UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule14A-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☑ Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | ||||
Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | ||||
☑ | Definitive Proxy Statement | |||
☐ | Definitive Additional Materials | |||
☐ | Soliciting Material | |||
MKS Instruments, Inc.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check all boxes that apply):
☑ | No fee required. | |||
☐ | ||||
| ||||
| ||||
| ||||
| ||||
Fee paid previously with preliminary materials. | ||||
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act | |||
| ||||
| ||||
| ||||
| ||||
MKS INSTRUMENTS, INC.
2 Tech Drive, Suite 201
Andover, Massachusetts 01810
March 27, 202031, 2022
Dear Shareholder:
You are cordially invited to attend the 20202022 Annual Meeting of Shareholders of MKS Instruments, Inc. to be held on Tuesday, May 12, 202010, 2022 at 10:00 a.m., Eastern Time, at MKS Instruments, Inc.,our headquarters at 2 Tech Drive, Suite 201, Andover, Massachusetts 01810.
The attached notice of Annual Meeting and proxy statement describe the business to be transacted at the Annual Meeting and provide additional information about us that you should know when voting your shares. The principal business at the Annual Meeting will be (i) the election of twothree Class IIIII Directors, each for a three-year term, (ii) the approval of our 2022 Stock Incentive Plan, (iii) the approval, on an advisory basis, of executive compensation and (iii)(iv) the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2020.2022.
Whether or not you plan to attend the Annual Meeting, please carefully review the attached proxy materials and take the time to cast your vote. If you attend the Annual Meeting, you may vote in person if you wish, even if you have previously voted, in which case your proxy vote will be revoked.
On behalf of MKS, I would like to express our appreciation for your continued interest in our Company.
Sincerely, |
JOHN T.C. LEE President and Chief Executive Officer |
MKS INSTRUMENTS, INC.
2 Tech Drive, Suite 201
Andover, Massachusetts 01810
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 10, 2022 at 10:00 A.M. EASTERN TIME
To our Shareholders:
The 2022 Annual Meeting of Shareholders of MKS INSTRUMENTS, INC., a Massachusetts corporation, will be held on Tuesday, May 10, 2022 at 10:00 a.m., Eastern Time, at our headquarters at 2 Tech Drive, Suite 201, Andover, Massachusetts 01810, for the following purposes:
1.
| The
| ||||||||
2.
| |||||||||
4.
|
The shareholders will also act on any other business as may properly come before the meeting.
We provide access to our proxy materials over the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we mail to our shareholders a Notice of Internet Availability of Proxy Materials, which we refer to as the Notice. We are mailing the Notice on or about March 31, 2022, and it contains instructions on how to access the proxy statement and our Annual Report for the fiscal year ended December 31, 2021, which we refer to as the 2021 Annual Report, over the Internet. The Notice also contains instructions on how our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 2021 Annual Report, and a form of proxy card or voting instruction card. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.
The Board of Directors has fixed the close of business on March 2, 2022 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. Your vote is important no matter how many shares you own. Whether or not you expect to attend the meeting, we urge you to vote your shares.
If you are a shareholder of record, you may vote at, the Annual Meeting and any adjournment or postponement thereof. Your vote is important no matter how many shares you own. Whether you expect to attend the meeting or not, please vote your shares by using the Internet or calling the toll-free telephone number as described in the instructions included in your Notice, by calling the toll-free telephone number, or, if you received a paper copy of the proxy materials, by completing, signing, dating and returning your proxy card or voting instruction card. If you are a beneficial shareholder (i.e. the shares you own are held in “street name” by a bank, broker or other nominee), you may vote by following the instructions your broker, bank or other nominee provides to you. Your prompt response is necessary to ensure that your shares are represented at the meeting. You can change your vote and revoke your proxy any time before the polls close at the meeting by following the procedures described in the accompanying proxy statement.
By Order of the Board of Directors, |
KATHLEEN F. BURKE Secretary |
Andover, Massachusetts
March 31, 2022
1 | ||||
1 | ||||
2 | ||||
2 | ||||
3 | ||||
3 | ||||
3 | ||||
3 | ||||
4 | ||||
4 | ||||
9 | ||||
11 | ||||
11 | ||||
12 | ||||
13 | ||||
Why We Are Requesting Shareholder Approval of the 2022 Stock Incentive Plan | 13 | |||
13 | ||||
14 | ||||
15 | ||||
24 | ||||
PROPOSAL FOUR – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 25 | |||
25 | ||||
25 | ||||
25 | ||||
26 | ||||
26 | ||||
26 | ||||
27 | ||||
Board of Director Meetings and Committees of the Board of Directors | 27 | |||
30 | ||||
31 | ||||
31 | ||||
31 | ||||
32 | ||||
32 | ||||
33 | ||||
33 | ||||
33 | ||||
33 | ||||
34 | ||||
34 | ||||
35 | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 37 | |||
39 |
i
42 | ||||
42 | ||||
52 | ||||
53 | ||||
53 | ||||
55 | ||||
55 | ||||
56 | ||||
57 | ||||
57 | ||||
63 | ||||
64 | ||||
64 | ||||
Deadline for Submission of Shareholder Proposals for the 2023 Annual Meeting | 64 | |||
64 | ||||
A-1 |
ii
MKS INSTRUMENTS, INC.
2 Tech Drive, Suite 201
Andover, Massachusetts 01810
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of MKS Instruments, Inc., a Massachusetts corporation, for use at the 2022 Annual Meeting of Shareholders to be held on Tuesday, May 10, 2022 at 10:00 a.m., Eastern Time, at our headquarters at 2 Tech Drive, Suite 201, Andover, Massachusetts 01810, and at any adjournment or postponement thereof, which we refer to as the 2022 Annual Meeting. References in this proxy statement to “we,” “us,” the “Company” or “MKS” refer to MKS Instruments, Inc. and its consolidated subsidiaries.
All proxies will be voted in accordance with the applicable shareholder’s instructions. If no choice is specified in the proxy, the shares will be voted in favor of the matters set forth in the accompanying Notice of 2022 Annual Meeting of Shareholders. Any proxy may be revoked by a shareholder at any time before its exercise by delivery of written revocation to the Secretary of MKS or by voting during the 2022 Annual Meeting. Attendance at the 2022 Annual Meeting will not in itself be deemed to revoke a proxy.
We provide access to our proxy materials over the Internet under the “notice and access” rules of the U.S. Securities and Exchange Commission, which we refer to as the SEC. As a result, we mail to our shareholders a Notice of Internet Availability of Proxy Materials, which we refer to as the Notice. We are mailing the Notice on or about March 31, 2022. The Notice contains instructions on how to access the proxy statement and our Annual Report for the fiscal year ended December 31, 2021, which we refer to as the 2021 Annual Report, over the Internet. The Notice also contains instructions on how our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 2021 Annual Report, and a form of proxy card or voting instruction card. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 10, 2022
This proxy statement and the 2021 Annual Report are available for viewing, printing and downloading at investor.mksinst.com/annual-meeting-materials.
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2021 AS FILED WITH THE SEC, EXCLUDING EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST TO: INVESTOR RELATIONS DEPARTMENT, MKS INSTRUMENTS, INC., 2 TECH DRIVE, SUITE 201, ANDOVER, MA 01810. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTING OF SECURITIES AND VOTES REQUIRED
At the close of business on March 2, 2022, the record date for the determination of shareholders entitled to notice of, and to vote at, the 2022 Annual Meeting, there were issued and outstanding and entitled to vote 55,562,986 shares of our common stock, no par value per share, which we refer to as our Common Stock. Each outstanding share entitles the record holder to one vote on each matter submitted at the 2022 Annual Meeting.
In order to transact business at the 2022 Annual Meeting, we must have a quorum. Under our Amended and Restated By-Laws, the holders of a majority of the shares of Common Stock issued and outstanding and entitled to vote at the 2022 Annual Meeting shall constitute a quorum for the transaction of business at the 2022 Annual Meeting. Shares of Common Stock held by shareholders present at the 2022 Annual Meeting or represented by proxy (including “broker non-votes” and shares that abstain or do not vote with respect to a particular proposal to be voted upon) will be counted for purposes of determining whether a quorum exists at the 2022 Annual Meeting. If a quorum is not present, the meeting will be adjourned until a quorum is obtained.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 1 |
The affirmative vote of the holders of a plurality of the votes cast on the matter is required for the election of directors (Proposal One); provided, however, any director nominee who receives a greater number of withhold votes than affirmative votes, which we refer to as a Majority Withhold Vote, in an uncontested election must offer to tender to the Board of Directors his or her resignation promptly following the certification of election results. The Board of Directors must accept or reject a resignation within 90 days following the certification of election results and publicly disclose its decision. Accordingly, the nominees who receive the highest number of votes of the shares present, in person or by proxy, and entitled to vote shall be elected to the available Class II Director positions, and in the event any nominee receives a Majority Withhold Vote, the resignation policy will apply as summarized here and as set forth in Section B.4 of our Corporate Governance Guidelines, which are posted on our website at https://www.mksinst.com/corporate-governance under Corporate Governance Documents. The vote on our 2022 Stock Incentive Plan (Proposal Two), the advisory vote on executive compensation (Proposal Three) and the ratification of PricewaterhouseCoopers LLP (Proposal Four) require the affirmative vote of the holders of a majority of the votes cast on the matter. Proposal Three is a non-binding proposal.
Shares held by shareholders who abstain from voting as to a particular matter, and “broker non-votes,” which are shares held in “street name” by banks, brokers or other nominees who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular non-routine matter, including the election of directors, the vote on our 2022 Stock Incentive Plan and the advisory vote on executive compensation, will not be counted as votes in favor of, or as votes cast for, a matter. Accordingly, abstentions and broker non-votes will have no effect on the voting on a matter that requires the affirmative vote of a majority of the votes cast on the matter. If the shares you own are held in street name by a bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee, as the record holder of your shares, is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the instructions your bank, brokerage firm or other nominee provides to you.
For additional details about voting and attending the 2022 Annual Meeting, please see “Voting and Meeting Information” below.
VOTING AND MEETING INFORMATION
The following sections provide additional details about voting and attending the 2022 Annual Meeting.
If you are a shareholder of record, you may vote your shares in any of the following ways:
Internet | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
You may vote your shares in advance of the 2022 Annual Meeting via the Internet by accessing our online portal at www.proxyvote.com. Proxies submitted via the Internet must be received by 11:59 p.m. Eastern Time on May 9, 2022. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
You may vote your shares in advance of the 2022 Annual Meeting telephonically by calling 1-800-690-6903 and following the instructions on your proxy card. Proxies submitted by telephone must be received by 11:59 p.m. Eastern Time on May 9, 2022. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
If you received a paper copy of the proxy materials, you may vote your shares in advance of the 2022 Annual Meeting by completing, signing, dating and returning your proxy card or voting instruction card. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In-Person at the
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
You may vote your shares
|
|
|
If you are a beneficial shareholder (i.e. the shares you own are held in “street name” by a bank, broker or other nominee), your bank, broker or other nominee will provide a vote instruction form to you with this proxy statement, which you may use to direct how your shares will be voted. You must instruct your bank, broker or other nominee how to vote with respect to the election of directors, the 2022 Stock Incentive Plan and the executive compensation advisory vote; your bank, broker or other nominee cannot exercise its discretion to vote on these matters on your behalf. Many banks and brokers offer the option of voting over the Internet or by telephone, instructions for which would be provided by your bank or broker on your vote instruction form. You may only vote your shares in-person at the 2022 Annual Meeting if you obtain a proxy issued in your name from your bank, broker or other nominee. For instructions on how to revoke or change your vote, you should contact your bank, broker or other nominee.
Attending the 2022 Annual Meeting
Admission of shareholders of record and beneficial shareholders to the 2022 Annual Meeting will begin at 9:45 a.m. Eastern Time. Shareholders of record who wish to attend the meeting should be prepared to present photo identification and beneficial shareholders who wish to attend the meeting should be prepared to present photo identification and a letter from their bank, broker or nominee confirming beneficial ownership of shares of our Common Stock. In addition, all shareholders will be required to comply with any federal, state and/or local government guidance related to COVID-19 in force on the day of the meeting.
You can view and download our proxy materials and 2021 Annual Report at our online portal, available to shareholders at www.proxyvote.com.
During the 2022 Annual Meeting, a complete list of our shareholders of record will be available for viewing by shareholders for any purpose germane to the 2022 Annual Meeting. Shareholders submitting any such request will be asked to include the 16-digit control number found on their proxy card, voting instruction card or Notice.
Whether or not you plan to attend the 2022 Annual Meeting, we urge you to vote your shares over the Internet or by telephone, or complete, sign, date and return the proxy card in the accompanying postage-prepaid envelope if you received a printed proxy card. A prompt response will greatly facilitate arrangements for the 2022 Annual Meeting and your cooperation will be appreciated. Shareholders who attend the 2022 Annual Meeting may vote their shares at the 2022 Annual Meeting even if they have previously sent in their proxies.
PROPOSED ACQUISITION OF ATOTECH
As announced on July 1, 2021, the Company entered into a definitive agreement to acquire Atotech Limited, or Atotech, a leading process chemicals technology company, which we refer to as the Acquisition. The closing of the proposed Acquisition is subject to satisfaction of certain closing conditions, including receipt of required regulatory approval from China and approval from the Royal Court of Jersey.
Subject to the closing of the proposed Acquisition, Atotech will form a new, fourth division of the Company. On October 25, 2021, the Board of Directors of the Company appointed James A. Schreiner, who currently serves as the Company’s Senior Vice President and Chief Operating Officer, to lead this new division as Senior Vice President and Chief Operating Officer, Atotech Division, subject to and effective upon the closing of the proposed Acquisition. In addition, on October 25, 2021, the Board of Directors elected Geoffrey Wild as a Class III Director, effective immediately following the closing of the proposed Acquisition, to fill the existing vacancy on the Board of Directors, and to serve until the 2023 Annual Meeting of Shareholders. Mr. Wild is currently the President and Chief Executive Officer and a director of Atotech.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 3 |
PROPOSAL ONE – ELECTION OF DIRECTORS
Our Amended and Restated By-Laws provide for a Board of Directors that is divided into three classes. The term of the Class II Directors expires at the 2022 Annual Meeting, the term of the Class III Directors expires at the 2023 Annual Meeting of Shareholders and the term of the Class I Directors expires at the 2024 Annual Meeting of Shareholders. Our Board of Directors, upon the recommendation of our Nominating and Corporate Governance Committee, has nominated John T.C. Lee, Jacqueline F. Moloney and Michelle M. Warner to serve as Class II Directors for a term to expire at the 2025 Annual Meeting of Shareholders. Dr. Lee, Ms. Moloney and Ms. Warner currently serve as directors. Each nominee has consented to being named herein and, if elected, to serve as a director until his or her successor is duly elected and qualified.
There is currently one vacancy on the Board of Directors, which our Amended and Restated By-Laws provide shall be filled solely by the affirmative vote of a majority of the remaining directors then in office. To fill this vacancy, as described under the heading “Proposed Acquisition of Atotech,” on October 25, 2021, the Board of Directors elected Geoffrey Wild, the current President and Chief Executive Officer and a director of Atotech, as a Class III director, effective immediately following the closing of the proposed Acquisition.
Shares represented by all proxies received by the Board of Directors and not so marked as to withhold authority to vote for an individual director will be voted (unless one or more nominees are unable or unwilling to serve) for the election of the nominees named below. The Board of Directors expects that each of the nominees named below will be available for election, but if any of them is not a candidate at the time the election occurs, it is intended that such proxies will be voted for the election of a substitute nominee to be designated by the Board of Directors. Proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE ELECTION OF JOHN T.C. LEE, JACQUELINE F. MOLONEY AND MICHELLE M. WARNER TO SERVE AS CLASS II DIRECTORS IS IN THE BEST INTERESTS OF MKS AND OUR SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE “FOR” ALL NOMINEES.
Set forth below are the names and ages of each member of our Board of Directors (including those who are nominees for election as Class II Directors), the positions and offices held, principal occupation and business experience during at least the past five years, the names of other publicly held companies on which the individual currently serves, or in the past five years has served, as a director, and the year each member of our Board of Directors joined our Board. We have also included information about each individual’s specific experience, qualifications, attributes or skills that led the Board of Directors to conclude that he or she should serve as a director of MKS. Information with respect to the number of shares of Common Stock beneficially owned by each individual, directly or indirectly, as of March 2, 2022, appears in this proxy statement under the heading “Security Ownership of Certain Beneficial Owners and Management.”
Name | Age | Position | Audit Committee | Compensation | Nominating Corporate | Class to Which | ||||||||
Rajeev Batra | 54 | Director | I | |||||||||||
Peter J. Cannone III | 56 | Director | III | |||||||||||
Gerald G. Colella | 65 | Chair | I | |||||||||||
Joseph B. Donahue | 63 | Director | III | |||||||||||
John T.C. Lee* | 59 | Director, President and CEO | II | |||||||||||
Jacqueline F. Moloney* | 68 | Lead Director | II | |||||||||||
Elizabeth A. Mora | 61 | Director | I | |||||||||||
Michelle M. Warner* | 55 | Director | II |
Chair |
Member |
* | Nominee for election at the 2022 Annual Meeting |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 4 |
Name | Year Became Director | Background and Qualifications | ||||
Rajeev Batra | 2018 | Mr. Batra has served as President of Siemens Digital Industries U.S., an innovation leader in automation and digital transformation in the process and discrete industries, since April 2019. Previously, Mr. Batra served in various senior roles at Siemens U.S., including President of the Digital Factory Division from October 2014 to April 2019, President of the Industry Automation Division from October 2009 to October 2014, Vice President and General Manager, Automation & Motion Division from October 2007 to October 2009, and Vice President and General Manager, Automotive & Aerospace Vertical Markets from October 2002 to October 2007. Mr. Batra is also a director of Amsted Industries, a diversified global manufacturer of industrial components serving primarily the railroad, vehicular, and construction and building markets, Vice Chair of the Board of Trustees and a member of the Executive Committee of the Manufacturers Alliance, a non-profit manufacturing leadership network that offers benchmarking, professional development, and research services, and a member of the Board of Governors of NEMA (National Electrical Manufacturers Association), a trade association of electrical equipment manufacturers, where he previously served as Chair. Mr. Batra received a B.S. in Electrical Engineering from Lawrence Technological University and an M.B.A. from the University of Michigan. Mr. Batra’s 20-plus years in executive leadership roles in broad industrial markets, his extensive portfolio experience in the automation, digitalization and I4.0/IoT areas, and his current role as President of Siemens Digital Industries U.S., qualify him to serve as a member of our Board of Directors. | ||||
Peter J. Cannone | 2021 | Mr. Cannone has served as Chairman and Chief Executive Officer of Demand Science, a global leading revenue intelligence platform delivering a comprehensive suite of business to business solutions, since August 2020. From April 2019 to July 2020, he served as General Partner of Optum Ventures, a healthcare-focused venture capital firm. From July 2018 to April 2019, he served as Chief Executive Officer of UpCurve, Inc., a management company, where he oversaw portfolio firms that provided critical digital, cloud, financial and healthcare solutions to small and midsize businesses. From November 2015 to December 2018, he served as Chief Executive Officer of ThriveHive, a provider of digital marketing services and one of UpCurve’s portfolio firms. From January 2007 to November 2014, he served as President and Chief Executive Officer of OnForce, a leading vendor of SaaS technology-enabled workforce solutions. From 1997 to 2006, he held senior management positions at PC Connection, Inc. and MicroWarehouse. Mr. Cannone holds a B.A. in Economics from the University of Massachusetts, Amherst, and an M.B.A. from Rensselaer Polytechnic Institute. Mr. Cannone’s 25 years of experience in executive leadership and senior management roles, including direct knowledge and experience in mergers and acquisitions, capital raising and financial planning and analysis, qualifies him to serve as a member of our Board of Directors. |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 5 |
Name | Year Became Director | Background and Qualifications | ||||
Gerald G. Colella | 2014 | Mr. Colella has served as our Chair of the Board of Directors since May 2020. He served as our Chief Executive Officer from January 2014 until his retirement in January 2020. Additionally, he served as our President from February 2013 to May 2018. He served as our Chief Operating Officer from January 2010 until December 2013 (additionally serving as Vice President until his promotion to President in February 2013). He served as our Vice President and Chief Business Officer from April 2005 until January 2010. Mr. Colella joined MKS in 1983 and progressed from materials planning and logistics to leading our global business and service operations before assuming his senior management roles. Mr. Colella has served as a director of Columbus McKinnon Corporation, a global leader in intelligent motion solutions, since November 2021 and Mr. Colella previously served as a director of GCP Applied Technologies Inc. from 2017 to 2020. He holds a B.A. in Secondary Education from the University of Massachusetts and an M.B.A. from Southern New Hampshire University. Mr. Colella’s 35-plus years of experience within the Company, including direct knowledge and experience in operations, business strategy and growth, both organically and by acquisitions, gives him particularly deep insight into our organization. | ||||
Joseph B. Donahue | 2020 | Mr. Donahue served as Executive Vice President and Chief Operating Officer of TE Connectivity Ltd., a publicly held manufacturer of connectors, sensors and minimally invasive surgical assemblies for the automotive, industrial, medical, aerospace and communications/consumer markets, from 2011 until 2017. He concurrently served as President of the Network Solutions segment of TE Connectivity from August 2012 until the divestiture of that business in August 2015. He also served at TE Connectivity (formerly Tyco Electronics Ltd.), including as President, Transportation Solutions segment from 2010 through July 2012, President of the Global Automotive Division from 2008 through 2009 and Senior Vice President of the same division beginning in September 2007. From September 2006 to August 2007, he was Group Vice President, Woodcoatings Division, for Valspar Corporation, a manufacturer of commercial and industrial coatings. Over the prior 16 years, Mr. Donahue held a variety of senior management roles at TE Connectivity and AMP Incorporated. Mr. Donahue holds a B.S. in Biological Sciences and an M.S. in Plastics Engineering from the University of Massachusetts, Lowell. He also holds an M.S. in Manufacturing Systems Engineering from Lehigh University. Mr. Donahue’s extensive experience in executive leadership roles for companies serving multiple markets, including industrial, as well as his experience managing all aspects of company global operations, including supply chain, manufacturing, environment, health and safety, and lean, his international experience having lived and worked in Japan, China and Germany, and his merger and acquisition experience qualify him to serve as a member of our Board of Directors. |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 6 |
Name | Year Became Director | Background and Qualifications | ||||
John T.C. Lee | 2020 | Dr. Lee has served as our President and Chief Executive Officer since January 2020. From September 2019 to January 2020, he served as our President, from May 2018 to September 2019, he served as our President and Chief Operating Officer, and from November 2016 to May 2018, he served as our Senior Vice President and Chief Operating Officer. From January 2014 until October 2016, Dr. Lee served as our Senior Vice President of Business Units. From November 2012 until December 2013, Dr. Lee served as our Senior Vice President, Controls, HPS (our integrated process solutions business), and Pressure, Flow, Measurement and Control, or PFMC. From January 2011 to November 2012, he served as Senior Vice President, Controls and PFMC, and from October 2007 to January 2011, he served as our Group Vice President, Controls and Information Technology products. Prior to joining MKS, Dr. Lee served as the Managing Director of Factory Technology and Projects within the Solar Business Group at Applied Materials, Inc., a global leader providing processing equipment to the semiconductor and display markets, from February 2007 until October 2007. From 2002 until February 2007, he served as General Manager of the Cleans Product Group and the Maydan Technology Center at Applied Materials. Prior to Applied Materials, Dr. Lee served from 1997 until 2002 as Research Director of the Silicon Fabrication Research Department at Lucent Technologies, Inc., a voice, data and video communications provider, and from 1991 until 1997 as a Member of the Technical Staff in the Plasma Processing Research Group within Bell Labs. He has served as Vice Chair and a member of the Executive Committee of the Board of Directors of the Massachusetts High Technology Council since 2021. Dr. Lee holds a B.S. from Princeton University and both an M.S.C.E.P. and a Ph.D. from the Massachusetts Institute of Technology, all in Chemical Engineering. Dr. Lee’s education combined with his technical understanding of our numerous and varied complex products, gained from over fourteen years of experience working in progressive leadership roles at our Company, and previously at Applied Materials, one of our largest customers, provide him with a unique leadership perspective. | ||||
Jacqueline F. Moloney | 2016 | Ms. Moloney has served since 2015 as the Chancellor of the University of Massachusetts, Lowell, a public university with over 18,000 students, and served as its Executive Vice Chancellor from 2007 to 2015. Ms. Moloney has been a tenured professor at the University since 1994 and served as the Dean of Online and Continuing Education from 1994 to 2007. Since 2008, Ms. Moloney has served as a director and |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 7 |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 8 |
Director Skills, Experience and Background
MKS is a global provider of instruments, systems, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity for our customers. Many of the markets for our products are cyclical and highly competitive. As we discuss below under the heading “Corporate Governance – Director Candidates,” the Nominating and Corporate Governance Committee is responsible for evaluating the appropriate skills, experience and background that MKS seeks in Board members in the context of our business and the existing composition of the Board of Directors. This evaluation includes numerous factors, such as integrity, business acumen, knowledge of our business and industry, effectiveness, experience, diligence, conflicts of interest and the ability to act in the interests of all shareholders.
Listed below are the skills and experience that we consider important for our directors given our current business and organizational structure. The continuing directors’ and director nominees’ biographies and the matrix below note each director’s and director nominee’s relevant experience, qualifications and skills relative to this list.
Skills/Competencies
• | Industry Experience |
A significant portion of our sales are derived from products sold to semiconductor capital equipment manufacturers and semiconductor device manufacturers. In addition, our products are used in the industrial technologies, life and health sciences, as well as research and defense markets. Directors with education and experience in semiconductor technology and other industrial technologies provide valuable perspectives on our research and development efforts, competing technologies, the products and processes we develop, our manufacturing and assembly and the markets in which we compete.
• | M&A/Business Development Experience |
Directors with a background in mergers and acquisitions and business development provide insights into developing and implementing strategies for growing our business. Useful experience in this area includes skills in assessing and analyzing the “fit” of a proposed acquisition with our long-term strategy, valuing transactions and assessing management’s integration plans with existing operations.
• | CEO/COO/CFO Experience |
Directors who have served in senior leadership positions are important to us because they have the experience and perspective to analyze, shape, and oversee the execution of important operational and policy issues.
• | Experienced Director |
Directors with public company board experience understand the dynamics and operation of a corporate board, the relationship of a public company board to the Chief Executive Officer and other executive officers, the legal and regulatory landscape in which public companies must operate, and how to oversee an ever-changing mix of strategic, operational, and compliance-related matters.
• | International Experience |
We are a global organization with manufacturing, research and development, and sales offices in many countries. We sell our products to thousands of customers worldwide and a significant portion of our revenues are from sales to customers in international markets. Our manufacturing facility locations include Austria, Canada, China, France, Germany, Israel, Italy, Romania, Singapore, South Korea and the United States. Because of these factors, directors with international experience can provide valuable business, regulatory and cultural perspectives regarding many important aspects of our business.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 9 |
Functional Background
• | Accounting/Finance |
Knowledge of financial markets, financing operations, and accounting and financial reporting processes is very important as it assists our directors in understanding, advising on, and overseeing our capital structure, financing and investing activities as well as our financial reporting and internal controls.
• | Engineering/R&D |
Our products incorporate sophisticated technologies to measure, monitor, deliver, analyze, power and control complex semiconductor and advanced manufacturing processes, thereby enhancing uptime, yield and throughput for our customers. We have developed, and continue to develop, new products to address industry trends. Directors with education and experience in engineering and research and development provide valuable perspectives regarding our research and development efforts, competing technologies, the products and processes we develop, our manufacturing and assembly and the markets in which we compete.
• | Regulatory/Legal/Governance |
Directors with a regulatory, legal or governance background can assist the Board of Directors in fulfilling its oversight responsibilities regarding our compliance, engagement with regulatory authorities, and governance structure.
• | Marketing/Sales |
Directors with marketing, brand management and sales experience can provide expertise and guidance as we seek to expand the markets in which we compete, grow sales and strengthen our brands.
• | Operations |
As we operate in many cyclical markets, with rapid demand changes, and have a broad footprint of international manufacturing operations, understanding of and experience with manufacturing and other operational processes are valuable assets to our Board of Directors.
• | Digitization/Cybersecurity/IoT |
The markets we serve increasingly rely on digitization and electronic connectivity as growth drivers, including, for example, the Internet of Things, or IoT. Further, we rely on various information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information and to carry out and support a variety of business activities, and the safety and security of our digital information is paramount to our success. Directors who have a sophisticated understanding of global digitization and/or cybersecurity literacy can assist with the Board of Directors’ oversight of driving future growth and securing our digital information in the rapidly evolving digital landscape.
Personal Demographics
Representation of a mix of ages, gender and racially diverse perspectives expand the Board of Directors’ understanding of the needs and perspectives of our customers, suppliers, employees and shareholders. In addition, we consider the tenure each director has on our Board of Directors to ensure the continued independence and effectiveness of the Board of Directors.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 10 |
The below matrix and the directors’ biographies note each director’s relevant experience, qualifications and skills relative to the skills and experience we consider important for our directors.
Directors | ||||||||||||||||
1 | 2 | 3 | 5 | 6 | 6 | 7 | 8 | |||||||||
SKILL/COMPETENCIES | ||||||||||||||||
• Industry Experience | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||
• M&A/Business Development Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
• CEO/COO/CFO Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
• Experienced Public Company Director | ✓ | ✓ | ✓ | |||||||||||||
• International Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
FUNCTIONAL BACKGROUND | ||||||||||||||||
• Accounting/Finance | ✓ | |||||||||||||||
• Engineering/R&D | ✓ | ✓ | ✓ | |||||||||||||
• Regulatory/Legal/Governance | ✓ | ✓ | ||||||||||||||
• Marketing/Sales | ✓ | ✓ | ✓ | |||||||||||||
• Operations | ✓ | ✓ | ✓ | |||||||||||||
• Digitization/Cybersecurity/loT | ✓ | ✓ | ||||||||||||||
PERSONAL DEMOGRAPHICS | ||||||||||||||||
• Tenure (years) | 4 | 1 | 8 | 2 | 2 | 6 | 10 | 3 | ||||||||
• Age | 54 | 55 | 65 | 63 | 59 | 68 | 61 | 55 |
The below matrix shows diversity statistics for our directors as of March 31, 2022.
Total Number of Directors | 8 | |||
Female | Male | |||
PART I: GENDER IDENTITY | ||||
• Gender Identity | 3 | 5 | ||
PART II: DEMOGRAPHIC BACKGROUND | ||||
• Asian | 0 | 2 | ||
• White | 3 | 3 | ||
• LGBTQ+ | 1 |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 11 |
PROPOSAL TWO – APPROVAL OF 2022 STOCK INCENTIVE PLAN
Why We Are Requesting Shareholder Approval of the 2022 Stock Incentive Plan
We are asking shareholders to approve the MKS Instruments, Inc. 2022 Stock Incentive Plan, which we refer to as the 2022 Plan. Our Board of Directors believes that our success depends, in large part, on our ability to maintain a competitive position by attracting, retaining and motivating key employees with experience and ability. We believe that our stock-based compensation programs are central to this objective. On February 7, 2022, upon the recommendation of the Compensation Committee, and subject to shareholder approval, the Board of Directors adopted the 2022 Plan. The 2022 Plan is intended to replace our 2014 Stock Incentive Plan, which we refer to as the Prior Plan, which expires by its terms on May 5, 2024. Upon the expiration of the Prior Plan, all then-outstanding awards under the Prior Plan will remain in effect, but no additional awards may be made under the Prior Plan. If our shareholders approve the 2022 Plan at the 2022 Annual Meeting, then we will not grant any new awards under the Prior Plan after the 2022 Annual Meeting; however, awards outstanding under the Prior Plan will remain in effect. The 2022 Plan provides for awards for up to 6,600,000 shares of Common Stock minus the number of shares of Common Stock subject to any equity awards granted by us under the Prior Plan after March 2, 2022 but before the 2022 Plan is approved by shareholders, which we refer to as the Prior Plan Interim Period Grants.
As of March 2, 2022, (i) an aggregate of 439,153 shares of our Common Stock were subject to outstanding restricted stock units, or RSUs, granted under the Prior Plan and under RSUs that we assumed in connection with our acquisitions of Newport Corporation, or Newport, and Electro Scientific Industries, Inc., or ESI, and (ii) 12,206,539 shares of our Common Stock were available for future awards under the Prior Plan. In addition, (i) stock appreciation rights, or SARs, with respect to 12,539 shares of our Common Stock were outstanding under the equity plan that we assumed in connection with our acquisition of Newport, with a weighted-average remaining term of 0.21 years and a weighted-average measurement price of $31.13 per share, and (ii) no shares of our Common Stock were subject to outstanding performance-based RSUs granted under the Prior Plan.
If shareholders approve the 2022 Plan, awards may be made under the 2022 Plan for up to 6,600,000 shares of our Common Stock, subject to adjustment in the event of stock splits and other similar events and which number of shares of Common Stock will be reduced due to the Prior Plan Interim Period Grants as described above. We expect that the proposed share pool under the 2022 Plan, even though lower than the existing share pool under the Prior Plan, will allow us to continue to grant equity awards at our historic rates for approximately five to six years, but may vary based on changes in participation and MKS stock price.
We believe that our stock-based compensation programs have been integral to our success in the past and will be important to our ability to succeed in the future. If the 2022 Plan is not approved, we will not be able to make long-term equity incentive awards under a shareholder-approved equity incentive plan after the expiration of the Prior Plan on May 5, 2024. Therefore, we consider approval of the 2022 Plan vital to our future success. ACCORDINGLY, THE BOARD OF DIRECTORS BELIEVES ADOPTION OF THE 2022 PLAN IS IN THE BEST INTERESTS OF MKS AND OUR SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2022 PLAN.
No liberal share recycling.The 2022 Plan prohibits the re-granting of (i) shares withheld or delivered to satisfy the exercise price of an award or to satisfy tax withholding obligations, (ii) shares that were subject to a SAR and were not issued upon the net settlement or net exercise of such award, or (iii) shares repurchased on the open market using proceeds from the exercise of an award.
Fungible Share Pool. Full-value awards count against the shares available for grant under the 2022 Plan as 1.91 shares for each share of our Common Stock subject to the award.
No Repricing of Awards.The 2022 Plan prohibits the direct or indirect repricing of stock options or SARs without shareholder approval.
No Discounted Options or SARs. All options and SARs must have an exercise or measurement price that is at least equal to the fair market value of the underlying Common Stock on the date of grant.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 13 |
No Reload Options or SARs.No options or SARs granted under the 2022 Plan may contain a provision entitling the award holder to the automatic grant of additional options or SARs in connection with any exercise of the original option or SAR.
No Dividend Equivalents on Options or SARs.No options or SARs granted under the 2022 Plan may provide for the payment or accrual of dividend equivalents.
Dividends and Dividend Equivalents on Restricted Stock, Restricted Stock Units and Other-Stock Based Awards Not Paid Until Award Vests. Any dividends or dividend equivalents paid with respect to restricted stock, RSUs or other stock-based awards will be subject to the same restrictions on transfer and forfeitability as the award with respect to which it is paid.
Limit on Non-Employee Director Compensation.The maximum aggregate amount of cash earned or paid and value of awards (calculated based on grant date fair value for financial reporting purposes) granted to any non-employee director in any calendar year may not exceed $750,000 (excluding fees related to regulatory compliance). Exceptions to these limitations may only be made by our Board of Directors in extraordinary circumstances provided that the non-employee director receiving any additional compensation does not participate in the decision to award such compensation.
Material Amendments Require Shareholder Approval. Shareholder approval is required prior to an amendment to the 2022 Plan that would (i) materially increase the number of shares authorized, (ii) expand the types of awards that may be granted or (iii) materially expand the class of participants eligible to participate.
Administered by an Independent Committee.The 2022 Plan is administered by the Compensation Committee, which is made up entirely of independent directors.
Information Regarding Overhang and Dilution
In developing our share request for the 2022 Plan and analyzing the impact of utilizing equity as a means of compensation on our shareholders, we considered both our “overhang” and our “burn rate.”
Overhang is a measure of potential dilution, which we define as the sum of (i) the total number of shares underlying all equity awards outstanding and (ii) the total number of shares available for future award grants, divided by the number of shares of our Common Stock outstanding. As of March 2, 2022, there were 451,692 shares underlying all equity awards outstanding, 12,206,539 shares available for future awards, and 55,562,986 shares outstanding. Accordingly, our overhang at March 2, 2022 was 23%. Historically, however, MKS has granted all of our equity awards in the form of full-value awards. Applying the fungible share ratio applicable to full-value awards under the 2022 Plan, pursuant to which each full-value equity award reduces the shares available under the 2022 Plan by 1.91 shares, and, assuming our historic grant practices continue, if the 6,600,000 shares of Common Stock proposed to be authorized for grant under the 2022 Plan (which number of shares of Common Stock will be reduced due to the Prior Plan Interim Period Grants as described above) replace the 12,206,539 shares available for future awards in the calculation, our overhang on March 2, 2022 would have been 13%.
Burn rate provides a measure of the potential dilutive impact of our equity award program. Set forth below is a table that reflects our burn rate for the 2021, 2020 and 2019 calendar years as well as an average over those years.
Calendar Year | Awards Granted | Basic Weighted Average Number of Shares of our Common Stock Outstanding | Gross Burn Rate(1) | |||||||
2021 | 228,917 | 55,420,069 | 0.41 | % | ||||||
2020 | 310,028 | 55,095,597 | 0.56 | % | ||||||
2019 | 440,135 | 54,710,842 | 0.80 | % | ||||||
Three-Year Average | 326,360 | 55,075,503 | 0.59 | % |
(1) | We define “Gross Burn Rate” as the
|
|
|
The following is a brief summary of the 2022 Plan, a copy of which is attached as Appendix A to this proxy statement. References to our Board of Directors in this summary shall include the Compensation Committee or any similar committee appointed by our Board of Directors to administer the 2022 Plan.
Types of Awards; Shares Available for Awards; Share Counting Rules
The 2022 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, non-statutory stock options, SARs, restricted stock, RSUs, other stock-based awards and cash awards as described below, which we collectively refer to as awards.
Subject to adjustment in the event of stock splits, stock dividends or similar events, awards may be made under the 2022 Plan (any or all of which awards may be in the form of incentive stock options) for up to 6,600,000 shares of our Common Stock; provided, however, that the number of shares of Common Stock that may be issued under the 2022 Plan will be reduced, on a one-for-one basis, by the number of shares of Common Stock subject to the Prior Plan Interim Period Grants.
The 2022 Plan uses a “fungible share” concept under which each share of our Common Stock subject to awards granted as options and SARs cause one share of our Common Stock per share under the award to be removed from the available share pool, while each share of our Common Stock subject to awards granted as restricted stock, RSUs, or other stock-based awards where the per share purchase price for the award is less than 100% of the fair market value of our Common Stock on the date of grant of the award will cause 1.91 shares of our Common Stock per share under the award to be removed from the available share pool. Shares of our Common Stock covered by awards granted under the 2022 Plan that are returned to the 2022 Plan as described in the following paragraph and become available for issuance pursuant to a new award will be credited back to the pool at the same rates described above.
Subject to adjustment in the event of stock splits, stock dividends or similar events, the maximum number of shares with respect to which awards may be granted to any one participant under the 2022 Plan may not exceed 500,000 shares per calendar year. For purposes of this per-participant limit, the combination of an option in tandem with a SAR is treated as a single award. Each share of our Common Stock subject to an award will be counted as one share for purposes of this limit.
The 2022 Plan provides that the maximum aggregate amount of cash and value of awards (calculated based on grant date fair value for financial reporting purposes) granted to any individual non-employee director in any calendar year may not exceed $750,000. However, fees paid by the Company on behalf of any non-employee director in connection with regulatory compliance and any amounts paid to a non-employee director as reimbursement of an expense will not count against this limit. Exceptions to this limitation may only be made by our Board of Directors in extraordinary circumstances provided that any non-employee director receiving additional compensation does not participate in the decision to award such compensation. This limitation does not apply to cash or awards granted to a non-employee director in his or her capacity as an advisor or consultant to the Company.
For purposes of counting the number of shares available for the grant of awards under the 2022 Plan and the per-participant limit of the 2022 Plan, all shares of Common Stock covered by SARs will be counted against the number of shares available for the grant of awards and against the per-participant limit of the 2022 Plan. However, SARs that may be settled only in cash will not be so counted. Similarly, to the extent that an RSU award may be settled only in cash, no shares will be counted against the shares available for the grant of awards under the 2022 Plan or the per-participant limit of the 2022 Plan. In addition, if we grant a SAR in tandem with an option for the same number of shares of our Common Stock and provide that only one such award may be exercised, which we refer to as a tandem SAR, only the shares covered by the option, and not the shares covered by the tandem SAR, will be so counted, and the expiration of one in connection with the other’s exercise will not restore shares to the 2022 Plan.
Shares covered by awards under the 2022 Plan that expire or are terminated, surrendered, or cancelled without having been fully exercised or are forfeited in whole or in part (including as a result of shares subject to be present at the 2020 Annual Meeting and will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions from shareholders. In the event that the ratification of the selection of PwC as our independent registered public accounting firm is not obtained at the 2020 Annual Meeting, the Board of Directors will reconsider its appointment.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO RATIFY THE SELECTION OF PWC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020 IS IN THE BEST INTERESTS OF MKS AND OUR SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
The Board of Directors has determined that all of the members of the Board of Directors, other than Mr. Colella and Dr. Lee, are independent as defined under the rules of the Nasdaq Stock Market, or Nasdaq.
Since 2005, we have separated the roles of Chief Executive Officer and Chairman of the Board of Directors in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting the strategic direction of the Company and theday-to-day leadership and performance of the Company, while the Chairman of the Board of Directors provides guidance to the Chief Executive Officer, sets the agenda for Board meetings and presides over meetings of the full Board of Directors. Mr. Bertucci, who has been our Chairman of the Board of Directors since 1995, will not be standing forre-election to the Board and, accordingly, his tenure as a director and Chairman will end as of the date of our 2020 Annual Meeting on May 12, 2020. Mr. Colella, our former Chief Executive Officer and current member of our Board of Directors, will assume the role as Chairman at that time.
In addition, the Board of Directors has established the position of Lead Director. Our Corporate Governance Guidelines provide that during any period in which the Chairman of the Board of Directors is not an independent director, and in such other instances as the Board of Directors may determine from time to time, a Lead Director shall be elected by and from the independent directors. While we are not currently obligated under our Corporate Governance Guidelines to have a Lead Director, as our Chairman of the Board of Directors is independent, we will be required to have a Lead Director in May 2020 when Mr. Colella, our former Chief Executive Officer and anon-independent member of our Board of Directors, assumes the role of Chairman. Mr. Beecher, who has been our Lead Director since 2012, will not be standing forre-election to the Board and, accordingly, his tenure as a director and Lead Director will end as of the date of our 2020 Annual Meeting on May 12, 2020. The Board will appoint a new Lead Director at that time.
The primary role of the Lead Director is to serve as a liaison between the independent directors and the Chairman of the Board of Directors and/or the Chief Executive Officer and to represent the interests of the independent directors, as appropriate. Pursuant to our Corporate Governance Guidelines, which are posted on our website atinvestor.mksinst.com in the Corporate Governance tab, the Lead Director shall, among other matters:
|
|
|
such award being repurchased by us at the original issuance price pursuant to a contractual repurchase right) or that result in any shares not being issued (including as a result of a SAR or an RSU that was settleable either in cash or in stock actually being settled in cash) will again be available for the grant of awards under the 2022 Plan (subject, in the case of incentive stock options, to any limitations under the Code). In the case of the exercise of a SAR, the number of shares counted against the shares available for the grant of awards and against the per-participant limit of the 2022 Plan will be the full number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle the SAR upon exercise, and the shares covered by a tandem SAR will not again become available for grant upon the expiration or termination of the tandem SAR.
Shares of Common Stock that are delivered (by actual delivery, attestation or net exercise) to us by a participant to purchase shares of Common Stock upon exercise of an award or to satisfy tax withholding obligations (including shares retained from the award creating the tax obligation) will not be added back to the number of shares available for the future grant of awards under the 2022 Plan. Shares purchased by us on the open market using proceeds from the exercise of an award will not increase the number of shares available for future grant of awards.
In connection with a merger or consolidation of an entity with us or our acquisition of property or stock of an entity, our Board of Directors may grant awards under the 2022 Plan in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof on such terms as our Board of Directors determines appropriate in the circumstances, notwithstanding any limitation on awards contained in the 2022 Plan. No such substitute awards shall count against the overall share limits or any sub-limits of the 2022 Plan, except as required by reason of Section 422 and related provisions of the Code.
Descriptions of Awards
Options. Optionees receive the right to purchase a specified number of shares of Common Stock at a specified exercise price and subject to the other terms and conditions that are specified in connection with the option grant. An option that is not intended to be an “incentive stock option” is a “non-statutory stock option.” Options may not be granted at an exercise price that is less than 100% of the fair market value of our Common Stock on the date of grant. If our Board of Directors approves the grant of an option with an exercise price to be determined on a future date, the exercise price may not be less than 100% of the fair market value of our Common Stock on that future date. Under present law, incentive stock options may not be granted at an exercise price less than 110% of the fair market value in the case of stock options granted to optionees holding more than 10% of the total combined voting power of all classes of our stock or any of our subsidiaries. Under the terms of the 2022 Plan, options may not be granted for a term in excess of ten years (and, under present law, five years in the case of incentive stock options granted to optionees holding greater than 10% of the total combined voting power of all classes of our stock or any of our subsidiaries). The 2022 Plan permits participants to pay the exercise price of options using one or more of the following manners of payment: (i) payment by cash or by check, (ii) except as may otherwise be provided in the applicable option agreement or approved by our Board of Directors, in connection with a “cashless exercise” through a broker, (iii) to the extent provided in the applicable option agreement or approved by our Board of Directors, and subject to certain conditions, by delivery to us of shares of Common Stock owned by the participant valued at their fair market value, (iv) to the extent provided in an applicable non-statutory stock option agreement or approved by our Board of Directors, by delivery of a notice of “net exercise” as a result of which we will retain a number of shares of Common Stock otherwise issuable pursuant to the stock option equal to the aggregate exercise price for the portion of the option being exercised divided by the fair market value of our Common Stock on the date of exercise, (v) to the extent permitted by applicable law and provided for in the applicable option agreement or approved by our Board of Directors, by any other lawful means (but not by a promissory note of the participant), or (vi) by any combination of these forms of payment. No option granted under the 2022 Plan may contain a provision entitling the participant to the automatic grant of additional options in connection with any exercise of the original option. No options granted under the 2022 Plan may provide for the payment or accrual of dividend equivalents.
Stock Appreciation Rights.A SAR is an award entitling the holder, upon exercise, to receive a number of shares of our Common Stock, or cash (or a combination of shares of our Common Stock and cash) determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of our Common
assure that at least two meetings per year of only the independent directors are held and chair any such meetings of the independent directors;
| 16 |
Stock over the measurement price. The 2022 Plan provides that the measurement price of a SAR may not be less than the fair market value of our Common Stock on the date the SAR is granted (provided, however, that if our Board of Directors approves the grant of a SAR effective as of a future date, the measurement price shall not be less than 100% of the fair market value on such future date) and that SARs may not be granted with a term in excess of 10 years. No SARs granted under the 2022 Plan may contain a provision entitling the participant to the automatic grant of additional SARs in connection with any exercise of the original SAR. No SARs granted under the 2022 Plan may provide for the payment or accrual of dividend equivalents.
Limitation on Repricing of Options or SARs. With respect to options and SARs, unless such action is approved by shareholders or otherwise permitted under the terms of the 2022 Plan in connection with certain changes in capitalization and reorganization events, we may not (1) amend any outstanding option or SAR granted under the 2022 Plan to provide an exercise price or measurement price per share that is lower than the then-current exercise price or measurement price per share of such outstanding option or SAR, (2) cancel any outstanding option or SAR (whether or not granted under the 2022 Plan) and grant in substitution therefor new awards under the 2022 Plan (other than certain substitute awards issued in connection with an acquisition by us, described above) covering the same or a different number of shares of our Common Stock and having an exercise price or measurement price per share lower than the then-current exercise price or measurement price per share of the canceled option or SAR, (3) cancel in exchange for a cash payment any outstanding option or SAR with an exercise price or measurement price per share above the then-current fair market value of our Common Stock or (4) take any other action under the 2022 Plan that constitutes a “repricing” within the meaning of the rules of the Nasdaq Stock Market, or Nasdaq.
Restricted Stock Awards.Restricted stock awards entitle recipients to acquire shares of our Common Stock, subject to our right to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) in the event that the conditions specified in the applicable award are not satisfied prior to the end of the applicable restriction period established for such award. Any dividends (whether paid in cash, stock or property) declared and paid by us with respect to shares of restricted stock will be paid to the participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares.
Restricted Stock Unit Awards. RSUs entitle the recipient to receive shares of our Common Stock, or cash equal to the fair market value of such shares, to be delivered at the time such award vests or on a deferred basis pursuant to the terms and conditions established by our Board of Directors. Our Board of Directors may provide that settlement of RSUs will be deferred on a mandatory basis or, at the election of the participant, in a manner that complies with Section 409A of the Code. A participant has no voting rights with respect to any RSU. Our Board of Directors may provide that a grant of RSUs may provide the participant with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of our Common Stock. Any such dividend equivalents may be settled in cash and/or shares of our Common Stock and will be subject to the same restrictions on transfer and forfeitability as the RSUs with respect to which such dividend equivalents are awarded.
Other Stock-Based Awards. Under the 2022 Plan, our Board of Directors may grant other awards of shares of our Common Stock, and other awards that are valued in whole or in part by reference to, or are otherwise based on, shares of our Common Stock or other property, having such terms and conditions as our Board of Directors may determine. We refer to these types of awards as other stock-based awards. Other stock-based awards may be available as a form of payment in settlement of other awards granted under the 2022 Plan or as payment in lieu of compensation to which a participant is otherwise entitled. Other stock-based awards may be paid in shares of our Common Stock or in cash, as our Board of Directors may determine. The award agreements of other stock-based awards may provide the holder of these awards with the right to receive dividend equivalents. Dividend equivalents may be settled in cash and/or shares of our Common Stock and will be subject to the same restrictions on transfer and forfeitability as the other stock-based award with respect to which they are awarded.
Cash Awards. Under the 2022 Plan, the Board of Directors has the right to grant cash-based awards, including awards subject to performance conditions.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 17 |
Performance Conditions. Our Board of Directors may specify that the degree of granting, vesting and/or payout of any award subject to performance-based vesting conditions will be subject to the achievement of one or more of the following performance measures established by the Board of Directors, which may be based on the relative or absolute attainment of specified levels of one or any combination of the following measures (and which may be determined pursuant to generally accepted accounting principles (“GAAP”) or on a non-GAAP basis, as determined by the Board of Directors): net income, earnings before or after discontinued operations, interest, taxes, depreciation and/or amortization, earnings per share, earnings per share before or after discontinued operations, interest, taxes, depreciation and/or amortization, bookings, bookings growth, revenue, revenue growth, operating profit before or after discontinued operations and/or taxes, operating expenses, gross margin, operating margin, profit margin, cost savings, inventory management, working capital, customer satisfaction, product quality, manufacturing objectives, completion of strategic acquisitions/dispositions, receipt of regulatory approvals, cash position, earnings growth, cash flow or cash position, stock price, market share, return on sales, assets, equity or investment, improvement of financial ratings, achievement of balance sheet, income statement or cash flow objectives, total shareholder return or any other performance measure as the Board of Directors may determine. These goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. The Board of Directors may specify that such performance measures will be adjusted to exclude any one or more of (i) extraordinary, non-recurring charges or other events, (ii) gains or losses on the dispositions of discontinued operations, (iii) other non-standard gains or losses, (iv) the cumulative effects of changes in accounting principles, (v) the write-down of any asset, (vi) fluctuation in foreign currency exchange rates, (vii) amortization of acquired intangible assets, (viii) acquisition and divestiture related charges or credits, (ix) litigation or claim judgments or settlements, (x) gain on sale of assets (xi) excess and obsolete inventory adjustments, (xii) tax effects of adjustments, (xiii) the effect of changes in tax laws or other laws affecting reported results, (xiv) charges for restructuring and reorganization programs and (xv) any other factors as the Board of Directors may determine. Such performance measures: (x) may vary by participant and may be different for different awards; (y) may be particular to a participant or the department, branch, line of business, subsidiary or other unit in which the participant works and (z) may cover such period as may be specified by the Board of Directors. The Board of Directors will have the authority to make equitable adjustments to the performance goals in recognition of unusual or non-recurring events affecting the Company or the financial statements of the Company, in response to changes in applicable laws or regulations or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles. Our Board of Directors may adjust the cash or number of shares payable pursuant to a performance award, and the Board of Directors may, at any time, waive the achievement of the applicable performance measures. Notwithstanding its designation as a performance award, no option or SAR will provide for the payment or accrual of dividend equivalents, any dividends declared and paid by the Company with respect to shares of restricted stock will be subject to the same dividend rules for restricted stock awards not designated as a performance award and any right to receive dividend equivalents on an award of RSUs and other stock-based awards will be subject to the same dividend equivalent rules for such awards that are not designated as a performance award.
Eligibility to Receive Awards
All of our employees, officers, and directors, as well as our consultants and advisors, are eligible to receive awards under the 2022 Plan. However, incentive stock options may only be granted to our employees, employees of our present or future parent or subsidiary corporations, and employees of any other entities the employees of which are eligible to receive incentive stock options under the Code.
Transferability of Awards
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered by a participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an incentive stock option, pursuant to a qualified domestic relations order. During the life of the participant, awards are exercisable only by the participant. However, except with respect to awards that are subject to Section 409A of the Code and incentive stock options, our Board of Directors may permit or provide in an award for the gratuitous transfer of the award by the participant to or for the benefit of any immediate family member,
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 18 |
family trust or other entity established for the benefit of the participant and/or an immediate family member thereof if we would be eligible to use a Form S-8 under the Securities Act of 1933, as amended, for the registration of the sale of the Common Stock subject to such award to the proposed transferee. Further, we are not required to recognize any transfer until such time as the participant and the permitted transferee have, as a condition to the transfer, delivered to us a written instrument in form and substance satisfactory to us confirming that such transferee will be bound by all of the terms and conditions of the award. None of the restrictions described in this paragraph prohibit a transfer from the participant to the Company.
No Rights as a Shareholder; Clawback
No participant shall have any rights as a shareholder with respect to any shares of Common Stock to be distributed with respect to an award granted under the 2022 Plan until becoming a record holder of such shares, subject to the terms of an award agreement. In accepting an award under the 2022 Plan, a participant agrees to be bound by any clawback policy that the Company has in effect or may adopt in the future.
Plan Benefits
As of March 2, 2022, seven executive officers (all of whom are also employees) and seven directors (excluding the CEO, who is an executive officer) would be eligible to receive awards under the 2022 Plan. In addition, the 2022 Plan permits grants of awards to employees. As of March 2, 2022, we had approximately 6,000 employees. The granting of awards under the 2022 Plan is discretionary, and the Company cannot now determine the number or type of awards to be granted in the future to any particular person or group.
On March 2, 2022, the last reported sale price of our Company Common Stock on Nasdaq was $153.42.
Administration
The 2022 Plan will be administered by our Board of Directors. Our Board of Directors has the authority to grant awards, to adopt, amend and repeal the administrative rules, guidelines and practices relating to the 2022 Plan that it deems advisable, and to construe and interpret the provisions of the 2022 Plan and any award agreements entered into under the 2022 Plan. Our Board of Directors may correct any defect, supply any omission or reconcile any inconsistency in the 2022 Plan or any award. All actions and decisions by our Board of Directors with respect to the 2022 Plan and any awards made under the 2022 Plan will be made in our Board of Directors’ discretion and will be final and binding on all persons having or claiming any interest in the 2022 Plan or in any award.
Pursuant to the terms of the 2022 Plan, our Board of Directors may delegate any or all of its powers under the 2022 Plan to one or more committees or subcommittees of our Board of Directors. The Board of Directors has authorized the Compensation Committee to administer certain aspects of the 2022 Plan. Awards granted to non-employee directors must be granted and administered by a committee of the Board of Directors, all of the members of which are independent directors as defined by Section 5605(a)(2) or any successor provision of the Nasdaq Marketplace Rules.
Subject to any applicable limitations contained in the 2022 Plan, the Board of Directors, the Compensation Committee, or any other committee to whom the Board of Directors delegates authority, as the case may be, selects the recipients of awards and determines (i) the number of shares of Common Stock, cash or other consideration covered by awards and the terms and conditions of such awards, including the dates upon which such awards become exercisable or otherwise vest, (ii) the exercise or measurement price of awards, if any, and (iii) the duration of awards.
Each award under the 2022 Plan may be made alone or in addition or in relation to any other award. The terms of each award need not be identical, and our Board of Directors need not treat participants uniformly. Our Board of Directors will determine the effect on an award of the disability, death, termination or other cessation of employment or service, authorized leave of absence or other change in the employment or other service status of a participant, and the extent to which, and the period during which, the participant (or the participant’s legal representative, conservator, guardian or designated beneficiary) may exercise rights or receive any benefits under an award. The Board of Directors may at any time provide that any award shall become immediately exercisable in whole or in part, free from some or all restrictions or conditions or otherwise realizable in whole or in part, as the case may be.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 19 |
In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of our Common Stock, other than an ordinary cash dividend, we are required to make equitable adjustments (or make substituted awards, as applicable), in the manner determined by our Board of Directors, to (i) the number and class of securities available under the 2022 Plan, (ii) the share counting rules set forth in the 2022 Plan, (iii) the sub-limit contained in the 2022 Plan, (iv) the number and class of securities and exercise price per share of each outstanding option, (v) the share- and per-share provisions and the measurement price of each outstanding SAR, (vi) the number of shares subject to and the repurchase price per share subject to each outstanding award of restricted stock, and (vi) the share and per-share-related provisions and the purchase price, if any, of each outstanding RSU award and each outstanding other stock-based award.
We will indemnify and hold harmless each director, officer, employee or agent to whom any duty or power relating to the administration or interpretation of the 2022 Plan has been or will be delegated against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with our Board of Directors’ approval) arising out of any act or omission to act concerning the 2022 Plan unless arising out of such person’s own fraud or bad faith.
Amendment of awards. Except as otherwise provided under the 2022 Plan with respect to repricing outstanding stock options or SARs and with respect to actions requiring shareholder approval, our Board of Directors may amend, modify or terminate any outstanding award, including but not limited to, substituting therefor another award of the same or a different type, changing the date of exercise or realization, and converting an incentive stock option to a non-statutory stock option, provided that the participant’s consent to any such action will be required unless our Board of Directors determines that the action, taking into account any related action, does not materially and adversely affect the participant’s rights under the 2022 Plan or the change is otherwise permitted under the terms of the 2022 Plan in connection with a change in capitalization or reorganization event.
Reorganization Events
The 2022 Plan contains provisions addressing the consequences of any reorganization event. A reorganization event is defined under the 2022 Plan as (a) any merger or consolidation of us with or into another entity as a result of which all of our Common Stock is converted into or exchanged for the right to receive cash, securities or other property, or is canceled, (b) any transfer or disposition of all of our Common Stock for cash, securities or other property pursuant to a share exchange or other transaction or (c) our liquidation or dissolution.
Provisions Applicable to Awards Other than Restricted Stock. Under the 2022 Plan, if a reorganization event occurs, our Board of Directors may take any one or more of the following actions as to all or any (or any portion of) outstanding awards other than restricted stock on such terms as our Board of Directors determines (except to the extent specifically provided otherwise in an applicable award agreement or another agreement between a participant and us): (1) provide that such awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (2) upon written notice to a participant, provide that all of the participant’s unvested awards will be forfeited immediately before the reorganization event and/or that all of the participant’s unexercised awards will terminate immediately prior to the consummation of such reorganization event unless exercised by the participant (to the extent then exercisable) within a specified period following the date of such notice, (3) provide that outstanding awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an award shall lapse, in whole or in part prior to or upon such reorganization event, (4) in the event of a reorganization event under the terms of which holders of our Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the reorganization event, which we refer to as the Acquisition Price, make or provide for a cash payment to participants with respect to each award held by a participant equal to (A) the number of shares of our Common Stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such reorganization event) multiplied by (B) the excess, if any, of (I) the Acquisition Price over (II) the exercise, measurement or purchase price of such award and any applicable tax withholdings, in exchange for the termination of such award, provided, that if the Acquisition Price per share (as determined by our Board of Directors) does not exceed the exercise price of the award, then the award will be canceled without any payment of consideration, (5) provide that, in connection with our liquidation or dissolution, awards shall convert
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 20 |
into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings) and (6) any combination of the foregoing. Our Board of Directors is not obligated to treat all awards, all awards held by a participant, or all awards of the same type, identically. Certain RSU awards that are subject to Section 409A of the Code will be settled in accordance with the terms of the applicable award agreement. Our Board of Directors, with reasonable notice to participants holding options or SARs, may impose a limitation on the ability these participants to exercise their awards for the minimum number of days prior to the closing of the reorganization event as is reasonably necessary to facilitate the orderly closing of the reorganization event.
Provisions Applicable to Restricted Stock. Upon the occurrence of a reorganization event other than our liquidation or dissolution, our repurchase and other rights with respect to outstanding restricted stock will inure to the benefit of our successor and will, unless our Board of Directors determines otherwise, apply to the cash, securities or other property which our Common Stock was converted into or exchanged for pursuant to such reorganization event in the same manner and to the same extent as they applied to such restricted stock. However, our Board of Directors may either provide for termination or deemed satisfaction of such repurchase or other rights under the instrument evidencing any restricted stock or any other agreement between a participant and us, either initially or by amendment or provide for forfeiture of such restricted stock if issued at no cost. Upon the occurrence of a reorganization event involving our liquidation or dissolution, except to the extent specifically provided to the contrary in the instrument evidencing any award of restricted stock or any other agreement between the participant and us, all restrictions and conditions on all restricted stock then outstanding shall automatically be deemed terminated or satisfied.
Provisions for Foreign Participants
The Board of Directors may establish one or more sub-plans under the 2022 Plan to satisfy applicable securities, tax or other laws of various jurisdictions. The Board of Directors will establish such sub-plans by adopting supplements to the 2022 Plan containing any limitations on the Board of Directors’ discretion under the 2022 Plan and any additional terms and conditions not otherwise inconsistent with the 2022 Plan as the Board of Directors deems necessary or desirable. All supplements adopted by the Board of Directors will be deemed to be part of the 2022 Plan, but each supplement will only apply to participants within the affected jurisdiction.
Amendment or Termination
If we receive shareholder approval of the 2022 Plan, no award may be granted under the 2022 Plan after May 9, 2032, but awards previously granted may extend beyond that date. Our Board of Directors may amend, suspend or terminate the 2022 Plan or any portion of the 2022 Plan at any time, except that (i) no amendment may be made to the plan to permit an option or SAR to be repriced without shareholder approval and (ii) no amendment that would require shareholder approval under the rules of the national securities exchange on which the Company then maintains its primary listing may be made effective unless and until such amendment has been approved by our shareholders. If the national securities exchange on which the Company then maintains its primary listing does not have rules regarding when shareholder approval of amendments to equity compensation plans is required (or if our Common Stock is not then listed on any national securities exchange), no amendment of the 2022 Plan materially increasing the number of shares authorized under the plan, expanding the types of awards that may be granted under the plan or materially expanding the class of participants eligible to participate in the plan will be effective unless and until the Company’s shareholders approve such amendment. If at any time the approval of our shareholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to incentive stock options, our Board of Directors may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the 2022 Plan adopted in accordance with the procedures described above will apply to, and be binding on the holders of, all awards outstanding under the 2022 Plan at the time the amendment is adopted, provided that our Board of Directors determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of participants under the 2022 Plan. No award will be made that is conditioned on shareholder approval of any amendment to the 2022 Plan unless the award provides that (i) it will terminate or be forfeited if shareholder approval of such amendment is not obtained within no more than 12 months from the date the award was granted and (ii) it may not be exercised or settled (or otherwise result in the issuance of shares of our Common Stock) prior to the receipt of such shareholder approval.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 21 |
If shareholders do not approve the adoption of the 2022 Plan, the 2022 Plan will not go into effect, and the Company will not grant any awards under the 2022 Plan. In this event, the Board of Directors will consider whether to adopt alternative arrangements based on its assessment of the needs of the Company.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax consequences that generally will arise with respect to awards granted under the 2022 Plan. This summary is based on the federal tax laws in effect as of the date of this proxy statement. In addition, this summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Code regarding nonqualified deferred compensation. Changes to these laws could alter the tax consequences described below.
Incentive Stock Options. A participant will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by the Company or its corporate parent or 50% or majority-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Non-statutory Stock Options.” The exercise of an incentive stock option may subject the participant to the alternative minimum tax.
A participant will have income upon the sale of the stock acquired under an incentive stock option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the stock. If a participant sells the stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the stock prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain. This capital gain will be long-term if the participant has held the stock for more than one year and otherwise will be short-term. If a participant sells the stock at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Non-statutory Stock Options.A participant will not have income upon the grant of a non-statutory stock option. A participant will have compensation income upon the exercise of a non-statutory stock option equal to the value of the stock on the day the participant exercised the option less the exercise price. Upon sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.
Stock Appreciation Rights.A participant will not have income upon the grant of a SAR. A participant generally will recognize compensation income upon the exercise of a SAR equal to the amount of the cash and the fair market value of any stock received. Upon the sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the SAR was exercised. This capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Restricted Stock Awards.A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a participant will have compensation income equal to the value of the stock less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the date of grant. If the participant does not make an 83(b) election, then when the stock vests the participant will have compensation income equal to the value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Restricted Stock Units. A participant will not have income upon the grant of an RSU. A participant is not permitted to make a Section 83(b) election with respect to an RSU award. When the RSU vests, the participant will
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 22 |
have income on the vesting date in an amount equal to the fair market value of the stock on the vesting date less the purchase price, if any. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Other Stock-Based Awards. The tax consequences associated with any other stock-based award granted under the 2022 Plan will vary depending on the specific terms of such award. Among the relevant factors are whether or not the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the award, and the participant’s holding period and tax basis for the award or underlying Common Stock.
Tax Consequences to the Company. There will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has compensation income, subject to the limitations of Section 162(m) of the Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE MKS INSTRUMENTS, INC. 2022 STOCK INCENTIVE PLAN.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 23 |
PROPOSAL THREE – ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our shareholders to vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement under the heading “Executive Compensation” including “Compensation Discussion and Analysis,” the tabular disclosure regarding such compensation, and the accompanying narrative disclosure. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices of executive compensation described in this proxy statement. The advisory vote is not a vote on our compensation practices for non-executive employees or our Board of Directors. The Dodd-Frank Act requires the Company to hold the advisory vote on executive compensation at least once every three years, but we have elected to submit the advisory vote to shareholders annually.
As described in detail under the heading “Executive Compensation — Compensation Discussion and Analysis,” our executive compensation program is designed to attract, motivate, and retain our executive officers, who are critical to our success. Under this program, our executive officers are rewarded for the achievement of specific short-term and long-term goals. Please see the “Compensation Discussion and Analysis” for additional details about our executive compensation program and philosophy, including information about the compensation of our Named Executive Officers.
The Compensation Committee continually reviews the compensation program for our executive officers to ensure it achieves the desired goals of aligning our executive compensation structure with our shareholders’ interests and current market practices. At the 2021 Annual Meeting of Shareholders, our shareholders overwhelmingly approved our executive compensation, with over 98% of the votes cast voting in favor of the “say-on-pay” proposal. The Compensation Committee considered the results of the 2021 “say-on-pay” vote, and based upon strong shareholder support, determined that our executive compensation program did not require any material changes in response to the 2021 “say-on-pay” vote.
Our Board of Directors is asking shareholders to approve a non-binding advisory vote on the following resolution:
RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement, is hereby approved.
This vote on the compensation of our Named Executive Officers is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the Named Executive Officers’ compensation as disclosed in this proxy statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO APPROVE, ON A NON-BINDING ADVISORY BASIS, THE EXECUTIVE COMPENSATION CONTAINED IN THIS PROXY STATEMENT IS IN THE BEST INTERESTS OF MKS AND OUR SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 24 |
PROPOSAL FOUR – RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has selected PricewaterhouseCoopers LLP, or PwC, as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. PwC was our independent registered public accounting firm for the fiscal year ended December 31, 2021.
Representatives of PwC are expected to attend the 2022 Annual Meeting. They will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions from shareholders. In the event that the ratification of the selection of PwC as our independent registered public accounting firm is not obtained at the 2022 Annual Meeting, the Board of Directors will reconsider its appointment.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO RATIFY THE SELECTION OF PWC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022 IS IN THE BEST INTERESTS OF MKS AND OUR SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
The Board of Directors has determined that all of the members of the Board of Directors, other than Mr. Colella and Dr. Lee, are independent as defined under the rules of Nasdaq. Mr. Colella is not independent, as he is our former Chief Executive Officer, and Dr. Lee is not independent as he currently serves as our President and Chief Executive Officer.
Since 2005, we have separated the roles of Chief Executive Officer and Chair of the Board of Directors in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting the strategic direction of the Company and the day-to-day leadership and performance of the Company, while the Chair of the Board of Directors provides guidance to the Chief Executive Officer, sets the agenda for Board meetings and presides over meetings of the full Board of Directors.
In addition, our Corporate Governance Guidelines provide that during any period in which the Chair of the Board of Directors is not an independent director, and in such other instances as the Board of Directors may determine from time to time, a Lead Director shall be elected by and from the independent directors. As Mr. Colella, the Chair of our Board of Directors, is not independent, we are currently obligated under our Corporate Governance Guidelines to have a Lead Director. Ms. Moloney has served as our Lead Director since 2020.
The primary role of the Lead Director is to serve as a liaison between the independent directors and the Chair of the Board of Directors and/or the Chief Executive Officer and to represent the independent directors, as appropriate. Pursuant to our Corporate Governance Guidelines, which are posted on our website at https://www.mksinst.com/corporate-governance under Corporate Governance Documents, the Lead Director shall, among other matters:
have the authority to call meetings of the independent directors;
preside at all meetings of the Board of Directors at which the Chair of the Board of Directors is not present;
assure that at least two meetings per year of only the independent directors are held and chair any such meetings of the independent directors;
facilitate communications and serve as a liaison between the independent directors and the Chair of the Board of Directors and/or the Chief Executive Officer, provided that any director is free to communicate directly with the Chair of the Board of Directors and with the Chief Executive Officer;
|
|
|
work with the Chair of the Board of Directors and the Chief Executive Officer in the preparation of the agenda for each Board of Directors meeting and approve each such agenda;
if a meeting is held between a major shareholder and a representative of the independent directors, the Lead Director shall serve, subject to availability, as such representative of the independent directors; and
otherwise consult with the Chair of the Board of Directors and the Chief Executive Officer on matters relating to corporate governance and performance of the Board of Directors.
Our Board of Directors believes that its leadership structure is appropriate at this time for our Company because it strikes an effective balance between management and independent leadership participation in the Board of Directors’ process.
Communications from Shareholders
The Board of Directors will give attention to written communications that are submitted by shareholders and will respond if appropriate. The Chair of the Nominating and Corporate Governance Committee, with the assistance of our General Counsel, is primarily responsible for monitoring communications from shareholders and for providing copies or summaries to the other directors as he or she considers appropriate. Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the Chair of the Nominating and Corporate Governance Committee considers to be important for the directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications.
Shareholders who wish to send communications on any topic to the Board of Directors should address such communications to the Board of Directors in care of Kathleen F. Burke, Esq., Senior Vice President, General Counsel and Secretary, MKS Instruments, Inc., 2 Tech Drive, Suite 201, Andover, MA 01810.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all of our directors, officers and employees (including the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), which is posted on our website at https://www.mksinst.com/corporate-governance under Corporate Governance Documents. We intend to disclose on our website any amendments to, or waivers for our executive officers or directors from, our code of business conduct and ethics.
Board’s Role in Risk Oversight
Management is responsible for the day-to-day management of risks the Company faces, while the Board of Directors, as a whole and through its committees, has the ultimate responsibility for the oversight of risk management. Senior management attends quarterly meetings of the Board of Directors, provides presentations on operations, including significant risks, and is available to address any questions or concerns raised by the Board of Directors. Additionally, our three standing board committees assist the Board of Directors in fulfilling its oversight responsibilities in certain areas of risk. Pursuant to its charter, the Audit Committee coordinates the Board of Directors’ oversight of the Company’s internal controls over financial reporting, disclosure controls and procedures, and code of business conduct and ethics. The Audit Committee also is responsible for discussing the Company’s policies with respect to financial risk assessment and financial risk management and overseeing the steps management has taken with respect to data privacy and cybersecurity risk exposure. Management regularly reports to the Audit Committee on these areas. The Compensation Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs as well as succession planning. The Nominating and Corporate Governance Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors, corporate governance and corporate social responsibility, including climate-related risks. In addition, from time to time, the Board of Directors may constitute a special committee to focus on a particular matter or risk. When any of the committees receives a report related to material risk oversight, the chair of the relevant committee reports on the discussion to the full Board of Directors.
Transactions with Related Persons
Our code of business conduct and ethics sets forth the general principle that our directors, officers and employees should refrain from engaging in any activity having a personal interest that presents a conflict of interest. The code of business conduct and ethics prohibits directors, officers and employees from engaging in any activity that may reasonably be expected to give rise to a conflict of interest or to adversely affect our interests. The code of business conduct and ethics provides that all employees are responsible to disclose to their managers, the Human Resources Department or the Legal Department any material transaction or relationship that reasonably could be expected to give rise to a material conflict of interest, and officers and directors must report such transactions to the Board of Directors, which shall be responsible for determining whether such transaction or relationship constitutes a material conflict of interest.
In addition, our written Related Person Transaction Procedures set forth the procedures for reviewing transactions that could be deemed to be “related person transactions” (defined as transactions required to be disclosed pursuant to Item 404 of RegulationS-K of applicable SEC regulations). In accordance with these procedures, directors and executive officers are required to submit annual certifications regarding interests and affiliations held by them and certain of their family members. We then review our records to determine whether we have engaged in any transactions since the beginning of our prior fiscal year with such affiliated persons and entities or with any person or entity known by MKS to be the beneficial owner of more than 5% of our voting securities, and provide a summary to the Audit Committee of any such material transaction in which the related person has a direct or indirect interest. In accordance with the procedures, the Audit Committee reviews any such transactions (including, but not limited to, transactions constituting related person transactions). In reviewing any such transaction, the Audit Committee considers, among other things, the related person’s interest in the transaction, the approximate dollar value of the transaction, whether the transaction was undertaken in the ordinary course of business, whether the terms of the transaction were at arm’s length, the purpose and potential benefits to the Company of the transaction, and whether the transaction is in the best interests of the Company. The Audit Committee may, in its sole discretion, impose such conditions as it deems appropriate in connection with any related person transaction. In accordance with the Audit Committee charter, the Audit Committee reviews the Related Person Transaction Procedures from time to time.
Wellington Management Group, LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, and Wellington Management Company LLP, which we refer to collectively as the Wellington Group, collectively beneficially owned approximately 7% of the Company’s outstanding voting shares as of December 31, 2019, according to a filing they have made with the SEC. Wellington Management LLP, an affiliate of the Wellington Group, manages cash accounts of MKS, in the aggregate amount of approximately $164 million as of December 31, 2019. In 2019, MKS paid Wellington Management LLP approximately $300,000 for these cash management services. Wellington Management LLP must manage the MKS cash accounts in accordance with, and subject to, the Company’s Corporate Investment Policy, which establishes clear guidelines for acceptable investments. As part of our Related Person Transaction Procedures, our Audit Committee reviewed the foregoing relationship with Wellington Management LLP.
Board of Director Meetings and Committees of the Board of Directors
The Board of Directors held four meetings in 2019. During 2019, each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings of all committees of the Board of Directors on which he or she served. Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meeting of shareholders. All of the directors then serving on the Board of Directors, other than Messrs. Chute and Hanley, who were not standing forre-election at the 2019 Annual Meeting, attended the 2019 Annual Meeting of Shareholders.
The Board of Directors has established three standing committees — Audit, Compensation, and Nominating and Corporate Governance — each of which operates under a charter that has been approved by the Board of Directors. Each committee’s current charter is posted on our website atinvestor.mksinst.com in the Corporate Governance tab.
The Audit Committee consists of Mr. Beecher (Chair), Ms. Moloney and Ms. Mora. The Board of Directors has determined that each of the three current members of the Audit Committee is an “audit committee financial expert” as defined in applicable SEC regulations. Each member of the Audit Committee also meets the requirements for independence under applicable Nasdaq and SEC rules. The Audit Committee’s responsibilities include:
|
|
|
Transactions with Related Persons
Our code of business conduct and ethics sets forth the general principle that our directors, officers and employees should refrain from engaging in any activity having a personal interest that presents a conflict of interest. The code of business conduct and ethics prohibits directors, officers and employees from engaging in any activity that may reasonably be expected to give rise to a conflict of interest or to adversely affect our interests. The code of business conduct and ethics provides that all employees are responsible for disclosing to the Company any transaction or relationship that reasonably could be expected to give rise to a conflict of interest, and executive officers and directors must report such transactions to the Board of Directors, which shall be responsible for determining whether such transaction or relationship constitutes a conflict of interest.
In addition, our written Related Person Transaction Procedures set forth the procedures for reviewing transactions that could be deemed to be “related person transactions” (defined as transactions required to be disclosed pursuant to Item 404 of Regulation S-K of applicable SEC regulations). In accordance with these procedures, directors and executive officers are required to submit annual certifications regarding interests and affiliations held by them and certain of their family members. We then review our records to determine whether we have engaged in any transactions since the beginning of our prior fiscal year with such affiliated persons and entities or with any person or entity known by MKS to be the beneficial owner of more than 5% of our voting securities, and provide a summary to the Audit Committee of any such material transaction in which the related person has a direct or indirect interest. In accordance with the procedures, the Audit Committee reviews any such transactions (including, but not limited to, transactions constituting related person transactions). In reviewing any such transaction, the Audit Committee considers, among other things, the related person’s interest in the transaction, the approximate dollar value of the transaction, whether the transaction was undertaken in the ordinary course of business, whether the terms of the transaction were at arm’s length, the purpose and potential benefits to the Company of the transaction, and whether the transaction is in the best interests of the Company. The Audit Committee may, in its sole discretion, impose such conditions as it deems appropriate in connection with any related person transaction. In accordance with the Audit Committee charter, the Audit Committee reviews the Related Person Transaction Procedures from time to time.
Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP, which we refer to collectively as the Wellington Group, collectively beneficially owned approximately 8% of the Company’s outstanding voting shares as of March 2, 2022, based on a filing they made with the SEC. Wellington Management LLP, an affiliate of the Wellington Group, manages a cash and investment account of MKS in the aggregate amount of approximately $306 million as of December 31, 2021. In 2021, MKS paid Wellington Management LLP approximately $273,000 for these cash and investment management services. Wellington Management LLP must manage this account in accordance with, and subject to, the Company’s Corporate Investment Policy, which establishes clear guidelines for acceptable investments. As part of our Related Person Transaction Procedures, our Audit Committee reviewed the foregoing relationship with Wellington Management LLP.
Board of Director Meetings and Committees of the Board of Directors
The Board of Directors held 12 meetings in 2021. During 2021, each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings of all committees of the Board of Directors on which he or she served. Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meeting of shareholders. All of the directors then serving on the Board of Directors attended the 2021 Annual Meeting of Shareholders.
The Board of Directors has established three standing committees — Audit, Compensation, and Nominating and Corporate Governance — each of which operates under a charter that has been approved by the Board of Directors. Each committee’s current charter is posted on our website at https://www.mksinst.com/corporate-governance under Corporate Governance Documents.
Audit Committee
The Audit Committee consists of Ms. Mora (Chair), Mr. Cannone and Mr. Donahue. Ms. Mora was elected Chair of the Audit Committee and Ms. Moloney joined the Audit Committee in February 2021, when Janice K. Henry
|
|
|
resigned as a member of the Board of Directors. In May 2021, Mr. Cannone replaced Ms. Moloney as a member of the Audit Committee upon his election to the Board of Directors. The Board of Directors has determined that each of Ms. Mora and Mr. Cannone is an “audit committee financial expert” as defined in applicable SEC regulations. Each member of the Audit Committee also meets the requirements for independence under applicable Nasdaq and SEC rules. The Audit Committee’s responsibilities include:
appointing, approving the fees of, assessing the independence of, evaluating, retaining and, when necessary, terminating the engagement of our independent registered public accounting firm;
overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of certain reports from the independent registered public accounting firm;
reviewing and discussing our annual audited financial statements and related disclosures with management and the independent registered public accounting firm;
reviewing our quarterly unaudited financial statements;
coordinating oversight of our internal controls over financial reporting, disclosure controls and procedures, and code of business conduct and ethics;
overseeing our internal audit function;
discussing our policies with respect to financial risk assessment and financial risk management;
establishing procedures for the receipt and retention of accounting-related complaints and concerns;
discussing our earnings press releases in advance of public disclosure, as well as generally discussing the types of financial information and earnings guidance, including “pro forma” and other “adjusted” non-GAAP information, provided to analysts, rating agencies and others;
meeting independently with our internal audit staff, independent registered public accounting firm and management;
reviewing our procedures for reviewing related person transactions, recommending any changes to these procedures and reviewing any related person transactions;
reviewing and approving our corporate investment policy, including our hedging policy;
reviewing and approving derivative financial instruments, including those subject to mandatory clearing;
overseeing the work of management to monitor and control data privacy and cybersecurity risk exposure;
reviewing with management our overall tax strategy, including areas requiring significant judgment or risk; and
preparing the Audit Committee report required to be included in the annual proxy statement.
The Audit Committee held five meetings in 2021.
Compensation Committee
The Compensation Committee consists of Mr. Batra (Chair), Ms. Moloney and Ms. Mora. Mr. Batra was elected Chair of the Compensation Committee in February 2021 when Ms. Mora assumed the role of Chair of the Audit Committee. Each member of the Compensation Committee meets the requirements for independence under applicable Nasdaq and SEC rules. The Compensation Committee’s responsibilities include:
reviewing and approving the compensation of our Chief Executive Officer, our other executive officers and, at the discretion of the Compensation Committee, other direct reports to our Chief Executive Officer;
overseeing the evaluation of our Chief Executive Officer, our other executive officers and, at the discretion of the Compensation Committee, other direct reports to our Chief Executive Officer;
overseeing our Chief Executive Officer and our other executive officers;
overseeing the evaluation of our executive officers;
overseeing Chief Executive Officer and other executives’ succession planning;
periodically reviewing and approving our management incentive bonus plans;
|
|
|
overseeing the risks associated with our compensation policies and practices and annually reviewing whether such policies and practices are reasonably likely to have a material adverse effect on the Company;
reviewing the Compensation Discussion and Analysis required to be included in the annual proxy statement;
preparing the annual Compensation Committee Report required to be included in the annual proxy statement;
overseeing and administering our equity incentive plans;
reviewing the results of advisory shareholder votes on executive compensation and recommending how frequently the Company should conduct such votes;
overseeing our stock ownership guidelines and monitoring compliance therewith;
reviewing and approving our clawback policy and monitoring compliance therewith;
reviewing and making recommendations to the Board of Directors with respect to director compensation; and
appointing, compensating, assessing the independence of, and overseeing the work of any compensation consultant.
The Compensation Committee held seven meetings in 2021. See the section below entitled “Executive Compensation — Compensation Discussion and Analysis” for further information about the role of the Compensation Committee and the scope of its activities.
Compensation Risk Assessment
Our Compensation Committee engaged its independent compensation consultant, Pearl Meyer & Partners, LLC, or Pearl Meyer, to conduct a risk assessment of our compensation programs and practices to understand if any risks exist that are reasonably likely to have a material adverse effect on our Company, and the results were reviewed by our Compensation Committee. Based on this assessment, our Compensation Committee concluded that our compensation programs and practices, as a whole, are appropriately structured and do not pose a material risk to our Company. Our compensation programs are intended to reward our executive officers and other employees for strong performance over the long-term, with consideration to short-term actions and results that strengthen and grow our Company. We believe our compensation programs provide the appropriate balance between short-term and long-term incentives, focusing on sustainable and profitable growth for our Company.
Compensation Committee Interlocks and Insider Participation
In 2021, Mr. Batra, Ms. Moloney and Ms. Mora served on the Compensation Committee. None of the members of the Compensation Committee during 2021 were, at any time, officers or employees of MKS or our subsidiaries, and none of them had any relationship with us requiring disclosure under applicable SEC rules and regulations. None of our executive officers serves, or has served, as a member of the Board of Directors or Compensation Committee (or other committee serving an equivalent function) of any other entity which has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of Ms. Moloney (Chair), Mr. Batra and Ms. Warner. Mr. Batra and Ms. Warner replaced Dr. Hanley and Richard S. Chute, each of whom stepped down in May 2019 when his tenure as a director ended. Each member of the Nominating and Corporate Governance Committee meets the requirements for independence under applicable Nasdaq and SEC rules. The Nominating and Corporate Governance Committee’s responsibilities include:
identifying individuals qualified to become members of the Board of Directors, consistent with criteria approved by the Board of Directors;
|
|
|
recommending to the Board of Directors the persons to be nominated for election as directors and to each of the committees of the Board of Directors, including the director recommended to serve as chair of each committee;
designating a Lead Director (if any), subject to the approval of the independent directors;
reviewing each director’s continuation on the Board of Directors at least once every three years;
overseeing the director succession planning process;
reviewing each director’s independence under Nasdaq listing standards and the applicable rules of the SEC;
overseeing corporate governance policies and reviewing the Company’s charter, by-laws and corporate governance guidelines;
reviewing and reporting to the Board of Directors on the Company’s corporate social responsibility and sustainability efforts, including climate-related risks and opportunities;
retaining and terminating any search firm to be used to identify director nominees;
periodically reviewing the Board of Directors’ leadership structure to assess whether it is appropriate;
conducting the annual evaluations of the Board of Directors, each of the committees of the Board of Directors and the directors who are up for nomination; and
monitoring communications from shareholders and other interested parties, including stockholder proposals, such as those related to corporate social responsibility, environmental and governance matters.
The Nominating and Corporate Governance Committee held nine meetings in 2021.
For information relating to the nomination of directors, see “Director Candidates” below.
The Nominating and Corporate Governance Committee recommended to the Board of Directors that the director nominees be nominated by the Board of Directors for election as Class II Directors. The Nominating and Corporate Governance Committee utilizes a number of processes to identify and evaluate director candidates, including the engagement of a third-party executive search firm and other resources to identify potential director candidates, as needed. Activities relating to identifying and selecting nominees include Board assessments of each incumbent director nominee for the current year, requests to Board members and others for recommendations of potential candidates, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by the members of the Nominating and Corporate Governance Committee and other members of the Board of Directors. The Nominating and Corporate Governance Committee recommended to the Board of Directors the nomination of Dr. Lee, Ms. Moloney and Ms. Warner for election at the 2022 Annual Meeting.
In considering whether to recommend any particular candidate for inclusion in the Board of Directors’ slate of recommended director nominees, the Nominating and Corporate Governance Committee applies the criteria attached to the Company’s Corporate Governance Guidelines. These criteria include the candidate’s integrity, business acumen, knowledge of our business and industry, effectiveness, experience, diligence, conflicts of interest and the ability to act in the interests of all shareholders. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. The Nominating and Corporate Governance Committee also assesses the candidate’s professional background and skills against those of the existing Board members to ensure a breadth and diversity of expertise that suits the Company’s current and future business risks, industries and challenges. See “Directors — Board Skills Matrix.” Nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law. In considering director candidates, the Nominating and Corporate Governance Committee actively seeks diverse candidates for the pool from which candidates are chosen. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, the Board of Directors and the Nominating and Corporate Governance Committee believe that it is essential that the members of the Board of Directors represent diverse viewpoints. In considering
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 30 |
candidates for the Board of Directors, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials in the context of these standards. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities.
Shareholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the shareholder or group of shareholders making the recommendation has beneficially owned at least $2,000 in market value or 1% of our Common Stock, whichever is less, for at least a year as of the date such recommendation is made, to the Nominating and Corporate Governance Committee, in care of Kathleen F. Burke, Esq., Senior Vice President, General Counsel and Secretary, MKS Instruments, Inc., 2 Tech Drive, Suite 201, Andover, MA 01810. Assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate shareholder-recommended candidates by following substantially the same process, and applying the same criteria, as it does in considering other candidates.
Shareholders also have the right under our Amended and Restated By-Laws to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or the Board of Directors, by following the procedures set forth under the heading “Deadline for Submission of Shareholder Proposals for the 2023 Annual Meeting” below.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility, or CSR, is a key priority for MKS and our leaders. As such, our CSR Program and overall CSR Management System is overseen by the CEO and the Nominating and Corporate Governance Committee.
MKS’ cross-functional CSR Steering Committee meets throughout the year, and sets program strategy, defines annual objectives, provides guidance on high-level tactics to achieve its stated objectives, communicates the CSR Program to internal and external stakeholders and monitors CSR industry trends. In accordance with its charter, the Nominating and Corporate Governance Committee also reviews and reports to the Board of Directors on the Company’s CSR and sustainability efforts, including climate-related risks and opportunities as well as the impact of other environmental and social issues on the Company.
In addition, our leadership approach is based on our commitment to conduct business with the highest standards of integrity. Our Code of Business Conduct and Ethics and our Human Rights and Labor Standards Policy are designed to ensure that we deliver on this commitment every day.
We are committed to our people and strive to foster a diverse, equitable and inclusive community, invest in continuous learning and development, engage meaningfully with employees, offer a competitive compensation and benefits program and provide a safe and healthy workplace. We believe that diversity of gender, race, ethnicity, sexual orientation, culture, education, background and experience fuels innovation and results as well as enables our employees to succeed. Our executive team is comprised of 20% female members and is 20% racially diverse, our Board of Directors is comprised of 38% female members, is 25% racially diverse and 13% LGBTQ+, and our Lead Director is a woman.
In 2021, we offered diversity, equity and inclusion, or DE&I, training for all employees and began bias awareness training for our global talent acquisition team. We proactively provide our hiring managers with diverse candidate slates in our employee recruiting process and, in accordance with our Corporate Governance Guidelines, seek diverse candidates for the pool from which our Board of Director nominees are chosen. We also regularly conduct robust analyses of pay practices across gender globally and other diversity factors within the United States to detect any existing disparities within base and total compensation, taking prompt and effective action to correct any identified disparities.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 31 |
MKS is committed to investing in learning and professional development. Our employees have access to a wide range of programs, classes, and resources to help them excel in their careers and share what they learn with their colleagues. Our performance management process includes performance feedback and career development discussions that are dynamic and actionable throughout the year. In 2021, we broadly rolled out a course to develop our focus on employee engagement, change management and leadership excellence. Over the last two years, approximately 240 of our leaders also completed a DE&I course hosted by a consulting firm recognized as best-in-class in the area of DE&I capability building. In addition, we provide financial support for college and graduate education for U.S. employees and access to online learning for all employees in local languages to help further the careers of our entire workforce.
In 2021, MKS conducted its first global employee engagement survey, the results of which were thoroughly assessed and shared with our CEO and executive leadership team as well as our Board of Directors. We plan to conduct employee engagement surveys on an annual basis and use the feedback we receive to examine current practices and drive new initiatives. MKS is also committed to providing total compensation packages that attract, motivate and retain our employees, as well as recognizing and rewarding each employee’s sustained performance and results. In addition, we are committed to ensuring that our total compensation packages are externally competitive while supporting our business plans and strategies. As employee turnover is an indicator of employee satisfaction, we monitor turnover globally. MKS has a very stable and committed workforce, as evidenced by low voluntary turnover. Our 12-month rolling average for voluntary turnover at the end of 2021 was below 7%. Our employee average tenure is more than 10 years.
MKS is committed to providing a safe and healthy workplace for all employees. We accomplish this through compliance with applicable laws and regulations regarding workplace safety, including recognition and control of workplace hazards, tracking injury and illness rates and maintaining detailed emergency and business continuity plans. We also offer employees and eligible family members a full range of health and wellness programs, as well as many clinical and administrative services.
Throughout the COVID-19 pandemic, the safety and well-being of our global workforce has been our highest priority. The commitment to this effort is evidenced by the extensive planning and numerous actions we swiftly took to respond to the pandemic, including implementing a number of safety precautions for our employees and a “work-from-home” policy for a significant portion of our workforce. MKS continues to maintain workplace flexibility such as working remotely where possible to reduce the number of people who are on site each day.
We value the environment and the communities in which we live and work. We are committed to operating our business in an environmentally and socially responsible manner, while conserving natural resources and reducing our environmental impact on the air, water, and land.
Innovation is a key part of our ability to sustain our product differentiation and increase our relevance to customers. Our products are used in a broad range of industries and applications. In particular, our products contribute to indirectly driving positive environmental impact and progress, including through supporting the development of renewable energy infrastructure, enabling environmental safety compliance, and increasing energy and water efficiencies in certain production processes.
In 2020, we collected data from certain of our offices and facilities, mostly in the United States, on our greenhouse gas emissions, energy consumption, and water consumption, which we reported in 2021. We strive to continue collecting this data across more of our MKS sites globally and plan to introduce new metrics in the future.
We believe that it is critical to create relationships with our stakeholders that support responsible and ethical business practices, conduct and compliance, which in turn benefits our employees, our environment, and our business.
Additional information regarding MKS’ activities related to its people and sustainability can be found in our Corporate Social Responsibility Report, which is accessible through the Corporate Social Responsibility section of our website at https://www.mksinst.com/corporate-social-responsibility. Our Corporate Social Responsibility Report is updated periodically.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 32 |
The following table summarizes the cash compensation payable by us to non-employee directors in 2021:
Annual Retainer | ||||
Base Retainer for All Non-Employee Board Members | $ | 70,000 | ||
Additional Retainers for Services: | ||||
Chair | $ | 75,000 | ||
Lead Director | $ | 25,000 | ||
Audit Committee Chair | $ | 25,000 | ||
Other Audit Committee Members | $ | 12,500 | ||
Compensation Committee Chair | $ | 20,000 | ||
Other Compensation Committee Members | $ | 10,000 | ||
Nominating and Corporate Governance Committee Chair | $ | 15,000 | ||
Other Nominating and Corporate Governance Committee Members | $ | 7,500 |
Retainers are pro-rated based on the time a director serves in the capacities listed. In addition, from time to time, the Board of Directors may establish special committees related to specific matters and may include a retainer for service on such special committees in its discretion.
Non-employee directors are eligible for awards under our 2014 Stock Incentive Plan, which is administered by the Compensation Committee. If the 2022 Plan is approved by our shareholders, non-employee directors will be eligible for awards under the 2022 Plan. In 2021, under our director compensation program, non-employee directors received automatic grants of RSUs on the date of the 2021 Annual Meeting of Shareholders, with a grant date value of $200,000, which RSUs shall vest in full on the day prior to the 2022 Annual Meeting.
If a new non-employee director joins our Board of Directors after our annual meeting of shareholders but before January 1st of the following year, he or she will be entitled to an initial RSU grant with a value equal to the annual RSU grant. In the event a non-employee director joins our Board of Directors during the period from January 1st through the date of that year’s annual meeting of shareholders, he or she will not be entitled to an initial RSU grant but will be entitled to the annual RSU grant on the date of the annual meeting of shareholders.
Director Compensation Table for 2021
The following table summarizes compensation earned by or paid to non-employee directors in 2021. Dr. Lee is excluded from the table because he was an executive officer in 2021 and his compensation is set forth in the Executive Compensation section below, under the heading “Executive Compensation Tables — Summary Compensation Table for 2021.”
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||
Rajeev Batra | $ | 95,972 | $ | 200,000 | $ | 295,972 | ||||||
Peter J. Cannone III(2) | $ | 55,809 | (3) | $ | 200,000 | $ | 255,809 | |||||
Gerald G. Colella | $ | 153,000 | (3)(4) | $ | 200,000 | $ | 353,000 | |||||
Joseph B. Donahue | $ | 90,500 | (3) | $ | 200,000 | $ | 290,500 | |||||
Janice K. Henry(5) | $ | 14,514 | $ | — | $ | 14,514 | ||||||
Jacqueline F. Moloney | $ | 122,589 | $ | 200,000 | $ | 322,589 | ||||||
Elizabeth A. Mora | $ | 104,618 | $ | 200,000 | $ | 304,618 | ||||||
Michelle M. Warner | $ | 85,500 | (3) | $ | 200,000 | $ | 285,500 |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 33 |
(1) | Represents the aggregate grant date fair value for each RSU granted during the year, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, or ASC 718. The assumptions used in determining the grant date fair values of these awards are set forth in Note 17 to our consolidated financial statements, which were included in our Annual Report on Form 10-K that was filed with the SEC on February 28, 2022. The outstanding stock awards held as of December 31, 2021 by each of the non-employee directors consisted of 1,147 RSUs. |
(2) | Mr. Cannone became a director in May 2021. |
(3) | Includes consideration for services on a special committee of the Board of Directors,
|
(4) | In
|
(5) Ms. Henry served as a director until February 2021.
AUDIT AND FINANCIAL ACCOUNTING OVERSIGHT
The Audit Committee of our Board of Directors has reviewed our audited financial statements for the year ended December 31, 2021 and discussed them with our management.
The Audit Committee discussed with PricewaterhouseCoopers LLP, or PwC, our independent registered public accounting firm, the matters required to be discussed bythe applicable requirements of the Public Company Accounting Oversight Board and the SEC.
The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Respectfully submitted,
Elizabeth A. Mora, Chair
Peter J. Cannone III
Joseph B. Donahue
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||
Rajeev Batra | $ | 81,550 | $ | 170,000 | $ - | $ | 251,550 | |||||||
Gregory R. Beecher | $ | 123,000 | (2) | $ | 170,000 | $ - | $ | 293,000 | ||||||
John R. Bertucci | $ | 133,000 | (2) | $ | 170,000 | $ 41,801(3) | $ | 344,801 | ||||||
Richard S. Chute(4) | $ | 29,237 | $ | - | $ - | $ | 29,237 | |||||||
Peter R. Hanley(4) | $ | 29,591 | $ | - | $ - | $ | 29,591 | |||||||
Rick D. Hess | $ | 78,000 | $ | 170,000 | $ - | $ | 248,000 | |||||||
Jacqueline F. Moloney | $ | 92,519 | $ | 170,000 | $ - | $ | 262,519 | |||||||
Elizabeth A. Mora | $ | 102,500 | $ | 170,000 | $ - | $ | 272,500 | |||||||
Michelle M. Warner(5) | $ | 48,742 | $ | 170,000 | $ - | $ | 218,742 |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT |
| 34 |
Principal Accountant Fees and Services
For the years ended December 31, 2021 and 2020, aggregate fees for professional services rendered by our independent registered public accounting firm, PwC, in the following categories were as follows:
|
Audit Fees Audit-Related Fees Tax Fees All Other Fees Total 2021 2020 $ 4,093,450 $ 4,143,170 172,500 - 239,483 284,204 376,150 116,052 $ 4,881,583 $ 4,543,426
Audit Fees
|
Audit fees billed for both years consisted of fees for professional services rendered for: (i) the audit of our annual consolidated financial statements, (ii) statutory audits, (iii) the review of our consolidated financial statements included in our quarterly reports on Form 10-Q, (iv) audit services related to other reports filed with the SEC and (v) the audit of our internal controls over financial reporting as required by the rules and regulations promulgated under Section 404 of the Sarbanes-Oxley Act of 2002.
|
Audit-Related Fees
|
Audit-related fees for the year ended December 31, 2021 were for professional services associated with the proposed acquisition of Atotech. There were no audit-related fees for the year ended December 31, 2020.
|
AUDIT AND FINANCIAL ACCOUNTING OVERSIGHT
The Audit Committee of our Board of Directors has reviewed our audited financial statements for the year ended December 31, 2019 and discussed them with our management.
The Audit Committee has also received from, and discussed with, PricewaterhouseCoopers LLP, or PwC, our independent registered public accounting firm, various communications that our registered public accounting firm is required to provide to the Audit Committee, including the matters required to be discussed bythe applicable requirements of the Public Company Accounting Oversight Board and the Commission.
The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board and the Commission, and has discussed with our registered public accounting firm its independence.
Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form10-K for the year ended December 31, 2019.
Respectfully submitted,
Gregory R. Beecher, Chair
Jacqueline F. Moloney
Elizabeth A. Mora
Principal Accountant Fees and Services
For the years ended December 31, 2019 and 2018, aggregate fees for professional services rendered by our independent registered public accounting firm, PwC, in the following categories were as follows:
Tax Fees
Tax fees for the years ended December 31, 2021 and December 31, 2020 were for services related to tax compliance, including the preparation of tax returns, and tax planning and tax advice, including assistance with foreign operations and foreign tax audits.
All Other Fees
All other fees for the years ended December 31, 2021 and December 31, 2020 were for due diligence services performed in connection with potential acquisitions and for accounting research software.
In 2021 and 2020, all fees for professional services rendered by our independent registered public accounting firm were pre-approved pursuant to the Audit Committee’s pre-approval requirements, described below.
Pre-Approval Policy and Procedures
The Audit Committee’s charter sets forth the Audit Committee’s obligations relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. The charter provides that we will not engage our independent registered public accounting firm to provide audit or non-audit services unless the service is pre-approved by the Audit Committee. In addition, we will not engage any other accounting firm to provide audit services unless such services are pre-approved by the Audit Committee. It is the Audit Committee’s policy that with respect to services performed or to be performed by PwC in connection with each fiscal year of the Company, the annual fees for non-audit services in such year shall not exceed one half of the aggregate fees payable to PwC for such year, without the prior express approval of the Audit Committee.
In connection with the foregoing, the Audit Committee may approve specific services in advance. In addition, from time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval of types of services is detailed as to the particular service or type of service to be provided and is also generally subject to a maximum dollar amount.
2019 | 2018 | |||||||
Audit Fees | $ | 4,664,773 | $ | 3,396,704 | ||||
Audit-Related Fees | - | 588,620 | ||||||
Tax Fees | 259,076 | 389,613 | ||||||
All Other Fees | 2,700 | 2,700 | ||||||
|
|
|
| |||||
Total | $ | 4,926,549 | $ | 4,377,637 | ||||
|
|
|
|
|
|
charter provides that we will not engage our independent registered public accounting firm to provide audit ornon-audit services unless the service ispre-approved by the Audit Committee. In addition, we will not engage any other accounting firm to provide audit services unless such services arepre-approved by the Audit Committee. It is the Audit Committee’s policy that with respect to services performed or to be performed by PwC in connection with each fiscal year of the Company, the annual fees fornon-audit services in such year shall not exceed one half of the aggregate fees payable to PwC for such year, without the prior express approval of the Audit Committee.
In connection with the foregoing, the Audit Committee may approve specific services in advance. In addition, from time to time, the Audit Committee maypre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any suchpre-approval of types of services is detailed as to the particular service or type of service to be provided and is also generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the Chair of the Audit Committee the authority to approve any audit ornon-audit services to be provided to us by our independent registered public accounting firm. Any approval of services by the Chair of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee.
The Audit Committee has considered and determined that the provision of thenon-audit services noted in the foregoing table is compatible with maintaining PwC’s independence.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
The Audit Committee has also delegated to the Chair of the Audit Committee the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. Any approval of services by the Chair of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee.
The Audit Committee has considered and determined that the provision of the non-audit services noted in the foregoing table is compatible with maintaining PwC’s independence.
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 36 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our Common Stock by (i) each shareholder known to us to be the beneficial owner of more than 5% of the outstanding shares of our Common Stock; (ii) the Named Executive Officers named in the Summary Compensation Table below; (iii) each of our current directors; and (iv) all of our directors and executive officers as a group. Unless otherwise indicated in the footnotes to the table, all equity amounts set forth in the table are as of March 2, 2022, and the address for each of our directors and executive officers is: c/o MKS Instruments, Inc., 2 Tech Drive, Suite 201, Andover, Massachusetts 01810.
Name of Beneficial Owner | Number of Shares Beneficially Owned(1) | Percentage of Common Stock Beneficially Owned | ||||||
5% shareholders | ||||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. | 5,643,401 | (2) | 10.16 | % | ||||
BlackRock, Inc. 55 East 52nd Street | 5,059,771 | (3) | 9.11 | % | ||||
Capital International Investors 333 South Hope Street 55th Floor Los Angeles, CA 90071 | 4,859,954 | (4) | 8.75 | % | ||||
Wellington Management Group LLP 280 Congress Street | 4,401,028 | (5) | 7.92 | % | ||||
Named Executive Officers | ||||||||
John T.C. Lee | 51,516 | * | ||||||
Seth H. Bagshaw | 31,764 | * | ||||||
Kathleen F. Burke | 46,128 | * | ||||||
Mark M. Gitin | 8,608 | (6) | * | |||||
James A. Schreiner | 5,758 | * | ||||||
Non-Employee Directors | ||||||||
Rajeev Batra | 6,083 | * | ||||||
Joseph B. Donahue | 1,988 | * | ||||||
Peter J. Cannone III | - | - | ||||||
Gerald G. Colella | 97,001 | (7) | * | |||||
Jacqueline F. Moloney | 7,467 | * | ||||||
Elizabeth A. Mora | 13,401 | * | ||||||
Michelle M. Warner | 3,969 | * | ||||||
All directors and executive officers as a group (14 persons) | 284,382 | (8) | * |
* | Represents less than 1% of the outstanding Common Stock. |
(1) | We believe that each shareholder has sole voting and investment power with respect to the shares listed, except as otherwise noted. The number of shares beneficially owned by each shareholder is determined under SEC rules, and the information is not necessarily indicative of ownership for any other purpose. Under such |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT | 37 |
rules, beneficial ownership includes any shares as to which the person has sole or shared voting or investment power and also any shares that the individual has the right to acquire within 60 days after March 2, 2022, subject to the vesting of RSUs or the exercise of any stock option or other right. The inclusion herein of any shares of Common Stock deemed beneficially owned does not constitute an admission by such shareholder of beneficial ownership of |
(2) | Based on information set forth in |
(3) | Based on information set forth in a Schedule 13G/A filed by BlackRock, Inc. on February 1, |
(4) | Based on information set forth in a Schedule 13G/A filed by Capital International Investors, a division of Capital Research and Management Company, on February 11, 2022, reporting stock ownership as of December 31, 2021. Capital International Investors has sole voting power with respect to 4,858,766 shares and sole investment power with respect to 4,859,954 shares. |
(5) | Based on information set forth in a Schedule 13G/A filed by Wellington Management Group LLP on February 4, 2022, reporting stock ownership as of December 31, 2021. Wellington Management Group LLP has shared voting power with respect to 3,898,269 shares and shared investment power with respect to 4,401,028 shares. |
(6) | Consists of 6,811 shares held directly by Dr. Gitin and 1,797 shares subject to RSUs that vest within 60 days after March 2, 2022. |
(7) | Consists of one share held directly by Mr. Colella and 97,000 shares held in the |
(8) | Consists of 280,385 shares held directly or indirectly by such directors and executive officers |
To our knowledge, there are no voting trusts or similar arrangements among any of the foregoing persons or entities with respect to the voting of shares of Common Stock.
Name of Beneficial Owners | Number of Shares Beneficially Owned(1) | Percentage of Common Stock Beneficially Owned | ||||||
5% shareholders | ||||||||
Black Rock, Inc. 55 East 52nd Street New York, NY 10055 | 5,157,397 | (2) | 9.44% | |||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 5,080,203 | (3) | 9.31% | |||||
Capital International Investors 11100 Santa Monica Boulevard 16th Floor Los Angeles, CA 90025 | 4,357,432 | (4) | 7.98% | |||||
Wellington Management Group, LLP 280 Congress Street Boston, MA 02210 | 3,832,320 | (5) | 7.02% | |||||
Named Executive Officers | ||||||||
Gerald G. Colella | 98,548 | (6) | * | |||||
John T.C. Lee | 24,704 | (7) | * | |||||
Seth H. Bagshaw | 31,989 | (8) | * | |||||
Kathleen F. Burke | 35,483 | (9) | * | |||||
John R. Abrams | - | (10) | - | |||||
Non-Employee Directors; Director Nominees | ||||||||
Rajeev Batra | 2,114 | * | ||||||
Gregory R. Beecher | 18,143 | * | ||||||
John R. Bertucci | 367,050 | (11) | * | |||||
Joseph B. Donahue | - | (12) | - | |||||
Janice K. Henry | - | (12) | - | |||||
Rick D. Hess | 3,487 | * | ||||||
Jacqueline F. Moloney | 5,232 | * | ||||||
Elizabeth A. Mora | 13,837 | * | ||||||
Michelle M. Warner | - | - | ||||||
All directors, director nominees and executive officers as a group (14 persons) | 600,587 | (13) | 1.10% |
MKS INSTRUMENTS, INC. | 2022 PROXY STATEMENT |
| 38
The following is a brief summary of the background of each of our current executive officers, other than Dr. Lee, whose background is described under the heading “Directors” above:
62
Kathleen F. Burke, Senior Vice President, General Counsel and 57 Ms. Burke has served as our Senior Vice President and
Our executive officers are appointed by the Board of Directors on an annual basis and serve until their successors are duly appointed and qualified. There are no family relationships among any of our executive officers or directors.
Compensation Discussion and Analysis Introduction The purpose of this section of
In October 2021, as described under the heading “Proposed Acquisition of Atotech,” our Board of Directors appointed Mr. Schreiner, who currently serves as our Senior Vice President and Chief Operating Officer, to the position of Senior Vice President and Chief Operating Officer, Atotech Division, subject to and effective upon the closing of the proposed acquisition of Atotech. Following this Compensation Discussion and Analysis, you will find a series of tables containing specific information about the compensation earned by or paid to our Named Executive Officers in 2021. Executive Summary Our Business We are a global provider of instruments, systems, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity for our customers. Our products are derived from our core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, vacuum technology, temperature sensing, lasers, photonics, optics, precision motion control, vibration control and laser-based manufacturing systems solutions. We also provide services relating to the maintenance and repair of our products, installation services and training. Our primary served markets include semiconductor, industrial technologies, life and health sciences, and research and defense. Company Performance in 2021 We delivered record revenue, net income and operating cash flow in 2021, despite unprecedented supply chain constraints and continuous COVID disruptions. Our record performance was driven by significant growth in revenue from our Semiconductor and Advanced Markets. We were able to execute with laser focus on meeting our customers’ needs while ensuring the safety and wellbeing of our employees, which remains our highest priority. Our focus on meeting our customers’ needs did not impact our long-term strategy. We invested in a number of areas to drive organic growth, while executing on strategic M&A opportunities. Our acquisition of Photon Control Inc., which we completed in July 2021, brought us critical temperature sensing, which is a seamless fit within our Surround the Chamber® offering. We expect our proposed acquisition of Atotech, which was announced on July 1, 2021, will add valuable chemistry expertise, enhance the breadth of our innovation capabilities, and accelerate our customers’ roadmaps in the era of miniaturization and complexity. We also made important strides in strengthening MKS by prioritizing our Corporate Social Responsibility efforts. We issued our inaugural CSR report, in which we articulated our strong commitment to diversity, equity and inclusion, as well as environmental management, employee development and governance.
In 2021, key results include: record revenue of $2.9 billion, an increase of 27% from $2.3 billion in 2020; record Semiconductor Market revenue of $1.8 billion, an increase of 32% from $1.4 billion in 2020, led by strong growth across our Vacuum and Analysis Division, including another record year in our Power Solutions business, and strong growth in sales by our Light and Motion Division to semiconductor applications, particularly for lithography, metrology and inspection customers; Advanced Markets revenue of $1.1 billion, an increase of 19% from $944 million in 2020, led by growing demand in Advanced Electronics applications, particularly for Flexible PCB via drilling applications, and recovery in Industrial, Life and Health Science, and Research and Defense markets; record net income of $551 million, or $9.90 per diluted share, compared to net income of $350 million, or $6.33 per diluted share, in 2020; record operating cash flow of $640 million, a 25% increase from the $513 million reported in 2020; and a return of $48 million to MKS shareholders in cash dividends. 2021 Compensation Outcomes Our executive compensation program is designed to reward our Named Executive Officers for performance and to align their interests with those of our shareholders. As a result of our financial performance in 2021, our Named Executive Officers received 200% of their target variable cash compensation tied to non-GAAP operating income and 200% of their target performance-based equity compensation tied to non-GAAP EBITDA. We believe these financial performance metrics are important to our shareholders because each is an indicator of how well we manage the operations and profitability of our Company. The successful alignment of our financial performance goals with our incentive payout opportunities for 2021 is evidenced by the fact that both our annual cash incentive plan and our performance-based equity awards paid out at maximum achievement in a year where our Company achieved record revenue, net income and operating cash flow. Consideration of 2021 Advisory Vote on Executive Compensation At our 2021 Annual Meeting of Shareholders, held on May 11, 2021, we submitted to our shareholders an advisory vote on executive compensation. Although annual advisory “say-on-pay” votes are non-binding, our Compensation Committee considers the outcome of this vote each year when making compensation decisions for our Named Executive Officers. At the 2021 Annual Meeting, our shareholders overwhelmingly approved our executive compensation, with over 98% of the votes cast voting in favor of the “say-on-pay” proposal. The Compensation Committee considered the results of the 2021 “say-on-pay” vote, and based upon strong shareholder support, determined that our executive compensation program did not require any material changes in response to the 2021 “say-on-pay” vote. The Compensation Committee will continue to consider the views of our shareholders in connection with our executive compensation program, in addition to considering evolving best practices, market compensation information and changing regulatory requirements. The Compensation Committee believes that the results of the 2021 “say-on-pay” vote were an endorsement of our compensation and pay decisions made in relation to our performance. Compensation Philosophy and Objectives The primary objectives of our executive compensation program are to: attract and retain high caliber executive talent; motivate and reward the attainment of short-term objectives that drive long-term value; and foster long-term alignment of executive and shareholder interests. We target each of our Named Executed Officers’ various compensation elements, including base salary, annual cash incentive compensation, and long-term equity incentive compensation, to be within a competitive range around median levels (plus or minus 15% of median) for each such respective position in the market. The competitive range is considered alongside other key factors when setting compensation levels, and final values may range from approximately the 25th percentile to approximately the 75th percentile, determined on an
individual basis. In considering the compensation of our Named Executive Officers relative to the market, we also qualitatively assess each Named Executive Officer’s overall performance, tenure and potential contributions to MKS’ ongoing growth. For 2021, the total target compensation of each of our Named Executive Officers fell within the competitive range of the median of our peer group, with the exception of the total target compensation of our Chief Financial Officer, which fell outside of the competitive range of the median of our peer group but below the 75th percentile. Base salaries are designed to provide executives with a level of predictability and stability with respect to a portion of their total compensation package. Base salaries are a relatively small component of the overall pay packages of our Named Executive Officers because we believe a significant majority of executive compensation should be variable and based on performance. Our annual cash incentive compensation program is designed to reward the attainment of short-term earnings goals that drive the long-term growth of MKS. We believe that our program goals are aligned with significant value creation, and that our plan creates a strong link between pay and performance while providing a meaningful incentive for our Named Executive Officers to deliver financial results that exceed our goals. We provide our Named Executive Officers with long-term equity incentive compensation in the form of RSUs, approximately half of which are performance-based, in order to: foster long-term alignment of executive and shareholder interests; balance the short-term focus on annual cash incentive compensation with creating long-term shareholder value; reward strong operational performance; and retain executives by providing equity-based compensation that generally vests over a three-year period. In order to further underscore our compensation values and enhance the efficacy of our pay programs, we also adhere to the following practices: What We Do
|