waters operates in 35 countries, including 14 manufacturing facilities and with products available in more than 100 countries. Our diverse organization is well-positioned to Deliver Benefit through innovations that enhance human health and well-being.
Our Performance
When 2020 began, it was unclear what impact the rapidly evolving situation surrounding the COVID-19 pandemic would have on our business and, as we moved through 2020, the pandemic ended up significantly disrupting our business by decreasing the customer demand for our products and services, which resulted in our sales declining for the first half of 2020 versus the first half of 2019. This decline in sales started in China early in the first quarter of 2020 and subsequently moved throughout the rest of the world as governmental-imposed lockdowns and customer site closures were put in place.
During the pandemic, Waters enacted a comprehensive program to reduce our cost base and revise our capital deployment plans to better align our operations and investments with the near-term growth challenge. As a result of these actions, the gradual loosening of governmental-imposed restrictions, and our customers reopening their research laboratories and manufacturing facilities in the second half of 2020, we were able to deliver a strong second-half financial performance with our sales growing 7% on a GAAP basis.
Waters is committed to a highly disciplined and balanced approach with our capital deployment strategy in order to maximize value to shareholders. We follow a consistent approach, which we categorize into three priorities (1) balance sheet strength and flexibility, (2) investing for growth, and (3) returning capital to shareholders.
During the COVID-19 pandemic, Waters completed a 90-day cost savings program in an effort to maintain its balance sheet strength and flexibility. This short-term plan balanced investment in growth initiatives with prudent management of our spending in order to preserve jobs for the long term and ensure we were prepared to rebound quickly once the effects of the pandemic had subsided. As a result, we continued to see meaningful new product launches in 2020, which were highlighted by the launch of the ArcTM HPLC, our most important launch of a liquid chromatograph in many years. We also set the standard for performance for chromatographic analyses with our ACQUITYTM PREMIER columns, featuring MaxPeakTM High Performance Surface technology, designed to improve sample throughput, assay-to-assay reproducibility, and overall confidence in analytical results. Additionally, we are increasingly focused on investments in our commercial infrastructure, including investments in digital demand generation, additional sales representatives, and additional resources in our service organization.
Waters also continued its investment in its new precision chemistry technology and manufacturing center in Taunton, Massachusetts, which will create even greater strategic differentiation in our chemistry business through a “center of excellence” that will enable sustainable growth in customer demand, enhanced innovation capability, and ongoing operational efficiency gains.
Over the longer term, Waters has delivered value to shareholders. While our shareholders experienced modest returns in 2020, with our stock price up 6% for the year, for the three-, five- and ten-year periods ending on December 31, 2020, our stock yielded a 28%, 84% and 218% return on an investment made on December 31, 2017, December 31, 2015, or December 31, 2010, respectively.
The following graph compares the cumulative total return on $100 invested as of December 31, 2015 through December 31, 2020 in the Company’s common stock, the NYSE Market Index, the SIC Code 3826 Index, and the S&P 500 Index.
OverviewOur Named Executive Officers
This Compensation Discussion and Analysis discusses the compensation programs forawarded to, earned by, or paid to our named executive officers.officers for 2020. Our named executive officers (“NEOs”) for fiscal year 20172020 were as follows:
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Dr. Udit Batra, Ph.D., President and CEO;
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Sherry L. Buck, Former Senior Vice President and Chief Financial Officer (“CFO”);
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Dr. Michael C. Harrington, Ph.D., Senior Vice President, Global Markets;
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Ian S. King, Senior Vice President, Global Products;
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Jonathan M. Pratt, Senior Vice President and President of TA Instruments; and
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Christopher J. O’Connell, Former President and CEO;
On January 9, 2017,September 1, 2020, Dr. Batra was appointed President and CEO of the Company, replacing Mr. O’Connell, who transitioned from such position on that same date and served as a Senior Advisor until December 31, 2020. On December 31, 2020, Ms. Buck joinedstepped down from her role as Senior Vice President and CFO, with Michael Silveira assuming the role of Interim CFO, effective January 1, 2021.
2020 Pay Program
This year’s Summary Compensation Table reflects the challenges and changes faced by the Company in 2020. Our former President and CEO, Mr. O’Connell, took a 40% salary reduction for a three-month period in 2020 (April – July) and our other executive officers took a 30% salary reduction for the same period as part of the cost reduction initiatives made throughout the Company in response to the COVID-19 pandemic. As part of these cost reduction initiatives, the Company temporarily suspended the matching contribution to the Waters Employee Investment Plan (the “401(k) Plan”) and the Waters 401(k) Restoration Plan (the “401(k) Restoration Plan”) from May 2020 through the end of the year. The Company also reset the targets under the Company’s AIP, which is the Company’s bonus plan in which the named executive officers, other executives and key
employees of the Company participate. These targets were originally set before the impact of the COVID-19 pandemic became apparent and became incapable of being met given the significant change in economic conditions created by the pandemic, especially in the beginning half of 2020, as discussed above. As part of the AIP reset, actual payouts under the plan would be reduced by 50% because the reset was made mid-year in order to drive second-half performance, which resulted in an overall payout cap of 100% of target payout for 2020 under the AIP. In the second half of the year, we welcomed a new President and CEO, Dr. Udit Batra, and our CFO, Sherry Buck, resigned from the Company, effective at the end of the year. Despite these short-term challenges and changes, our compensation philosophy and our commitment to pay-for-performance remain consistent.
2020 CEO Pay Program Design
The 2020 pay program is primarily equity-oriented and at-risk. As noted above, our current CEO, Dr. Batra, started in September 2020 and his annualized 2020 pay was approximately:
69% equity-based (RSUs and stock options)*
52% performance-based (target annual incentives and stock options)*
14% guaranteed cash (base salary)*
*Based on the grant date fair value of equity awards and determined by annualizing his base salary and target annual incentives as if he were employed for the full year.
Changes to the Executive Team
Waters had three significant changes in leadership in 2020 and into early 2021, as Dr. Batra succeeded Mr. O’Connell as President and CEO of the Company, effective September 1, 2020, Ms. Buck resigned from her role as Senior Vice President and Chief Financial Officer, effective December 31, 2020 and Mr. Cassis resignedSilveira was appointed Interim Chief Financial Officer, effective January 1, 2021.
2020 Pay Program Outcomes
Although we delivered modest performance to shareholders in 2020, demonstrated through a total shareholder return (“TSR”) of 6%, 2020 was a challenging year for the Company. As discussed above, as difficult conditions around the globe materialized early in 2020 as a result of the COVID-19 pandemic, we remained cognizant of the ongoing variability we face in our end markets. Early in the year, it was evident that the original performance goals for our AIP were incapable of being met due to the ongoing impact of the COVID-19 pandemic on our business. To continue to maintain an annual bonus program that was tied to the achievement of performance goals that would serve as a meaningful incentive to our employees, the Compensation Committee reset the performance goals for our AIP around mid-year. The decision to reset AIP performance goals was based on three key factors:
We expected the second half of the year to be stronger than the first half of the year;
We believed that resetting performance goals would keep employees focused and motivated to drive second-half performance, aimed squarely on accelerating our growth, specifically for our new products; and
We decided that because the reset of performance goals was made mid-year, any potential payouts under the 2020 AIP would be reduced by 50%, thus any potential payouts would be capped at 100% of target payout.
The Company finished the year with a strong fourth quarter, with revenues for the fourth quarter up 10% on a GAAP basis and up 7% on a non-GAAP basis and net income for the fourth quarter up 9% as reported and up 11% on a non-GAAP basis, in each case, as compared to the fourth quarter of 2019. A reconciliation of our Generally Accepted Accounting Principles (GAAP) to Non-GAAP items can be found on our website. Based on these strong results, the named executive officers received a payout of 79% of their respective target payouts under the AIP based on corporate performance, before the individual modifier was applied, as further detailed below.
Our 2017-2020 LTI award, based on relative TSR, completed its three-year performance measurement period on December 31, 2020. Our performance over the period yielded a 26% payout on PSUs granted in December 2017. The Compensation Committee did not make any changes to any LTI awards or the performance goals under them in 2020. Further details on each of these programs, and their 2020 outcomes, are described below.
Shareholder Engagement and Changes in the 2020 Pay Program
As detailed further below, the Company engaged with shareholders in 2019 to discuss, among other topics, executive compensation program design. Following our say-on-pay vote support level of approximately 80% received in 2019, we sought to understand the shareholders’ viewpoints regarding our executive compensation program, and to understand changes that shareholders would appreciate in our executive compensation program. Executive compensation is also regularly discussed as part of our ongoing investor outreach. In 2019, management had specific discussions with certain shareholders regarding executive compensation design. The insight and views shared with us by these shareholders were considered as we made design changes to our 2020 incentive programs, which are summarized below. In 2020, approximately 86% of shares voted in favor of our say-on-pay proposal, which we believe reflects shareholders’ support of the changes made to our executive compensation program.
Adjustments for our 2020 compensation program include:
Long-Term Incentive (“LTI”) Program:
¡ | Increased weighting of PSU grants to 50% of the overall annual LTI award, up from 30% |
¡ | Decreased weighting of stock options from 70% to 50% of the overall annual LTI award grant |
¡ | Introduced a new metric, three-year non-GAAP constant-currency revenue growth, with a weighting of 50% for PSUs granted beginning in 2020 |
¡ | Retained relative TSR as a metric for PSUs but reduced the weighting of this metric to 50% |
¡ | Adjusted grant timing for annual LTI awards to executives to the first quarter of each year so we are able to incorporate full prior year performance in making compensation decisions |
Annual Incentive Plan:
¡ | Introduced a new metric, non-GAAP net income growth, weighted at 50% |
¡ | Increased the weighting of the non-GAAP constant-currency revenue growth metric to 50% |
¡ | Removed the non-GAAP earnings per share (“EPS”) growth metric |
More details on these changes are available further in this proxy.
2020 EXECUTIVE COMPENSATION PROGRAM
2020 Compensation Program Reviews
In 2019, the Compensation Committee conducted a comprehensive review of our current incentive programs (both the AIP and the LTI program), which led to changes in the timing of the executive review process, as well as core program design changes, for 2020 as described above. The Compensation Committee historically granted LTI awards to our executives in December and did so in December 2018. During 2019, the Compensation Committee decided to change the timing of annual LTI awards to our executives and to move the grant dates to the beginning of each calendar year. This change allows the Compensation Committee to consider full prior-year results in making pay decisions and aligns the timing of executive performance review practices and grant timing with that of non-executive employees. As a result, annual LTI awards were not made in December 2019, but were instead made in February 2020. The timing of the approval for annual base salary increases was also changed from his positionthe December Compensation Committee to the February Compensation Committee meeting to consider full prior-year results in making pay decisions and to align with non-executive performance review practices of the Company.
In 2019, the Compensation Committee examined our current program design against peer companies and the broader market, focusing on the alignment of these programs to our business strategy and long-term value creation. The objectives of this review were primarily to:
Ensure incentive programs remain aligned with the creation of shareholder value
Create a greater link to revenue growth, a key strategic and operational imperative
Incorporate individual performance to enhance differentiation in compensation
Utilize performance metrics that reflect generators of shareholder value
Align pay outcomes with desired performance outcomes
Recognize innovation through emphasis on long-term revenue growth
Simplify the programs to improve motivational and retentive value
Changes to the annual incentive program, effective beginning in 2020, include changing a key performance metric from non-GAAP EPS to non-GAAP net income, adjusting the weighting of each performance metric, modifying the threshold and maximum performance levels as a percentage of target payout, and adding an individual modifier to distinguish an individual’s contribution to the overall results. Changes to the LTI program include increasing the weighting of PSUs from 30% to 50% of the overall LTI award value and adding a three-year non-GAAP constant-currency revenue growth metric to PSU grants in addition to the existing relative TSR metric. Stock options will continue to be utilized; however, they will generally represent 50% of the overall LTI award value, which has been reduced from our previous weighting of 70%. For purposes of this Compensation Discussion and Analysis, the value and weighting of LTI awards is determined based on the grant date fair value of the awards, assuming target performance for PSUs.
We believe our updated incentive programs, which were effective beginning in 2020, align with our business strategy and support our key priorities of growth and innovation, and that the combination of the revised annual incentive program and LTI program will keep the Company focused on short-term goals, while driving us to deliver sustained, long-term value creation to our shareholders. Please see the detailed description of the changes made to each incentive program in the respective sections below.
Pay Mix
Consistent with our performance-based compensation philosophy, variable, performance-based compensation comprises a substantial portion of the target total direct compensation (base salary, target annual incentive award, and grant date value of the LTI equity incentive awards) for our named executive officers. For 2020, we have included 2020 annualized base salary, 2020 annualized target annual incentive award and Dr. Batra’s September 2020 LTI awards in the CEO pay mix calculations in the charts below in order to present what we believe to fairly represent what target total direct compensation would have been if Dr. Batra had been employed for the full year. For all other NEOs (other than Mr. O’Connell), we have included target total direct compensation for 2020 (base salary, annual incentive award and grant date value of LTI awards). We have excluded Mr. O’Connell from these calculations because he was not serving as an executive officer at the end of 2020. Our 2020 performance-based compensation (target annual incentive award and grant date value of long-term equity incentives, as applicable and adjusted as described above) represented approximately 52% of the target total direct compensation for Dr. Batra and approximately 78% for all other named executive officers as a group (excluding Mr. O’Connell). The pay mix for Dr. Batra and all other named executive officers is relatively consistent with the Company’s industry peer group described below.
CEO Pay Mix (1) | NEO Pay Mix | |
(1) | The CEO pay mix includes the 2020 annualized base salary, 2020 annualized target annual incentive award and September 2020 LTI awards. |
2020 Key Business Priorities and Connection to our Executive Compensation Program
The chart below illustrates the key performance metrics in our executive compensation program and how Waters performed against these metrics during 2020 (and 2019 and 2018, in the case of PSUs).
Key Business Priorities | Compensation Design | Performance Results and Corresponding Compensation | ||||||
Sustainable | Alignment with the long-term interests of our shareholders is achieved through our annual performance-based LTI program, which includes stock options that vest over a five-year period and PSUs that are earned and vest over a three-year performance period and are based on relative TSR. Beginning with the annual grant of PSUs made in 2017, the Company implemented a post-vesting holding requirement of two years for the CEO and one year for other executives. | The PSUs granted on December 5, 2017 vested in 2021 based on the achievement of the performance conditions stated in the award. The performance metric for these grants was 100% based on relative TSR over a three-year performance period ending on as of December 31, 2020, which was 24.19%, or in the 31st percentile of the S&P 500 Health Care Index over the three-year performance period. This level of achievement resulted in a payout of 26% of the target PSUs granted. | ||||||
Organic | Alignment with the Company’s strategy to drive organic revenue growth through the use of a non-GAAP constant-currency revenue growth metric under our AIP. This metric had a weighting of 50% in 2020. Beginning in 2020, 50% of annual PSU grants will be eligible to be earned and vested based on non-GAAP constant-currency revenue growth over a three-year performance period. | In 2020, revenue reported on both a GAAP basis and non-GAAP basis declined 2% as compared to 2019, exceeding the adjusted target decline of 8%. While the pandemic significantly impacted our results in the first half of the year and for the full year, we had a strong second half performance that resulted in revenue increases of 7% and 5% on a GAAP basis and non-GAAP basis*, respectively, as compared to the second half of 2019. | ||||||
Net income | Shareholder value is reinforced with a non-GAAP net income growth performance goal under the AIP. This non-GAAP net income metric had a weighting of 50% in 2020. | In 2020, net income declined 12% on a GAAP basis and 2020 non-GAAP net income declined 8% as compared to the prior year, exceeding the adjusted target decline of 22%. While the pandemic significantly impacted our results in the first half of the year and for the full year, we had a strong second half performance that resulted in net income increases of 2% and 4% on a GAAP basis and non-GAAP basis*, respectively, as compared to the second half of 2019. | ||||||
*Use of Non-GAAP Financial Metrics in our Executive Compensation Program
The Company generally uses non-GAAP financial metrics to facilitate financial and operational decision-making, evaluate historical operating results, make comparisons to competitors’ operating results and determine management incentive compensation.
(1) | The Company believes that referring to comparable constant-currency revenue growth rates is a useful way to evaluate the underlying performance of the Company’s net revenue. Constant-currency revenue growth rate, a non-GAAP financial metric, measures the change in net revenue between current- and prior-year periods, without taking into account the impact of foreign currency exchange rates during the current period. In 2020, the impact of foreign currency exchange rates was minimal as the Company’s revenue declined by approximately 2% on both an as-reported basis and on a constant-currency basis. |
(2) | The Company’s non-GAAP net income growth is based on net income reported in accordance with GAAP, but adjusted to exclude certain charges and credits that the Company considers not directly related to ongoing operations of the Company. In 2020, GAAP net income was adjusted to exclude purchased intangibles amortization, restructuring costs and certain other items, asset impairments, pension costs, litigation settlements, and certain income tax items. |
A reconciliation of GAAP to non-GAAP net income can be found in the Form 8-K dated February 2, 2021 that contained the Company’s results of operations for the quarter and year ended December 31, 2020, which is on the Company’s website at http://www.waters.com under the caption “Investors.” Copies may be obtained, without charge, upon written request to the Company, c/o Senior Director, Investor Relations, at 34 Maple Street, Milford, MA 01757 or at investor_relations@waters.com.
Dr. Batra’s New Hire Compensation
Dr. Udit Batra was appointed to serve as the Company’s Chief Financial OfficerPresident and transitionedCEO effective September 1, 2020. Dr. Batra’s compensation was set by the Compensation Committee consistent with the Company’s executive compensation philosophy and after reviewing competitive market data provided by Pearl Meyer. The Company entered into an employment agreement with Dr. Batra that provides for an annual base salary of $1,000,000 and an annual target bonus opportunity of 125% of his annual base salary.
On September 1, 2020 Dr. Batra received an LTI award with a grant date value of approximately $5,000,000, approximately 50% which was delivered in stock options and approximately 50% of which was delivered in RSUs. These new hire LTI awards were intended to compensate Dr. Batra for a seniorportion of the equity awards from his prior employer that he forfeited as a result of joining Waters. The new hire stock option grants vest 20% each year on the first five anniversaries of the date of grant and the RSU grants vest as to one-third of the awards each year on each of the first three anniversaries of the date of grant, generally subject to Dr. Batra’s continued employment through the applicable vesting date. For 2021, Dr. Batra received the same performance-based LTI vehicle mix as our other executives.
The employment agreement also provides that Dr. Batra will be entitled to reimbursement of up to $35,000 in legal and other professional advisor role. Mr. Cassis retired fromfees in connection with the negotiation of the agreement.
Under his employment agreement, if Dr. Batra’s employment is terminated by the Company effective March 9, 2018. Although Mr. Cassis ceasedother than for cause (as defined in the agreement) or if he resigns for good reason (as defined in the agreement), he will be entitled to serve as Chief Financial Officerreceive the severance benefits described in January 2017,the “— Payments Upon Termination or Change of Control” section of this Proxy Statement. The Company has also entered into a Change of Control/Severance Agreement with Dr. Batra, pursuant to which he is included aswill be entitled to certain benefits in connection with a named executive officertermination without cause (as defined in this discussion andagreement) or for good reason (as defined in this agreement), as described in the accompanying tables pursuant to SEC rules.“— Payments Upon Termination or Change of Control” section of this Proxy Statement.
On July 21, 2017, the Company combined the Instruments Technology Group with the Applied Technology Group consisting of Informatics, Consumables and Scientific Operations, to create the Waters Global Products Group. Coincident with this change, effective July 21, 2017, Rohit Khanna resigned from his position as Senior Vice President, Applied Technology. Mr. Khanna continued to serve as Senior Vice President of the Company and as a member of its executive committee until his retirement on December 31, 2017.
Shareholder Outreach and Say-on-Pay
The Compensation Committee values the opinions of our shareholders and considers the outcome of our annual Say-on-Pay shareholder vote in determining the structure of our executive compensation program, as well as in making future compensation decisions. Waters has historically received annual support for our executive compensation program. Shares voted in favor of our executive compensation program in 2019 and 2020 were approximately 80% and 86%, respectively. The Compensation Committee has made changes to our executive compensation program over the past three years based in part on shareholder feedback, as described in further detail below.
Listening to Our Shareholders
Our shareholders continue to have favorable views of many of the aspects of our executive compensation program, including our emphasis on performance-based compensation and the strength of our performance goals. Our shareholders have also provided constructive feedback to the Company in certain areas of our executive compensation program. In 2019, the Company had discussions with interested shareholders regarding executive compensation design. The insight and views shared with us by these shareholders were considered as we made design changes to our 2020 incentive programs. Key changes made to our executive compensation program in response to shareholder feedback include:
A three-year non-GAAP constant-currency revenue growth metric will be used in addition to the relative TSR metric for PSU awards in 2020 as revenue growth is considered a strong indicator of sustained innovation;
PSUs were incorporated into our annual LTI grants beginning in 2017, and, beginning in 2020, the PSU weighting was increased from 30% to 50% of the total grant date value of annual LTI awards;
Annual LTI grants were generally re-sized around the market median;
Post-vesting holding periods were implemented for PSU awards beginning in 2017; and
All excise tax gross-up provisions were eliminated from existing agreements with named executive officers and we committed not to provide such gross-up provisions in the future.
COMPENSATION PHILOSOPHY, GOVERNANCE, AND PAY PRACTICES
Philosophy and Objectives of Waters’ Executive Compensation Program
Waters’ executive compensation program is intended to be both performance-based and market competitive,market-competitive, with an emphasis on short- and long-term variable performance-based compensation. The objectives of the Company’s executive compensation program are as follows:
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To focus senior executives on achieving financial and operating objectives that enhance long-term shareholder value;
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To align the interests of senior executives with the Company’s shareholders; and
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To attract and retain senior executive talent.
The Company’s executive compensation program is designed to motivate and reward executives for sustained high levels of achievement of the Company’s financial and operating objectives. In conjunction with our objective to emphasizephilosophy of emphasizing performance-based compensation, base salaries are generally targeted at or below the market median for similarly situated executives in comparable companies,(determined as described below), with actual base salaries varying based on the performance, tenure, experience, and contributions of the executive officer. Annualofficer, and target annual incentive target awards are positioned to be at or slightly above the market median, andwith annual performance targets representbased on challenging operational and financial goals. In the aggregate, these two annual compensation components provide a target total cash compensation opportunity that approximates the median of the market. We believe that the structure of our total
annual cash compensation effectively aligns our executives’ interests with stockholders’ intereststhose of our shareholders’ by placing an appropriate emphasis on the achievement of annual financial and operating objectives. In order to continue this alignment, the Compensation Committee reset the performance goals under the AIP for 2020 to incentivize and drive performance despite the volatility created by the global COVID-19 pandemic.
For longer-term alignment of the interests of our executives and stockholders,shareholders, the Company grants annual long-term equity incentiveLTI awards to executives, generally consisting of stock options and performance stock units (“PSUs”).PSUs. The Company also grants RSUs from time to time, generally in connection with promotions and for new hires. Stock options provide value to the executive only if the Company’s stock price increases over time and PSUs will only vestbe earned and be
earnedvest if the Company delivers a greater total shareholder return than thea pre-established comparator group of companies over a three-year performance period. Beginning in 2020, 50% of the annual PSU grants will be eligible to be earned and vest only if the Company’s non-GAAP constant-currency revenue growth exceeds pre-established goals over a three-year performance period. The grant date value of long-term equity incentiveannual LTI awards is generally targeted to be at the market median. The Compensation Committee, however, retains discretion to grant awards with grant date values either below or above the market median based on the executive’s performance, role, and grant size relative to other executives. RSUs generally vest over a three- to five-year period and encourage retention. Stock options and PSUs, which vest over a five-year period and three-year
period, respectively, also serve as valuable retention tools. To further encourage retention, PSUs also have a two-year post-vesting hold requirement for the Chief Executive Officer position and a one-year post-vesting hold requirement for all other executives.
In addition to the philosophy and structure of the executive compensation program as described above, the Compensation Committee also considers, as appropriate, the compensation practices for all Waters employees in reviewing the compensation for named executive officers.
Pay Mix
Consistent with our performance-based compensation philosophy, variable, performance-based compensation comprises a substantial portion of the target total direct compensation (base salary, target annual incentive award and grant date value of the long-term incentive award) for our named executive officers. For 2017, performance-based compensation (annual and long-term equity incentives at target, as applicable, and at grant) represented 87% of the target total direct compensation for Mr. O’Connell and 76% for all other named executive officers as a group, excluding Mr. Cassis. The pay mix for Mr. O’Connell and all other named executive officers, excluding Mr. Cassis, is consistent with the Company’s compensation peer group.
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2017 Key Business Priorities and Connection to our Executive Compensation Program
The chart below illustrates how Waters emphasizes key performance metrics in our executive compensation program and how these metrics align with our business priorities and performance.
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Use ofNon-GAAP Financial Metrics in our Executive Compensation Program
The Company generally usesnon-GAAP financial measures to facilitate management’s financial and operational decision-making, evaluate historical operating results, make comparisons to competitors’ operating results and determine management incentive compensation.
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A reconciliation of GAAP tonon-GAAP E.P.S. andnon-GAAP operating income can be found in the Form8-K dated January 23, 2018 that contained the company’s results of operations for the quarter and year ended December 31, 2017, which are incorporated herein by reference, and on the Company’s website athttp://www.waters.com under the caption “Investors”. Copies may be obtained, without charge, upon written request to the Company, c/o Vice President, Investor Relations, 34 Maple Street, Milford, MA 01757.
Stockholder Outreach andSay-on-Pay
The Compensation Committee values the opinions of our stockholders and considers the
outcome of our annualSay-on-Pay stockholder vote in determining the structure of our executive compensation program, as well as in making future compensation decisions. Waters has historically received strong annual support for our executive compensation program, with greater than 90% of voted shares voting in favor of Waters’ executive compensation programs, however, in 2016, only 60% of voted shares voted in favor of our executive compensation program. In response, our Compensation Committee established a Stockholder Outreach Program so that we could engage and receive feedback from our stockholders on our executive compensation program. In 2017, 86% of voted shares voted in favor of our executive compensation program.
Listening to our Stockholders
Our stockholders have favorable views of many of the aspects of our executive compensation program, including our emphasis on performance-based components of compensation and the strength of our performance measures. Over the past two years, our stockholders, however, have provided constructive feedback to the Company in certain areas of our executive compensation program. Key changes made to our executive compensation program in response to stockholder feedback include:
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Compensation Governance and Pay Practices
Waters maintains strong pay and governance practices as outlined below. A full description of these policies and practices can be found in the discussion below in the section entitled “Elements“— Elements of Executive Compensation.”
What We Do |
What We Don’t Do | |||||
● | ● No executive perquisites | |||||
● Compensation recoupment policy for cash incentive awards | ● No new or legacy excise taxgross-up provisions |
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● | ● No option repricing without | |||||
● Annual compensation risk assessment | ● No ad-hocdiscretionary or guaranteed annual cash bonus payments | |||||
● Anti-hedging policy | ||||||
● Independent compensation consultant | ||||||
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● Beginning in 2020, PSU awards make up 50% of the total grant date value of annual LTI awards and include a market-based component (relative TSR) and an internal performance metric (three-year non-GAAP constant-currency revenue growth) |
Compensation Arrangements of Ms. Buck, Newly Appointed CFOStock Ownership Guidelines
Sherry BuckIn order to closely align their interests with those of the Company’s shareholders, the Company has minimum stock ownership guidelines for our executive officers and non-employee Directors. These guidelines require the accumulation by anyone who holds the Chief Executive Officer position of common stock equal to five times his or her base salary over a three-year period and the accumulation by our other executive officers of common stock equal to two times their base salary over a five-year period. The stock ownership guidelines for non-employee Directors require the accumulation of a minimum of five times the annual cash Board retainer over a five-year period.
If an executive officer or Director shall become non-compliant with the guidelines, he or she will have a period of twelve months to regain compliance with the guidelines. If, after such twelve-month period, the executive officer or Director remains non-compliant, then 50% of the net after-tax profit from any subsequent stock option exercise must be retained in shares of common stock until compliance with the guidelines is achieved. Exceptions to these stock ownership guidelines may be considered by the Nominating and Corporate Governance Committee. For purposes of these guidelines, in addition to any direct ownership of shares of common stock by an executive officer or Director, any shares of restricted stock and vested “in-the-money” stock options granted by the Company to such executives or Directors apply toward the satisfaction of the guidelines.
All of our currently employed named executive officers and current Directors have satisfied the requirements of the ownership guidelines, except for Dr. Batra, who joined the Company in September 2020, Mr. Pratt, who joined the Company in September 2019, and Dr. Huang, who was appointed to servethe Board in January 2021, who have until 2023, 2024 and 2026, respectively, to meet the requirements of the ownership guidelines.
Recoupment Policy
The Company has adopted a Recoupment Policy for cash incentive awards paid to current or former named executive officers under the Company’s AIP. Under this policy, if any executive officer engaged in misconduct that resulted in a restatement of financial results, the Board or an authorized committee, such as the Company’s Senior Vice PresidentCompensation Committee, if it is determined appropriate, could seek reimbursement of the portion of AIP awards impacted by the event. The Company will review and, Chief Financial Officer, effective January 9, 2017. Ms. Buck replaced Eugene Cassis, who resigned as necessary, amend or replace the Company’s Chief Financial Officer on January 9, 2017 and transitionedRecoupment Policy to a senior advisory rolebe in full compliance with the Company.
In connection with Ms. Buck’s hiring, the Company consulted with its independent compensation consultant, Pearl Meyer, on the competitive market data for Chief Financial Officers’ compensation in the Company’s industry peer group. Ms. Buck’s compensation was set by the Committee after reviewing competitive market provided by Pearl Meyer data and consistent with the Company’s executive compensation philosophy of setting base salary at or below the market median, total target cash compensation at approximately the market median and annual long-term incentive compensation also at the market median. The Company entered into an offer letter with Ms. Buck that provides for an annual base salary of $525,000 and an annual target bonus opportunity based on achievement of performance objectives as established by the Committee equal to 75% of her annual base salary. Ms. Buck’s annual salary and target total cash compensation were both set at approximately the 50th percentile of the market data. In addition, on January 19, 2017, Ms. Buck was granted an annual long-term equity award, consistent with the annual grant made to other executive officers on December 9, 2016. The grant date value of Ms. Buck’s long-term equity award was approximately $1,225,000, with 70% of the long-term equity grant comprised of stock options and 30% of the long-term equity grant comprised of
PSUs. Ms. Buck’s annual long-term equity grant was also set at approximately the 50th percentile of the competitive market data. Ms. Buck’s agreement also provides forsign-on awards, which were intended to compensate Ms. Buck for a portion of the equity awards from her prior employer that were forfeited as a result of joining Waters. She received a cashsign-on bonus of $300,000 and a long-term equity grant with a grant date value of approximately $600,000, $300,000 of which was delivered in stock options and $300,000 of which was delivered in restricted stock units (“RSUs”). The stock options will vest 20% each year on the first five anniversaries of the date of grant and the RSUs will vest 33% each year on the first three anniversaries of the date of grant, in each case generally subject to her continued employment through the applicable vesting date.
Transition and Retirement of Mr. Khanna, Former Senior Vice President, Applied Technology
On July 21, 2017 the company announced the formation of a fully-integrated Global Products organization, which combined into one organization the former Instruments Technology group under the leadership of Mr. Ian King and the former Applied Technology Group under the leadership of Mr. Rohit Khanna. Coincident with this organizational transition, Mr. Khanna resigned from his position as Senior Vice President, Applied Technology, effective July 21, 2017, and remained a Senior Vice President of the Company and member of the Company’s executive committee until his retirement on December 31, 2017 (the period between July 21, 2017 and December 31, 2017 is referred to as the “Transition Period”). During the Transition Period, pursuant to a Transition and Separation Agreement between him and the Company, dated July 21, 2017, Mr. Khanna received his then-current base salary,
remained eligible to receive an annual incentive award in respect of fiscal 2017, and remained eligible to participate in the Company’s employee benefit plans, but did not participate in any long-term incentive compensation or other similar programs of the Company. Due to the elimination of his position, upon his retirement on December 31, 2017, the Committee determined that it was appropriate to provide Mr. Khanna with continued salary and subsidized COBRA continuation coverage for 12 months and accelerated vesting of those stock options and RSUs that would have vested on or before December 31, 2018 (or,Dodd-Frank Act when rules are adopted with respect to a stock option grant made in February 2016, February 2019).the Dodd-Frank Act’s compensation recoupment provisions.
Data Used to Make Compensation DeterminationsCOMPENSATION SETTING PROCESS
Competitive Market Assessment
Competitive market data is an important componentfactor used by the Compensation Committee in determining the amount of each element of compensation for our named executive officers. The Compensation Committee utilizes Pearl Meyer to provide advice and analysis on the structure of our executive compensation program as well as competitive data on base salary, total cash compensation, and long-term incentives. Pearl Meyer
prepares this competitive assessment annually for the Compensation Committee. The Compensation Committee reviews the total direct compensation package forof each named executive officer, from the perspective of total direct compensation, which includes base salary, target annual incentive award and the grant date value of the long-term incentive award.LTI awards. The Compensation Committee also reviews each named executive officer’s total compensation package to ensure that the total compensation package emphasizesit contains an appropriate level of performance-based compensation elements and is designed to meet the overall objectives of our executive compensation program. The Compensation Committee considers a range of factors in determining the amount of each compensation element for each named executive officer. The range of factors includes Company performance, individual performance and experience, competitive market data, hiring and retention needs, scope of responsibility, and an individual’s potential for making future contributions to the Company.
Pearl Meyer and the Compensation Committee utilize a core industry peer group of 1617 publicly traded companies in the life sciences and analytical instrument industry with generally similar revenues and market capitalization as Waters.
The 2017 industry peer group isused for 2020 executive compensation decisions was comprised of the following companies.
Agilent | ||
| Intuitive Surgical | |
Bio-Rad Laboratories | Mettler-Toledo | |
Bruker | Perkin Elmer | |
Cooper Companies | ResMed | |
Edwards Lifesciences | ||
FLIR Systems | ||
Hologic | Teleflex | |
IDEXX Laboratories | Varian Medical | |
Illumina |
Each year, Pearl Meyer evaluates the peer group for its continued appropriateness for external executive compensation comparisons based on the primary selection criteria of similarity in industry, products and services, revenue, and market capitalization. The target range for inclusion inAt the time the peer group forwas originally selected, we targeted peers with both revenue and market capitalization isranging between 50% to 200% of Waters’ revenue and market capitalization. There were no changes to
The Compensation Committee monitors the peer group for 2017.year to year to determine if changes are needed. The median revenue for the peer group for the four quarters ended prior to August 20172019 was $2.5$2.9 billion and the median market capitalization for the peer
group as of August 20172019 was $12.3$16.1 billion. Waters’ revenue and market capitalization for the same period were $2.2$2.4 billion and $14.6$14.1 billion, representingboth of which were within 20% of the 41st and 57th percentiles, respectively.peer group median. Based on this analysis, the Compensation Committee did not adjust our peer group for 2020.
Pearl Meyer and the Compensation Committee also utilized the Aon Hewitt Executiveindependent, globally recognized executive compensation published surveys. The Compensation and Radford Surveys as an additional tool to review the competitiveness of each named executive officer’s compensation levels against the market. The Aon Hewitt Executive Compensation and Radford Surveys provide a general industry perspective based on revenue scope for each named executive officer position. We use
theCommittee used this broad survey data in combination with the peer group data in evaluating our named executive officers’ compensation. The Compensation Committee does not rely upon data from any one individual company participatingincluded in any of these surveys in making compensation decisions. Data from the survey source andthese surveys and/or the peer companies are combined to develop a primary market composite which is based on an average of survey data and peer company data.data, which the Compensation Committee uses to compare our named executive officers’ compensation against the market.
Elements of Executive CompensationELEMENTS OF EXECUTIVE COMPENSATION
There are three keyprimary elements of our executive compensation program: base salary, annual incentive awards, and long-term incentiveLTI awards. Each element addresses specific objectives of the program and together they are intended to meet the overall philosophy and objectives of our executive compensation program as described above. The mix
of short-term cash incentives and long-term equity incentives focuses executives on the achievement of annual and longer-term financial and operating objectives that drive long-term stockholdershareholder value. In addition, theThe Compensation Committee reviews the combined total of these three compensation elements (measured at target for annual and long-term incentives, as applicable), or total direct compensation, in order to appropriately position total direct compensation relative to both the marketplacemarket and the Company’s objectives. Although the amount of each element of compensation for each named executive officer differs based on position-specific market data, the critical nature of the executive’s position to the business, the executive’s level of contribution, and other individual factors, the overall structure and compensation elements utilized in 20172020 are consistent for the CEO and all other named executive officers.
Compensation | Objective | Target Position to |
Named Executive Officers (1) | |||||
Base Salary | To attract and retain senior executives and other key employees. | Generally targeted at or below the 50th
Actual individual salaries may vary based on an executive’s performance, tenure, experience and contributions.
| The overall market position for base salaries in | |||||
Annual Incentive | To motivate | Target payouts at 100% achievement of performance goals are generally positioned at or slightly above the 50th percentile in order to achieve a target total cash
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Long-Term Based Equity Incentive Awards | To motivate senior executives and other key employees to contribute to the Company’s long-term growth of
| Equity compensation is targeted to be | Annual |
(1) | The |
Base Salary
The base salaries for the CEO and other named executive officers are reviewed annually by the Compensation Committee. Consistent with the compensation practices established for all Company employees, the individual salaries for the CEO and named executive officers are determined based upon a combination of factors, including past individual performance and experience, Company performance, scope of responsibility, an individual’s potential for making contributions to future Company performance, competitive pay practices and the annual base salary increase guidelines. The Compensation Committee considers all these factors in determining base salary increases and does not assign a specific weighting to any individual factor.
Assessment of 2017 Base Salary and Promotional Increases
In addition to considering the factors listed above, the Compensation Committee also considers the competitive market position of aneach named executive officer’s base salary. BasePrior to 2020, it had been the Company’s practice for base salary increases areto be approved by the Compensation Committee at the end of the fiscal year with an effective date at the beginning of the next fiscal year, or January 1st of each year. Beginning in 2020, base salary increases will generally be approved by the Compensation Committee during the February Compensation Committee meeting to align with other performance review practices of the Company.
There were no increases in base salaries for our currently-employed NEOs for 2019 or 2020. The competitivedecision not to increase base salary was based primarily on below target performance with respect to the Company’s constant-currency revenue growth goals for 2018 and 2019 and an assessment completed by Pearl Meyer at the end of 2016 provided the market information used in determiningcompetitiveness of the NEO’s then-current base salary in effect in 2017 for our named executive officers.levels. The overall competitive market position for our currently-employed NEOs based on the named executive officers in this Pearl Meyer analysis at the end of 2019 was at approximately the 40th50th percentile.
Annual Incentive
BasedThe Compensation Committee periodically reviews the Company’s annual incentive plan with Pearl Meyer. The objectives of this review are to consider the alignment of this plan with Waters’ compensation philosophy and emphasis on Pearl Meyer’s market assessmentpay-for-performance and to review the performance metrics and goals utilized under the plan to ensure they provide the best ongoing motivators to execute our business strategy and create shareholder value.
2020 Annual Incentive Plan
In 2020, the Company re-named our annual incentive plan the AIP and made various changes to further align the Company’s short-term incentives with the Company’s business strategy.
The payouts under the 2020 AIP are based upon the achievement of non-GAAP constant-currency revenue growth goals (weighted 50%) and non-GAAP net income growth goals (weighted 50%). The Compensation Committee feels that shifting the weighting on constant-currency revenue growth from 25% in 2019 to 50% in 2020 will reinforce the Company’s belief that revenue growth drives our overall environment for base salary increasessuccess and consistent with our objective of targeting the 50th percentile of market for executives,enables us to continue to invest in future growth and innovation. In addition, the Compensation Committee increased base salariesbelieves that the move from a non-GAAP EPS growth metric (previously weighted at 75%) to non-GAAP net income growth metric (weighted at 50%) will emphasize operational results and reflect the on-going operational efforts of the broader employee population.
Due to the shift from non-GAAP EPS growth to non-GAAP net income growth, the 2020 AIP does not include a minimum non-GAAP operating income growth goal before any payout can be achieved. The 2019 annual incentive plan included this minimum threshold level for all named executive officers as follows:
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Ms. Buck was hired January 9, 2017 therefore did not receive a pay increase for 2017. Her base salary was determined bynon-GAAP operating income growth because the Compensation Committee usingbelieved that non-GAAP EPS growth could reflect events that did not accurately reflect on-going operations. The Compensation Committee believes that non-GAAP net income growth more directly aligns with operational results, and the same factors listed above, after taking into accountminimum thresholds for each metric (non-GAAP constant-currency revenue and non-GAAP net income) will adequately govern the base salary she received from her prior employer. With thepayouts under each metric.
In addition of Ms. Buck to the Chief Financial Officer role, Mr. Cassis transitioned from Senior Vice President Chief Financial Officer to a senior advisory rolemetric changes above, the threshold and did not receive a pay increase.
In July, the Company promoted Mr. King to Senior Vice President, Global Products Group. Based on a market analysis conducted by Pearl Meyer in connection with this promotion and the assumption of meaningful additional responsibilities by Mr. King, Mr. King received base salary increase effective July 30, 2017 of 8.1%, which positioned Mr. King’s base salary just under the market median.
Annual Incentive
The Management Incentive Plan is the annual incentive planmaximum performance levels for our named executive officers, senior executives, and other key employeesas a percentage of target payout, have been modified to increase the threshold payout from 25% to 50% of the Company. named executive officer’s target annual bonus and reduce the maximum payout from 250% of the named executive officer’s target annual bonus to 200% of the target annual bonus. These modifications were made based on the Compensation Committee’s review of competitive market data provided by Pearl Meyer, as well as feedback from shareholders.
The new AIP also incorporates an individual modifier to its plan design, which will allow the Company to distinguish an individual’s contribution to the overall results achieved against the pre-established corporate performance goals, by increasing or decreasing an individual’s payout by up to 20%, while maintaining the specific, measurable objectives set forth in the annual operating plan. The individual modifier will permit the Compensation Committee establishes Companyto better recognize individual performance targetsthat contributed to our overall results (up to the maximum payout cap under this plan at the beginningAIP).
Assessment of each fiscal year2020 Annual Incentive Plan
Target annual incentive bonuses for our named executive officers. Incentive payouts to each named executive officer under this planthe AIP are based on a percentage of the executive’s base salary, as follows: Dr. Batra and Mr. O’Connell (125% of base salary); Ms. Buck, Dr. Harrington and Mr. HarringtonMessrs. King and Pratt (75% of base salary); and Messrs. Cassis, Khanna and King (65% of base salary). For 2017, Mr. Cassis’ target incentive was reduced to 65% of base salary due to his transition to a senior advisory role., with actual bonuses determined based on performance against goals established by the Compensation Committee.
A summary of our 2017 Management Incentive Plan2020 AIP payout structure as a percentage of the named executive officer’s base salary, prior to the adjustments made to the AIP during 2020, is described in the table below.
2017 Management Incentive Plan Payout Structure as a Percent of Base Salary(1) | ||||||||||||||||
Name | Below Threshold Performance | Threshold Performance (.25 x Target) | Target Performance (1.0 x Target) | Maximum Performance (2.5 x Target) | ||||||||||||
Christopher J. O’Connell | 0 | % | 31.25 | % | 125 | % | 312.5 | % | ||||||||
Sherry L Buck | 0 | % | 18.75 | % | 75 | % | 187.5 | % | ||||||||
Eugene G. Cassis | 0 | % | 16.25 | % | 65 | % | 162.5 | % | ||||||||
Michael C. Harrington | 0 | % | 18.75 | % | 75 | % | 187.5 | % | ||||||||
Rohit Khanna | 0 | % | 16.25 | % | 65 | % | 162.5 | % | ||||||||
Ian S. King | 0 | % | 16.25 | % | 65 | % | 162.5 | % |
2020 AIP Payout Structure as a Percent of Base Salary(1) | ||||||||
Name | Below Threshold Performance | Threshold Performance | Target Performance | Maximum Performance (2.0 x Target) | ||||
Dr. Udit Batra, Ph.D. (2) | 0% | 62.5% | 125% | 250% | ||||
Sherry L. Buck | 0% | 37.5% | 75% | 150% | ||||
Dr. Michael C. Harrington, Ph.D. | 0% | 37.5% | 75% | 150% | ||||
Ian S. King | 0% | 37.5% | 75% | 150% | ||||
Jonathan M. Pratt | 0% | 37.5% | 75% | 150% | ||||
Christopher J. O’Connell | 0% | 62.5% | 125% | 250% |
(1) | Payouts are interpolated for performance between threshold, target and maximum levels. |
(2) | Dr. Batra’s base salary was prorated from his start date on September 1, 2020. As a result, his annual incentive bonus opportunities for 2020 were also prorated. |
For 2020, payouts under the AIP were based upon the achievement of a non-GAAP constant-currency revenue growth goal (weighted 50%) and a non-GAAP net income growth goal (weighted 50%). In order to receive an incentivea payout equal to 100% of the executive’s target annual bonus, the Company must achieve 100% of itsthe performance target. All payouts at thresholdgoals established for the year. Threshold performance arefor either metric results in a payout equal to 25%50% of the named executive officer’s target annual bonus and are only payable upon achievement of both a minimumnon-GAAP operating income threshold performance target, a minimumnon-GAAP E.P.S. goal and a minimum constant currency revenue goal. Performance below the minimum threshold level fornon-GAAP operating income results in no payout at all, and performance below the threshold level for the other two metrics results in no payout underrelated to that metric. In 2017,2020, the Compensation Committee maintained a maximum payout opportunityopportunities were 200% of 250% of target (which it had reduced from 300% of target in 2016) to better reflect the market for maximum payouts among the peer group.target. The Compensation Committee believes that athis maximum payout opportunity of 250% of target payout is consistent with the Company’s philosophy to position total target cash compensation at the median of the competitive market and to provide the opportunity for greater reward for overachievement of challenging performance goals. As discussed in detail below, the Compensation Committee establishes annual performance goals which are intended to be challenging but able to be achievedachievable if Company performance is strong.
Historically,In 2020, the Compensation Committee has utilizednon-GAAP E.P.S.constant-currency revenue growth and non-GAAP net income growth as the primary performance measuremetrics under the Management
Incentive PlanAIP for our named executive officers. Use of thea non-GAAP E.P.S. measureconstant-currency revenue growth goal supports the belief that revenue growth drives our overall success and enables us to continue to invest in future growth and innovation. The non-GAAP constant-currency revenue growth goals are based on revenue reported in accordance with GAAP but measures the change in net revenue between two periods, without taking into account the impact of foreign currency exchanges rates during the period. Use of a non-GAAP net income growth goal promotes executive team alignment, focuses the executive team on operational efficiencies and profitable growth, provides a long-term perspective among executives, and drives long-term stockholdershareholder value. In addition to theThe non-GAAP E.P.S.net income growth target, the Compensation Committee also requires that a minimumnon-GAAP operating income measure be achieved in order to maintain a balanced focus on operational improvements, excluding the effects of any benefits from finance costs, taxes and stock repurchases tonon-GAAP E.P.S. Thenon-GAAP E.P.S. growth targetsgoals are based on E.P.S.net income reported in accordance with GAAP, but adjusted to exclude certain charges and credits, net of tax, including, but not limited to, purchased intangibles amortization, stock award modification, restructuring costs, asset impairments, acquisition-relatedpension costs, litigation provisions, acquiredin-process research and development, tax audit settlements, and other items considered unusual orone-time costs. In addition in 2017, the Compensation Committee elected to exclude the $.24 E.P.S. impact of the adoption of the new Accounting Standards Update (ASU)2016-09, Improvements to Employee Share-Based Payment Accounting, which amended ASC Topic 718, Compensation — Stock Compensation, from thenon-GAAP E.P.S. measure in order for thenon-GAAP E.P.S. performance to be measured on a consistent basis between periods.certain income tax items. The Company considers these itemsnon-operational and not directly related to ongoing operations and therefore
excludes them from the performance metricsgoals set under the Management Incentive Plan.AIP. A reconciliation of GAAP to non-GAAP constant-currency revenue and net income can be found in the Form 8-K filed by Waters dated February 2, 2020 or the Company’s website.
As discussed previously, it became apparent that the impact of the global COVID-19 pandemic on the Company’s business would render the performance goals originally established under the 2020 AIP unachievable. As a result, the Compensation Committee made a decision to reset AIP performance goals mid-year and established new target performance goals for each of the AIP performance metrics based on the Company’s revised full-year forecasts. The Compensation Committee reviewsbelieves that resetting the target performance goals under the AIP was appropriate to continue to incentivize all AIP-eligible employees in the
face of the extraordinary challenges resulting from the COVID-19 pandemic and approves annual adjustedto drive performance for the remainder of the year. The reset of the AIP occurred non-GAAPmid-year E.P.S. for purposesand was intended to incentivize employees to accelerate the second-half sales growth while measuring full-year performance of measuring E.P.S. growth goal achievement.
In addition, in 2016,the Company and, as such, the Compensation Committee added an additional performance measure of revenue, as measured in constant currency,considered it appropriate to reduce any annual payout amounts under the Management Incentive PlanAIP by 50%, resulting in order to focus our executives on implementationan overall payout cap for 2020 bonuses of 100% of the Company’s strategy to drive organic revenue growth. For 2017, like 2016, thenon-GAAP E.P.S. measure was weighted at 75% and the revenue in constant currency was weighted at 25%.
target payout. The Compensation Committee also established anon-GAAP operating income goal, the attainment of
which would determine the maximum amount of bonuses payable to our named executive officers under our Management Incentive Plan, as described below, which would then be subjectmade no other changes to the Management Incentive Plan’s individual payout limit as described above. The additionalnon-GAAP operating income goal was established by the Compensation Committee to enhance our ability to deduct amounts paid under the Management Incentive Plan as “performance based compensation” for purposes of Section 162(m)structure of the Internal Revenue Code. TheAIP, and the metrics, weightings, threshold and maximum payout opportunitylevels and individual modifier are consistent with the original plan design for Mr. O’Connell is set at 1% ofnon-GAAP operating income, and the maximum payout opportunity is set at .5% ofnon-GAAP operating income for Messrs. Harrington, Khanna and King and Ms. Buck, but, in each case, not more than the maximum payment amount included in the Management Incentive Plan.
2020.
The performance measuresgoals required for payout under the 2017 Management Incentive Plan2020 AIP are outlined in the table below.
2017 Management Incentive Plan Performance Targets | ||||||||
2017 Performance Measures |
Below Threshold Performance | Threshold Performance | Target Performance | Maximum Performance | ||||
2017Non-GAAP E.P.S. growth over 2016 | <5% | 5% | 10% | 20% | ||||
2017 Revenue growth in constant currency over 2016 | <3% | 3% | 6% | 12% | ||||
2017Non-GAAP Operating Income growth over 2016 | <3% | 3% | ||||||
The threshold operating income performance measure must be met in order for there to be a payout under the Management Incentive Plan under eithernon-GAAP E.P.S. or Revenue measured in constant currency component. |
Non-GAAP operating income for 2017 represents an 8.2% increase over 2016.Non-GAAP E.P.S. for 2017 was $7.49, which included a $.24 benefit from a change to stock compensation accounting implemented during 2017 and represented 13% growth over 2016. Due to theone-time and substantial benefit generated by this change in accounting rules, the Committee excluded the $.24 benefit for the purpose of calculatingnon-GAAP E.P.S. under the MIP. As a result, thenon-GAAP E.P.S. performance for the payment of MIP bonuses was $7.25, which represents 9.5% growth over 2016non-GAAP E.P.S. of $6.62. Revenue in constant currency for 2017 was $2,285,313,000 which represents a 5.8% increase over 2016.Non-GAAP E.P.S. and
non-GAAP operating income for 2017 and 2016 excluded, net of tax, as applicable, purchased intangibles amortization, stock award modification, restructuring costs, asset impairments, acquisition-related costs, litigation provisions, acquiredin-process research and development, tax audit settlements, the impact of the enactment of the Tax Cuts and Jobs Act (Tax Reform) and other items considered unusual orone-time costs since the Company believes that these items are not directly related to ongoing operations. Based on the Company’s performance under thenon-GAAP E.P.S. and revenue goals, the overall payout under 2017 annual incentive awards as a percent of target was 95% of target.
2020 AIP Performance Targets and Achievement | ||||||||||||||||||
2020 Performance Measures | Original Performance Targets | Reset Performance Targets | Actual Achievement | |||||||||||||||
Below Threshold Performance | Threshold Performance | Target Performance | Maximum Performance | Below Threshold Performance | Threshold Performance | Target Performance | Maximum Performance | |||||||||||
2020 non-GAAP revenue (decline) growth in constant currency over 2019 | <2% | 2% | 5% | 9% | <(11%) | (11%) | (8%) | 8% | (2%) | |||||||||
2020 non-GAAP net income decline over 2019 | <(4%) | (4%) | (3%) | 1% | <(30%) | (30%) | (22%) | (4%) | (8%) |
The following chart represents the target bonus opportunity, theindividual modifier earned, actual bonus achieved as a percentage of base salary and as a percentage of target bonus opportunity, and the actual bonus paid for 2017.2020 are outlined in the table below.
2017 Management Incentive Plan Payouts | ||||||||||||||||||||
Name | Target Bonus Opportunity as a Percent of Salary | Actual Bonus Percent of Salary | Percent of Actual Bonus Payout to Target Bonus Opportunity | Actual Bonus Payout | ||||||||||||||||
Christopher J. O’Connell
|
| 125
| %
|
| 118
| %
|
| 95
| %
| $
| 1,063,824
|
| ||||||||
Sherry L Buck
|
| 75
| %
|
| 71
| %
|
| 95
| %
| $
| 372,338
|
| ||||||||
Eugene G. Cassis
|
| 65
| %
|
| 61
| %
|
| 95
| %
| $
| 249,281
|
| ||||||||
Michael C. Harrington
|
| 75
| %
|
| 71
| %
|
| 95
| %
| $
| 319,147
|
| ||||||||
Rohit Khanna
|
| 65
| %
|
| 61
| %
|
| 95
| %
| $
| 218,417
|
| ||||||||
Ian S. King
|
| 65
| %
|
| 61
| %
|
| 95
| %
| $
| 245,862
|
|
2020 AIP Payouts | ||||||||||||
Name | Target Bonus Opportunity as a Percentage of Salary (1) | Payouts Under Original Performance Targets | Individual Modifier | Actual Bonus Achieved as a Percentage of Salary | Actual Bonus Achieved as a Percentage of Target Bonus Opportunity | Actual Bonus Payout | ||||||
Dr. Udit Batra, Ph.D. (2) | 125% | 0% | 120% | 118% | 94% | $394,036 | ||||||
Sherry L. Buck (3) | 75% | - | - | - | - | - | ||||||
Dr. Michael C. Harrington, Ph.D. | 75% | 0% | 120% | 71% | 94% | $331,028 | ||||||
Ian S. King | 75% | 0% | 100% | 59% | 79% | $253,458 | ||||||
Jonathan M. Pratt | 75% | 0% | 100% | 59% | 79% | $250,511 | ||||||
Christopher J. O’Connell | 125% | 0% | 100% | 98% | 79% | $928,364 |
(1) | As described above, the actual payouts were reduced by 50% as part of the AIP target reset approved by the Compensation Committee in 2020. |
(2) | Dr. Batra’s base salary was prorated from his start date on September 1, 2020. As a result, his annual incentive bonus opportunity for 2020 was also prorated. |
(3) | Ms. Buck resigned from the Company on December 31, 2020 and was not eligible to receive an AIP payout because the plan generally requires employment through the date of payment. |
The Company periodically reviews the Management Incentive Plan with Pearl Meyer. The objectives of this review are to consider the alignment of the Management Incentive Plan with Waters’ compensation philosophy and emphasis onpay-for-performance and to review the performance measures utilized under the plan to ensure these measures provide the best ongoing motivators of strategy execution and the creation of stockholder value.
Long-Term Performance-Based Equity Incentive Awards
The Compensation Committee considers long-term performance-based awards in the form of equity-based incentive compensation at the Compensation Committee’s annual December meeting. Multiple factors, considered collectively, are reviewed by the Compensation Committee in determining the overall equity value to award each named executive officer. These factors include competitive market data, dilution, share usage, stock compensation expense, the financial and operational performance of the Company, each named executive officer’s individual performance, and the value of equity grants both individually to each named executive officer and in the aggregate to all named executive officers. The Compensation Committee believes that it is important to provide meaningful reward and recognition opportunities to the named executive officers irrespective of the potential gains they may realize from priorthat are performance-based and deliver long-term performance based awards.value creation to our shareholders.
It has been the long-standing practice of the Compensation Committee to utilizenon-qualified stock options to align the interests of our named executive officers and other senior executives with
those of Waters’ stockholders.shareholders. We continue to believe that stock options provide strong alignment between stockholdersshareholders and these executives because the value of a stock option to an executive is directly related to the stock price appreciation delivered to stockholdersshareholders following the grant date of the option. If our stock price does not appreciate, the executive will not realize any value with respect to the stock option.
In response to general feedback from our stockholdersshareholders received after our 2016 annual stockholder meeting,through the Shareholder Outreach Program, the Compensation Committee added PSUs as an element of our long-term performance-based equity incentiveLTI program starting in 2016. The Compensation Committee grants PSUs to provide an equity-based award tied to a performance goal other than absolute increase in stock price (which is the case with stock options). Our stockholdersshareholders expressed the view in 2016 that relative TSR was an appropriate performance measuremetric given that it directly correlates to Company and stock price performance, and the Compensation Committee also believed that it was an appropriate and effective measuremetric to further tie compensation realized to performance. In addition, our PSU design was modified in 2020 so that 50% of the award would be tied to three-year non-GAAP constant-currency revenue growth as that would be a strong indicator of sustained innovation.
The overallCompensation Committee also grants RSUs from time to time, including to new hires and in connection with promotions. We believe that RSUs serve an important retention function and are appropriate for new hires and promotions in order to increase their stock ownership to align their interests with those of our shareholders.
Prior to 2020, the Compensation Committee generally awarded annual equity grantLTI awards for named executive officers at the Compensation Committee’s annual December meeting. In 2019, a decision was made to move the LTI award grants to the February Compensation Committee meeting, beginning in 20172020, to align with the performance review practices of the Company and grants to non-executive employees. As a result of this change, our named executive officers were not granted annual LTI awards in 2019. Each of our NEOs (other than Dr. Batra) was granted annual LTI awards in February of 2020. Dr. Batra was granted LTI awards in connection with his hire in September 2020, as described in detail above.
Annual LTI grants in February 2020 were targeted at the market median for executives, with 70%named executive officers. As part of the overallcomprehensive incentive plan review conducted in 2019, the Compensation Committee sought to more closely align the LTI program with the Company’s business strategy and implemented the following changes for the February 2020 LTI award grants to our named executive officers:
Approximately 50% of the annual grant date equity value grantedis delivered in the form of stock options and 30% of the overall grant date equity value granted50% in the form of PSUs.PSUs; and
Approximately 50% of the PSU grant value would be tied to relative TSR and 50% tied to three-year non-GAAP constant-currency revenue growth.
The three-year constant-currency revenue growth metric is a non-GAAP financial metric that measures the change in net revenue between two periods, without taking into account the impact of foreign currency exchanges rates during the period.
Non-qualified stock options were granted under the 2012 Equity Incentive Plan and willgenerally vest 20% each year on the first five anniversaries of the date of grant, generally subject to continued employment through the applicable vesting date.Non-qualified stock options have an exercise price equal to the closing price of Waters’ common stock on the grant date and have aten-year term.
TSR-basedPSUs, comprising 50% of the annual PSU awards (at target), will be eligible to vest based on the achievement of the Company’s total stockholder returnTSR relative to the total stockholder returnTSR of each company in the S&P 500 Health Care Index over a three-year performance period. The number of shares eligible for issuanceearned under the PSUs will be determined based on the relative total stockholder returnTSR achieved and,as compared to TSR for the companies included in the S&P 500 Health Care Index, with straight line interpolation between these performance levels, as shown in the chart below, can range from 0% of the target shares subject to the award if the Company’s TSR percentile rank is equal to or less than the 25th percentile of the S&P Health Care Index, to 100% of the target shares subject to the award (if the TSR percentile rank is at the 50th percentile) to a maximum of 200% of the target shares subject to the award (if the TSR percentile rank is at or greater than the 75th percentile). below.
TSR Percentile Rank | Applicable Payout Percent | |
= > 75th Percentile | 200% | |
50th Percentile | 100% | |
< = 25th Percentile | 0% |
If Waters’ TSR is negative, in no event will more than 100% of the target number of shares subject to an award be earned. Each earned and vested performance sharePSU will be settled by delivery of one share of our common stock. To further align the design of PSUs with the long-term interests of stockholders,shareholders, the PSUs granted beginning on December 5, 2017 imposedrequire a post-vesting holding period on the shares received (after payment of tax) in respect of earned PSUs, which is two years in the case of the CEO and one year in the case of the other named executive officers.
|
| |
|
| |
|
|
Revenue-based PSUs, comprising 50% of the annual PSU awards (at target), will be eligible to be earned and vest based on the achievement of a non-GAAP constant-currency compound annual growth rate goal over a three-year performance period. The threshold, target, and maximum performance goals will be established on the grant date and based on the Company’s long-term strategic plan as of that date. The number of shares earned under the PSUs will be determined based on the non-GAAP constant-currency growth rate achieved and can range from 0% of the target shares subject to the award if the minimum threshold growth rate is met, to 100% of the target shares subject to the award if the target growth rate is achieved, to a maximum of 200% of the target shares subject to the award if the maximum growth rate is achieved, with straight line interpolation between these performance levels. Competitive market data for long-term performance-based equity incentive awards is prepared for the Compensation Committee by Pearl Meyer. As noted above, the Compensation
Committee uses this data as one of the factors in determining the size of the equity grant for each named executive officer. Historically,
2018-2020 PSU Performance Results
The PSUs granted on December 8, 2017 vested in 2021 upon the Compensation Committee targeted long-term incentives above the market median as part of an overall compensation structure designed to emphasize performance-based compensation. However, in response to feedback from our stockholders that voiced concerns about targeting equity grants between the 50th and 75th percentilesCommittee’s determination of the market, the Compensation Committee reoriented equity grants at the market median. As a result, both the 2016 and 2017 annual grants to executives were positioned at or slightly above the 50th percentile, but in no case greater than the 55th percentile.
Pearl Meyer also reviewed and prepared a summary of share usage, dilution and stock based compensation expense using data asachievement of the fiscal year endedperformance metric included in the award. The performance metric for these awards was 100% based on relative TSR for the performance period ending on December 31, 2016. The analysis concluded that, under our equity plan,2020, which was 24.19%, or in the Company’s annual share usage, as a percent of common shares outstanding, was below the median of the Industry Peer Group on both a one and three-year basis. The Company’s dilution was 4.0%, which falls at the median Peer Group. The Company’s fair value of annual stock-based compensation for the fiscal year ended December 31 2016 was below the 50thst percentile of the peer group on bothS&P 500 Health Care Index over the three-year performance period. This achievement resulted in a one and three-year basis, as waspayout of 26% of the fair value of equity awards as a percent of market capitalization. The Compensation Committee reviews these metrics annually and in December 2017 determined that the overall grant practices with respect to share usage and stock compensation expense were appropriate relative to the Industry Peer Group.
In 2017, our named executive officers received the following long-term incentive awards:
Name | 2017 Annual Award Grant Value Stock Options (1) | 2017 Annual (1) | Promotion Award Grant Value Stock Options (1)(2) | 2016 Annual Award Grant Value Stock Options (1)(3) | 2016 Annual (1)(3) | Sign-On Award Grant Value Stock Options (1)(3) | Sign-On (1)(3) | |||||||
Christopher J. O’Connell | $3,850,000 | $1,650,000 | - | - | - | - | - | |||||||
Sherry L. Buck | $1,050,000 | $450,000 | - | $857,500 | $367,500 | $300,000 | $300,000 | |||||||
Eugene G. Cassis (4) | - | - | - | - | - | - | - | |||||||
Michael C. Harrington | $945.000 | $405,000 | - | - | - | - | - | |||||||
Ian S. King | $840,000 | $360,000 | $300,000 | - | - | - | - | |||||||
Rohit Khanna (4) | - | - | - | - | - | - | - |
|
|
|
|
Perquisites and Benefits
The Company generally does not offer any perquisites for the exclusive benefit of our named executive officers. However, Mr. O’Connell and Ms. Buck were each entitled to relocation benefits in connection with their moves to Massachusetts in 2016 and 2017, respectively.
The named executive officers are eligible to participate in compensation and benefit plans that are generally offered to other employees, such as the Waters Employee Investment401(k) Plan, (the “401(k) Plan”), the Employee Stock Purchase Plan and health and insurance plans. The named executive officers are also eligible to participate in the Waters 401(k) Restoration Plan (the “401(k) Restoration Plan”) that is available to all employees who meet certain minimum earnings eligibility criteria. The Waters 401(k) Restoration Plan and the Waters Retirement Restoration Plan are designed to restore the benefits, matching contributions and compensation deferral that are limited by Internal Revenue Service benefit and compensation maximums. These plans areThis plan is described more fully in the narrative that accompanies the Pension Benefits table and theNon-Qualified Deferred Compensation table in this Proxy Statement.
Severance and Change of Control Arrangements
The Company provides severance protection to each of Messrs. O’Connell, Cassis,Drs. Batra and Harrington Khanna and Messrs. King and Ms. BuckPratt pursuant to a Change of Control/Severance Agreement in the event that his or her employment is terminated by the Company without cause or he or she resigns for good reason prior to or followingin connection with a change of control. Our severance
and change of control protections are designed to ensure continuity of executive managementleadership in the event of a change of control of the Company and to ensure the ability of executives to evaluate a potential change of control in the best interests of the Company and stockholders.shareholders. For a description of the severance and change of control protections in our named executive officers’ Change of Control/Severance Agreements, please see the “Payments“— Payments Upon Termination or Change of Control” section of this Proxy Statement.
The Company also provides Mr. O’Connell and Ms. BuckDr. Batra with certain severance protections pursuant to their Offer Lettershis employment agreement in the event their respectivehis employment is terminated by the Company other than for cause or if they resignhe resigns for good reason outside of the change of control context, as described below in the “Payments“— Payments Upon Termination or Change of Control” section of this Proxy Statement.
CEO Pay Ratio Disclosure
In accordanceconnection with SEC rules, Waters determined that, for fiscal 2017, (1)Mr. O’Connell’s termination, he received the mediantermination payments and benefits contemplated by his employment agreement with the Company, together with an extension of the annual total compensationperiod in which he could exercise certain outstanding vested stock options from 30 days to one-year post-termination. See the “— Payments Upon Termination or Change of allControl” section of our employees (taking into account permitted exclusions and adjustments as described below) who were employed as of October 1, 2017, other than our CEO, was $75,696, and (2) the 2017 annual total compensation of our CEO was $7,599,550. Based on this information, the estimated ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees (other than our CEO), based on the assumptions and adjustments described below, was100-to-1.
As of October 1, 2017, our total employee population consisted of 6,738 employees, of which 2,736 were located in the United States and 4,002 were located innon-US jurisdictions. Pursuant to SEC rules, an employer can excludenon-U.S. jurisdictions as long as the total of all excluded employees is less than 5% of the workforce and that all employees in a specificnon-U.S. jurisdiction are excluded (the “De Minimis Exemption”). In accordance with the De Minimis Exemption, we excluded all employees from the following countries (291): Sweden (47); Australia (32); Denmark (31); Austria (28); Malaysia (27); Hong Kong (21); Hungary (28); Poland (23); Czech Republic (16); Israel (18); Finland (6); Norway (5); Portugal (6); and United Arab Emirates (3).
After excluding these employees, our employee population for purposes of identifying the median employee consisted of 6,447 employees, of which 2,736 were located in the United States and 3,711 were located innon-US jurisdictions.
To identify the median of the compensation of all of our employees (other than our CEO), we used total cash compensation, including 2016 base salary and actual bonus paid in 2017 in respect of fiscal 2016 performance, with salaries annualized for those permanent employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2017 using current base salary and target bonus amounts for 2017 bonuses. Compensation fornon-US employees was converted to dollars based on average fourth quarter foreign currency exchange.
With respect to our median employee, we then identified and calculated the elements of such
employee’s compensation for fiscal 2017 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, resulting in annual total compensation in the amount of $75,696. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation table in this Proxy Statement below.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.Statement.
Equity Ownership GuidelinesTax Implications
Increasingly, stockholders of public companies are focusing on the equity ownership of directors and officers of the companies in which they invest. In order to more closely align the interests of the Company’s stockholders with those of management, the Company has minimum stock ownership guidelines for Directors and named executive officers. These guidelines provide for the accumulation by anyone who holds the Chief Executive Officer position of common stock equal to five times his or her base salary over a three-year period. Additionally, the Company’s other named executive officers on December 31, 2017, Ms. Buck and Messrs. Cassis, Harrington, Khanna and King, are each required to accumulate common stock equal to two times their base salary. Pursuant to the guidelines, members of the Board are required to accumulate a minimum of 5,000 shares of common stock of the Company.
If, as the case may be, a named executive officer shall becomenon-compliant with the guidelines, he or she will have a period of twelve months to regain compliance with the guidelines. If, after such twelve month period, the named executive officer remains
non-compliant, then, with respect to any subsequent exercise of a stock option by such executive officer, 50% of such executive’s netafter-tax profit from such exercise must be retained in shares of common stock until compliance with the guidelines is achieved. Exceptions to these equity ownership guidelines may be considered by the Nominating and Corporate Governance Committee with respect to individual financial situations of current or future executives covered by the guidelines. For purposes of the accumulation of shares of common stock to comply with these guidelines, in addition to any direct ownership of shares of common stock by a named executive officer or Director, any shares of restricted stock and vested“in-the-money” stock options, which either were or will be granted by the Company to such executives or Directors, apply toward the satisfaction of the guidelines. The ownership guidelines have been met by all Directors except for Dr. Ornskov, who is in the process of complying, and all named executive officers except for Ms. Buck, who has until 2022 to meet her ownership guideline.
Recoupment Policy
The Company has adopted a Recoupment Policy for cash incentive awards paid to current or former named executive officers under the Company’s management incentive plans. Under this policy, if any executive officer engaged in misconduct that resulted in a restatement of financial results, the Board or an authorized committee, such as the Compensation Committee, if it is determined appropriate, could seek reimbursement of the portion of management incentive plan awards impacted by the event. The Company will review and as necessary amend or replace the Recoupment Policy to be in full compliance with the Dodd-Frank Act when rules are adopted with respect to the Dodd-Frank Act’s compensation recoupment provisions.
Tax and Accounting Implications
Waters considers the tax and accounting aspects of the elements of compensation utilized by the Company in determining the most effective method to use to deliver executive compensation. This includes, but is not limited to, Section 162(m) of the Internal Revenue Code and the regulations thereunder (collectively, “Section 162(m)”). Section 162(m) generally limits the tax deduction available to public companies for annual compensation paid to the chief executive officer and certain other named executive officers in excess of $1 million. At the time the Compensation Committee made its compensation decisions in respect of awards granted during fiscal 2017, the tax law provided that compensation which qualified as “performance-based” under Section 162(m) was exempt from its deduction limitations.
Federal tax legislation enacted in December 2017 eliminated the Section 162(m) performance-based compensation exemption and made other changes to Section 162(m), but with a grandfathering rule that preserves the performance-based compensation exemption for certain arrangements and awards in place as of November 2, 2017. The Compensation Committee intends to administer arrangements and awards subject to this grandfathering rule, including stock option grants under the 2003 Equity Incentive Plan and 2012 Equity Incentive Plan and PSUs under the 2012 Equity Incentive Plan, with a view towards preserving eligibility for the performance-based compensation exemption to the extent practical and consistent with the Company’s overall compensation objectives. However, the Compensation Committee believes that its primary responsibility is to provide a compensation program that attracts, retains, and rewards the executive talent necessary for Waters’ success.success and meets the other objectives described above. Consequently, the Compensation Committee mayhas and will continue to pay compensation that is not tax deductible, in whole or in part, or is otherwise limited as to tax deductibility.
The information contained in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Waters specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K of the Exchange Act. Based on its review and these discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Christopher A. Kuebler (Chair) Edward Conard Gary E. Hendrickson Dr. Flemming Ornskov, M.D., M.P.H.
Executive Compensation TablesEXECUTIVE COMPENSATION TABLES
The table below summarizes the compensation of our named executive officers for the fiscal years ended December 31, 20172020 and, if applicable, 20162019 and 2015.2018. Compensation is not included in the table below for Ms. BuckDr. Batra for fiscalthe years prior to herhis hire in 2017,2020, for Messrs. Harrington,Mr. Pratt for the years prior to his hire in 2019, or for Mr. King or Khanna for fiscal year 2015the years 2019 and 2018 because they werehe was not a named executive officersofficer for fiscal year 2015,such years, or for any of our named executive officers for any portion of a fiscal year during which they were not employed by us.
Summary Compensation Table
| ||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in ($)
| All Other Compensation ($) | Total ($) | |||||||||||
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
| |||||||||||||
Christopher J. O’Connell Officer (a) |
|
2017
|
| $894,202
| -
| $1,649,850
| $3,849,973
| $1,063,824
| -
| $142,139
| $7,599,988
| |||||||||
|
2016
|
| $849,750
| -
| $1,840,312
| $3,500,018
| $1,299,954
| -
| $140,981
| $7,631,015
| ||||||||||
|
2015
|
| $234,808
| $1,700,000
| $2,499,911
| $7,499,233
| $268,497
| -
| $29,218
| $12,231,667
| ||||||||||
Sherry L. Buck Chief Financial Officer |
| 2017
|
| $494,712
| $300,000
| $1,117,360
| $2,203,177
| $372,338
| -
| $94,707
| $4,582,294
| |||||||||
Eugene G. Cassis Former Senior Vice President, Chief Financial Officer, Senior Vice President and Senior Advisor |
| 2017
|
| $405,563
| -
| -
| -
| $249,281
| $31,343
| $48,032
| $734,219
| |||||||||
| 2016
|
| $405,563
| -
| -
| -
| $372,260
| $22,020
| $40,539
| $840,382
| ||||||||||
| 2015
|
| $393,750
| -
| -
| $1,449,507
| $248,025
| $5,659
| $32,925
| $2,129,866
| ||||||||||
Michael C. Harrington Global Markets |
| 2017
|
| $448,077
| -
| $404,838
| $944,999
| $319,147
| $21,367
| $50,259
| $2,188,687
| |||||||||
| 2016
|
| $395,723
| -
| $441,593
| $1,339,955
| $367,154
| $13,603
| $41,393
| $2,599,421
| ||||||||||
Rohit Khanna President Applied Technology |
| 2017
|
| $354,952
| -
| $354,473
| $1,643,660
| $218,417
| $49,246
| $34,515
| $2,655,263
| |||||||||
| 2016
|
| $341,175
| -
| $367,994
| $1,199,969
| $274,448
| $33,969
| $29,322
| $2,246,877
| ||||||||||
Ian S. King Global Products |
| 2017
|
| $380,197
| -
| $359,964
| $1,140,780
| $245,862
| $26,893
| $17,262
| $2,170,958
| |||||||||
| 2016
|
| $329,950
| -
| $367,994
| $1,269,980
| $266,493
| $19,585
| $28,062
| $2,282,064
|
Summary Compensation Table
| ||||||||||||||||
Name and Principal Position |
Year |
Salary |
Stock |
Option |
Non-Equity
|
All Other |
Total ($) | |||||||||
(b) | (c) | (d) |
(e) | (f) | (g) | |||||||||||
Dr. Udit Batra, Ph.D. |
| 2020
|
| $284,615
| $2,499,928
| $2,499,938
| $394,036
| $35,000
| $5,713,517
| |||||||
Sherry L. Buck Former Senior Vice President and Chief Financial Officer |
| 2020 |
| $500,194 | $694,969 | $828,489 | — | $12,013 | $2,035,665 | |||||||
| 2019 |
| $540,750 | — | — | — | $18,474 | $559,224 | ||||||||
| 2018 |
| $540,144 | $479,915 | $1,119,981 | $466,275 | $19,437 | $2,625,752 | ||||||||
Dr. Michael C. Harrington, Ph.D. Global Markets |
| 2020 |
| $432,900 | $556,058 | $662,779 | $331,028 | $10,638 | $1,993,403 | |||||||
| 2019 |
| $468,000 | — | — | — | $53,967 | $521,967 | ||||||||
| 2018 |
| $467,308 | $449,968 | $1,049,955 | $403,545 | $48,627 | $2,419,403 | ||||||||
Ian S. King Senior Vice President, Global Products |
| 2020 |
| $397,750 | $602,431 | $717,974 | $253,458 | $9,774 | $1,981,387 | |||||||
Jonathan M. Pratt Senior Vice President and President of TA Instruments |
| 2020 |
| $393,125 | $463,313 | $552,326 | $250,511 | $9,661 | $1,668,936 | |||||||
| 2019 |
| $120,962 | $249,968 | $252,941 | — | $292 | $624,163 | ||||||||
Christopher J. O’Connell |
| 2020 |
| $850,500 | $2,286,004 | $3,848,179 | $928,364 | $4,319,459 | $12,232,506 | |||||||
| 2019 |
| $945,000 | — | — | — | $139,859 | $1,084,859 | ||||||||
| 2018 |
| $943,269 | $1,649,946 | $3,849,939 | $1,358,083 | $456,984 | $8,258,221 |
(a) | Dr. Batra commenced employment with us on September 1, 2020 and Mr. O’Connell terminated employment with us on December 31, 2020. Neither Dr. Batra nor Mr. O’Connell received |
(b) | Reflects the base salary earned by the named executive officers during |
(c) |
|
Reflects the aggregate grant date fair value of |
|
$4,572,008 for Mr. O’Connell. The aggregate grant date fair value of the PSUs granted during 2018, assuming achievement of the highest level of performance, was $1,139,450 for Ms. Buck, $1,068,348 for Dr. Harrington and $3,893,572 for Mr. O’Connell. |
Reflects the aggregate grant date fair value ofnon-qualified stock options granted to the named executive officer in the applicable year, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The assumptions used to calculate these amounts are disclosed in |
Reflects the annual incentive compensation earned in |
|
Reflects the matching contribution made for the benefit of each named executive officer under the Waters 401(k) Restoration Plan, anon-qualified retirement plan, and our 401(k) Plan, a qualified retirement plan, for |
Named Executive Officer | Matching Contributions 401(k) Restoration | Company Paid Group Term Life Premiums | Relocation Benefits | Matching Contributions 401(k) Restoration | Company Paid Group Term Life Premiums | Professional Fee Reimbursements and Relocation Benefits | Severance | |||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | |||||||||||||||||||||
Dr. Udit Batra, Ph.D. | — | — | — | — | — | — | $35,000 | — | — | — | ||||||||||||||||||||||||||||
Sherry L. Buck | $12,013 | $16,800 | $16,500 | — | $1,674 | $1,440 | — | — | $1,497 | — | ||||||||||||||||||||||||||||
Dr. Michael C. Harrington, Ph.D. | $10,638 | $52,293 | $47,187 | — | $1,674 | $1,440 | — | — | — | — | ||||||||||||||||||||||||||||
Ian S. King | $9,774 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Jonathan M. Pratt | $9,661 | — | — | — | $292 | — | — | — | — | — | ||||||||||||||||||||||||||||
Christopher J. O’Connell | $131,881 | $67,095 | — | $1,440 | $1,440 | $1,170 | $8,818 | $72,446 | $16,200 | $138,185 | $192,492 | — | $1,674 | $1,440 | — | — | $263,052 | $4,303,259 | ||||||||||||||||||||
Sherry L. Buck | $16,200 | — | — | $1,009 | — | — | $77,498 | — | ||||||||||||||||||||||||||||||
Eugene G. Cassis | $46,669 | $39,215 | $31,969 | $1,363 | $1,324 | $956 | — | — | ||||||||||||||||||||||||||||||
Michael C. Harrington | $48,914 | $40,348 | — | $1,345 | $1,045 | — | — | — | ||||||||||||||||||||||||||||||
Rohit Khanna | $33,421 | $28,423 | — | $1,094 | $899 | — | — | — | ||||||||||||||||||||||||||||||
Ian S. King | $16,200 | $27,223 | — | $1,062 | $839 | — | — | — |
Reflects the total of compensation elements reported in columns (b) through |
The table below sets forth the range of potential payouts under the Management Incentive Plan and the grants of stock options, RSUs and PSUs made to the named executive officers in the last fiscal year.
Grants of Plan-Based Awards Fiscal Year 2017 | ||||||||||||||||||||||||
Name | Award | Grant Date | Estimated Future Payouts Under
| Estimated Future Payouts
| All Other
| All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/share) | Grant Date Fair Value of Stock and Option Awards | ||||||||||||||||
Threshold ($)
| Target ($)
| Maximum ($)
| Threshold (#)
| Target (#)
| Maximum (#)
| |||||||||||||||||||
(b) | (b) | (b) | (c) | (c) | (c) | (d) | (e) | (f) | (g) | |||||||||||||||
Christopher J. O’Connell | Stock Option | 12/5/2017 | 73,557 | $194.26 | $3,849,973 | |||||||||||||||||||
PSU | 12/5/2017 | 340 | 8,493 | 16,986 | $1,854,192 | |||||||||||||||||||
MIP | $281,250 | $1,125,000 | $2,812,500 | |||||||||||||||||||||
Sherry L. Buck | Stock Option | 1/19/2017 | 29,165 | $141.74 | $1,153,184 | |||||||||||||||||||
PSU | 1/19/2017 | 104 | 2,593 | 5,186 | $460,932 | |||||||||||||||||||
RSU | 1/19/2017 | 2,116 | $299,922 | |||||||||||||||||||||
Stock Option | 12/5/2017 | 20,061 | $194.26 | $1,049,993 | ||||||||||||||||||||
PSU | 12/5/2017 | 93 | 2,316 | 4,632 | $519,571 | |||||||||||||||||||
MIP | $98,438 | $393,750 | $984,375 | |||||||||||||||||||||
Eugene G. Cassis (a) | MIP | $65,904 | $263,616 | $659,040 | ||||||||||||||||||||
Michael C. Harrington | Stock Option | 12/5/2017 | 18,055 | $194.26 | $944,999 | |||||||||||||||||||
PSU | 12/5/2017 | 83 | 2,084 | 4,168 | $467,525 | |||||||||||||||||||
MIP | $84,375 | $337,500 | $842,750 | |||||||||||||||||||||
Rohit Khanna (a) | MIP | $57,744 | $230,978 | $577,444 | ||||||||||||||||||||
RSU | 7/21/2017 | 4,073 | $754,483 | |||||||||||||||||||||
Stock Option | 7/21/2017 | 7,514 | $139.51 | $384,416 | ||||||||||||||||||||
Stock Option | 7/21/2017 | 5,248 | $117.68 | $370,771 | ||||||||||||||||||||
Stock Option | 7/21/2017 | 9,382 | $128.93 | $566,016 | ||||||||||||||||||||
Stock Option | 7/21/2017 | 10,000 | $113.36 | $747,200 | ||||||||||||||||||||
Stock Option | 7/21/2017 | 6,400 | $98.21 | $571,328 | ||||||||||||||||||||
Stock Option | 7/21/2017 | 4,600 | $87.06 | $460,598 | ||||||||||||||||||||
Ian S. King | Stock Option | 8/17/2017 | 6,600 | $180.22 | $300,828 | |||||||||||||||||||
Stock Option | 12/5/2017 | 16,048 | $194.26 | $839,952 | ||||||||||||||||||||
PSU | 12/5/2017 | 74 | 1,853 | 3,706 | $415,702 | |||||||||||||||||||
MIP | $65,000 | $260,000 | $650,000 |
Grants of Plan-Based Awards | ||||||||||||||||||||||||||
Name | Award | Grant | Date of | Estimated Future Payouts Under
| Estimated Future Payouts
| All Other
| All Other
| Exercise | Grant | |||||||||||||||||
Threshold ($)
| Target ($)
| Maximum ($)
| Threshold (#)
| Target (#)
| Maximum (#)
| |||||||||||||||||||||
(b) | (b) | (b) | (c) | (c) | (c) | (d) | (e) | (f) | (g) | |||||||||||||||||
Dr. Udit Batra, Ph.D. (a) | Stock | 9/1/2020 | 6/29/2020 | — | — | — | — | — | — | — | 35,077 | $212.02 | $2,499,938 | |||||||||||||
RSU | 9/1/2020 | 6/29/2020 | — | — | — | — | — | — | 11,791 | — | — | $2,499,928 | ||||||||||||||
AIP | — | — | $167,123 | $417,808 | $835,616 | — | — | — | — | — | ||||||||||||||||
Sherry L. Buck | Stock | 2/12/2020 | 2/12/2020 | — | — | — | — | — | — | — | 13,419 | $224.37 | $828,489 | |||||||||||||
PSU | 2/12/2020 | 2/12/2020 | — | — | — | 1,671 | 3,342 | 6,684 | — | — | — | $694,969 | ||||||||||||||
AIP | — | — | $162,225 | $405,563 | $811,126 | — | — | — | — | — | ||||||||||||||||
Dr. Michael C. Harrington, Ph.D. | Stock | 2/12/2020 | 2/12/2020 | — | — | — | — | — | — | — | 10,735 | $224.37 | $662,779 | |||||||||||||
PSU | 2/12/2020 | 2/12/2020 | — | — | — | 1,337 | 2,674 | 5,348 | — | — | — | $556,058 | ||||||||||||||
AIP | — | — | $140,400 | $351,000 | $702,000 | — | — | — | — | — | ||||||||||||||||
Ian S. King | Stock | 2/12/2020 | 2/12/2020 | — | — | — | — | — | — | — | 11,629 | $224.37 | $717,974 | |||||||||||||
PSU | 2/12/2020 | 2/12/2020 | — | — | — | 1,448 | 2,897 | 5,794 | — | — | — | $602,431 | ||||||||||||||
AIP | — | — | $129,000 | $322,500 | $645,000 | — | — | — | — | — | ||||||||||||||||
Jonathan M. Pratt | Stock | 2/12/2020 | 2/12/2020 | — | — | — | — | — | — | — | 8,946 | $224.37 | $552,326 | |||||||||||||
PSU | 2/12/2020 | 2/12/2020 | — | — | — | 1,114 | 2,228 | 4,456 | — | — | — | $463,313 | ||||||||||||||
AIP | — | — | $127,500 | $318,750 | $637,500 | — | — | — | — | — | ||||||||||||||||
Christopher J. O’Connell | Stock | 2/12/2020 | 2/12/2020 | — | — | — | — | — | — | — | 44,730 | $224.37 | $2,761,630 | |||||||||||||
PSU | 2/12/2020 | 2/12/2020 | — | — | — | 5,571 | 11,142 | 22,284 | — | — | — | $2,286,004 | ||||||||||||||
AIP | — | — | $472,500 | $1,181,250 | $2,362,500 | — | — | — | — | — | ||||||||||||||||
Stock | 12/5/2017 | 12/5/2017 | $1,086,549 |
(a) |
|
(b) | Reflects the range of |
to the section titled |
(c) | Reflects the number of PSUs granted by the Compensation Committee |
PSUs based on relative TSR reflect the number of PSUs that would be earned if threshold performance were achieved (a TSR percentile rank above the 25th percentile), amounts in the target column (100% of the target award) reflect the number of PSUs that would be earned if target performance were achieved (a TSR percentile rank of 50th percentile), and amounts in the maximum column (200% of the target award) reflect the |
(d) | Reflects the number of RSUs granted by the Compensation Committee on |
(e) | Reflects the number ofnon-qualified stock options granted by the Compensation Committee on |
(f) | Reflects the closing price of a share of our common stock on the grant date of the stock option. |
(g) | Amounts shown in this column, with respect tonon-qualified stock options granted in |
(h) | Reflects the incremental fair value, computed in accordance with FASB ASC Topic 718, |
Narrative Disclosure to the Summary Compensation Table and the Grants of Plan Based Awards Table
The only named executive officers who wereDr. Batra and Mr. Pratt are parties to an employment agreement or offer letter orwith us. Pursuant to Dr. Batra’s employment agreement,
with us were Mr. O’Connell and Ms. Buck. Pursuant to Mr. O’Connell’s offer letter, which was entered into in connection with his commencement of employment with us in 2015,on September 1, 2020, he wasis entitled to an initial base salary of $825,000, which has subsequently been increased,$1,000,000 and is entitled to a
target annual incentive bonus equal to 125% of his base salary. Dr. Batra is also entitled to participate in our employee benefit plans.
Mr. O’ConnellPratt entered into an offer letter with us in August 2019 in connection with his commencement of employment, which entitles him to an initial annual base salary of $425,000 and a target annual incentive bonus equal to 75% of his base salary. Mr. Pratt is also entitled to participate in our employee benefit plans and receivedto receive relocation assistance in connection with his relocation to within a reasonable commuting distance of the Company’s headquarters in 2016 and 2017.headquarters.
The Company entered into an offer letter with Ms. Buck in January 2017 in connection with her commencement of employment with us. The terms of the arrangement are described above under “Compensation Arrangements of Newly Appointed CFO”.
The severance payments and benefits to which Mr. O’Connell, Ms. Buck and each of our othercurrently employed named executive officers are entitled, and the severance payments and benefits provided to Mr. O’Connell in connection with his termination of employment, are described under the “Payments“— Payments Upon Termination or Change of Control” section of this Proxy Statement. Ms. Buck did not receive any severance payments or benefits in connection with her termination of employment on December 31, 2020.
Each of our named executive officers was eligible to participate in the Company’s Management Incentive PlanAIP for 20172020.
Drs. Batra and actual amounts paid under the plan were determined based on the achievement ofpre-established performance goals, as described above in the Compensation Discussion & Analysis.
Messrs. O’Connell, Harrington, and Messrs. King, Pratt, and O’Connell and Ms. Buck were each grantednon-qualified stock options and PSUs in 2017.2020. Thenon-qualified stock option awards listed in the Grants of Plan-Based Awards Table which were granted pursuant to the
2012 Equity Incentive Plan, vest 20% each year on the first five anniversaries of the date of grant, generally subject to continued employment through the applicable vesting date, of the award, have aten-year term, and have an exercise price equal to the closing market price of the Company’s common stock on the date of grant. Ms. Buck, Dr. Harrington, and Messrs. King, Pratt, and O’Connell were each granted PSUs in 2020. The PSUs listed in the Grants of Plan-Based Awards Table were also granted pursuant to the 2012 Equity Incentive Plan, may be earned based on either the Company’s total stockholder returnTSR relative to the total stockholder returnTSR for each companythe companies included in the S&P 500 Health Care Index over a three-year performance period and,or the Company’s three-year non-GAAP constant-currency revenue growth rate. The PSUs, to the extent earned, vest atafter the end of the three-year performance period, generally subject to continued employment through the vesting date of the award. The grant date fair value of the PSUs was determined based on the probable outcome of the performance conditions associated with the awards, and was based on a Monte Carlo simulation model to reflect the impact of the total stockholder return market condition. The maximum payout for PSUs is 200% of target. Beginning with the annual grant of PSUs made in 2017, the Company implemented a post-vestpost-vesting holding requirement of two years for the CEO and one year for other executive officers. Ms. Buck alsoDr. Batra received a grant of RSUs on January 19, 2017September 1, 2020 in connection with herthe commencement of his employment. These RSUs vest as toone-third of the RSUseach year on each of the first second and thirdthree anniversaries of the date of grant, generally subject to herhis continued employment through the applicable vesting datedate. Mr. O’Connell and Ms. Buck forfeited all equity grants made to them in 2020 in connection with the end of the award.
their employment.
The table below sets forth the outstanding equity awards held by each of our named executive officers as of December 31, 2017.2020.
Outstanding Equity Awards at FiscalYear-End 2017 | ||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of |
Number of |
Option |
Option |
Number of |
Market |
Equity |
Equity Value of Have Not | ||||||||
(a) | (a) | (a) | (b) | (b) | (c) | (c) | ||||||||||
Christopher J. O’Connell | 31,130 | 46,696 | $123.55 | 9/8/2025 | 6,745 | $1,303,067 | - | - | ||||||||
54,238 | 81,359 | $128.93 | 12/9/2025 | - | - | - | - | |||||||||
18,787 | 75,148 | $139.51 | 12/9/2026 | - | - | 21,504 | $4,154,358 | |||||||||
- | 73,557 | $194.26 | 12/5/2027 | - | - | 340 | $65,631 | |||||||||
Sherry L Buck | - | 29,165 | $141.74 | 1/19/2027 | 2,116 | $408,790 | 5,186 | $1,001,883 | ||||||||
- | 20,061 | $194.26 | 12/5/2027 | - | - | 93 | $17,897 | |||||||||
Eugene G. Cassis | - | 5,000 | $98.21 | 12/6/2023 | 1,375 | $265,636 | - | - | ||||||||
- | 16,000 | $113.36 | 12/11/2024 | - | - | - | - | |||||||||
- | 23,589 | $128.93 | 12/9/2025 | - | - | - | - | |||||||||
Michael C. Harrington | 30,000 | - | $87.06 | 12/11/2022 | - | - | - | - | ||||||||
16,000 | 4,000 | $98.21 | 12/6/2023 | 2,037 | $393,528 | - | - | |||||||||
16,800 | 11,200 | $113.36 | 12/11/2024 | - | - | - | - | |||||||||
10,507 | 15,762 | $128.93 | 12/9/2025 | - | - | - | - | |||||||||
2,623 | 10,496 | $117.68 | 2/10/2026 | - | - | - | - | |||||||||
4,509 | 18,035 | $139.51 | 12/9/2026 | - | - | 5,160 | $996,860 | |||||||||
- | 18,055 | $194.26 | 12/5/2027 | - | - | 83 | $16,104 | |||||||||
Rohit Khanna | 4,600 | - | $87.06 | 12/30/2018 | - | - | - | - | ||||||||
6,400 | - | $98.21 | 12/30/2018 | - | - | - | - | |||||||||
10,000 | - | $113.36 | 12/30/2018 | - | - | - | - | |||||||||
9,382 | - | $128.93 | 12/30/2018 | - | - | - | - | |||||||||
5,248 | - | $117.68 | 12/30/2018 | - | - | - | - | |||||||||
7,514 | - | $139.51 | 12/30/2018 | - | - | - | - | |||||||||
Ian S King | 23,000 | - | $79.15 | 12/7/2021 | - | - | - | - | ||||||||
23,000 | - | $87.06 | 12/11/2022 | - | - | - | - | |||||||||
9,600 | 2,400 | $98.21 | 12/6/2023 | 1,019 | $196,861 | - | - | |||||||||
11,400 | 7,600 | $113.36 | 12/11/2024 | - | - | - | - | |||||||||
7,130 | 10,695 | $128.93 | 12/9/2025 | - | - | - | - | |||||||||
2,623 | 10,496 | $117.68 | 2/10/2026 | - | - | - | - | |||||||||
3,757 | 15,030 | $139.51 | 12/9/2026 | - | - | 4,300 | $830,717 | |||||||||
- | 6,600 | $180.22 | 8/17/2027 | - | - | - | - | |||||||||
- | 16,048 | $194.26 | 12/5/2027 | - | - | 74 | $14,319 |
Outstanding Equity Awards at Fiscal Year-End 2020
| ||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of |
Number of |
Option |
Option |
Number of |
Market |
Equity |
Equity Value of Units or That Have Not | ||||||||
(a) | (a) | (a) | (b) | (b) | ||||||||||||
Dr. Udit Batra, Ph.D. | — | 35,077 | $212.02 | 9/1/2030 | 11,791(c) | $2,917,329(c) | — | — | ||||||||
Sherry L. Buck | 12,036 | — | $194.26 | 12/5/2027 | — | — | — | — | ||||||||
7,286 | — | $189.54 | 12/10/2028 | — | — | — | — | |||||||||
Dr. Michael C. Harrington, Ph.D. | 5,254 | — | $128.93 | 12/9/2025 | — | — | — | — | ||||||||
2,624 | 2,624 | $117.68 | 2/10/2026 | — | — | — | — | |||||||||
4,509 | 4,508 | $139.51 | 12/9/2026 | — | — | — | — | |||||||||
10,833 | 7,222 | $194.26 | 12/5/2027 | 541(d) | $133,854(d) | — | — | |||||||||
6,831 | 10,247 | $189.54 | 12/10/2028 | — | — | 2,374 | $587,375 | |||||||||
— | 10,735 | $224.37 | 2/12/2030 | — | — | 2,674 | $661,601 |
Outstanding Equity Awards at Fiscal Year-End 2020
| ||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of |
Number of |
Option |
Option |
Number of |
Market |
Equity |
Equity Value of Units or That Have Not | ||||||||
Ian S. King | 19,000 | — | $113.36 | 12/11/2024 | — | — | — | — | ||||||||
17,825 | — | $128.93 | 12/9/2025 | — | — | — | — | |||||||||
10,495 | 2,624 | $117.68 | 2/10/2026 | — | — | — | — | |||||||||
15,029 | 3,758 | $139.51 | 12/9/2026 | — | — | — | — | |||||||||
3,960 | 2,640 | $180.22 | 8/17/2027 | — | — | — | — | |||||||||
9,628 | 6,420 | $194.26 | 12/5/2027 | 481(d) | $119,009(d) | — | — | |||||||||
5,920 | 8,881 | $189.54 | 12/10/2028 | — | — | 2,057 | $508,943 | |||||||||
— | 11,629 | $224.37 | 2/12/2030 | — | — | 2,897 | $716,776 | |||||||||
Jonathan M. Pratt | 847 | 3,392 | $211.30 | 10/10/2029 | 947(c) | $234,307(c) | — | — | ||||||||
— | 8,946 | $224.37 | 2/12/2030 | — | — | 2,228 | $551,252 | |||||||||
Christopher J. O’Connell | 12,120 | — | $128.93 | 12/9/2025 | — | — | — | — | ||||||||
18,787 | — | $139.51 | 12/9/2026 | — | — | — | — | |||||||||
44,134 | — | $194.26 | 12/5/2027 | — | — | — | — | |||||||||
25,048 | — | $189.54 | 12/10/2028 | — | — | — | — |
(a) | The expiration date for allnon-qualified stock option grants is ten years from the date of grant. Allnon-qualified stock options vest 20% per year on each of the first, second, third, fourth and fifth anniversaries of the date of grant, generally subject to continued employment through the applicable vesting date. |
(b) |
|
PSUs that vest upon |
(c) | RSUs granted on September 1, 2020 to Dr. Batra vest as to one-third of the RSUs on each of the first, second and third anniversaries of the date of grant and those granted to Mr. Pratt on October 10, 2020 vest 20% per year on each of the first five anniversaries of the date of grant. RSU grants are generally subject to continued employment through the applicable vesting date. Dollar amounts included in the column have been determined by multiplying the number of outstanding RSUs by $247.42, which was the closing price of Waters common stock on December 31, 2020. |
(d) | PSUs that vested in February 2021 based on the achievement of the performance conditions stated in the award with respect to the three-year performance period ending on December 31, 2020. The amounts included are the number of PSUs that were earned based upon performance (26% of target), as well as their value determined by multiplying the number of earned PSUs by $247.42, which is the closing price of Waters common stock on December 31, 2020. |
The table below sets forth certain information regarding stock option awards exercised by, and shares of our common stock delivered upon vesting of PSUs and RSUs to, our named executive officers during the last fiscal year.
Option Exercises and Stock Vested Fiscal Year 2017
| ||||||||||||||||
Option Exercises and Stock Vested Fiscal Year 2020 | Option Exercises and Stock Vested Fiscal Year 2020 | |||||||||||||||
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||
Name | Number of Securities (#) | Value Realized Upon ($) | Number of Shares Acquired on Vesting (#) | Value Realized on ($) | Number of Securities Acquired on Exercise | Value Realized Upon ($) | Number of Shares (#) | Value Realized on Vesting ($) | ||||||||
(a) | (b) | (a) | (b) | |||||||||||||
Dr. Udit Batra, Ph.D. | — | — | — | — | ||||||||||||
Sherry L. Buck | 17,499 | $1,397,824 | 3,973 | $834,252 | ||||||||||||
Dr. Michael C. Harrington, Ph.D. | 24,381 | $2,060,890 | 3,250 | $658,775 | ||||||||||||
Ian S. King | 12,000 | $1,442,812 | 2,709 | $549,114 | ||||||||||||
Jonathan M. Pratt | — | — | 236 | $47,703 | ||||||||||||
Christopher J. O’Connell | - | - | 6,745 | $1,258,347 | 257,664 | $27,273,668 | 13,547 | $2,745,977 | ||||||||
Sherry L. Buck | - | - | - | - | ||||||||||||
Eugene G. Cassis | 68,725 | $4,479,100 | 1,375 | $268,400 | ||||||||||||
Michael Harrington | 40,800 | $3,497,413 | 2,036 | $397,427 | ||||||||||||
Rohit Khanna | 103,313 | $10,050,868 | 4,073 | $790,955 | ||||||||||||
Ian S. King | 13,000 | $1,234,404 | 1,018 | $198,714 |
(a) | Equals the Company’s stock price on the exercise date, minus the per share exercise price of thenon-qualified stock option, multiplied by the number of shares acquired on exercise. |
(b) | Equals the Company’s stock price on the vesting date multiplied by the number of shares acquired on vesting. |
The table below sets forth certain information regarding the present value of the accumulated benefits of our named executive officers under our pension arrangements as of December 31, 2017. No amounts were paid to our named executive officers under our pension arrangements during our 2017 fiscal year. These plans have been frozen to new participants since 2007.
Pension Benefits Fiscal Year 2017 | ||||||||
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | ||||
(b) | (c) | |||||||
Christopher J. O’Connell (a) |
Waters Corporation Retirement Plan | - | - | - | ||||
Waters Corporation Retirement Restoration Plan | - | - | - | |||||
Sherry L. Buck (a) |
Waters Corporation Retirement Plan | - | - | - | ||||
Waters Corporation Retirement Restoration Plan | - | - | - | |||||
Eugene G. Cassis |
Waters Corporation Retirement Plan | 37.37 | $424,226 | - | ||||
Waters Corporation Retirement Restoration Plan | 37.37 | $6,903 | - | |||||
Michael C. Harrington |
Waters Corporation Retirement Plan | 30.08 | $220,043 | - | ||||
Waters Corporation Retirement Restoration Plan | 30.08 | $22,446 | - | |||||
Rohit Khanna |
Waters Corporation Retirement Plan | 36.19 | $515,117 | - | ||||
Waters Corporation Retirement Restoration Plan | 36.19 | $132,586 | - | |||||
Ian S. King |
Waters Corporation Retirement Plan | 35.80 | $370,308 | - | ||||
Waters Corporation Retirement Restoration Plan | 35.80 | $23,695 | - |
|
|
|
The Waters Retirement Plan (“Retirement Plan”) is a U.S. defined benefit cash balance plan for eligible U.S. employees. The Waters Retirement Restoration Plan (“Retirement Restoration Plan”) is a U.S. unfunded,non-qualified, defined benefit cash balance plan which provides supplemental retirement benefits out of the general assets of the Company that are otherwise limited due to regulations promulgated by the Internal Revenue Service limiting the amount of compensation that may be taken into account in computing the benefit payable under the Retirement Plan. Each participant’s benefits under the Retirement Plan and Retirement Restoration
Plan are determined based on annual pay credits and interest credits that are made to each participant’s notional accounts. Effective December 31, 2007, future pay credits to the Retirement Plan and Retirement Restoration Plan on behalf of senior executives were discontinued and no further pay credits will be made on or after January 1, 2008. Interest credits will continue to be made to participants’ notional accounts. Interest credits are based on theone-year constant maturity Treasury Bill rate on the first business day in November of the preceding plan year plus 0.5%, subject to a 5.0% minimum and a 10.0% maximum rate.
A participant becomes vested in his or her notional accounts under the Retirement Plan and Retirement Restoration Plan upon completion of five years of service, at which time the participant becomes 100% vested. The normal retirement age under the plans is age 65. Under these plans, early retirement is defined as attainment of age 62 with at least 10 years of service. However, former participants of the Millipore Retirement Plan (a former parent company of Waters) are eligible for early retirement upon attainment of age 55 with at least 10 years of service. Mr. Cassis is a former Millipore Retirement Plan participant and is eligible for retirement under the plans.
The valuation method and material assumptions used in calculating the benefits reported in column (c) are disclosed in the Waters 2017 Annual Report for the fiscal year ended December 31, 2017, and are incorporated herein by reference.
The table below summarizesnon-qualified deferred compensation plan benefits in the last fiscal year for our named executive officers.
Non-Qualified Deferred Compensation
| Non-Qualified Deferred Compensation
| Non-Qualified Deferred Compensation
| ||||||||||||||||||
Name | Executive Contributions in Last FY | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | ||||||||||
(a) | (b) | (c) | (d) | |||||||||||||||||
(a) | (b) | (c) | (d) | |||||||||||||||||
Dr. Udit Batra, Ph.D. | — | — | — | — | — | |||||||||||||||
Sherry L. Buck | — | — | — | — | — | |||||||||||||||
Dr. Michael C. Harrington, Ph.D. | $108,225 | — | $446,557 | — | $2,547,394 | |||||||||||||||
Ian S. King | — | — | $706,817 | — | $2,862,584 | |||||||||||||||
Jonathan M. Pratt | $39,312 | — | $7,670 | — | $46,982 | |||||||||||||||
Christopher J. O’Connell | $224,517 | $115,681 | $89,244 | - | $715,293 | — | — | $393,390 | — | $2,656,717 | ||||||||||
Sherry L. Buck | - | - | - | - | - | |||||||||||||||
Eugene G. Cassis | $348,355 | $30,469 | $687,907 | - | $3,834,418 | |||||||||||||||
Michael C. Harrington | $177,358 | $32,714 | $175,092 | - | $1,107,939 | |||||||||||||||
Rohit Khanna | $35,495 | $21,564 | $441,823 | - | $2,014,303 | |||||||||||||||
Ian S. King | - | - | $343,863 | - | $1,819,905 |
(a) | Amounts in this column are also reported as salary (column (b) |
(b) | Amounts in this column represent Company contributions to the 401(k) Restoration Plan. These amounts are also reported under the All Other Compensation column (column |
(c) | Amounts reported in this column reflect participant-directed earnings in investment vehicles that are consistent with those offered under the qualified 401(k) Plan, with the exception of Waters common stock, the self-directed Brokeragelink Option, and the Fidelity Managed Income Portfolio. These amounts are not included in the Summary Compensation Table because the earnings are not “above-market” or preferential. |
(d) | The aggregate balance amounts under the 401(k) Restoration Plan include deferrals made for prior |
Allnon-qualified deferred compensation contributions made by the named executive officers, or by the Company on behalf of the named executive officers, are made under the 401(k) Restoration Plan. The purpose of the 401(k) Restoration Plan is to allow certain managementexecutives and highly compensated employees to defer salary, commissions, and Management Incentive Planbonus payments to anon-qualified retirement plan in addition to the
amount permitted to be deferred under the 401(k) Plan ($18,00019,500 in 2017,2020, or $24,000$26,000 if age 50 or older). The 401(k) Restoration Plan is also intended to permit participants to receive the additional matching contributions that they would have been eligible to receive under the 401(k) Plan if the Internal Revenue Service limits on compensation for such plan ($270,000285,000 in 2017)2020) did not apply. Upon termination of employment or retirement from the Company, account balances are distributed according to the payment option and form of payment (e.g., lump sum or installment payments) elected by the participant at time of deferral. In connection with Mr. O’Connell’s termination of employment as of December 31, 2021, the balance of his 401(k) Restoration Plan account will be distributed to him according to his distribution elections and applicable tax rules.
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Severance-Related Compensation for NEOs Departing During 2020
As described above, Mr. O’Connell transitioned from his position as President and CEO of the Company on September 1, 2020 and served as a Senior Advisor until December 31, 2020. We were party to an employment agreement with Mr. O’Connell and his termination of employment was treated as a termination by Waters without cause for purposes of such agreement, which entitled Mr. O’Connell to certain severance benefits and payments under that agreement.
In connection with his termination, we entered into a transition and separation agreement with Mr. O’Connell. The terms of this agreement are consistent with the separation payments and benefits provided for in his employment agreement. Furthermore, all unvested equity awards as of December 31, 2020 were forfeited in accordance with the terms and conditions of the governing plan and award agreements. Accordingly, Mr. O’Connell received the following severance payments and benefits in connection with his termination:
Annual incentive award under the 2020 AIP plan based on actual full-year performance payable, and reduced by 50% consistent with the terms of the AIP reset for all employees, payable to him when such bonuses are paid to active employees.
Cash severance equal to two times the sum of (a) his annual base salary for calendar year 2020 and (b) his target annual incentive compensation opportunity for calendar year 2020, with such amount being payable in accordance with the Company’s regular payroll practices over a period of 24 months.
An amount equal to the amount the Company would have paid for premiums for 24 months of continued insurance benefit coverage (life, accident, health, and dental) payable in cash in a lump sum in January 2021.
All vested equity awards as of December 31, 2020 will be governed by the terms and conditions of the governing plan and award agreements, with the exception that vested stock options with the grant dates of December 5, 2017 and December 10, 2018 shall remain outstanding and exercisable until December 31, 2021.
Mr. O’Connell’s obligations under the transition and separation agreement include:
Our receipt of release claims against Waters;
Confidentiality obligations; and
A two-year non-compete obligation.
The amounts provided in the table below for Mr. O’Connell are the actual cash amounts payable to him in connection with his termination of employment. The incremental fair value, computed in accordance with FASB ASC Topic 718, associated with the modification of the post-termination exercise period of certain outstanding vested stock options is included in the “Option Awards” column of the Summary Compensation Table above.
On December 31, 2020, Ms. Buck voluntarily resigned and, as such, was not entitled to any separation benefits or payments in connection with her resignation.
Payments Upon Termination or ChangeNon-Change of Control Severance-Related Agreements
Under his offer letter,employment agreement, if Mr. O’Connell’sDr. Batra’s employment is terminated by the Company other than for cause (as defined in the offer letter)employment agreement) or if he resigns for good reason (as defined in the offer letter)employment agreement), Mr. O’ConnellDr. Batra will be entitled to, subject to his execution of a release of claims and continued compliance with the restrictive covenants contained in the offer letter, continuedemployment agreement, an amount equal to two times the sum of his base salary and target annual bonus forincentive compensation opportunity, payable over a period of 24 months following his termination of employment. In addition, Mr. O’ConnellDr. Batra will be entitled to receive a lump sum payment equal to the amount that the Company would have paid in premiums under the life, accident, health, and dental insurance plans in which Mr. O’ConnellDr. Batra and his dependents were participating immediately prior to the termination of his employment for the24-month period following the date of such termination. Further, if Dr. Batra’s employment is terminated as a result of his death or disability or is terminated by us without cause or by him for good reason, the sign-on stock options and RSUs granted to him in 2020 in connection with his commencement of employment with us will vest in full. If Mr. O’ConnellDr. Batra is employed on or after July 1 of the year in which his employment termination occurs, he will also be entitled to apro-rata annual bonus for such year, based on actual performance. Mr. O’ConnellDr. Batra will be subject tonon-competition andnon-solicitation restrictions for a period of two years following the termination of his employment.
In accordance with Ms. Buck’s offer letter, if Ms. Buck’s employment is terminated by the Company other than for cause (as defined in the offer letter) or if she resigns for good reason (as defined in the offer letter), Ms. Buck will be entitled to, subject to her execution of a release of claims and continued compliance with the restrictive covenants contained in the offer letter, continued salary and target annual bonus for a period of 12 months following her termination of employment. In addition, Ms. Buck will be entitled to receive a lump sum payment equal to the amount that the Company would have paid in premiums under the life, accident, health and dental insurance plans in which Ms. Buck and her dependents were participating immediately prior to the termination of her employment for the12-month period following the date of such termination. Ms. Buck will be subject tonon-competition and
non-solicitation restrictions for a period of one year following the termination of her employment.
Messrs.Dr. Harrington and Messrs. King and Pratt do not have an offer letter or employment agreementsagreement with the Company. However, eachCompany that provides for severance benefits outside the change of control context.
Change of Control Severance-Related Agreements
Each of our currently employed NEOs is party to an Executive Change of Control/Severance Agreement, as is Ms. Buck. Ms. BuckAgreement. These agreements provide for double-trigger accelerated equity vesting in connection with a change of control for all equity grants made after 2016. Dr. Batra and Mr. Pratt entered into her agreementtheir agreements on her hire date of January 9, 2017. Messrs.July 14, 2020 and February 19, 2020, respectively. Dr. Harrington and Mr. King each entered into an amended and restated Executive Change of Control/Severance Agreements as of March 22,23, 2017 to, among other things, remove a legacy provision providing for the payment of a “gross up” amount to the executive for any excise tax under the “golden parachute” provisions of Section 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code” and thegross-up provision, the “280G Gross Up Payment”), as described below.
Messrs. Khanna and Cassis were each party to an ExecutiveCash Change of Control/Severance Agreement prior to their respective retirements. In connection with his transition from the position as Senior Vice President, Applied Technology on July 21, 2017 and his retirement on December 31, 2017, Mr. Khanna entered into a Transition and Separation Agreement, as described under “Transition and Retirement of Mr. Khanna, Former Senior Vice President, Applied Technology” above. In connection with his retirement in March 2018, Mr. Cassis did not receive any severance benefits.
CashControl Severance Benefits
Under the terms of the Executive Change of Control/Severance Agreements with the named executive officers other than Dr. Batra, if any of the foregoing executives’executive’s employment is terminated without cause (as defined in the agreement) or if the executive resigns for good reason (as defined in the agreement), in each case, in certain circumstances, during the period beginning 9nine months prior to, and ending 18 months following, a “change of control” of the Company (as defined in the agreement), the executive would be entitled to receive the following amounts in a lump sum payment:
Twotwo times annual base salary;
Twotwo times the greater of the annual accrued incentive plan payment in the year of termination or the target incentive plan payout; and
Anan amount equal to the amount the Company would have paid in premiums for 24 months of continued insurance benefit coverage (life, accident, health, and dental).
For Ms. Buck, the foregoing amounts payable under the agreement are to be reduced by the amount of any severance or similar amounts paid or payable under Ms. Buck’s offer letter, as described above.
In addition, the Company entered into a Change of Control/Severance Agreement with Mr. O’Connell dated September 8, 2015. Under the terms of hisDr. Batra’s agreement, if Mr. O’Connell’sDr. Batra’s employment is terminated without cause (as defined in the agreement) or he resigns for good reason (as defined in the agreement), in each case, in certain circumstances, during the period beginning 9nine months prior to, and ending 18 months following, a “change of control” of the Company (as defined in the agreement), he would be entitled to receive the following amounts in a lump sum payment:
Threethree times annual base salary;
Threethree times the greater of the annual accrued incentive plan payment in the year of termination or the target incentive plan payout; and
Anan amount equal to the amount the Company would have paid in premiums for 36 months of continued insurance benefit coverage (life, accident, health, and dental).
The foregoing amounts payable under the agreement are to be reduced by the amount of any severance or similar amounts paid or payable under Mr. O’Connell’sDr. Batra’s offer letter, as described above.
Equity-Related Change of Control Severance Benefits
In addition, in the event of a termination of Mr. O’Connell’sDr. Batra’s employment without cause or resignation for good reason, in each case, in certain circumstances within 9 months prior or 18 months following a change of control, all of his outstanding and unvested stock options and RSUs will fully accelerate and become fully exercisable. In addition, if Mr. O’Connell’s employment is terminated as a result of his death or disability or is terminated by us without cause or by him for good reason, thesign-on stock optionsvested and RSUs granted to him in 2015 in
connection with his commencement of employment with us will vest in full.exercisable.
For stock options and RSUs granted on or after December 9, 2016 to Messrs.Dr. Harrington and Messrs. King or Ms. Buck,and Pratt, in the event of a termination of employment without cause or resignation for good reason, in each case, in certain circumstances, within 9 months prior or 18 months following a change of control, all of the outstanding and unvested stock options and RSUs held by such individuals will fully accelerate and become fully vested and exercisable upon such termination of employment. For stock options and RSUs granted prior to December 9, 2016 to Messrs. Cassis,Dr. Harrington and Mr. King in the event of a change of control, all of the outstanding and unvested stock options and RSUs held by them will become fully acceleratevested and become exercisable upon such change of control.
For PSUs granted on or after December 9, 2016, to Dr. Harrington and Messrs. O’Connell, Harrington, King and Ms. Buck,Pratt, if a change of control occurs, the Compensation Committee will determine the extent to which the performance criteria has been satisfied and the number of PSUs that are earned based on such performance criteria as of the change of control. If in connection with the change of control, the earned PSUs are assumed or continued, or a new award is substituted for the earned PSUs and the named executive officer’s employment is terminated without cause or for good reason (in each case, as defined in the executive’s individual agreement with Waters) within 18 months following the change of control, the earned PSUs will automatically vest in full. If in connection with a change of control, the earned PSUs are not assumed or continued, or a new award is not substituted for the earned PSUs, the earned PSUs will automatically vest in full. If the employment of a named executive officer terminates during the performance period of the PSUs due to his or her death, or with respect to PSUs granted in 2017, his or her retirement, the PSUs will remain eligible to vest based on actual performance and, to the extent vested, will be settled at the end of the performance period or, if earlier on a change of control, prorated for the number of days within the performance period as of the date of termination. Retirement means a termination of employment (other than for cause or at a time when cause exists) at any time the executive ashas reached age 60 with 10 years of service with the intention of concluding his or her working or professional career. As of December 31, 2017,2020, only Dr. Harrington and Mr. King satisfied the age and service conditions under the retirement definition.
Under the terms of his Transition and Separation Agreement, those stock options and RSUs held by Mr. Khanna that would have vested on or before December 31, 2018 (or, with respect to a stock option grant made in February 2016, February 2019) vested in full and the remainder of Mr. Khanna’s equity awards were forfeited.
Other Terms
For purposes of the Change of Control/Severance Agreements, “change of control” generally refers to the closing of a merger, consolidation, liquidation, or reorganization of the Company after which the Company does not represent more than 50% of the resulting entity; the acquisition of more
than 50% of the voting stock of the Company; or the sale of substantially all of the Company’s assets.
The Change of Control/Severance Agreements provide that, in the event that a named executive officer is subject to an excise tax under Section 4999 of the Code, he or she will be entitled to the greater of the following amounts, determined on anafter-tax basis: (1) all payments that would be payable, without regard to the excise tax imposed under Section 4999 of the Code (the “Transaction Payments”), or (2) the portion of such Transaction Payments that provides the named executive officer with the largest payment possible without the imposition of an excise tax under Section 4999 of the Code.
Potential Post-Termination Payments Table
The following table and footnotes present potential payments to each named executive officer (other than Mr. Khanna)Drs. Batra and Harrington and Messrs. King and Pratt under various circumstances as if the officer’s employment had been terminated on December 29, 2017, 31, 2020,
the last business day of fiscal 2017,2020, and, as indicated below, if a change of control had also occurred on such date. Pursuant to his Transition and Separation Agreement, Mr. Khanna received continued salary and subsidized COBRA continuation coverage for 12 months following his termination of employment on December 31, 2017 (in the amount of $355,350 and $17,898, respectively, based on Mr. Khanna’s base salary and the premium costs, as applicable, in effect on December 31, 2017) and accelerated vesting of those stock options and RSUs that would have vested on or before December 31, 2018 (or, with respect to a stock option grant made in February 2016, February 2019) (the value of such accelerated vesting is $1,995,872, determined as describedThe amounts provided in the footnotestable below for Mr. O’Connell and Ms. Buck are the actual amounts payable to the table below).them in connection with their respective terminations of employment.
Potential Post-Termination Payments Table | Potential Post-Termination Payments Table | Potential Post-Termination Payments Table
| ||||||||||||||||||||||||||||||
Name |
Termination/ | Base Salary
| Incentive Plan | Benefits Continuation |
Accelerated (c) |
Accelerated |
Accelerated |
Total Value of
|
Termination/ | Base Salary
| Incentive Plan | Benefits Continuation |
Accelerated (d) |
Accelerated |
Accelerated |
Total Value
| ||||||||||||||||
Christopher J. O’Connell | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | td,788,404(a) | $ 2,235,505(a) | $40,236(a) | $3,251,909 | td,303,067 | - | $8,619,121 | ||||||||||||||||||||||||
Death | - | - | - | td2,513,983 | td,303,067 | $692,393 | td4,509,443 | |||||||||||||||||||||||||
Disability | - | - | - | $3,251,909 | td,303,067 | - | $4,554,976 | |||||||||||||||||||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | td,682,606(b) | $3,353,258(b) | $60,353(b) | td2,513,983 | td,303,067 | $3,717,942 | td3,631,209 | |||||||||||||||||||||||||
Dr. Udit Batra, Ph.D. | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | td,000,000(a) | td,500,000(a) | $50,759(a) | td,241,726 | td,917,329 | — | $8,709,814 | ||||||||||||||||||||||||
Death | — | — | — | td,241,726 | td,917,329 | — | $4,159,055 | |||||||||||||||||||||||||
Disability | — | — | — | td,241,726 | td,917,329 | — | $4,159,055 | |||||||||||||||||||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $3,000,000(b) | $3,750,000(b) | $76,139(b) | td,241,726 | td,917,329 | — | td0,985,194 | |||||||||||||||||||||||||
Sherry L. Buck | Actual Termination of Employment | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Dr. Michael C. Harrington, Ph.D. | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Death | — | — | — | td,051,356 | — | $907,537 | td,958,893 | |||||||||||||||||||||||||
Retirement | — | — | — | — | — | $907,537 | $907,537 | |||||||||||||||||||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $936,000(b) | $702,000(b) | $35,468(b) | td,051,356 | — | td,764,599 | $5,489,423 |
Potential Post-Termination Payments Table | ||||||||||||||||
Name |
Termination/ | Base Salary
| Incentive Plan | Benefits Continuation |
Accelerated (c) |
Accelerated |
Accelerated |
Total Value of
| ||||||||
Sherry L. Buck | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | $494,712(a) | $371,034(a) | $19,603(a) | - | - | - | $885,349 | ||||||||
Death | - | - | - | $1,500,539 | $408,790 | $303,244 | $2,212,573 | |||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $989,424(b) | $742,068(b) | $39,206(b) | $1,500,539 | $408,790 | $948,370 | $4,628,397 | |||||||||
Eugene G. Cassis | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | - | - | - | - | $265,636 | - | $265,636 | ||||||||
Death | - | - | - | $3,268,009 | $265,636 | - | $3,533,645 | |||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $ 811,126(b) | $ 608,345(b) | $ 28,380(b) | $3,268,009(f) | $265,636(g) | - | $4,981,496 |
Potential Post-Termination Payments Table | ||||||||||||||||
Name |
Termination/ | Base Salary
| Incentive Plan | Benefits Continuation |
Accelerated (c) |
Accelerated |
Accelerated |
Total Value
| ||||||||
Michael C. Harrington | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | - | - | - | - | $393,528 | - | $393,528 | ||||||||
Death | - | - | - | $4,047,554 | $393,528 | $166,143 | $4,607,225 | |||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $ 896,154(b) | $672,116(b) | $40,101(b) | $4,047,554(f) | $393,528(g) | $166,143 | $6,215,596 | |||||||||
Rohit Khanna | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | $355,350(h) | - | $17,898(h) | $1,602,460(h) | $393,412(h) | - | $2,369,120(h) | ||||||||
Ian S. King | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | - | - | - | - | $196,861 | - | $196,861 | ||||||||
Death | - | - | - | $3,206,886 | $196,861 | $138,453 | $3,542,200 | |||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $ 760,394(b) | $494,256(b) | $27,686(b) | $3,206,886(f) | $196,861(g) | $773,340 | $5,459,423 |
Potential Post-Termination Payments Table
| ||||||||||||||||
Name |
Termination/ | Base Salary
| Incentive Plan | Benefits Continuation |
Accelerated (d) |
Accelerated |
Accelerated |
Total Value
| ||||||||
Ian S. King | Involuntary Termination by the Company without Cause or by the Executive for Good Reason | — | — | — | — | — | — | — | ||||||||
Death | — | — | — | $2,046,739 | — | $798,177 | $2,844,916 | |||||||||
Retirement | — | — | — | — | — | $798,177 | $798,177 | |||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $860,000(b) | $645,000(b) | $35,468(b) | $2,046,739 | — | $1,684,188 | $5,271,395 | |||||||||
Jonathan M. Pratt
| Involuntary Termination by the Company without Cause or by the Executive for Good Reason | — | — | — | — | — | — | — | ||||||||
Death | — | — | — | $328,724 | $234,307 | — | $563,031 | |||||||||
Involuntary Termination by the Company without Cause or by Executive for Good Reason Following Change of Control | $850,000(b) | $637,500(b) | $49,078(b) | $328,724 | $234,307 | $551,252 | $2,650,861 | |||||||||
Christopher J. O’Connell | Actual Termination of Employment | $1,890,000(c) | $2,362,500(c) | $50,759(c) | — | — | — | $4,303,259 |
(a) | Represents two times the sum of Dr. Batra’s annual base salary and target annual incentive bonus award, and the amount the Company would have paid in premiums under the life, health, and dental insurance plans for 24 months for Dr. Batra and his dependents, determined based on base salary, target annual incentive |
(b) | Represents three times annual base salary, target annual incentive |
(c) | Represents actual amounts payable to Mr. O’Connell under the transition and separation agreement dated June 17, 2020. In addition, the expiration date of Mr. O’Connell’s outstanding vested stock options with the grant dates of December 5, 2017 and December 10, 2018 were extended from 30 days (per the terms of the award agreements) to one-year in accordance with his transition and separation agreement. |
(d) | Represents the in-the-money value of 100% of the unvested portion of the executive’s stock |
Represents 100% of the unvested portion of the executive’s RSUs. |
Represents the value of the unvested PSUs assuming the target number of shares vested and became earned on December |
In accordance with SEC rules, we are required to disclose the ratio of the median of the annual total compensation of all of our employees (other than the CEO) to the annual total compensation of our CEO. To identify our median employee for 2020, we first identified our total employee population as of October 1, 2020, which consisted of 7,139 employees, of which 2,781 employees were located in the United States and 4,358 employees were located in non-U.S. jurisdictions. As permitted by SEC rules, we then excluded all employees (353 total) from the following countries/jurisdictions: Canada (48); Sweden (47); Australia (31); Austria (31); Denmark (31); Malaysia (29); Hungary (27); Hong Kong (22); Poland (21); Czech Republic (17); Israel (14); Puerto Rico (13); Portugal (7); Finland (5); Norway (5); and United Arab Emirates (5). After excluding these employees, our employee population for purposes of identifying the median employee consisted of 6,786 employees, of which 2,781 employees were located in the United States and 4,005 employees were located in non-U.S. jurisdictions. To identify the median of the compensation of all of our employees (other than our CEO), we used total cash compensation, including 2019 base salary and actual bonus paid in 2020 in respect of fiscal 2019 performance, with salaries annualized for those permanent employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2020 using their 2020 base salary and target bonus amounts. Compensation for non-U.S. employees was converted to U.S. dollars based on average fourth quarter foreign currency exchange rates. With respect to our median employee, we then identified and calculated the elements of such employee’s compensation for fiscal 2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation in the amount of $67,703. With respect to the annual total compensation |
|
|
of our CEO, we annualized the compensation of our current CEO (2020 base salary and annual bonus earned in respect of 2020 performance), who was appointed as of September 1, 2020, and otherwise included the amounts set forth for him in the Summary Compensation Table above. We determined that, for fiscal 2020, (1) the median of the annual total compensation of all of our employees, other than our CEO, was $67,703, and (2) the 2020 annualized total compensation of our CEO was $7,209,866 As a result, the estimated ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees (other than our CEO), was approximately 106-to-1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above.
Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Director CompensationDIRECTOR COMPENSATION
The table below summarizes the compensation for the Company��sCompany’s non-employee directorsDirectors in the last fiscal year. Dr. Batra and Mr. O’Connell did not receive any compensation for histheir respective service as a director during 2017.2020. The compensation heDr. Batra and Mr. O’Connell received in respect of histheir employment is included in the Summary Compensation Table in the Compensation Discussion and Analysis above.
Director Compensation Fiscal Year 2017
| ||||||||
Name | Fees Earned or
| Stock Awards ($) | Option Awards ($) | Total ($) | ||||
(a) | (b) | (b) | (c) | (f) | ||||
Joshua Bekenstein | $16,750 | $109,963 | $109,977 | $236,690 | ||||
Michael J. Berendt, Ph.D. | $77,000 | $109,963 | $109,977 | $296,940 | ||||
Douglas Berthiaume | $82,500 | $222,910 | $156,588 | $461,998 | ||||
Edward Conard | $80,500 | $109,963 | $109,977 | $300,440 | ||||
Laurie H. Glimcher, M.D. | $65,500 | $109,963 | $109,977 | $285,440 | ||||
Christopher A. Kuebler | $78,000 | $109,963 | $109,977 | $297,940 | ||||
William J. Miller | $70,500 | $109,963 | $109,977 | $290,440 | ||||
Flemming Ornskov, M.D. | $32,000 | $109,825 | $109,999 | $251,824 | ||||
JoAnn A. Reed | $92,500 | $109,963 | $109,977 | $312,440 | ||||
Thomas P. Salice | $106,500 | $109,963 | $109,977 | $326,440 |
Director Compensation Fiscal Year 2020
| ||||||||
Name | Fees Earned or Paid in Cash ($)
| Stock Awards ($) | Option Awards ($) | Total ($) | ||||
(a) | (b) | (c) | ||||||
Linda Baddour | $84,350 | $109,773 | $109,941 | $304,064 | ||||
Dr. Michael J. Berendt, Ph.D. | $85,850 | $109,773 | $109,941 | $305,564 | ||||
Edward Conard | $96,550 | $109,773 | $109,941 | $316,264 | ||||
Dr. Laurie H. Glimcher, M.D. (resigned August 17, 2020) | $58,400 | $109,773 | $109,941 | $278,114 | ||||
Gary E. Hendrickson | $87,950 | $149,674 | $109,941 | $347,565 | ||||
Christopher A. Kuebler | $100,425 | $184,614 | $109,941 | $394,980 | ||||
Dr. Flemming Ornskov, M.D., M.P.H. | $202,667 | $259,671 | $109,941 | $572,279 | ||||
JoAnn A. Reed | $103,100 | $109,773 | $109,941 | $322,814 | ||||
Thomas P. Salice | $87,627 | $194,751 | $109,941 | $392,319 |
(a) | Reflects Board and committee retainers and meeting fees earned in |
Name | Fees Deferred in 2020
| Aggregate Stock Unit (#) | ||||
Amount ($) | Number of Shares (#) | |||||
Edward Conard | $96,550 | 465.72 | 22,605.24 | |||
Gary E. Hendrickson | $87,950 | 425.17 | 909.50 | |||
Christopher A. Kuebler | — | — | 3,278.74 | |||
Dr. Flemming Ornskov, M.D., M.P.H. | — | — | 822.16 | |||
Thomas P. Salice | — | — | 9,449.91 |
(b) | Mss. Baddour and Reed, Drs. Berendt and Ornskov, Messrs. |
(c) | Ournon-employee |
|
For 2017, cash compensation forIn response to the global COVID-19 pandemic and resulting business challenges, the Board of Directors remained consistent with 2016. Eachvoted to reduce their retainers and meeting fees by 20% for a three-month period in 2020 (April – July) to support the spending reduction initiatives made throughout the Company. The retainers and fees described below outline the annualized Director compensation structure without the COVID-19 reductions, actual fees earned including the COVID-19 savings are reflected in the table above.
For 2020, the annual retainer for each non-employee directorDirector was paid a retainer of $55,000, for the year, paid in quarterly installments, and a $1,500 fee for each Board and committee meeting attended. The additionalConsistent with prior years, the annual retainer for the Lead Director andthrough March 2020 was $25,000 in addition to the annual retainer earned for non-executivenon-employee Directors. As discussed above, the Company appointed a non-employee Chairman of the Board in March 2020 and replaced the additional Lead Director retainer with an additional annual Chairman retainer of $150,000 per year, paid in quarterly installments. The non-employee Chairman is eligible for 2017 was $20,000, resulting in a totalboth the annual retainer for non-employee Directors and the Lead Director andnon-executiveannual Chairman ofretainer but is not eligible for additional committee chair retainers or committee fees. For 2020, the Board of $75,000. The annual retainers for 2017 for the chairs of the CompensationFinance Committee, and the Nominating and Corporate Governance Committee, and the Science and Technology Committee were $10,000$10,000; the Compensation Committee Chair was $12,500; and the Audit Committee Chair was $15,000.
The annual director equity awards granted on the first business day in January 2017 totaled2020 had a grant date fair value of approximately $220,000 in equity value to directors,Directors, with 50% of the value in the form of restricted stock and 50% in the form ofnon-qualified stock options. The number ofnon-qualified stock options was determined based on the Black-Scholes value on the date of grant. Both the restricted stock andnon-qualified stock option grants to directorsDirectors have aone-year vesting term. In addition, the restricted stock andnon-qualified stock option grant agreements provide for acceleration of any unvested awards upon the death of a director while in service.service or in the event of a change of control. The per share exercise price of the annual stock option grant was equal to the closing price of the Company’s common stock on the grant date ($136.43235.06 per share).
In addition, Messrs. Hendrickson, Kuebler, and Salice and Dr. Ornskov each received a one-time supplemental restricted stock award in 2020 in recognition of their time and efforts related to the search for a new CEO and leadership transition following Dr. Batra’s hire. The restricted stock awards have a one-year vesting term and provide for acceleration of any unvested awards upon the death of a director while in service or in the event of a change of control. The per share exercise price of the one-time supplemental restricted stock award grant was equal to the closing price of the Company’s common stock on the grant date ($215.68 per share).
All directorsDirectors are also reimbursed for expenses incurred in connection with their attendance at meetings. Directors who are full-time employees of
the Company receive no additional compensation or benefits for service on the Board or its committees.
The Compensation Committee utilizes Pearl Meyer to provide advice on the structure of our directorDirector compensation program. Pearl Meyer and the Compensation Committee utilize sources of data consistent with that used for the executive compensation assessment, which include the Industry Peer Groupindustry peer group of 1617 publicly traded companies described above in the Compensation Discussion and Analysis. Based on the competitive assessment conducted by Pearl Meyer, cash compensation for directors in 2018 will remain consistent with 2017.
The Company also sponsors the 1996Non-Employee Director Deferred Compensation Plan, which providesnon-employee members of the BoardDirectors with the opportunity to defer 100% of retainer, meeting, and committee fees. Fees may be deferred in cash or invested in Company common stock units. If a director elects to defer his or her fees in Company common stock units, the amount deferred is converted into common stock units by dividing the amount of fees payable by the average stock price of the Company’s common stock for the fiscal quarter. Fees deferred in cash are credited with an interest rate equal to the lesser of the Prime Rate plus 50 basis points or the maximum rate of interest that may be used without being treated as an “above market” interest rate under the SEC guidelines. In 2017,2020, Messrs. Bekenstein, Conard Kuebler and SaliceHendrickson elected to defer fees into Company common stock units and Ms.Dr. Glimcher and Mr. Kuebler elected to defer hertheir fees into cash.
Report Dr. Glimcher had previously elected to receive her fees deferred in cash in three annual installments upon cessation of the Compensation Committeeservice and, as a result of the Board of Directors
The information containedher resignation in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by referenceAugust 2020, received $180,832 in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Waters specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis as required by Item 402(b) of Regulationcash, which represents approximately S-Kone-third of the Exchange Act. Based on its review and these discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be includedher balance of fees deferred in this Proxy Statement.cash plus applicable interest.
The Board does not know of any other business to be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, however, it is intended that the persons named in the enclosed form of Proxy will vote said Proxy in accordance with their best judgment.
The table below sets forth certain information regarding beneficial ownership of common stock as of March 15, 201817, 2021 by (i) each person or entity who is known to the Company who ownsto beneficially own five percent or more of the common stock, by(ii) each named executive officerof the Company’s Directors, director nominees, and Director nominee and allnamed executive officers and Director Nominees(iii) all of the Company’s Directors, director nominees, and executive officers as a group.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percentage of Outstanding Common Stock(1) | ||||||
5% Stockholders | ||||||||
The Vanguard Group, Inc. (2) | 7,687,346 | 9.82 | % | |||||
Massachusetts Financial Services Company (3) | 5,796,674 | 7.40 | % | |||||
BlackRock, Inc. (4) | 5,611,395 | 7.17 | % | |||||
Fundsmith LLP (5) | 4,365,313 | 5.58 | % | |||||
Executive Officers and Directors | ||||||||
Sherry Buck (6) | 7,700 | * | ||||||
Michael C. Harrington (6) | 86,178 | * | ||||||
Dr. Ian S. King (6) | 86,735 | * | ||||||
Christopher J. O’Connell (6) | 126,470 | * | ||||||
Dr. Michael J. Berendt (6) | 58,798 | * | ||||||
Edward Conard (6)(8) | 95,298 | * | ||||||
Dr. Laurie H. Glimcher (6) | 22,073 | * | ||||||
Christopher A. Kuebler (6)(8) | 42,298 | * | ||||||
Dr. Flemming Ornskov | 1,156 | * | ||||||
JoAnn A. Reed (6) | 54,909 | * | ||||||
Thomas P. Salice (6)(7)(8) | 132,896 | * | ||||||
All Directors and Executive Officers as a group (16 persons) | 767,421 | * |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percentage of Outstanding Common Stock(1) | ||||||
5% Shareholders | ||||||||
The Vanguard Group, Inc. (2) | 6,655,080 | 10.7 | % | |||||
Massachusetts Financial Services Company (3) | 3,944,322 | 6.4 | % | |||||
BlackRock, Inc. (4) | 4,730,353 | 7.6 | % | |||||
Fundsmith LLP (5) | 4,409,835 | 7.1 | % | |||||
The Bank of New York Mellon Corporation (and affiliates) (6) | 4,740,210 | 7.6 | % | |||||
Directors and Named Executive Officers | ||||||||
Dr. Udit Batra, Ph.D. (7) | 11,791 | * | ||||||
Christopher J. O’Connell (7) | 82,777 | * | ||||||
Sherry L. Buck (7) | 0 | * | ||||||
Dr. Michael C. Harrington, Ph.D. (7) | 37,482 | * | ||||||
Jonathan M. Pratt | 3,898 | * | ||||||
Linda Baddour (7) | 6,407 | * | ||||||
Dr. Michael J. Berendt, Ph.D. (7) | 51,856 | * | ||||||
Edward Conard (7)(8) | 100,422 | * | ||||||
Gary E. Hendrickson (7)(8) | 6,592 | * | ||||||
Dr. Pearl S. Huang, Ph.D. | 439 | * | ||||||
Christopher A. Kuebler (7)(8) | 42,203 | * | ||||||
Dr. Flemming Ornskov, M.D., M.P.H. (7)(8) | 12,451 | * | ||||||
JoAnn A. Reed (7) | 47,764 | * | ||||||
Thomas P. Salice (7)(8)(9) | 133,348 | * | ||||||
Ian S. King (7) | 92,335 | * | ||||||
All Directors and Executive Officers as a group (20 persons) | 700,921 | 1.1 | % |
* | Represents less than 1% of the total number of the issued and outstanding shares of common stock. |
(1) |
|
(2) | Amounts shown reflect the aggregate number of shares of common stock beneficially owned by The Vanguard Group, Inc. based on information set forth in Schedule 13G/A filed with the SEC on February |
(3) | Amounts shown reflect the aggregate number of shares of common stock beneficially owned by Massachusetts Financial Services Company (“MFS”) based on information set forth in Schedule 13G/A |
filed with the SEC on February |
(4) | Amounts shown reflect the aggregate number of shares of common stock beneficially owned by BlackRock, Inc. based on information set forth in Schedule 13G/A filed with the SEC on |
|
(5) | Amounts shown reflect the aggregate number of shares of common stock beneficially owned by Fundsmith LLP based on information set forth in Schedule 13G filed with the SEC on February |
(6) | Amounts shown reflect the aggregate number of shares of common stock beneficially owned by The Bank of New York Mellon Corporation based on information set forth in Schedule 13G/A filed with the SEC on February 1, 2021. The Schedule 13G/A indicates that (i) The Bank of New York Mellon Corporation was the beneficial owner with sole dispositive power as to 3,751,860 shares, with shared dispositive power as to 888,678 shares, with sole voting power as to 3,520,687 shares, and shared voting power as to 408 shares; (ii) BNY Mellon IHC, LLC was the beneficial owner with sole dispositive power as to 3,536,389 shares, with shared dispositive power as to 867,110 shares, with sole voting power as to 3,323,800 shares, and shared voting power as to none of the shares; (iii) MBC Investments Corporation was the beneficial owner with sole dispositive power as to 3,536,389 shares, with shared dispositive power as to 867,110 shares, with sole voting power as to 3,323,800 shares, and shared voting power as to none of the shares; (iv) BNY Mellon Investment Management (Jersey) Limited was the beneficial owner with sole dispositive power as to 3,169,665 shares, with shared dispositive power as to 858,352 shares, with sole voting power as to 3,039,629 shares, and shared voting power as to none of the shares; (v) BNY Mellon Investment Management Europe Holdings Limited was the beneficial owner with sole dispositive power as to 3,169,665 shares, with shared dispositive power as to 858,352 shares, with sole voting power as to 3,039,629 shares, and shared voting power as to none of the shares; (vi) BNY Mellon International Asset Management Group Limited was the beneficial owner with sole dispositive power as to 3,169,665 shares, with shared dispositive power as to 858,352 shares, with sole voting power as to 3,039,629 shares, and shared voting power as to none of the shares; (vii) BNY Mellon International Asset Management (Holdings) Limited was the beneficial owner with sole dispositive power as to 3,169,665 shares, with shared dispositive power as to 858,352 shares, with sole voting power as to 3,039,629 shares, and shared voting power as to none of the shares; (viii) BNY Mellon International Asset Management (Holdings) No. 1 Limited was the beneficial owner with sole dispositive power as to 3,169,665 shares, with shared dispositive power as to 858,352 shares, with sole voting power as to 3,039,629 shares, and shared voting power as to none of the shares; and (ix) Walter Scott and Partners Limited was the beneficial owner with sole dispositive power as to 3,169,665 shares, with shared dispositive power as to 858,352 shares, with sole voting power as to 3,039,629 shares, and shared voting power as to none of the shares. The address of each of the foregoing entities is c/o The Bank of New York Mellon Corporation, 240 Greenwich Street, New York, New York 10286. |
(7) | Includes share amounts which the named individuals have the right to acquire through the exercise of options which are exercisable within 60 days of March |
|
(8) | Excludes deferred compensation in the form of phantom stock, receipt of which may be, at the election of the Director, on a specified date at least six months in the future or upon his or her cessation of service as a Director of the Company. |
(9) | Includes 3,000 shares held in Mr. Salice’s Individual Retirement Account, 7,950 shares held by a charitable trust over which Mr. Salice shares voting and investment power with his spouse as trustees and 60,274 shares held by an LLC over which Mr. Salice has voting and investment power. Mr. Salice disclaims beneficial ownership of the shares held by the charitable trust and of the shares held by the LLC, except to the extent of his pecuniary interest in the LLC. |
SECTION 16(a) BENEFICIAL OWNERSHIPANNUAL REPORT ON FORM 10-K
REPORTING COMPLIANCE
Federal securities laws requireThe Company filed its Annual Report on Form 10-K for the Company’s Directors, executive officers, and persons who own more than 10% of the common stock of Waters to fileyear ended December 31, 2020 with the SEC on February 24, 2021. The Annual Report on Form 10-K, including all exhibits, can also be found on the New York Stock ExchangeCompany’s website (www.waters.com) and can be downloaded free of charge. Paper copies of the Annual Report on Form 10-K, including the financial statements and schedules, may be obtained without charge from the Company. Paper copies of exhibits to the Annual Report on Form 10-K are available, but a reasonable fee per page will be charged to the requesting shareholder. Shareholders may make requests in writing to the attention of the Senior Director of Investor Relations at our principal executive offices at 34 Maple Street, Milford, Massachusetts 01757, calling the Senior Director of Investor Relations of Waters at (508) 482-3448 or emailing investor_relations@waters.com.
SHAREHOLDER PROPOSALS FOR THE 2022 ANNUAL MEETING
Shareholder Proposals for Inclusion in the Proxy Statement for the 2022 Annual Meeting
If a shareholder wishes to have a proposal formally considered at the Company’s 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) and included in the Company’s proxy statement for that meeting, the proposal must be in writing and received by the Secretary of the Company initial reportsat the Company’s principal executive offices at 34 Maple Street, Milford, Massachusetts 01757 by no later than December 2, 2021, and the proposal must otherwise comply with the requirements of beneficial ownership and reportsRule 14a-8 under the Exchange Act.
Director Nominations for Inclusion in the Proxy Statement for the 2022 Annual Meeting
The Board has adopted a proxy access provision in the Bylaws that allows an eligible shareholder or group of changes in beneficial ownershipup to 20 shareholders owning at least 3% of our common stock continuously for three years to nominate up to two individuals or 20% of the common stock.
ToBoard, whichever is greater, for election at the Company’s knowledge, based solely on review2022 Annual Meeting, and to have those individuals included in our proxy statement for that meeting. If a shareholder or group of shareholders wishes to nominate one or more director candidates to be included in the proxy statement for the 2022 Annual Meeting pursuant to these proxy access provisions in Article I, Section 11 of the copies of such reports and written representations furnished to the Company that no other reports were required, none of the Company’s executive officers, Directors andgreater-than-ten-percent beneficial owners failed to file any such report required by Section 16 of the Exchange Act on a timely basis during the fiscal year ended December 31, 2016.
Proposals of stockholders to be presented at the 2019 Annual Meeting of Stockholders anticipated to be scheduled on or about May 9, 2019,Bylaws, notice must be received by the Secretary of the Company at 34 Maple Street, Milford, Massachusetts 01757 as follows: Proposals that are submitted pursuant to Rule14a-8 under the Exchange Act, and are to be considered for inclusion in the Company’s Proxy Statementprincipal executive offices no earlier than November 2, 2021 and form of Proxy relating to that meeting, must be submitted in writing and received by no later than 11:59 p.m.December 2, 2021 (subject to adjustment as described in the Bylaws), local time, on November 29, 2018. In
addition, a stockholder may bring beforeand the 2019nomination must otherwise comply with the Bylaws.
Other Proposals or Director Nominations for Presentation at the 2022 Annual Meeting (other than
If a proposal),shareholder wishes to present other business or may submit nominations fornominate a director ifcandidate at the stockholder complies with Section 10 (for nominees of directors) and Section 11 (for business to2022 Annual Meeting, notice must be transacted) of the company’s bylaws, as applicable, by:
providing written notice toreceived by the Secretary of the Company at the address above between February 13, 2019 and March 10, 2019Company’s principal executive offices not less than 90 days nor more than 120 days prior to the date of the first anniversary of the date of the preceding year’s Annual Meeting (subject to adjustment as described in the bylaws), and
supplying the additional information as required in Sections 10 and 11 of the bylaws, as applicable.
If a stockholder wishes to nominate a candidate for election to the Board at the 2019 Annual Meeting of Stockholders, and is eligible and elects to haveBylaws). Any such candidate included in the proxy materials for
such meeting pursuant to our proxy access bylaw, such nomination must be submitted to the Secretary of the Company between October 30, 2018 and November 29, 2018 andnotice must include the information set forthspecified in Article I, Section 13(f) of our bylaws.the Bylaws.
Only one copy of our Annual Report, Proxy Statement, or Notice (as defined below) is being delivered to multiple security holders sharing an address, unless we have
received instructions to the contrary from one or more of the stockholders.
shareholders.
We will undertake to deliver promptly upon written or oral request a separate copy of our Annual Report, the Proxy Statement, or Notice to any stockholdershareholder at a shared address to which a single copy of either of those documents was delivered. To receive a separate copy of our Annual Report, Proxy Statement, or Notice, or if two stockholdersshareholders sharing an address have received two copies of any of these documents and desire to only receive one in the future, you may write to the Vice PresidentSenior Director of Investor Relations at our principal executive offices at 34 Maple Street, Milford, Massachusetts 01757, or call the Vice PresidentSenior Director of Investor Relations of Waters at(508) 482-2314.482-3448, or email investor_relations@waters.com.
ANNUAL MEETING OF WATERS CORPORATIONINFORMATION CONCERNING SOLICITATION AND VOTING
Date, Time, and Place of the Annual Meeting; Shareholder Questions
The Annual Meeting will be held on May 11, 2021 at 9:00 a.m., Eastern Time. The Annual Meeting will be a virtual meeting held exclusively via the Internet; you will not be able to attend the Annual Meeting in person. In order to attend and, potentially, to submit questions, you must register at www.proxydocs.com/wat. After you register, you will receive instructions via email, including your unique links that will allow you access to the Annual Meeting.
Our virtual Annual Meeting will allow shareholders to submit questions in two ways, both of which require that you be registered to attend the Annual Meeting. First, using your unique links provided at registration, shareholders may submit questions in advance of the Annual Meeting. Second, while viewing the Annual Meeting, shareholders may submit real-time questions via viewscreen.
During a designated question and answer period at the Annual Meeting, we will respond to appropriate questions submitted by shareholders. We will answer as many shareholder-submitted questions as time permits, and any questions that we are unable to address during the Annual Meeting will be answered following the meeting. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.
The decision to hold a virtual meeting was made as part of our effort to maintain a safe and healthy environment for our Directors, members of management, and shareholders who wish to attend the Annual Meeting, in light of the ongoing COVID-19 pandemic. We believe that hosting a virtual meeting is in the best interests of the Company and its shareholders and enables increased shareholder attendance and participation because shareholders can participate from any location around the world.
Solicitation
This Proxy Statement is being furnished by the Board in connection with its solicitation of Proxies for use at the Annual Meeting. Solicitation of Proxies, which is being made by the Board, may be made through officers and regular employees of the Company by telephone or by oral communications with shareholders following the original solicitation. No additional compensation will be paid to officers or regular employees for such Proxy solicitation. The Company has retained Alliance Advisors, LLC to conduct a broker solicitation for a fee of $10,000, plus reasonable out-of-pocket expenses. Expenses incurred in connection with the solicitation of Proxies will be borne by the Company.
Voting Matters
The representation in person or by Proxy of a majority of the outstanding shares of common stock of the Company, par value $0.01 per share (the “common stock”), entitled to vote at the Annual Meeting is necessary to provide a quorum for the transaction of business at the Annual Meeting. Shares can only be voted if a shareholder is present via web conference, has voted via the Internet or by telephone, or is represented by a properly signed Proxy. Each shareholder’s vote is very important. Whether or not you plan to attend the Annual Meeting via web conference, please vote over the Internet or by telephone or sign and promptly return the Proxy card, which requires no additional postage if mailed in the United States. All signed and returned Proxies will be counted towards establishing a quorum for the Annual Meeting, regardless of how the shares are voted.
Shares represented by Proxy will be voted in accordance with your instructions. You may specify how you want your shares to be voted by voting on the Internet, by telephone, or by marking the appropriate box on the Proxy card. If your Proxy card is signed and returned without specifying how you want your shares to be voted, your shares will be voted as recommended by the Board, or as the individuals named as Proxy holders deem advisable on all other matters as may properly come before the Annual Meeting. The Proxy will be voted at the Annual Meeting if the signer of the Proxy was a shareholder of record on March 17, 2021 (the “Record Date”).
Any shareholder voting by Proxy has the power to revoke the Proxy prior to its exercise either by voting electronically at the Annual Meeting, by executing a later-dated Proxy or by delivering a signed written notice of the revocation to the Company, c/o Secretary, at 34 Maple Street, Milford, MA 01757 before the Annual Meeting begins.
As of the Record Date, there were 62,059,082 shares of common stock outstanding and entitled to vote at the Annual Meeting. Each outstanding share of common stock is entitled to one vote. There are no cumulative voting rights. For ten days prior to the Annual Meeting, a list of the shareholders entitled to vote at the Annual Meeting will be available for inspection at the Company’s principal executive offices at 34 Maple Street, Milford, MA 01757 for proper purposes relating to the Annual Meeting. During the Annual Meeting, such list will be available for inspection upon request.
Voting
To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the Annual Meeting via web conference. Shareholders have three options for submitting their votes: (1) via the Internet, (2) by phone, or (3) by mail using a paper proxy card. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient for you, and it saves the Company significant postage and processing costs. In addition, when you vote via the Internet or by telephone prior to the Annual Meeting date, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted. Refer to your Notice or the email you received for electronic delivery of the Proxy Statement for further instructions on voting.
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http://www.proxypush.com/wat | 866-307-0858 | Mark, sign, and date the proxy card and return it in the enclosed postage-paid envelope. | ||
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Please make your marks like this: ☒ Use dark black pencil or pen only
Board of Directors Recommends a VoteFORproposals 1 through 3.
Proxy. Have your proxy card in hand when you access the website. |
to proxy card in hand when you call. |
If you vote your proxy by Internet or by telephone, please do NOT mail back the proxy card. You can access, view and download the Proxy Statement and Annual Report at http://www.proxydocs.com/wat.
ELECTRONIC DELIVERY OF WATERS SHAREHOLDER COMMUNICATIONS
Notice of Electronic Availability of Proxy Statement and Annual Report
As permitted by SEC rules, Waters is making this Proxy Statement and its Annual Report available to its shareholders electronically via the Internet. On April 1, 2021, we mailed the Notice to our shareholders, which contains instructions on how to access this Proxy Statement and our Annual Report and vote by Internet. If you received the Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report electronically or to receive a printed version in the mail. The Notice also instructs you on how you may submit your proxy over the Internet or via web conference at the Annual Meeting.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS:
The Proxy Statement and Annual Report are available at http://www.proxydocs.com/wat.
Whether or not you expect to attend the Annual Meeting via web conference, we urge you to vote your shares by phone, via the Internet, or, if you receive a paper copy of the Proxy Statement and Annual Report, by signing, dating, and returning the proxy card by mail at your earliest convenience. This will ensure the presence of a quorum at the Annual Meeting. Promptly voting your shares will save us the expense and extra work of additional solicitation. Submitting your proxy now will not prevent you from voting your shares at the Annual Meeting if you want to do so, as your vote by proxy is revocable at your option.
Waters | YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: | |||||||||||
THE SCIENCE OF WHAT’S POSSIBLE.TM P.O. BOX 8016, CARY, NC 27512-9903 | INTERNET | |||||||||||
Go To: www.proxypush.com/WAT | ||||||||||||
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• • • | Use any touch-tone telephone, 24 hours a day, 7 days a week. Have your Proxy Card ready. Follow the simple recorded instructions. | |||||||||||
• • | Mark, sign and date your Proxy Card. Fold and return your Proxy Card Form in the postage-paid envelope provided. |
CONTROL NUMBER
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Waters Corporation | ||||||||
Annual Meeting of Shareholders |
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For Shareholders as of March 17, 2021 | ||||||||
TIME: | Tuesday, May 11, 2021 09:00 AM, Eastern Time | |||||||
PLACE: | Annual Meeting to be held live via the Internet - please visit | |||||||
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Annual Meeting of Waters Corporation
to be held on Wednesday, May 9, 2018
for Holders as of March 15, 2018
This proxy is being solicited on behalf of the Board of Directors
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The undersigned hereby appoints Christopher J. O’ConnellUdit Batra and Mark T. Beaudouin,Keeley A. Aleman (the “Named Proxies”), and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Waters Corporation which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FORIDENTICAL TO THE ELECTIONBOARD OF THE DIRECTORS IN ITEM 1, FOR THE PROPOSALS IN ITEMS 2 AND 3 AND AUTHORITY WILL BE DEEMED GRANTED UNDER ITEM 4.RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof.
All votes must be received by 5:00 P.M.If you hold shares in any Employee Stock Purchase Plan, or 401(k) savings plan of the Company (the “Plans”), Eastern Time, May 8, 2018.
All votesthen this proxy card, when signed and returned, or your telephone or Internet proxy, will constitute voting instructions on matters properly coming before the Annual Meeting and at any adjournments or postponements thereof in accordance with the instructions given herein to the trustee for 401(k) participants must beshares held in any of the Plans. Shares in each of the Plans for which voting instructions are not received by 5:00 P.M., Eastern Time, May 6, 2018.2021, or if no choice is specified, will be voted by an independent fiduciary.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE
Copyright © 2021 Mediant Communications Inc. All Rights Reserved
Waters Corporation
Annual Meeting of Shareholders
Please make your marks like this: | X | Use dark black pencil or pen only |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL(S) 1, 2, 3.
PROPOSAL | YOUR VOTE | BOARD OF DIRECTORS RECOMMENDS | ||||||||
1. | To elect the nine directors specifically named in the proxy statement to serve for a term of one year and until their | |||||||||
FOR | AGAINST | ABSTAIN | ||||||||
1.01 Udit Batra | ☐ | ☐ |
| FOR
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1.02 Linda Baddour | ☐ | ☐ | ☐ | FOR | ||||||
1.03 Michael J. Berendt | ☐ | ☐ | ☐ | FOR | ||||||
1.04 Edward Conard | ☐ | ☐ | ☐ | FOR | ||||||
1.05 Gary E. Hendrickson | ☐ | ☐ | ☐ | FOR | ||||||
1.06 Pearl S. Huang | ☐ | ☐ | ☐ | FOR | ||||||
1.07 Christopher A. Kuebler | ☐ | ☐ | ☐ | FOR | ||||||
1.08 Flemming Ornskov | ☐ | ☐ | ☐ | FOR | ||||||
1.09 Thomas P. Salice | ☐ | ☐ | ☐ | FOR | ||||||
FOR | AGAINST | ABSTAIN | ||||||||
2. | To ratify the selection of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2021. | ☐ | ☐ | ☐ | FOR | |||||
3. | To approve, by non-binding vote, named executive officer compensation. | ☐ | ☐ | ☐ | FOR | |||||
4. | To consider and act upon any other matters which may properly come before the meeting or any adjournment thereof. | |||||||||
You must pre-register to attend the meeting online and/or participate at www.proxydocs.com/WAT. | ||||||||||
Authorized Signatures - Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. |
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