| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material §240.14a-12 |
| ☒ | No fee required. | |||
| ☐ | ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| Fee paid previously with preliminary materials. | ||||
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act 14a-6(i)(1) and0-11. | |||
| Street Address | Mailing Address | |||
| 9120 Lockwood Boulevard | ||||
| ||||
| ||||
| ||||
 | ||||
| ||||
| Mechanicsville, Virginia 23116 | ||||
March 17, 202127, 2024
Dear Shareholders:
It is a pleasure to invite you to the Owens & Minor, Inc. Annual Meeting of Shareholders on Thursday, April 29, 2021May 9, 2024 at 9:00 a.m. Eastern Daylight Time. Due to ongoing concerns regarding the COVID-19 virus, theThe Annual Meeting will be held in a virtual meeting format only, via the Internet. Additionally, we believe that a virtual meetingInternet, which allows us to make participation accessible for shareholders from any geographic location while reducing the costs and environmental impact associated with holding an in-person meeting. Information regarding attending the virtual Annual Meeting can be found on page 5177 of the Proxy Statement.
The Notice of 20212024 Annual Meeting of Shareholders and Proxy Statement describe the items of business for the meeting. In addition to considering these matters, we will review significant accomplishments and events since our last shareholders’ meeting, as well as future opportunities and initiatives we intend to pursue. Our Board of Directors and management team will be therepresent to discuss items of interest and to answer any questions.
The Notice of 20212024 Annual Meeting of Shareholders contains instructions on how to access our proxy materials and our 20202023 Annual Report/Form 10-K over the Internet, as well as how shareholders can receive paper copies of such documents, if they so desire.
You may vote your shares via the Internet or by telephone or, if you prefer, you may request paper copies of the proxy materials and submit your vote by mail by following the instructions on the proxy card. We encourage you to vote via the Internet. Whichever method you choose, your vote is important so please vote as soon as possible. All of us at Owens & Minor appreciate your continued interest and support.
Warm regards,
Mark A. Beck
Chair of the Board of Directors
Owens & Minor, Inc.
WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING,
THE BOARD OF DIRECTORS URGES YOU TO VOTE.
Proxy Statement
Page | ||||
i | ||||
1 | ||||
| 5 | |||
| 8 | |||
10 | ||||
| ||||
11 | ||||
| 12 | |||
| 17 | |||
| 17 | |||
| 18 | |||
| 20 | |||
| 20 | |||
| 21 | |||
| ||||
| 22 | |||
Proposal 2: Ratification | 27 | |||
27 | ||||
28 |
| |||
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan | 30 | |||
Page | ||||
| 39 | |||
| 39 | ||||
| 39 | |||
| 40 | |||
| 41 | |||
42 | ||||
58 | ||||
| 59 | |||
|
| |||
| 61 | |||
| 62 | |||
63 | ||||
64 | ||||
65 | ||||
70 | ||||
| 71 | ||||
Proposal | 75 | |||
| 76 | |||
| 76 | |||
Further Information About Attending the Virtual Annual Meeting | ||||
77 | ||||
| ||||
Annex A – Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan | A-1 | |||
Your Vote Is Important
Whether or not you plan to attend the Annual Meeting, please vote your shares promptly, as instructed in the Notice Regarding the Availability of Proxy Materials, by the Internet or by telephone. You may also request a paper proxy card to submit your vote by mail, if you prefer. We encourage you to vote via the Internet.
Non-GAAP measures. This document contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). In general, the measures exclude items and charges that (i) management does not believe reflect Owens & Minor, Inc.’s (the Company) core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation. Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The non-GAAP financial measures disclosed by the Company should not be considered substitutes for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated. A description of these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent financial measures are included in the Company’s Current Report on Form 8-K filed with the SEC on February 20, 2024.
Notice of Annual Meeting of Shareholders
To Be Held Thursday, April 29, 2021May 9, 2024
TOTHE SHAREHOLDERSOF OWENS & MINOR, INC.:
The Annual Meeting of Shareholders of Owens & Minor, Inc. (the “Company” or, “Owens & Minor”, “we”, “us”, “our”, etc.) will be held virtually, via the Internet, on Thursday, April 29, 2021May 9, 2024 at 9:00 a.m. EDT in a virtual meeting format only, via the Internet.Eastern Daylight Time (“EDT”). You will not be able to attend the Annual Meeting in person.online, listen to the meeting live, submit questions and vote. To be admitted to the Annual Meeting at www.meetingcenter.io/294274694www.meetnow.global/MQUPCLA you must enter the 15-digit control number found on your proxy card, voting instruction form or notice you previously received. We encourage you to access the meeting in advance of the designated start time.
The purposes of the meeting are:
| 1. | To elect the |
| 2. | To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
| 3. | To approve the amendment to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan; |
| 4. | To conduct an advisory vote to approve the compensation of the Company’s named executive officers; and |
To transact any other business properly before the Annual Meeting. |
Shareholders of record as of March 5, 202114, 2024 will be entitled to vote at the Annual Meeting.
Your attention is directed to the attached Proxy Statement. The Notice Regarding the Availability of Proxy Materials is being distributed on or about March 17, 2021.27, 2024. This Proxy Statement, the proxy card and Owens & Minor’s 20202023 Annual Report/Form 10-K are being furnished on the Internet on or about March 17, 2021.27, 2024.
BY ORDEROFTHE BOARDOF DIRECTORS,
NHICHOLASEATH J. PH. GACEALLOWAY
Executive Vice President, General Counsel &
Corporate Secretary
Owens & Minor, Inc.●20212024 Proxy Statementi
Proxy Statement Summary
|
| • |
|
| • |
|
| • | Voting: Shareholders as of the record date are entitled to vote; each share of common stock (“Common Stock”) is entitled to one vote for each director nominee and one vote for each of the other proposals |
Voting Matters and Recommendations
Items of Business | Board Recommendation | Page | ||||
1 | Election of nine director nominees to serve one-year terms | “FOR” Each Nominee | 21 | |||
2
| Ratification of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2024 | “FOR” | 27 | |||
3 | Approval of Amendment No. 1 to the 2023 Omnibus Incentive Plan | “FOR” | 30 | |||
4 | Advisory vote on the compensation of our named executive officers | “FOR” | 75 | |||
Director Nominees
| Committee Memberships | ||||||||||||||||||||||||||||||
Name | Primary Occupation | Age | Director Since | Independent | Audit | Exec | Gov & Nom | OP&C | ||||||||||||||||||||||
Mark A. Beck | Chair of the Board, Owens & Minor, Inc. Co-founder and Owner of B-Square Precision, LLC
|
| 58
|
|
| 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gwendolyn M. Bingham
| Retired United States Army Lieutenant General (three stars)
|
| 64
|
|
| 2020
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Kenneth Gardner-Smith
| Chief People Officer, DaVita, Inc.
|
| 43
|
|
| 2022
|
|
|
|
|  | |||||||||||||||||||
Robert J. Henkel
| Retired President and Chief Executive Officer, Ascension Healthcare
|
| 69
|
|
| 2019
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Rita F. Johnson-Mills
| President (Southern Region), CINQCARE
|
| 65
|
|
| 2022
|
|
|
|
|
|
|
| |||||||||||||||||
Stephen W. Klemash
| Retired Partner, Ernst & Young LLP Former Lead Partner, Ernst & Young Americas Center for Board Matters
|
| 63
|
|
| 2021
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Teresa L. Kline
| Retired President and Chief Executive Officer of Health Alliance Plan of Michigan and Executive Vice President of Henry Ford Health System
|
| 65
|
|
| 2022
|
|
|
|
|
|
|
| |||||||||||||||||
Edward A. Pesicka
| President & Chief Executive Officer, Owens & Minor, Inc.
|
| 57
|
|
| 2019
|
|
|
|
| ||||||||||||||||||||
Carissa L. Rollins
| Chief Information Officer, Illumina, Inc.
|
| 54
|
|
| 2022
|
|
|
|
|
|
|
| |||||||||||||||||
Audit = Audit Committee Exec = Executive Committee Gov & Nom = Governance & Nominating Committee
OP&C = Our People & Culture Committee
Owens & Minor, Inc.●2024 Proxy Statement1
Proxy Statement Summary |
Director Nominee Group Information
Our Corporate Governance Highlights
Director Independence and Board Leadership | • All directors, including our Board Chair, are independent except for our CEO • Only independent directors serve on the Audit, Governance & Nominating, and Our People & Culture Committees • The independent directors on our Board and our Board committees conduct regular executive sessions without management | |
Board Evaluation, | • The Board and each of its committees conduct an annual self-evaluation to assess their respective performance • The Governance & Nominating Committee identifies Board candidates based on selection criteria and considers candidates with diversity of experiences, gender, ethnicity and race for director vacancies • Our Bylaws provide that no director nominee can stand for election if the nominee is over age 72 • 5 of 9 director nominees are women and/or racially diverse • Average age of director nominees is 60 | |
Board and Committee Oversight | • The Board actively engages annually in comprehensive senior management succession planning • The Board and its committees perform risk oversight of our Company, including our ERM program, ESG framework and governance structure, cybersecurity and information security risks • Each Board committee oversees the specific financial, compensation and governance risks related to its functions and responsibilities | |
Governance Practices | • Annual review of our Corporate Governance Guidelines and Board committee charters • Our insider trading policy prohibits hedging or pledging Owens & Minor stock • Recoupment (“clawback”) policy for incentive compensation, including performance-based cash compensation and all equity compensation • Maintain substantial stock ownership requirements for directors and executive officers • Our Code of Honor applies to our directors, executive officers and all teammates • Corporate Governance Guidelines limit director membership on other public company boards | |
Shareholder Rights | • Declassified Board with annual election of our directors serving one-year terms • Majority voting standard for uncontested director elections (plurality voting in contested elections) • Proxy access allowing holders of 3% of our stock for at least three years to include the greater of two nominees or nominees representing 20% of board seats in our proxy statement if they satisfy the requirements in our Company Bylaws • Annual shareholder advisory vote on the compensation of our named executive officers | |
2Owens & Minor, Inc.●2024 Proxy Statement
Proxy Statement Summary |
Our Executive Compensation Highlights
Executive Compensation Philosophy
Our executive compensation program which is described in more detail in our “Compensation Discussion and Analysis” section is designed with a pay-for-performance philosophy that aligns with the business’s strategy and goals, both short and long-term, and pays for sustained performance, profitable growth, and achievement of results. We generally target the 50th percentile of our peer group and the relevant market as a reference point for positioning target total compensation for our executives,1 with the ability to earn above or below the 50th percentile based on Company and/or individual performance. Key considerations when determining an executive’s compensation include experience, size and scope of role, pay position relative to the market, internal equity, and talent retention.
We designed our executive compensation program framework to reward for Company and individual performance and focus on the following objectives:
| • | Reasonable but market-competitive base salaries to attract, motivate and retain executives. |
| • | Appropriate balance between short- and long-term incentives and fixed and at-risk incentive compensation, to weigh cost against expected benefit and to align with the creation of shareholder value, including: |
| • | Annual cash incentives to drive critical business results each year; and |
| • | Long-term incentive equity awards to retain management and focus executives on longer-term financial performance and execution of our operational and strategic plans. |
| • | Retirement, severance, and other market-competitive benefits to attract executive talent and encourage retention. |
| 1 | This is a reference point, not a policy, and actual compensation may be above or below the target level based on corporate and/or individual performance. |
Compensation Components
We base a significant portion of compensation on the achievement of objective financial measures to create a strong link between pay and performance. We have no specific policies on the percentage of total compensation that should be “performance-based,” but consider this relationship in determining the overall balance and reasonableness of the executives’ total direct compensation packages. In 2023, our President & CEO’s total target compensation was 87% performance-based and 13% fixed, and our other named executive officers’ (“NEOs”) total target compensation was 81% performance-based and 19% fixed.
 |  |
We believe our proportionate mix of compensation opportunities is appropriate in that we provide a slightly greater relative percentage of incentive-based compensation tied to financial performance and long-term objectives to the CEO versus other NEOs because the CEO is able to more directly impact financial results and the creation of long-term shareholder value.
Owens & Minor, Inc.●2024 Proxy Statement3
Proxy Statement Summary |
Compensation Factors and Governance
The Our People & Culture Committee (“OP&C Committee”) applies several corporate governance features related to executive compensation, which are summarized below. We believe that these mechanisms help to assure the alignment of executive and shareholder interests.
WHAT WE DO | ||
| Pay for Performance. We link pay to performance and a significant portion of our executives’ potential total annual compensation, both cash and equity, is based on the achievement of objective, simple, and transparent financial measures designed to enhance short- and long-term performance. | |
| Performance-Based Equity Awards. At least half of our annual equity award grants are performance share units (“PSUs”) with multi-year performance requirements. | |
| Share Ownership Guidelines. We have established stock ownership guidelines for our officers, and our tenured NEOs meet or exceed the established ownership guidelines. Newly appointed NEOs are in the process of attaining the required ownership level. | |
| Limited Perquisites. We provide limited perquisites to executive officers. | |
| Double-Trigger Change in Control Provisions. Equity vesting and severance benefits resulting from a change in control are “double-trigger” and require a qualifying termination of employment following the change in control. | |
| Recoupment Policy. We maintain a recoupment policy to recover all performance-based cash compensation and all equity-based compensation (including both time- and performance-vesting equity awards) paid to current and former executive officers and other senior executives and teammates designated as subject to the policy under circumstances involving restatement of our financial statements. | |
| Risk Mitigation. We mitigate risks associated with compensation by establishing caps on incentive compensation, multiple performance targets for incentive compensation, and ongoing processes to identify and manage risk. | |
| Independent Compensation Consulting Firm. The OP&C Committee receives advice about its compensation programs and practices from an independent consulting firm that provides no other services to the Company, and the Company is not aware of any conflicts of interest with respect to its work. | |
WHAT WE DON’T DO | ||
| No Employment Agreements. We do not have employment agreements with our executive officers. | |
| No Hedging. We prohibit our executive officers and directors from hedging against the economic ownership of Company stock. | |
| No Pledging. We prohibit our executive officers from pledging Company stock. | |
| No Repricing of Equity Awards. Our stock plans do not permit the repricing of equity awards without shareholder approval. | |
| No Tax Gross-Ups. We do not provide excise tax gross-ups. | |
4Owens & Minor, Inc.●2024 Proxy Statement
Proxy Statement
Annual Meeting of Shareholders
to be held on April 29, 2021May 9, 2024
When and Where the Annual Meeting Will Be Held
The Annual Meeting will be held virtually on Thursday, April 29, 2021May 9, 2024 at 9:00 a.m. EDT at www.meetingcenter.io/294274694www.meetnow.global/MQUPCLA through a live audio webcast. We have adopted a virtual format for our Annual Meeting to ensure the health and well-being of our teammates, directors and shareholders in the current COVID-19 environment. Additionally, we believe that a virtual meetingwhich allows us to make participation accessible for shareholders from any geographic location with Internet connectivity, while reducing costs and environmental impact associated with holdingarranging and arrangingholding for an in-person meeting.
How to Attend the Virtual Annual Meeting
Shareholders at the close of business on March 5, 202114, 2024 (the “Record Date”) have a right to attend the Annual Meeting. In order to be admitted to the Annual Meeting at www.meetingcenter.io/294274694,www.meetnow.global/MQUPCLA, registered shareholders must enter the 15-digit control number found in the shaded bar on your Notice of Internet Availability or proxy card. The password for the meeting is OMI2021. Further information regarding attending the virtual Annual Meeting can be found at page 5177 of this Proxy Statement.
What You Are Voting On
Proxies are being solicited by the Board of Directors for purposes of voting on the following proposals and any other business properly brought before the meeting:
| Proposal 1: | Election of the | ||
| Proposal 2: | Ratification of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, | ||
| Proposal 3: | Approval of the amendment to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan. | ||
| Proposal 4: | Advisory vote to approve the compensation of our named executive officers (the |
Who is Entitled to Vote
Shareholders of Owens & Minor, Inc. (the “Company” or “Owens & Minor”) as of the close of business on March 5, 2021 (the “Record Date”)the Record Date are entitled to vote. Each share of the Company’s common stock (“Common Stock”)Stock is entitled to one vote with respect to each matter to be voted upon at the meeting. As of March 5, 2021, 73,504,09914, 2024, 76,598,351 shares of Common Stock were issued and outstanding.
Owens & Minor, Inc.●20212024 Proxy Statement15
About the Meeting |
How to Vote
You can vote via the Internet, by telephone or by mail.
By Internet. You may vote via the Internet by following the specific instructions on the Notice of Internet Availability of Proxy Materials. Shareholders who have requested a paper copy of a proxy card by mail may submit proxies over the Internet by following the instructions on the proxy card. We encourage you to vote via the Internet. If your shares are held by your bank or broker in street name, please refer to the instruction form that you receive from your bank or broker or contact your bank or broker to determine whether you will be able to vote via the Internet.
By Telephone. You may vote by telephone by calling the toll-free number on the proxy card and following the instructions. Shareholders will need to have the control number that appears on their proxy card or notice available when voting. If your shares are held by your bank or broker in street name, please refer to the instruction form that you receive from your bank or broker or contact your bank or broker to determine whether you will be able to vote by telephone.
By Mail. Shareholders who have requested a paper copy of a proxy card by mail may submit proxies by completing, signing, and dating the enclosed proxy card and returning it in the postage-paid envelope provided.
However you choose to vote, you may revoke a proxy prior to the meeting by (1) submitting a subsequently dated proxy by any of the methods described above, (2) giving notice in writing to the Corporate Secretary of the Company or (3) voting at the virtual meeting (attendance at the meeting will not itself revoke a proxy).
What Happens if You Do Not Make Selections on Your Proxy
If your proxy contains specific voting instructions, those instructions will be followed. However, if you sign and return your proxy card by mail or submit your proxy by telephone or via the Internet without making a selection on one or more proposals, you give authority to the individuals designated on the proxy card to vote on the proposal(s) for which you have not made specific selections or given instructions and any other matter that may arise at the meeting. If no specific selection is made or instructions given, it is intended that all proxies that are signed and returned or submitted via telephone or Internet will be voted “FOR” the election of all nominees for director, “FOR” the ratification of KPMG LLP as our independent registered public accounting firm in 2021,2024, “FOR” approval of the amendment to the 2023 Omnibus Incentive Plan, and “FOR” the approval of the Say on PaySay-on-Pay Proposal.
Whether Your Shares Will be Voted if You Don’t Provide Your Proxy
Whether your shares will be voted if you do not provide your proxy depends on how your ownership of shares of Common Stock is registered. If you own your shares as a registered holder, which means that your shares of Common Stock are registered in your name, and you do not provide your proxy, your shares will not be represented at the meeting, will not count toward the quorum requirement, which is explained below, and will not be voted.
If you own your shares of Common Stock in street name, your shares may be voted even if you do not provide your broker with voting instructions. Brokers have the authority under New York Stock Exchange (“NYSE”) rules to vote shares for which their beneficial owner customers do not provide voting instructions on certain “routine” matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a broker non-vote.
The Company believes that only the proposal to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 20212024 is a routine matter for which brokerage firms will have discretionary voting power if you do not give voting instructions with respect to this proposal. The proposal to elect directors, the proposal to approve the amendment to the 2023 Omnibus Incentive Plan and the Say on PaySay-on-Pay Proposal are non-routine matters for which brokerage firms will not have discretionary voting power and for which specific voting instructions from their customers are required. As a result, brokerage firms will not be allowed to vote on these non-routine matters on behalf of their customers if the customers do not return specific voting instructions.
26Owens & Minor, Inc.●20212024 Proxy Statement
About the Meeting |
What Constitutes a Quorum
A majority of the outstanding shares of Common Stock present or represented by proxy constitutes a quorum. A quorum is required to conduct the Annual Meeting. If you vote your proxy, you will be considered part of the quorum. Abstentions and shares held by brokers or banks in street name (“broker shares”) that are voted on any matter are included in the quorum. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.
The Vote Required to Approve Each Item
Election of Directors. The affirmative vote of a majority of the votes cast at the meeting is required for the election of each director. A majority of votes cast means that the number of votes cast “FOR” a nominee’s election must exceed the number of votes cast “AGAINST” that nominee’s election. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the results of this vote.
Ratification of Appointment of KPMG LLP. The appointment of KPMG LLP will be ratified if the votes cast “FOR” this proposal exceed the number of votes cast “AGAINST” this proposal. Abstentions will not be counted as votes cast on this proposal and will have no effect on the results of this vote. There should be no broker non-votes because this is considered a routine matter under the rules of the NYSE.
AdvisoryApproval of the Amendment to the 2023 Omnibus Incentive Plan. The approval of the amendment to the 2023 Omnibus Incentive Plan requires the affirmative vote of a majority of the votes cast on this proposal. A majority of votes cast means that the number of votes cast “FOR” this proposal must exceed the number of votes cast “AGAINST” this proposal. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the results of this vote.
Advisory Vote to Approve the Say on PaySay-on-Pay Proposal. The compensation of our executive officers named in the Summary Compensation Table will be approved on an advisory basis if the votes cast “FOR” this proposal exceed the number of votes cast “AGAINST” this proposal. Abstentions and broker non-votes will not be counted as votes cast on this proposal and will have no effect on the results of this vote.
How to Obtain a Paper Copy of the Proxy Materials
Shareholders will find instructions about how to obtain a paper copy of the proxy materials on the notice they received in the mail about the Internet availability of proxy materials.
What it Means if You Get More Than One Notice about the Internet Availability of Proxy Materials
Your shares are probably registered differently or are held in more than one account. Please vote all proxies to ensure that all your shares are voted. Also, please have all of your accounts registered in the same name and address. You may do this by contacting our transfer agent, Computershare, Inc., at 1-866-252-0358.
Costs of Soliciting Proxies
Owens & Minor will pay all costs of this proxy solicitation. The Company has retained Georgeson, LLC to aid in the distribution and solicitation of proxies for approximately $7,500$8,500 plus expenses. The Company will reimburse brokers and other custodians, nominees, and fiduciaries for their expenses in forwarding proxy and solicitation materials.
Owens & Minor, Inc.●20212024 Proxy Statement37
General.General. The Company is managed under the direction of the Board of Directors (the “Board”), which has adopted Corporate Governance Guidelines to set forth certain corporate governance practices.practices applicable to the Board. Each year, we review our corporate governance policies and practices relative to applicable laws, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002, and rules and regulations promulgated thereunder or adopted by the Securities and Exchange Commission (“SEC”(the “SEC”) and the NYSE, the exchange on which the Common Stock is listed, as well as the policies and practices recommended by groups and authorities active in corporate governance.
Corporate Governance Materials.Materials. The Company’s Bylaws, Corporate Governance Guidelines, Code of Honor, and the charters of the Audit Committee, the CompensationGovernance & BenefitsNominating Committee (the “Compensation Committee”), and the Governance & NominatingOP&C Committee are available on our website at http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab. The information available on, or that can be accessed through, our website is not a part of, or incorporated by reference into, this Proxy Statement.
Code of Honor.Honor. The Board of Directors has adopted a Code of Honor that is applicable to all teammates of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer, as well as the members of the Board of Directors.Board. We would post any amendments to or waivers from our Code of Honor (to the extent applicable to the Company’s principal executive officer, principal financial officer, principal accounting officer, any other executive officer, or any director) on our website http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab.
Director Independence.Independence. The Board of Directors has determined that the following Board members and/or nominees are “independent” within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines: Aster Angagaw, Mark A. Beck, Gwendolyn M. Bingham, Kenneth Gardner-Smith, Robert J. Henkel, Rita F. Johnson-Mills, Stephen W. Klemash, Mark F. McGettrick, Eddie N. Moore, Jr., Michael C. Riordan,Teresa L. Kline, and Robert C. Sledd.Carissa L. Rollins. To assist it in making determinations of independence, the Board has adopted categorical standards which are included in the Company’s Corporate Governance Guidelines available on our website at http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab. The Board has determined that all directors and/or nominees identified as independent in this Proxy Statement meet these standards.
Structure and Leadership of the Board.Board. The Board of Directors does not have a firm policy with respect to the separation of the offices of Chair of the Board and the Chief Executive Officer. Instead, the Board believes that it is in the best interests of the Company for the Board to make this determination from time to time taking into account many factors including the make-up of the Board, the performance of the business, the tenure of the CEO, or as part of the succession planning process when it selects a new Chief Executive Officer or when a Chair ceases his or her service on the Board. At this juncture, theThe Board believes that the separation of the Chair and Chief Executive Officer roles currently serves the best interests of the Company by allowing a non-executive, independent director to lead the Board while our current Chief Executive Officer focuses on the Company’s performance, day-to-day operations, customer service, teammate engagement, Company culture, leadership, and the implementation of strategic initiatives.
Our Corporate Governance Guidelines also provide for the annual election of a lead independent director by our non-management directors in the event thatif the Chair is not independent. The lead independent director primarily presides at Board meetings in the absence of the Chair, presides at meetings of the independent directors, serves as the principal liaison between the independent directors and the Chair and Chief Executive Officer, and advises the Chair with respect to agendas and information requirements relating to the Board and committee meetings. The Board believes that the lead independent director, when the Chair is not independent, enhances communications between Board members (including the Chair) and committees as well as the overall functioning of the Board’s leadership.
Majority Vote Requirement for Election of Directors. The Company’s Bylaws and Corporate Governance Guidelines provide for the election of directors by majority vote in uncontested elections. Under the Company’s Corporate Governance Guidelines, with respect to director nominations, the Board will only nominate those incumbent directors who submit irrevocable resignations effective upon the failure of such director nominee to receive the required vote for re-election and the Board’s acceptance of such resignation. In the event an incumbent director fails to receive a majority of the votes cast, the Governance & Nominating Committee (or such other committee designated by the Board) will make a recommendation to the Board as to whether to accept or reject the resignation. The Board must act on the resignation, taking into accountconsidering the Governance & Nominating Committee’s recommendation, and publicly disclose its decision regarding the resignation, including, if applicable, its rationale for rejecting a resignation, in a press release and an appropriate disclosure with the SEC within 90 days following certification of the election results. The Governance & Nominating Committee in making its recommendation, and the Board in making its decision, may each consider any factors or other information that it considers appropriate and relevant.
48Owens & Minor, Inc.●20212024 Proxy Statement
Corporate Governance |
The Board’s Role in Risk Oversight. The Board of Directors currently administers its risk oversight function through the full Board and not through a separate risk committee of the Board. However, each of the Audit Committee, the CompensationOP&C Committee and the Governance & Nominating Committee oversees the specific financial, compensation compliance and governance risks, respectively, relating to its functions and responsibilities and reports on these matters to the full Board. The Board performs its risk oversight function through regular reporting by the Board committees as well as the officers and management-level personnel who supervise the day-to-day risk management activities of the Company, including an enterprise risk steering committee comprisedcomposed of senior leaders of the Company.Company and is an element of the Company’s enterprise risk management (“ERM”) program.
Cybersecurity Risks.The Board recognizes the importance of oversight of cybersecurity and information security risks and at least annually receives a comprehensive presentation and report from management on the state of the Company’s cybersecurity program and systems protection. The presentation and report address topics and updates on all layers of cybersecurity, technology, applications, threat environment, and processes to prevent, detect and respond to threats. Cybersecurity and information security monitoring, mitigation and threat assessment are also part of the Company’s ERM program. Additionally, the Audit Committee monitors our information security programs and receives updates from management quarterly, or more frequently as determined appropriate, on the cybersecurity program and matters related to cybersecurity incidents, as well as one-on-one discussions with the Chief Information Officer and Chief Information Security Officer.
We model our cybersecurity program to align with practices and standards referenced within the National Institute of Standards and Technology cybersecurity framework. Our information security program includes, but is not limited to:
| • | Following the methodology of Identify, Protect, Detect, Respond, and Recover; |
| • | Mandatory annual cybersecurity awareness training for all teammates accessing the Company’s network; |
| • | Monthly Company-wide phishing prevention and awareness exercises; |
| • | Identification and remediation of information security risks and vulnerabilities in our information technology (“IT”) systems, including regular scanning of both internal and externally facing systems and annual third-party penetration testing; |
| • | Implementation of security technologies intended to identify and assist in containing and remediating malware risks; |
| • | Active monitoring of logs and events for our network perimeter and internal systems; |
| • | Due diligence of information security programs for third-party vendors that handle our data; |
| • | Partnering with the Cybersecurity and Infrastructure Security Agency (“CISA”)/U.S. Department of Homeland Security/Federal Bureau of Investigation, to leverage their provided sensitive/confidential threat intel and with CISA for weekly vulnerability scans of our key public facing servers; |
| • | Maintaining a cyber insurance policy that provides coverage for security breach recovery and response; and |
| • | Engagement of third-party consultants to assess the health of our cybersecurity program. |
Additional information related to our cybersecurity program is contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Environmental, Social and Governance (“ESG”). The Governance & Nominating Committee reviews and has oversight of the Company’s ESG programs and practices. The Governance & Nominating Committee and full Board regularly receive reports on the progress of our ESG programs.
Annual Performance Evaluation.The Board conducts an annual self-evaluation (for the full Board and for each of its committees) to determine whether it and its committees are functioning effectively. The Governance & Nominating Committee receives comments from all directors and reports annually to the Board with an assessment of the Board’s performance. The assessment focuses onexamines the Board’s contribution to the Company and specifically focuses on areas in which the Board or management believes that the Board can improve.
Board Diversity. Consistent with the Company’s Corporate Governance Guidelines, the Governance & Nominating Committee seeks to select Directorsdirectors who reflect a diverse set of skills, technical expertise, educational and professional backgrounds, industry experiences and personal backgrounds, perspectives and experiences.public service. While the Board has not adopted a formal policy with regard to the
Owens & Minor, Inc.●2024 Proxy Statement9
Corporate Governance |
consideration of diversity in identifying director nominees, the Governance & Nominating Committee and the Board believe that considering diversity is consistent with the goal of creating a Board that best serves the needs of the Company and the interests of its shareholders, and it is one of the many factors that they consider when identifying individuals for Board membership. Twenty-five percentThe table on page 21 sets forth the diversity, experience, and tenure of our Director nominees are women and/or ethnically diverse.director nominees.
Report of the Governance & Nominating Committee
The Governance & Nominating Committee iswas composed of sixfive directors in 2023, and is currently composed of three directors, all of whom the Board has determined are independent. The Governance & Nominating Committee met fivefour times during 2020.2023. In performing the various duties and responsibilities outlined in its charter, the Governance & Nominating Committee, among other things, received regular reports on the Company’s enterprise quality and regulatory compliance; reviewed and approved changes toESG programs; conducted the annual review of its charter and the Corporate Governance Guidelines; reviewed and assessed the Company’s director compensation program relative to comparable peer companies, including appropriate compensation for the non-executive Chair of the Board; andcompanies; led the annual Board and committee assessment process.process; recommended rotation of members for each of the Board’s committees; and reviewed director education for the full Board. During 2020,2023, the Governance & Nominating Committee reviewed and along with the full Board devoted time to management succession planning, including the review and approval of updates to the CEO emergency replacement plan and, in conjunction with the CompensationOP&C Committee, reviewed the performance of the Chief Executive Officer. Also during 2020, the Committee undertook oversight of the Company’s environmental, social and governance programs.
Due to the upcoming retirement of two directors during 2021, the Committee devoted considerable time and attention to director succession planning, which included the engagement with an outside consulting firm to assist in the identification and strategic recruitment of directors possessing the qualities, character, experience and expertise that will contribute to the leadership and success of the Company.
| THE GOVERNANCE & NOMINATING COMMITTEE |
| Mark A. Beck |
10Owens & Minor, Inc.●20212024 Proxy Statement5
Corporate Governance |
In 2019, we introduced our IDEAL values, which represent who we are at our best and have served as touchstones for how we do our work every day. In 2023, we took the next step in the evolution of our corporate culture and introduced our Purpose and Vision. We believe this work is vital to Owens & Minor’s continued growth and that purposeful organizations have a distinct advantage in achieving long term success. Our purpose captures who we are and the scale of our impact. At Owens & Minor, Life Takes Care.
Our mission articulates how we will advance our purpose and calls our teammates to act like owners and pursue a results-driven culture. At Owens & Minor, our vision is to be the unstoppable and dynamic leader that connects patients and providers to trusted healthcare products and solutions.
Our purpose gives us our true north and our vision focuses our efforts and, together, they help Owens & Minor deliver on our mission to empower our customers to advance healthcare.
Shareholder Engagement
Our Board of Directors and our leadership value our shareholders’ perspectives. Shareholder engagement is an integral part of the Company’s strategy. To help ensure that we understand and focus on the priorities that matter most to our shareholders, our Board of Directors and senior management proactively conduct investor outreach throughout the year.
We engage with shareholders through various outreach initiatives, including:
| • | Quarterly earnings releases with corresponding conference calls and webcasts; |
| • | Regular reports filed with the SEC, including annual and quarterly reports; |
| • | Participation in investor conferences and non-deal roadshows; |
| • | In-person and virtual meetings with current and prospective investors and research analysts; |
| • | Proactive outreach to institutional investors, pension funds and governance professionals; and |
| • | Our annual shareholders’ meeting. |
In addition to discussing business results and initiatives, strategy, and capital structure, we engage with investors on various other matters essential to our business and the Company, such as governance practices, risk management and ESG. Our senior executives regularly share with our Board the feedback received from our shareholders.
Owens & Minor, Inc.●2024 Proxy Statement11
Corporate Governance |
Specific Ways We Engaged with Shareholders in 2023
We actively engaged with shareholders throughout 2023, but the seminal event was our Investor Day in December that was held live in Boston and broadcast through our corporate website. Seventy-eight unique firms participated in the event either in-person or via webcast. During this event, different members of executive management presented the Company’s strategic vision, operating and growth strategy and multi-year financial targets.
In addition to our Investor Day activity, we remained actively engaged with shareholders and other members of the investment community. We held in-person or telephonic discussions with more than 100 individual firms. Between the individual meetings and our Investor Day, we engaged with current shareholders holding over 50% of our shares. We also continued to meet with prospective shareholders, debtholders and sell-side analysts. Our investment community outreach continues to be in the form of quarterly earnings presentations, attendance at industry conferences, and several in-person meetings both at the Company and at investor locations. We participated in four industry investor conferences in 2023. Presentation materials from our Investor Day, as well as attendance at investor conferences, are available to our shareholders generally through our filings with the SEC or on the “Investors Relations” section of our website at www.investors.owens-minor.com.
Additionally in June 2023, we published our latest annual sustainability report. The 2022 report provides an update on the initiatives we outlined in our past reports and discusses the Company’s ESG focus and contributions. It also provides visibility to our shareholders into the performance metrics and achievements that support the Company’s sustainability focus.
Environmental, Social, and Governance
The worldIntroduction.Since our founding in 1882, Owens & Minor has changed since remained committed to our teammates, our customers, and the communities where we do business. As part of this commitment, we recognize the need to identify, prioritize, and manage ESG impacts from our operations.
In 2021, we completed our first ESG materiality assessment to identify and prioritize topics most relevant to our key stakeholders. Using the results of the materiality assessment, we developed a framework to align ESG risks and opportunities with our overall business strategy while striving to improve our ESG-related impacts. To effectively manage the implementation of our strategy, we created a governance structure to define our ESG framework and deliver on our commitments. Since its inception, our ESG governance framework has grown to include our expanded Patient Direct offerings and ensure representation across Owens & Minor.
Owens & Minor’s foundingESG Framework. Our ESG Framework forms the basis of our ESG program, integrating the priorities identified in 1882, but one constant overour materiality assessment into key aspects of our operations and overall business strategy.
Guided by our Purpose, Life Takes Care™, our ESG Frameworkemphasizes the yearsimportance of incorporating ESG commitments into our company culture and IDEAL (Integrity, Development, Excellence, Accountability, Listening) Values. Our framework consists of four focus areas:
Promoting Environmental Stewardship: Minimize the impact of our operations on the environment.
Caring for our Customers and Communities: Deliver superior and easily accessible care for customers and the communities we support.
Operating Responsibly: Demonstrate sound governance, accountability and responsible sourcing.
Empowering our Teammates: Foster an empowering, safe, diverse and inclusive work environment where all teammates can thrive.
Promoting Environmental Stewardship
Minimizing Physical Climate Risk.Owens & Minor is dedicated to serving our customers and communities, while also protecting teammate safety, during times of emergency and natural disasters to ensure the reliability of product supply and patient care. Honoring our commitment to taking carethe Health Sector Climate Pledge developed by The White House and U.S. Department of Health and Human Services, and to further strengthen the integrity of our supply chain in the event of
12Owens & Minor, Inc.●2024 Proxy Statement
Corporate Governance |
future climate impacts, Owens & Minor released a Climate Resilience Plan for Continuous Operations. This Plan outlines our strategies to ensure the continuity of our operations despite the unique challenges presented by climate change. Owens & Minor continues to adapt our infrastructure and operations to address the unique challenges presented by climate change through:
| • | Prospective risk assessments; |
| • | Community engagement and partnership; |
| • | Assessing the strength of our infrastructure and operations; |
| • | Industry and healthcare organization collaboration; and |
| • | Interdisciplinary planning, oversight, and evaluation. |
To increase the transparency of our environmental footprint Owens & Minor released its inaugural disclosure to the CDP (formerly the Carbon Disclosure Project) in 2023, providing further detail on greenhouse gas (“GHG”) emissions related to operations and the programs in place to address those emissions.
Managing Carbon Footprint: Sites & Fleet Efficiency. At our manufacturing sites, we have adopted practices to reduce our environmental impact, including efforts to eliminate waste, reduce our carbon footprint, and increase renewable energy usage. Additionally, we measure GHG emissions, water usage, and waste to set and implement site-specific goals intended to reduce our environmental footprint. Our Emissions Reduction Working Group has made significant progress in expanding data capture associated with energy consumption and GHG emissions from our manufacturing operations and identifying key opportunities to focus emissions reduction efforts.
Our transportation team remains committed to the fleet efficiency targets set for our strategic logistics partners and continues to share fuel efficiency and freight routing information with the U.S. Environmental Protection Agency (“EPA”) SmartWay program to develop more environmentally friendly shipping methods. Our transportation team works closely with freight partners to identify the most efficient routes available. Our ocean freight partners have invested in upgrading their vessels to improve fuel efficiency and have plans in place to meet carbon emissions reduction targets. We continuously work towards reducing our carbon footprint by prioritizing sea and rail routes when practicable.
In 2023, our Patient Direct segment launched a successful pilot program of electric vehicles supporting our fleet in Southern California. Lessons learned from this pilot informed the addition of 24 electric vehicles to contribute to efficiency improvements and reductions in the carbon emissions associated with bringing essential medical supplies to our customers. Additionally, a program targeting reduced vehicle idle time yielded such strong results – cutting idle time nearly in half for participating vehicles – that the program will be rolled out to all Apria branches in 2024. Owens & Minor continues to evaluate freight strategies, optimize transportation modes and delivery routes, and update and upgrade equipment to further our organization’s climate risk mitigation objectives.
Waste & Water Management. Our facilities continue to focus on mitigating the impact of waste generated by production and operations at our sites. Our commitment to protecting the environment is demonstrated in the following areas:
| • | Sustaining largely landfill-free operations across our manufacturing sites; |
| • | Implementing and maintaining recycling programs at our distribution centers and manufacturing sites; |
| • | Focusing on the impact of downstream waste by converting more packaging to Forest Stewardship Council (“FSC”)-certified materials; |
| • | Increasing consumer awareness of our product takeback and repair programs; and |
| • | Working to enhance the recyclability of our distributed products and packaging materials. |
Our Packaging & Labelling Working Group identified opportunities to remove unnecessary components from various packaging configurations across several product lines to reduce the impact of downstream waste. The team created an updated informational packaging design to improve the handling and reprocessing of packaging materials manufactured through our operations. Our SAFESKIN* Glove Manufacturing Facility has been consistently recognized for environmental best practices, receiving awards for river conservation, fish release programs, and tree planting to prevent soil erosion.
Caring for Our Customers and Communities
Product Quality and Safety.Quality is the foundation for everything we do at Owens & Minor. The Quality Assurance and Regulatory Affairs (“QARA”) Team effectively manages a robust Quality System that meets or exceeds all laws, regulations,
Owens & Minor, Inc.●2024 Proxy Statement13
Corporate Governance |
and standards that govern our business. This system serves as a framework to support consistent, high-quality solutions for both internal and external customers. Owens & Minor complies with the U.S. Food & Drug Administration (“FDA”) and European Union Medical Device Regulation and is also certified under the International Organization for Standardization (“ISO”) 13485 and the Medical Device Single Audit Program. In 2023, our QARA team:
| • | Enhanced the medical device reporting program; |
| • | Established a design control program for our kitting business; |
| • | Obtained successful FDA 510k clearances for new product codes; and |
| • | Upgraded the electronic Quality Management Systems to support the Owens & Minor Quality System program. |
We manage our internal quality system audits as required by the FDA and ISO, as well as through third-party audits.
The Patient Direct segment holds Centers of Medicare & Medicaid Services Durable Medical Equipment, Prosthetics, Orthotics, and Supplies approved third-party accreditation from the Community Health Accreditation Program; The Joint Commission; Healthcare Quality Association on Accreditation; and Utilization Review Accreditation Commission, as applicable to business operations. These organizations continuously collect safety and key performance indicators to monitor compliance with their requirements. Additionally, client and referral satisfaction is surveyed and reported for evaluation by leadership.
Supporting Our Communities.We invest in the communities where we operate through charitable contributions from The Owens & Minor Foundation (the “Foundation”) and by encouraging our teammates’ volunteerism. Launched in May 2021 with a $10 million endowment, the Foundation is dedicated to making impactful investments to charitable and civic organizations in the communities we serve and focuses primarily in three areas: Environment, with particular attention to the stewardship of waterways; Healthcare; and Diversity, Equity & Inclusion. Since its inception, the Foundation has contributed more than $2 million to organizations supporting our three focus areas.
In 2021, The Owens & Minor Foundation selected Ronald McDonald House Charities® (“RMHC”) as its flagship charity partner, donating Halyard® products and contributing more than $1 million for multi-year support of RMHC programming that directly improves the health and well-being of children and their families. In 2023, The Foundation’s contribution guaranteed 5,000 overnight stays to ensure families with ill or injured children remained together and close to medical care. In addition, Owens & Minor teammates volunteered nearly 2,000 hours to help feed and nourish RMHC families.
Also in 2023, the Foundation collaborated with our Veterans Teammate Resource Group (“Veterans TRG”) to partner with Hope for the Warriors® to help support active U.S. servicemembers, veterans, and military families, as well as to provide ongoing engagement opportunities for Owens & Minor teammates. The Owens & Minor Veterans TRG provides a forum for active and former U.S. military servicemembers to advocate for veterans and veterans’ causes on behalf of teammates and in local communities. The Foundation’s support will assist more than a thousand Hope for the Warriors clients across a variety of programs.
Further, the Foundation continued its commitment to environmental charities nationwide with contributions to Chattahoochee Riverkeeper™, The Conservation Foundation, FRIENDS of Great Salt Lake, Los Angeles Waterkeepers™, and Save the Sound™ to increase access, education and conservation of the nation’s waterways. In summary, these and other contributions continue Owens & Minor’s longstanding legacy of service to our teammates, customers, and the communities in which we operate. Owens & Minor is committed to conducting our business in an environmentally friendly, socially conscious and sustainable manner.
In 2020 we formalized our environmental, social and governance (“ESG”) program as discussed below and in 2021, we expect to advance our commitment to ESG by performing an ESG materiality assessment and further developing our program. This assessment will help us identify our priority ESG topics that are salient for our Company and our ability to create long-term value. These priority ESG topics will also serve as the foundation for our ESG strategy and inaugural ESG report, which we expect to publish this year.Operating Responsibly
In the sections below, we have provided an overview of how Owens & Minor is beginning to integrate ESG practices across our governance, operations, supply chain and communities in which we operate.
Our Values
Our values reflect our commitment to our customers, our teammates, the environment and the communities where we live and work. They embody “IDEAL” behavior — Integrity, Development, Excellence, Accountability and Listening. All Owens & Minor teammates are responsible for embodying these values every day.
GOVERNANCE
We maintain a Code of Honor (the “Code”) that sets forth the standards and guidelines for ethical behavior expected of everyone who works for and with our company. The Code is core to our mission and values. We require that every Owens & Minor teammate and member of our Board of Directors pledge to abide by the standards set forth by the Code. The Code addresses a variety of topics, including our expectations related to diversity and equal opportunity employment, data privacy, fair compensation and anti-bribery.
6Owens & Minor, Inc. ● 2021 Proxy Statement
|
ESG Governance
In 2020, our executive leadership together with a subcommittee of Board members began defining our ESG governance, strategy and accountability structure. It is expected that the Governance & Nominating Committee will oversee the development and implementation of Owens & Minor’s ESG strategy and this Committee’s charter will be amended in 2021 to include information regarding our ESG strategy and governance.
In addition, leadership has designated an ESG team comprised of teammates from functions across the company to develop the ESG strategy. Representatives from Investor Relations, Human Resources, Supply Chain, Community Engagement, Environment, Health and Safety, Compliance and Legal as well as other functions are expected to contribute to this effort.
Ethics and Compliance
We have combined social compliance and environmental sustainability into one overarching Corporate Responsibility Policy Statement that demonstrates our commitment to our teammates, suppliers, shareholders, and customers. Among other issues, the Statement includes topics such as business integrity, code of honor, anti-bribery and corruption and protections against child labor and forced labor practices. The Statement can be found on our website at “Corporate Governance” in the “Investor Relations” tab.
OPERATIONS
Environment, Health and Safety
Environmental Initiatives
Regulatory Compliance.We are committed to environmentally responsible business practices and conducting business in compliance with applicable environmental laws rules, and regulations. We aim to complyregulations as well as through environmentally responsible practices. Owens & Minor complies with all relevant regulatory standards pertaining tofor air emissions, storm waterstormwater, and pollution prevention under the U.S. EPA and other global authorities.authorities applicable to where we operate. We have also developeddevelop and maintain environmental initiativesobjectives that focus on reducing our impact across our manufacturing sites and vehicle fleets.
At our manufacturing sites, we strive to eliminate waste, reduce our carbon footprint and increase the use of renewable energy. A majority of our global manufacturing sites have measured greenhouse gas emissions (“GHG”), water and waste data annually since 2015 and use this data to implement site-level goals and initiatives to reduce their environmental footprint. In addition, several sites have established site-level goals, including commitments to zero waste-to-landfill and sourcing 100% renewable energy. Several manufacturing sites are also in the process of obtaining ISO 14001 certification for their environmental management systems.
From a vehicle fleet perspective, 14Owens & Minor, usesInc.●2024 Proxy Statement
Corporate Governance |
Governance & Transparency. As part of our comprehensive Ethics and Compliance Program that aligns with the fundamental elements of an effective compliance program, as outlined by the U.S. Government and healthcare industry best practices, we maintain a combinationCode of owned fleetHonor. This Code creates a standard for ethical behavior that is required of all our teammates and contract carriersbusiness partners, including expectations for specific topics such as anti-bribery and anti-corruption. Annually, we require all teammates and our Board of Directors to conduct deliveriespledge to uphold the Code’s standards.
We monitor corruption and bribery through our corporate internal audit, procurement, compliance, and vendor relations teams, who review various reports from all areas of our business. Owens & Minor prohibits all forms of bribery and corruption and maintains policies and procedures to prevent unethical business practices. Our internal audit, procurement, and vendor relations teams hold various compliance trainings to maintain compliance with all laws and regulations. We also maintain a whistleblower hotline for teammates to report any compliance concerns.
Ethical Supply Chain. The company’s social compliance programs strive to uphold human rights in all our business activities. Owens & Minor supports these programs with elements including, but not limited to:
| • | Oversight from our Board and Executive Leadership Team, as well as our Human Resources, Legal, Ethics & Compliance, Privacy, and Supply Chain leadership; |
| • | Risk analysis; |
| • | Policies and procedures; |
| • | Training and communication; |
| • | Auditing and monitoring; |
| • | Whistleblower hotline; |
| • | Anti-bribery and anti-corruption standards; |
| • | Modern slavery assessments and safeguards – Including all forms of involuntary labor, trafficked labor, forced labor, and child labor; and |
| • | Environmental protections. |
We also work to ensure that both Owens & Minor and our vendors adhere to business integrity fundamentals including, but not limited to:
| • | Privacy laws and regulations; |
| • | Healthcare law; |
| • | Import/export compliance; |
| • | Security, both physical and cyber; |
| • | Conflict minerals policies; |
| • | Antitrust; |
| • | Industry standards; and |
| • | Transparency. |
Advancing Supplier Diversity. We support a socially responsible supply chain that includes qualified businesses with women-owned, minority, LGBTQ+, disabled, and veteran representation. In addition to our Supplier Diversity Council, Owens & Minor has expanded its program to include Tier 1 and Tier 2 diversity mentoring, adding dedicated leadership for diversity programs, and implementing private label products to be utilized by diverse suppliers. To continue building on our Supplier Diversity Program, in 2023 Owens & Minor established a commercial marketing strategy to optimize supplier diversity. To support and better understand supplier performance, Owens & Minor centralized reporting, increased the visibility of products from our distribution centerspartner diverse suppliers, and tracked the associated usage so that we may better identify opportunities to customers.continue to grow and expand the program.
Empowering Our Field Operations team focuses on fuel efficiency initiatives including route optimization Teammates
In alignment with our IDEAL Values, Owens & Minor strives to empower our teammates by ensuring there are open channels of communication across all levels of the organization. Our teammates are supported with development programs
Owens & Minor, Inc.●2024 Proxy Statement15
Corporate Governance |
and replacing equipment regularlya healthy work environment, and we aim to reducerealize success together through diversity, equity, and inclusion (“DE&I”). In 2023, we held regular virtual Town Hall meetings with our fuel consumption.Executive Leadership Team and global teammates and encouraged all managers to align action plans across their teams with survey responses. We provided Learning Pathways designed to support teammates in developing skills for their role and planning their career paths. Through our annual talent review, we continue to invest in leadership development opportunities to increase the readiness of top talent leaders to assume greater responsibility at Owens & Minor. We also bolstered our support for DE&I by continuing to grow our TRGs to provide support and help in personal and career development while creating a safe space where teammates can bring their authentic selves to work every day. In 2023, we launched the Diverse Abilities Inclusion & Support (“DAIS”) TRG for all teammates with diverse abilities, caring for a family member with diverse abilities, or wishing to join as an ally. This TRG advances awareness and inclusion while promoting an environment where teammates feel comfortable sharing, feel they are heard, and are encouraged to utilize resources available through our company and their communities. Our goal is to provide education and support while promoting inclusion and understanding of teammates with diverse abilities.
HealthSupporting Our Teammates.The health, wellness and Safety Initiatives
The safety of our teammates is paramount to our success.a foundational priority at Owens & Minor. We are committed to providing a work environment that empowers all teammates to make safe choices and leave work safely each day. A substantial parttake care of our workforce is comprised of teammates, who work in distribution centers and manufacturing facilities, operating equipment and machinery and performing physical labor.
Across our manufacturing and distribution center operations, we have a Safety Management System (“SMS”) to standardize safety procedures and to improve performance. We continuously assess the health and safety risks our teammates face in their jobs, and we work to mitigate those risks usingtake care of our SMS through job hazard assessments, Behavior Based Safety (“BBS”) protocols, teammate engagement programs, and internal safety inspections.
Moreover, in 2020, we established a Global Safety & Risk Council to bring together allcustomers. We value the contributions teammates make toward growing Owens & Minor business units to share best practices, standardize compliance procedures and strengthenoffer a comprehensive suite of benefits and well-being resources such as health and financial wellness programs, adoption assistance, parental leave, education assistance, and bereavement leave.
Teammate safety is a priority at Owens & Minor, and we pursue a “safety as a lifestyle” approach, which was demonstrated in 2023, as we achieved a total-company recordable incident rate of 1.02—lower than the Company’s safety culture. Ouraverage of 2.7 for private industry. Additionally, we achieved a DART rate (cases with Days Away, Restricted, or Transfer of Duty) of 0.61, also lower than the private industry average of 1.7. Several of our sites routinely work millions of hours without a recordable injury, reflecting our commitment to safety and investments in training has led to a 71% reduction in our Total Recordable Incident Rate (“TRIR”) for our manufacturingoverall target of zero injuries. During 2023, we achieved several Environment, Health, and distribution center operations since 2018.Safety milestones including, but not limited to:
Owens & Minor, Inc. ● 2021 Proxy Statement7
| • | |
|
| • | 75% of our Patient Direct locations worked the entire year free of recordable incidents. |
Our COVID-19
| • | We hosted a “Spring into Safety” housekeeping challenge in March to focus on the fundamentals for our safe workplace. |
| • | Our facility in Kells, Ireland hosted a Wellness Week in December educating and refreshing our teammates on self-care, winter safety, and Supervisor training/preparedness. |
| • | We hosted Global Safety Week in August, involving all Products & Healthcare Services, (e.g., manufacturing, distribution), Patient Direct and Corporate Functions in a coordinated, structured week to celebrate the safety of our teammates and educate them for continued well-being. This special week also included a global competition encouraging sites to get creative and showcase teammate’s engagement activities. |
Overall, we seek to strengthen and continuously improve all of our Environment, Health, and Safety Measuresprogram initiatives with the goal of providing an optimal environment to achieve our Purpose and Vision.
Our firstPromoting Diversity, Equity, and foremost priorityInclusion.Promoting DE&I is always teammate safety. We have establishednot a COVID-19 Steering Committee which is responsible for establishingproject nor a point-in-time discussion. Building a diverse, equitable, and overseeing implementationinclusive workplace takes dedication and a long-term commitment from each one of COVID-19 protocols across the Company, including usage of PPE, social distancing, limiting the number of visitors, temperature checks, testing and most recently, vaccination availability. The Committee members meet on a weekly basis with Operations and Distribution leadersus to track cases and provide resources necessary for our teammates to continue producing and delivering life-saving medical products to health care systems globally.
Additional information on our COVID-19 response can be found in “Taking Care of Our Teammates” on page 26 of this Proxy Statement and on our website at https://www.owens-minor.com/COVID-19/.
Diversity and Inclusion
We are committed to fostering an empowering work environment that enables our teammates to thrive. Diversity and inclusion are a critical part of fulfillinglive our IDEAL Values and to bring our authentic selves to work each day.
We encourage a working environment that promotes the success and well-being of all our teammates. We advocate for DE&I across our business to help succeed in delivering on our mission. We actively participate inDE&I strategy. Reflecting our commitment to and support initiatives that promote diversityfor DE&I, we launched Unconscious Bias training for all senior leaders in 2023, and inclusionwe will continue educating at deeper levels of the organization in our workplace.2024.
For example,Our TRGs were created in 2020 we created Teammate Resource Groups (“TRGs”) that provide space, resourcesto promote engagement and support for underrepresented identity groups. Our current TRGs includegroups, including African American/Black, Veteran and Military, LGBTQ+, Military, Women in HealthcareWomen’s Empowerment Network, Hispanic, Asian American/Pacific Islanders, and Women in Tech TRGs.Technology. With the addition of our eighth TRG in 2023 centered on teammates with or who care for family members with Diverse Abilities, we have more than 1,000 members and allies participating in TRGs throughout the company. A new TRG has been approved for Q1 2024 focusing on emerging and future leaders within the company. To further advance our Purpose of Life Takes Care, each TRG received funding in 2023 from the Foundation to support
We also embed diversity and inclusion in our teammate recruitment practices. Our diversity recruiting initiatives include actively partnering with Historically Black Colleges and Universities (“HBCUs”) to increase the visibility of
16Owens & Minor’s hiringMinor, Inc.●2024 Proxy Statement
Corporate Governance |
nonprofit organizations nominated by each TRG that align with that specific TRG’s mission and goals. These contributions allowed our TRGs to develop partnerships by participating in engagement events and volunteer opportunities for students and alumni. In addition, we are a proud military employer of choice and we partner with multiple military and Veteran organizations to supportin the service-members in our Company and communities.
We track and measure representation across gender and ethnic minority as part of our commitment to fostering an empowering work environmentdiverse communities where every teammate can thrive, and are committed to increasing diversity in our workforce, particularly in leadership roles.
SUPPLY CHAIN
Supply Chain Integration into Supplier Standards
We believe that good corporate citizenship by our Company and those we do business with is essential to our long-term business success. We engage in business globally and work with third-party suppliers across our global supply chain. We maintain Supplier Social Compliance Standards (“SSCS”) to hold our third-party suppliers accountable to our expectations. These standards communicate our values and address our expectation of our suppliers with respect to health and safety, environmental impact, prohibition of child or forced labor, working conditions, freedom of association and collective bargaining, anti-discrimination, integrity and conflict minerals.
Our Social Compliance Leadership Committee oversees the implementation of our SSCS internally and externally within our supply chain. This Committee also oversees the auditing and due diligence of suppliers, conducts trainings to educate teams across manufacturing, supply chain and procurement and raises awareness of trends and issues related to global social compliance.
We are also committed to advancing supplier diversity by working with minority, women, disabled and veteran owned businesses. We believe a thriving community of diverse suppliers generates innovation while contributing to the economic development of the communities in which we live and work.
COMMUNITIES
Community Engagement
We are active members of the communities where we operate. By contributing financially and through volunteer work, we help build stronger communities and create a better environment. We accomplish this in a number of ways, including direct
8Owens & Minor, Inc. ● 2021 Proxy Statement
|
contributions and corporate sponsorships to charitable organizations, specific programs designed to enrich our communities and community volunteer efforts. Our primary focus areas are:
Health and wellness: We strive to improve the quality of life for our teammates and the people in our communities by supporting organizations such as the Special Olympics, American Heart Association and American Cancer Society.
Education: The quality of an education ensures the growth of the future workforce and provides better opportunities for our community. We strive to strengthen programs by supporting Community in Schools, the Boys & Girls Club and local high schools.
Civic and community: We invest in our communities by providing opportunities for teammates to volunteer where they live and work, supporting organizations such as FeedMore and Red Cross of America.
Our teammates are active members of our larger, global communities through fundraising and volunteering with community groups. We actively engage our teammates to identify organizations to support through our Charitable Contribution Committee.
Our Path Forward
In 2021, we expect to reinforce our commitment to ESG through developing a formal strategy with focus areas and goals to track progress and an external report to increase transparency of our ESG initiatives.
We provide disclosures on our ESG efforts and relevant policies on our website at http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab.
The Board of Directors held 16 meetings during 2020.2023 which included regular meetings and special meetings to provide oversight related to, among other things, the Company’s strategic planning, certain executive management changes and navigating macro-economic conditions during 2023. All directors attended at least 75% of the meetings of the Board and committees on which they served. Our directors attend our Annual Meeting of shareholdersShareholders unless there is compelling reason why they cannot. All of our directors in office at that time attended our 20202023 Annual Meeting of Shareholders.
Under the Company’s Corporate Governance Guidelines, the independent directors meet in executive session after each regularly scheduled Board meeting. These meetings are chaired by our Chair who is elected annually by the non-management directors following the Annual Meeting of Shareholders. Shareholders and other interested parties may contact the Chair by following the procedures set forth in “Communications with the Board of Directors” on page 12 of this Proxy Statement.
The Board of Directors currently has the following committees, which the Board established to assist it with its responsibilities:
Audit Committee:Oversees (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualification and independence of the Company’s independent registered public accounting firm, (iv) the performance of the Company’s independent registered public accounting firm and internal audit functions and (v) issues involving the Company’s ethical and legal compliance responsibilities. Committee.The Audit Committee oversees:
| • | Integrity of the Company’s financial statements; |
| • | The Company’s compliance with legal and regulatory requirements; |
| • | Qualification and independence of the Company’s independent registered public accounting firm; |
| • | Performance of the Company’s independent registered public accounting firm and internal audit functions; |
| • | Certain aspects of the Company’s ERM program, including cybersecurity risk; and |
| • | Issues involving the Company’s ethical and legal compliance responsibilities. |
The Audit Committee has sole authority to appoint, retain, compensate, evaluate, and terminate the Company’s independent registered public accounting firm. The Board of Directors has determined that each of Messrs. McGettrick and MooreCommittee Chair, Stephen Klemash, is an “audit committee financial expert,” as defined by SEC regulations and that each member of the Audit Committee is financially literate under NYSE listing standards. All members of the Audit Committee are independent as such term is defined under the enhanced independence standards for audit committees in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder as incorporated into the NYSE listing standards and under the Company’s Corporate Governance Guidelines. The Audit Committee met 10six times during 2020.2023.
CompensationOur People & BenefitsCulture Committee. The OP&C Committee:Administers executive compensation programs, policies and practices. Advises the Board on salaries and compensation of the executive officers and makes other studies and recommendations concerning
Owens & Minor, Inc. ● 2021 Proxy Statement9
| • | |
|
| • | Advises the Board on salaries and compensation of the executive officers; |
compensation and compensation policies. May delegate authority for day-to-day administration and interpretation of compensation plans to certain senior officers of the Company (other than for matters affecting executive officer compensation and benefits).
| • | Conducts studies and recommendations concerning compensation and compensation policies; |
| • | May delegate authority for day-to-day administration and interpretation of compensation plans to certain senior officers of the Company (other than for matters affecting executive officer compensation and benefits); and |
| • | Exercises oversight over other matters affecting our culture and our teammates such as DE&I, teammate satisfaction, teammate health and well-being, job satisfaction and turnover. |
All members of the CompensationOP&C Committee are independent within the meaning of the enhanced NYSE listing standards and the Company’s Corporate Governance Guidelines and are “non-employee directors” as defined in Rule 16b-3 under the Exchange Act. The CompensationOP&C Committee met sixeight times during 2020.2023.
Governance & Nominating Committee. The Governance & Nominating Committee:Considers and recommends nominees for election as directors and officers and nominees for each Board committee. Reviews and recommends changes to director compensation. Reviews and evaluates the procedures, practices and policies of the Board and its members and leads the Board in its annual self-review. Oversees the governance of the Company, including reviewing and recommending changes to the Corporate Governance Guidelines. Conducts succession planning for senior management.
| • | Considers and recommends nominees for election as directors and officers and nominees for each Board committee; |
| • | Reviews and recommends changes to director compensation; |
Owens & Minor, Inc.●2024 Proxy Statement17
Corporate Governance |
| • | Reviews and evaluates the procedures, practices and policies of the Board and its members and leads the Board in its annual self-review; |
| • | Oversees the governance of the Company, including reviewing and recommending changes to the Corporate Governance Guidelines; |
| • | Conducts succession planning for senior management; and |
| • | Reviews the Company’s ESG programs and practices. |
All members of the Governance & Nominating Committee are independent within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines. The Governance & Nominating Committee met fivefour times during 2020.2023.
Executive Committee:Committee.Exercises limited powers of the Board when the Board is not in session. The Executive Committee did not meet during 2020.2023.
Board Committee Membership
The Board, upon recommendation from the Governance & Nominating Committee, reviews and determines the composition of the Committees, appoints the Committee Chairs, and considers periodic rotation of committee members and chairs, taking into account the benefits of continuity and depth of experience, professional background, and experience with understanding different aspects of our business. In January 2024, the Board rotated the members of the Governance & Nominating and OP&C Committees.
Director | Board | Audit | Compensation & Benefits | Executive | Governance & Nominating | ||||||||||||||||||||
Aster Angagaw** |
| X |
| X | |||||||||||||||||||||
Mark A. Beck |
| X | * |
| X |
| X | * |
| X | |||||||||||||||
Gwendolyn M. Bingham |
| X |
| X |
| X | |||||||||||||||||||
Robert J. Henkel |
| X |
| X | * |
| X |
| X | ||||||||||||||||
Stephen W. Klemash** |
| X |
| X |
| X | |||||||||||||||||||
Mark F. McGettrick |
| X |
| X | * |
| X |
| X | ||||||||||||||||
Eddie N. Moore, Jr. |
| X |
| X |
| X |
| X | * | ||||||||||||||||
Edward A. Pesicka |
| X |
| X | |||||||||||||||||||||
Michael C. Riordan |
| X |
| X |
| X | |||||||||||||||||||
Robert C. Sledd |
| X |
| X | |||||||||||||||||||||
No. of Meetings in 2020 |
| 16 |
| 10 |
| 6 |
| 0 |
| 5 | |||||||||||||||
Director | Board | Audit | Executive | Governance & Nominating | Our People & Culture | |||||
Mark A. Beck | C |
| C | • | • | |||||
Gwendolyn M. Bingham | • |
| • | C |
| |||||
Kenneth Gardner-Smith | • |
|
|
| • | |||||
Robert J. Henkel | • |
| • |
| C | |||||
Rita F. Johnson-Mills | • |
|
| • |
| |||||
Stephen W. Klemash** | • | C | • |
|
| |||||
Teresa L. Kline | • | • |
|
|
| |||||
Edward A. Pesicka* | • |
| • |
|
| |||||
Carissa L. Rollins | • | • |
|
|
| |||||
No. of Meetings in 2023 | 16 | 6 | 0 | 4 | 8 | |||||
C Chair • Member * Non-Independent Director ** Financial Expert
|
|
The Governance & Nominating Committee reviews director compensation annually, and it is the responsibility of this committee to recommend to the Board of Directors any changes in director compensation. The Board of Directors makes the final determination with respect to director compensation. The Governance & Nominating Committee has the authority under its charter to retain outside consultants or advisors to assist it in gathering information and making decisions.
The Company uses a combination of cash and equity compensation to attract and retain qualified candidates to serve on its Board of Directors. In setting director compensation, the Company considers the time commitment of timethat directors must make in performing their duties, the level of skills required by the Company of its Board members and the market competitiveness of its director compensation levels. Additionally, from time to time, the Company performs a market review with respect to other leading companies of similar size to the Company and with respect to the Company’s peer group, under the supervision of the Governance & Nominating Committee, and upon recommendation of the Company’s independent compensation consultant, to determine the compensation arrangements for the independent directors of the
18Owens & Minor, Inc.●2024 Proxy Statement
Corporate Governance |
Company. The table below sets forth the schedule of fees paid to non-employee directors for their annual retainer and service in various capacities on Board committees and in Board leadership roles. Employee directors do not receive any additional compensation for serving on the Board or any of its committees.
10Owens & Minor, Inc. ● 2021 Proxy Statement
|
Schedule of Director Fees
Type of Fee | Cash | Equity | Cash | Equity | ||||||||||||
Annual Retainer | $ | 125,000 |
| $ | 125,000 | (1) | $ | 125,000 |
| $ | 175,000 | (1) | ||||
Additional Annual Retainer for the Chair |
| 60,000 |
|
| N/A |
| ||||||||||
Additional Annual Retainer for Independent Board Chair |
| 110,000 |
|
| N/A |
| ||||||||||
Additional Annual Retainer for Audit Committee Chair |
| 20,000 |
|
| N/A |
|
| 30,000 |
|
| N/A |
| ||||
Additional Annual Retainer for Compensation Committee Chair |
| 20,000 |
|
| N/A |
| ||||||||||
Additional Annual Retainer for OP&C Committee Chair |
| 25,000 |
|
| N/A |
| ||||||||||
Additional Annual Retainer for Governance & Nominating Committee Chair |
| 15,000 |
|
| N/A |
|
| 25,000 |
|
| N/A |
| ||||
| (1) | Restricted stock grant with one-year vesting period. |
Directors may defer the receipt of all or part of their director fees under the Directors’ Deferred Compensation Plan. Amounts deferred are “invested” in bookkeeping accounts that measure earnings and losses based on the performance of a particular investment. Directors may elect to defer their fees into the following two subaccounts: (i) an account based upon the price of the Common Stock and (ii) an account based upon the current interest rate of the Company’s fixed income fund in its Retirement and Savings Plan (the “401(k) Plan”). Subject to certain restrictions, a director may take cash distributions from a deferred fee account either prior to or following the termination of his or her service as a director.
2023 Director Compensation Table
The table below summarizes the actual compensation paid by the Company to non-employee directors who served during the year ended December 31, 2020.2023. Mr. Pesicka’s compensation is shown in the table entitled “2023 Summary Compensation Table”.
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | ||||||||||||||||||||||||||||
Name | Fees Earned in Cash ($)(1) | Stock Awards ($)(1)(2)(4) | Option Awards ($)(3) | Non-Equity ($) | Change in Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||
Aster Angagaw(5) |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A | |||||||||||||||||||||
Mark A. Beck |
| 161,667 |
| 125,000 |
| — |
| — |
| — |
| — |
| 286,667 | |||||||||||||||||||||
Gwendolyn M. Bingham |
| 114,583 |
| 145,833 |
| — |
| — |
| — |
| — |
| 260,416 | |||||||||||||||||||||
Robert J. Henkel |
| 130,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 255,000 | |||||||||||||||||||||
Stephen W. Klemash(5) |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A | |||||||||||||||||||||
Mark F. McGettrick |
| 145,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 270,000 | |||||||||||||||||||||
Eddie N. Moore, Jr. |
| 140,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 265,000 | |||||||||||||||||||||
Michael C. Riordan |
| 125,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 250,000 | |||||||||||||||||||||
Robert C. Sledd |
| 170,000 |
| 125,000 |
| — |
| — |
| — |
| — |
| 295,000 | |||||||||||||||||||||
Name | Fees Earned ($) | Stock Awards ($)(1)(2)(3) | Total ($) | |||||||||
Mark A. Beck |
| 235,000 |
|
| 175,000 |
|
| 410,000 | ||||
Gwendolyn M. Bingham |
| 150,000 |
|
| 175,000 |
|
| 325,000 | ||||
Kenneth Gardner-Smith |
| 125,000 |
|
| 175,000 |
|
| 300,000 | ||||
Robert J. Henkel |
| 150,000 |
|
| 175,000 |
|
| 325,000 | ||||
Rita F. Johnson-Mills |
| 125,000 |
|
| 175,000 |
|
| 300,000 | ||||
Stephen W. Klemash |
| 155,000 |
|
| 175,000 |
|
| 330,000 | ||||
Teresa L. Kline |
| 125,000 |
|
| 175,000 |
|
| 300,000 | ||||
Carissa L. Rollins |
| 125,000 |
|
| 175,000 |
|
| 300,000 | ||||
| (1) | Includes amounts deferred by the directors under the Directors’ Deferred Compensation Plan. |
| (2) | The amounts included in the “Stock Awards” column are the aggregate grant date fair value of the awards computed in accordance with the FASB ASC Topic 718. Assumptions used in the calculation of the stock awards are included in note 10 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated herein by reference. The actual value a director may receive for Stock Awards depends on market prices, and there can be no assurance that the amounts shown are the amounts that will be realized. |
| (3) |
|
The Stock Award amount of |
|
Owens & Minor, Inc.●20212024 Proxy Statement1119
Corporate Governance |
Stock Ownership Guidelines for Directors
The Company maintains stock ownership guidelines for its directors and modified those guidelines in 20182021 to provide that each director shall attain, within five years after his or her service on the Board begins (or by May 8, 2023July 30, 2026 for directors serving as of May 8, 2018)July 30, 2021), a level of equity ownership of Common Stock having a value of at least $325,000.four times the director’s annual cash retainer. Currently, the annual cash retainer is $125,000 and the equity ownership guideline value is $500,000.
Director Candidate Recommendations and Nominations by Shareholders. The Governance & Nominating Committee charter provides that the Governance & Nominating Committee will consider director candidate recommendations by shareholders. Shareholders should submit any such recommendations to the Governance & Nominating Committee through the method described under “Communications with the Board of Directors” below. In addition, our Bylaws provide that any shareholder of record entitled to vote for the election of directors at the applicable meeting of shareholders may nominate directors by complying with the notice procedures and requirements set forth in the Bylaws and summarized inBylaws. For more information, see “Shareholder Proposals” on page 5021 of this Proxy Statement.
Process for Identifying and Evaluating Director Candidates. The Governance & Nominating Committee evaluates all director candidates in accordance with the director qualification standards and the criteria described in our Corporate Governance Guidelines. These guidelines require the Governance & Nominating Committee on an annual basis to review and evaluate the requisite skills and characteristics of individual Board members and nominees as well as the composition of the Board as a whole. This assessment includes whether the member or candidate is independent and includes considerations of diversity, age, skills, and experience in the context of the Board’s needs. The goal of the Governance & Nominating Committee is to have a Board whose membership reflects a mix of diverse skill sets, technical expertise, educational and professional backgrounds, industry experiences and public service as well as perspectives of different genders and ethnicities. The Governance & Nominating Committee reviews its annual assessment with the Board each year and, as new member candidates are sought, attempts to maintain, and enhance the level of diverse backgrounds and viewpoints of directors constitutingcomposing the Board. As part of the Board’s annual self-assessment process, the Board will consider the effectiveness of its overall composition and structure as well as its performance and functioning.
There are no differences in the manner in whichway the Governance & Nominating Committee evaluates director candidates based on whether the candidate is recommended by a shareholder.shareholder or was identified by other means. The Governance & Nominating Committee did not receive any nominations from shareholders for the 20212024 Annual Meeting.
Our Bylaws provide that no director nominee can stand for election if, at the time of appointment or election, the nominee is over the age of 72; however, onunder exceptional circumstances, the Board may waive on a temporary basis the director age limitations to allow a director to be appointed, elected, and serve past age 72.
Proxy Access. Our Bylaws further permit a shareholder, or a group of up to 20 shareholders, owning 3% or more of the outstanding shares of the Company’s stock eligible to vote in the election of directors continuously for at least three years, to nominate and include in the Company’s Annual Meeting proxy materials director candidates to comprise generally up to two or 20% of the Board seats (whichever is greater), provided that such shareholder or group of shareholders satisfies the requirements set forth in Article I, Section 1.10 of the Bylaws. No shareholder nominated a director candidate for the
2021 Annual Meeting.
Communications with the Board of Directors
The Board of Directors has approved a process for shareholders and other interested parties to send communications to the Board. Shareholders and other interested parties can send written communications to the Board, any committee of the Board, non-management directors as a group, the Chair, the lead director or any other individual director atby one of the following address:means: (1) postal mail to P.O. Box 2076, Mechanicsville,27626, Richmond, VA 23116-2076.23261-7626, or (2) on our website at http://www.owens-minor.com under “Corporate Governance” in the “Investor Relations” tab. All communications will be relayed directly to the applicable director(s).
1220Owens & Minor, Inc.●20212024 Proxy Statement
Proposal 1: Election of Directors
EightNine directors have been nominated for election to the Board of Directors for a one-year term expiring at the 20222025 Annual Meeting of Shareholders or until their respective successors are elected. Each nominee has agreed to serve if elected and qualified. If any nominee is not able to serve, the Board may designate a substitute or reduce the number of directors serving on the Board. Proxies will be voted for the nominees shown below (or if not able to serve, such substitutes as may be designated by the Board). The Board has no reason to believe that any of the nominees will be unable to serve.
Our Bylaws currently provide that the number of directors constituting the Board of Directors shall from time to time be set by resolution adopted by the affirmative vote of a majority of the Directors in office. In accordance with the Bylaws, the Board has approved that the Board of Directors would consist of 10 directors and the Company intends to amend its Bylaws to provide for eight directors upon the election of the eight nominees in this Proxy Statement.nine directors. The Governance & Nominating Committee has recommended to the Board of Directors, and the Board of Directors has approved, eightnine persons as nominees for election to the Board of Directors. At its meeting immediately following the 2021 Annual Meeting, the Board of Directors intends to amend the Bylaws to decrease the size of the Board of directors from 10 to eight directors to remove vacancies created by the departure of retiring directors Messrs. Moore and Sledd. Proxies cannot be voted for a greater number of directors than the number of nominees named.
Information on each nominee, including the particular experience, qualifications, attributes and/or skills that led the Board to conclude that he or she should serve as a director of the Company, is set forth below.
Nominees for Electionbelow in the following tables and in nominee specific disclosures.
Experience & Skills of Director Nominees |  |  |  |  |  |  |  |  |  | |||||||||
Significant Leadership Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Healthcare Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Manufacturing/ Operations Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Global, Emerging Markets Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Supply Chain & Logistics Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Technology, Cybersecurity or IT Oversight | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Financial Literacy & Reporting | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Risk Oversight/ Risk Management | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Public Company Governance | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Environmental, Social & Governance (ESG) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||
Background of Director Nominees | | | | | | | | | | |||||||||
Gender | Male | Female | Male | Male | Female | Male | Female | Male | Female | |||||||||
Race/Ethnicity | White | African American | African American | White | African American | White | White | White | White | |||||||||
Age | 58 | 64 | 43 | 69 | 65 | 63 | 65 | 57 | 54 | |||||||||
Owens & Minor, Inc.●2024 Proxy Statement21
|
Nominees for Election
Mark A. Beck
| ||
Principal Occupation:
B-Square Precision, LLC
Age
|
| |
Owens & Minor, Inc. ● 2021 Proxy Statement13
|
| ||
Director since 2019 Independent Director, Chair of the Board
Committees:
|
Background:
Mr. Beck serves as the Board’s Chair, a position he has held since September 2020, and is the co-founder and CEO of B-Square Precision, LLC, a private company engaged in the acquisition and management of companies that manufacture high-precision tools, dies, molds and components. Previously, Mr. Beck served as President and Chief Executive Officer of JELD-WEN Holding, Inc. (JELD-WEN), one of the world’s largest door and window manufacturers, from November 2015 to February 2018, and was a director of JELD-WEN from May 2016 to February 2018. Prior to JELD-WEN, Mr. Beck served as an Executive Vice President at Danaher Corporation, leading Danaher’s water quality and dental platforms, beginning in April 2014. Previously, he spent 18 years with Corning Incorporated in a series of management positions with increasing responsibility, culminating in his appointment as Executive Vice President overseeing Corning’s environmental technologies and life science units in July 2012. Mr. Beck currently serves on the board of directors of IDEX
Qualifications:
The Board of Directors has nominated Mr. Beck to continue his service as a director based on his experience as a chief executive officer of a public company with significant international operations and his track-record of innovation and successfully integrating acquired businesses. His insights into the manufacturing industry, both domestic and international, bring a unique perspective to Owens & Minor’s Board that assists us strategically as we grow our proprietary product manufacturing and sales capabilities and seek to manage our many relationships with the manufacturing community globally. | |
Gwendolyn M. Bingham
| ||
Principal Occupation: Retired United States Army (three-stars)
Age Director since Independent Director
Committees:
Nominating(Chair)
|
Background:
Lieutenant General (three-stars) Bingham retired in September 2019 from the
Qualifications:
The Board of Directors has nominated LTG (retired) Bingham to continue her service as a director of the Company based on her over 20 years of senior executive leadership experience in complex logistics and supply chain management, resource management, environmental and energy matters, talent management and strategic planning. Additionally, LTG (retired) Bingham has unique experience in leading the Army’s most significant integrated material management center with manufacturing centers in multiple locations and personnel worldwide to support the Army’s efforts to sustain, prepare and transform its operations, which provides insight into the challenges faced in the business of global distribution and supply chain management. | |
14
22Owens & Minor, Inc.●20212024 Proxy Statement
Proposal 1: Election of Directors |
| ||
Principal Occupation:
Age Director since 2022 Independent Director Committee: Our People & Culture | Background: Mr. Gardner-Smith has served as the Chief People Officer since 2020 for DaVita, Inc., a Fortune 500 kidney dialysis service provider. Prior to that Mr. Gardner-Smith has held the following positions with DaVita, including Regional Group VP, Field Operations – Southeast from 2015 to 2019, Division VP from 2014 to 2015, Group Director from 2013 to 2014, and Regional Director, Operations from 2011 to 2013. Prior to his employment with DaVita from 2008 to 2011, Mr. Gardner-Smith worked as an investment banker at Morgan Stanley focused on mergers and acquisitions. From 2003 to 2006, Mr. Gardner-Smith was Relationship Manager for Wells Fargo. Qualifications: The Board of Directors has nominated Mr. Gardner-Smith to continue his service as a director of the Company based on his extensive experience and business management leadership in the healthcare industry, including home-based care, as well as his experience developing process innovation, transformation, and talent strategies. His experience and range of perspectives as a senior healthcare executive in compensation, succession planning and diversity and inclusion will benefit the Company as it continues to develop talent and invest in human capital resources and expand as a medical product manufacturer and healthcare solutions partner for the healthcare industry. | |
Robert J. Henkel | ||
Principal Occupation: Retired, President & Chief Ascension Health Age 69 Director since 2019 Independent Director
Committees:
Culture (Chair)
|
Background:
Mr. Henkel
Qualifications:
The Board of Directors has nominated Mr. Henkel to continue his service as a director of the Company based on his extensive experience in the healthcare industry. Mr. Henkel brings deep leadership and management experience and insight both generally and specific to the healthcare industry, including unique strategic and operational experience from the healthcare industry. His unique perspective will benefit Owens & Minor as it continues to expand as a full-service partner for customers that focus on global healthcare solutions and understand the challenges faced at multiple levels within the global healthcare marketplace. | |
Owens & Minor, Inc.●2024 Proxy Statement23
|
Rita F. Johnson-Mills
| ||
Principal Occupation:
CINQCARE
Age Director since 2022 Independent Director Committee: Governance & Nominating | Background: Ms. Johnson-Mills has served as President (Southern Region) of CINQCARE since March 2022. Prior to that, Ms. Johnson-Mills served as founder and CEO of consulting firm RJM Enterprises from January 2018 to February 2022. From August 2014 to December 2017, she served as President and Chief Executive Officer of UnitedHealthcare Community Plan of Tennessee, a health plan serving more than 500,000 government sponsored healthcare consumers with over $2.5 billion of annual revenue, after having previously served as Senior Vice President, Performance Excellence and Accountability for UnitedHealthcare Community & State since 2006, and was a founding member of UnitedHealthGroup’s Diversity and Inclusion Council. Ms. Johnson-Mills also previously served as the Director of Medicaid Managed Care for the Centers for Medicare and Medicaid Services and as Chief Executive Officer of Managed Health Services Indiana and Buckeye Health Plan, wholly owned subsidiaries of Centene Corporation. Ms. Johnson-Mills currently serves on the public company board of directors of Nyxoah SA and previously served on the board of Brookdale Senior Living, Inc. Ms. Johnson-Mills also serves as a director on the private boards of Quest Analytics, LLC and Ellipsis Health, and is a Governance Fellow with the National Association of Corporate Directors (NACD). She is a Hogan Certified Executive Coach and a Senn Delaney Certified Corporate Culture Facilitator. Qualifications: The Board of Directors has nominated Ms. Johnson-Mills to continue her service as a director of the Company based on her experience as a healthcare executive with more than 25 years of combined federal, state, and private industry experience. Her leadership experience and success in driving profitable, sustainable growth and implementation of programs to improve employee engagement and build strategic relationships in the public and private healthcare insurance sectors will benefit Owens & Minor as it continues to expand as a full-service partner for customers that focus on global healthcare solutions and offer indispensable guidance to our organization in our continued focus on home-based care solutions. | |
Stephen W. Klemash | ||
Principal Occupation: Retired Partner, Ernst & Young and EY Americas Center for Board Matters Age 63 Director since 2021 Independent Director
Committees: Audit Executive
|
Background:
Mr. Klemash
Qualifications:
The Board of Directors has nominated Mr. Klemash to continue to serve as a director of the Company based on his extensive experience working with public companies, strong financial knowledge, and breadth of experience in business consulting, accounting, risk management, technology and cybersecurity, and corporate governance. The Board believes that the Company will benefit from Mr. Klemash’s comprehensive knowledge of board governance including ESG criteria along with his accounting, | |
24Owens & Minor, Inc.●20212024 Proxy Statement15
Proposal 1: Election of Directors |
Teresa L. Kline
| |||
Principal Occupation: Retired, President and Chief Executive Officer of Health Alliance Plan of Michigan and Executive Vice President
Age Director since Independent Director
Audit
|
Background:
Qualifications:
The Board of Directors has nominated | ||
Edward A. Pesicka
| |||
Principal Occupation: President and Chief Executive Officer of
Age Director since 2019
Executive |
Background:
Mr. Pesickais the President and Chief Executive Officer of Owens & Minor, Inc. a position he has held since March 2019. Previously Mr. Pesicka served as an independent consultant and advisor in the healthcare, life sciences and distribution industries since January 1, 2016. From January 2000 through April 2015, Mr. Pesicka served in various roles of increasing responsibility at Thermo Fisher Scientific Inc., including,
Qualifications:
The Board of Directors has nominated Mr. Pesicka to continue to serve as a director of the Company based upon his unique ability as President and Chief Executive Officer to communicate to and inform the Board about the Company’s day-to-day operations, implementation of strategic initiatives, and industry developments. The Board believes that Mr. Pesicka brings an important perspective on the Company’s current operations and ongoing relationships with customers and suppliers. Mr. Pesicka’s substantial experience and expertise in distribution, as well as the healthcare and life sciences industries, allow him to contribute valuable industry perspectives and strategic leadership to the Board. | ||
16Owens & Minor, Inc.●20212024 Proxy Statement25
Proposal 1: Election of Directors |
| |||
Principal Occupation:
Age Director since Independent Director
Audit
|
Background:
Qualifications:
The Board of Directors has nominated | ||
The Board of Directors recommends a vote FOR the election of each nominee as director.Director.
26Owens & Minor, Inc.●20212024 Proxy Statement17
|
Effective immediately following the Annual Meeting, Messrs. Moore and Sledd’s respective terms will expire, at which time each of them will retire from the Board. The Company gratefully acknowledges and thanks Messrs. Moore and Sledd for their respective years of service on the Board and dedication to the Company, its shareholders and teammates.
| ||
|
| |
| ||
|
| |
18Owens & Minor, Inc. ● 2021 Proxy Statement
Proposal 2: Ratification of Independent Registered Public Accounting Firm
The Audit Committee (with confirmation of the Board) has selected KPMG LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 20212024, and has directed that management submit such appointment of KPMG LLP for ratification by the shareholders at the Annual Meeting. Representatives of KPMG LLP will be present at the Annual Meeting to answer questions and to make a statement if they desire to do so.
Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation, and oversight of the work of the Company’s independent registered public accounting firm. Shareholder ratification of this appointment is not required by the Company’s Bylaws or otherwise. If shareholders fail to ratify the appointment, the Audit Committee will take such failure into consideration in future years. If shareholders ratify the appointment, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of the Company.
Prior to selecting KPMG LLP for fiscal 2021,2024, the Audit Committee evaluated KPMG LLP’s performance with respect to fiscal 2020.2023. In conducting this annual evaluation, the Audit Committee considered management’s assessment of KPMG LLP’s performance in areas such as (i) independence, (ii) the quality and the efficiency of the services provided, including audit planning and coordination, (iii) industry knowledge and (iv) the quality of communications, including KPMG LLP staff accessibility and keeping management and the Committee apprised of issues. The Audit Committee also considered KPMG LLP’s tenure, the impact on the Company of changing auditors and the reasonableness of KPMG LLP’s billable rates. The Audit Committee is responsible for the audit fee negotiations associated with the retention of KPMG LLP. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered accounting firm. Further, in conjunction with the rotation of the auditing firm’s lead engagement partner every five years, the Audit Committee and its chair will continue to be directly involved in the selection of KPMG LLP’s new lead engagement partner. The members of the Audit Committee and the Board believe that the continued retention of KPMG LLP to serve as our independent external auditor is in the best interests of usOwens & Minor and our shareholders.
The Board of Directors recommends a vote FOR the ratification of the appointment of KPMG LLP to serve as
the Company’s independent registered public accounting firm for the year ending December 31, 2021.2024.
Fees Paid to Independent Registered Public Accounting Firm
For each of the years ended December 31, 20202023 and 2019,2022, KPMG LLP billed the Company the fees set forth below in connection with professional services rendered by that firm to the Company:
| Year 2020 | Year 2019 | |||||||
Audit Fees | $ | 3,571,000 |
| $ | 4,449,000 |
| ||
Audit-Related Fees |
| 40,000 |
|
| 30,000 |
| ||
Tax Fees |
| 345,000 |
|
| 835,000 |
| ||
All Other Fees |
| 2,000 |
|
| — |
| ||
Total | $ | 3,958,000 |
| $ | 5,314,000 |
| ||
| Year 2023 ($) | Year 2022 ($) | |||||||
Audit Fees(1) | $ | 4,377,500 |
| $ | 4,457,000 |
| ||
Audit-Related Fees(2) |
| 63,000 |
|
| 38,000 |
| ||
Tax Fees(3) |
| 243,300 |
|
| 310,000 |
| ||
All Other Fees(4) |
| 169,310 |
|
| 9,000 |
| ||
Total | $ | 4,853,110 |
| $ | 4,814,000 |
| ||
Audit Fees. These were fees for professional services performed for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s filings on Forms 10-K and 10-Q, Sarbanes-Oxley compliance, and services normally provided in connection with statutory and regulatory filings or engagements.
| (1) | Fees for professional services performed for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s filings on Forms 10-K and 10-Q, Sarbanes-Oxley compliance, and services normally provided in connection with statutory, regulatory filings or engagements and services related to the Apria acquisition in 2022. |
Audit-Related Fees. These were fees primarily for the annual audits of the Company’s employee benefit plan financial statements, internal control attestations in certain foreign jurisdictions and consultations by management related to financial accounting and reporting matters.
| (2) | Fees primarily for the annual audit of the Company’s employee benefit plan financial statements and agreed-upon procedures attestation in 2023. |
Tax Fees. These were fees primarily for advice and consulting services related to the structuring of international operations, and the restructuring of business operations.
| (3) | Fees primarily for advice and consulting services related to the structuring of international operations and sales and use tax returns. |
| (4) | All other fees in 2023 include a cyber maturity assessment, and in 2023 and 2022, include fees for online resources provided by KPMG LLP. |
Owens & Minor, Inc.●20212024 Proxy Statement1927
Proposal 2: Ratification of Independent Registered Public Accounting Firm |
All Other Fees. All other fees in 2020 include fees for online resources provided by KPMG LLP. There were no other fees in 2019 other than those described above.
The Audit Committee has established policies and procedures for the pre-approval of audit services and permitted non-audit services in order to ensure the services do not impair the auditor’s independence. The Audit Committee will pre-approve on an annual basis the annual audit services engagement terms and estimated fees and will also pre-approve certain audit-related services that may be performed by the independent auditors up to the estimated pre-approved fee levels, as well as permissible tax planning and compliance services. The Audit Committee may delegate pre-approval authority to one or more of its members, but any pre-approval decision by such member or members must be presented to the full Audit Committee at its next scheduled meeting. All services provided by, and fees paid to, KPMG LLP in 20202023 were pre-approved by the Audit Committee in accordance with the pre-approval policies, and there were no instances of waiver of approval requirements or guidelines being waived during this period.
The Audit Committee iswas composed of fourfive directors in 2023, and is currently composed of three directors, each of whom is independent under the enhanced independence standards for audit committees in the Exchange Act and the rules thereunder as incorporated into the listing standards of the NYSE and under the Company’s Corporate Governance Guidelines, and twoone of whom have been determined by the Board of Directors to be an audit committee financial experts.expert. The Audit Committee met 10six times during 2020.2023. The Audit Committee operates under a written charter adopted by the Board of Directors, which the Audit Committee reviews at least annually and revises as necessary to ensure compliance with current regulatory requirements and industry changes.
As its charter reflects, the Audit Committee has a broad array of duties and responsibilities. responsibilities and assists the Board in fulfilling its oversight responsibility related to the preparation of financial statements, compliance with legal and regulatory requirements, the Company’s independent registered public accounting firm, including its qualifications, performance and independence, the Company’s internal audit function, treasury and finance matters, and the Company’s enterprise risk management and data and cybersecurity risks.
With respect to financial reporting and the financial reporting process, management, the Company’s independent registered public accounting firm and the Audit Committee have the following respective responsibilities:responsibilities set forth below.
Management is responsible for:
Establishing and maintaining the Company’s internal control over financial reporting;
| • | Establishing and maintaining the Company’s internal control over financial reporting; |
Assessing the effectiveness of the Company’s internal control over financial reporting as of the end of each year; and
| • | Assessing the effectiveness of the Company’s internal control over financial reporting as of the end of each year; and |
Preparation, presentation and integrity of the Company’s consolidated financial statements.
| • | Preparation, presentation and integrity of the Company’s consolidated financial statements. |
The Company’s independent registered public accounting firm is responsible for:
Performing an independent audit of the Company’s consolidated financial statements and the Company’s internal control over financial reporting;
| • | Performing an independent audit of the Company’s consolidated financial statements and the Company’s internal control over financial reporting; |
Expressing an opinion as to the conformity of the Company’s consolidated financial statements with U.S. generally accepted accounting principles; and
| • | Expressing an opinion as to the conformity of the Company’s consolidated financial statements with U.S. generally accepted accounting principles; and |
Expressing an opinion as to the effectiveness of the Company’s internal control over financial reporting.
| • | Expressing an opinion as to the effectiveness of the Company’s internal control over financial reporting. |
The Audit Committee is responsible for:
Selecting the Company’s independent registered public accounting firm;
| • | Selecting the Company’s independent registered public accounting firm; |
Overseeing and reviewing the consolidated financial statements and the accounting and financial reporting processes of the Company; and
| • | Overseeing and reviewing the consolidated financial statements and the accounting and financial reporting processes of the Company; and |
Overseeing and reviewing management’s evaluation of the effectiveness of internal control over financial reporting.
| • | Overseeing and reviewing management’s evaluation of the effectiveness of internal control over financial reporting. |
In this context, the Audit Committee has met and held discussions with management and KPMG LLP, the Company’s independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements for the year ended December 31, 20202023 were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee has reviewed and discussed these consolidated financial statements
28Owens & Minor, Inc.●2024 Proxy Statement
Proposal 2: Ratification of Independent Registered Public Accounting Firm |
with management and KPMG LLP, including the scope of the independent registered public accounting firm’s responsibilities, critical accounting policies and practices used, and significant financial reporting issues and judgments made in connection with the preparation of such financial statements.
20Owens & Minor, Inc. ● 2021 Proxy Statement
|
The Audit Committee has discussed with KPMG LLP the matters required to be discussed pursuant to Public Company Accounting Oversight Board Auditing Standard No. 1301 (Communications with Audit Committees). The Audit Committee has also received the written disclosures and communications from KPMG LLP required by the PCAOB regarding the independence of that firm and has discussed with KPMG LLP the firm’s independence from the Company.
In addition, the Audit Committee has discussed with management its assessment of the effectiveness of internal control over financial reporting and has discussed with KPMG LLP its opinion as to the effectiveness of the Company’s internal control over financial reporting.
Based upon its discussions with management and KPMG LLP and its review of the representations of management and the report of KPMG LLP to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202023 for filing with the SEC.
| THE AUDIT COMMITTEE |
Stephen W. Klemash, Chair
|
Owens & Minor, Inc.●20212024 Proxy Statement2129
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely onIn this Proposal 3, the Company’s recordsshareholders are being asked to approve Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan (the “2023 Plan” or, as amended, the “Amended 2023 Plan”), a copy of which is attached as Annex A, to (i) increase the aggregate number of shares of Common Stock available for issuance under the 2023 Plan by 2,150,000 shares of Common Stock, (ii) increase the aggregate number of shares of Common Stock that may be issued or used with respect to incentive stock options (“ISOs”) by 2,150,000 shares of Common Stock and (iii) prohibit liberal share recycling for all awards (the “Proposed Amendments”). Other than the Proposed Amendments, no material changes will be made to the 2023 Plan. If the Company’s shareholders do not approve this Proposal 3, the 2023 Plan will continue by its terms, without the Proposed Amendments, and will terminate automatically on May 11, 2033.
Historical Information
The 2023 Plan authorizes the Company to grant equity awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards to eligible teammates, consultants and non-employee directors of our Company and its affiliates, up to 4,025,000 shares of Common Stock. As of March 15, 2024, there were 2,741,643 shares of Common Stock remaining available for issuance under the 2023 Plan. If Amendment No. 1 to the 2023 Plan is approved by the Company’s shareholders, 2,150,000 additional shares of Common Stock will be authorized for issuance thereunder, subject to the adjustment provisions of the 2023 Plan described below.
The following table provides certain additional information providedregarding awards outstanding and unvested under the 2023 Plan as of March 15, 2024:
Options Outstanding | 0 | |||
Weighted Average Exercise Price of Options Outstanding | N/A | |||
Weighted Average Remaining Term of Options Outstanding | N/A | |||
Total Full-Value Awards Outstanding (Including Restricted Stock Units, Restricted Stock, target Performance Stock Units and target Performance Shares)(1) | 3,983,644 | |||
Shares of Common Stock Outstanding | 76,598,351 | |||
Overhang(2) | 5.20% | |||
Shares Available for Future Grant under the 2023 Plan | 2,741,643 | |||
Dilution under the 2023 Plan, as a Percentage of Common Stock Outstanding(3) | 8.78% | |||
| (1) | Total full-value awards outstanding as of March 15, 2024 were comprised of the following: restricted stock units/restricted stock 2,975,141; performance stock units/performance shares (based on the target performance level) 1,008,503. |
| (2) | Overhang consists of the number of shares subject to equity awards outstanding as of March 15, 2024, divided by the number of Common Stock outstanding as of March 15, 2024. |
| (3) | Dilution consists of the number of shares subject to equity awards outstanding as of March 15, 2024, and the number of shares available for future grant under the 2023 Plan, divided by the number of Common Stock outstanding as of March 15, 2024. |
Why Amendment No. 1 to the 2023 Plan is Important
We believe that aligning the interests of teammates and non-employee directors with those of long-term shareholders is a key element of compensation at the Company; accordingly, it is essential that the Company maintain the flexibility and sufficient share reserve in the 2023 Plan to appropriately incentivize teammates and non-employee directors who provide valuable services to the Company and its affiliates. The 2023 Plan has benefited the Company by (i) assisting in recruiting and retaining the services of teammates and non-employee directors with high ability and initiative, (ii) providing greater incentives for teammates and non-employee directors who provide valuable services to the Company and its affiliates, and (iii) associating the interests of teammates and non-employee directors with those of the Company and its shareholders. For our CEO and other NEOs, equity-based incentive awards represent a significant portion of their compensation, with such awards representing approximately 69% and 63% of total target compensation, respectively. Amendment No. 1 to the 2023 Plan is intended to enhance the 2023 Plan and is needed to continue our equity compensation program, which is an important element in our ability to remain competitive in attracting and retaining experienced talent. We believe that our ability to recruit, retain and incentivize top talent will be adversely affected if Proposal 3 is not approved.
30Owens & Minor, Inc.●2024 Proxy Statement
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
Historical Burn Rate; Potential Economic Dilution Analysis
We are committed to managing the use of our equity incentives prudently to balance the benefits equity compensation brings to our compensation programs against the dilution it causes our shareholders. As part of our analysis when considering the number of shares to be added to the 2023 Plan by Amendment No. 1, we considered our equity plans’ “burn rate,” calculated as (i) the number of shares subject to equity awards granted under the Owens & Minor, Inc. 2018 Stock Incentive Plan (the “2018 Plan”) and the 2023 Plan for the three years ending December 31, 2023, divided by (ii) the weighted average number of shares outstanding for that period. Our average burn rate for the three years ending December 31, 2023 was 3.87%. The total potential dilution resulting from issuing all shares authorized under our equity plans as of March 15, 2024 (including the 2,150,000 additional shares that would be available if shareholders approve Amendment No. 1) would be approximately 11.59%. We believe that our burn rate and potential dilution amounts are reasonable for our industry and market conditions. During this three-year period, we have sought to provide equity compensation to our teammates and non-employee directors who we believe are important to our organization in furthering our business strategy. In addition, during this time we have made multiple leadership appointments and promotions to advance our strategy. Additionally, we made a significant business acquisition in 2022 of Apria, Inc. to accelerate our business strategy and issued awards representing 275,025 shares of Common Stock to teammates who joined us from Apria, including the employment of Apria’s former CEO, who was appointed as our Company’s Executive Vice President, President – Patient Direct & CEO of Apria upon the closing of the acquisition. Also contributing significantly to the number of awards that we were required to issue under the 2023 Plan in furthering our business strategy was a decline in the trading price of our Common Stock in 2022 and 2023, which required the issuance of a greater number of awards to achieve our intended incentives.
Expected Duration
If Amendment No. 1 to the 2023 Plan is approved by our directors,shareholders, we expect that the shares available under the 2023 Plan for future awards will be sufficient for currently-anticipated awards for the next two years. Expectations regarding future share usage could be impacted by a number of factors such as: (i) the future performance of our stock price; (ii) hiring and promotion activity at the executive officerslevel; (iii) the rate at which shares are returned to the 2023 Plan reserve upon awards’ expiration, forfeiture or cash settlement without the issuance of the underlying shares; (iv) factors involved in acquiring other companies; and beneficial owners(v) other factors. While we believe that the assumptions we used are reasonable, future share usage may differ from current expectations.
For the foregoing reasons, our Board of Directors recommends that our shareholders approve Amendment No. 1 to the 2023 Plan.
Amended 2023 Plan Best Practices
The Amended 2023 Plan includes several features that are consistent with the interests of shareholders and corporate governance best practices, including the following:
| • | No automatic award grants are promised to any eligible individual; |
| • | No liberal share recycling for any awards; |
| • | Awards assumed by a successor in connection with a change in control will not vest solely as a result of the change in control (unless specifically provided otherwise in an award agreement or any applicable employment agreement or similar agreement); |
| • | No tax gross-ups under the Amended 2023 Plan; |
| • | No evergreen for the Amended 2023 Plan share reserve; |
| • | No repricing, replacement or re-granting of options, stock appreciation rights or other stock awards without shareholder approval (except in the event of certain equitable adjustments or a change in control, as further described below); |
| • | Any award (or portion thereof) granted under the Amended 2023 Plan will vest no earlier than the first anniversary of the date the award is granted (subject to an exception equal to no more than 5% of the shares reserved for issuance under the Amended 2023 Plan); |
Owens & Minor, Inc.●2024 Proxy Statement31
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
| • | Awards, including time-based awards, are subject to potential reduction, cancellation or recoupment pursuant to the Company’s clawback policy, as discussed in more detail on page 58; |
| • | Awards are generally nontransferable; |
| • | Meaningful annual limits on total non-employee director compensation; and |
| • | Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such award has vested. |
Summary of the Amended 2023 Plan
The Amended 2023 Plan will provide for the grant of both ISOs, which are intended to qualify for favorable tax treatment under Section 422 of the Code, and non-qualified stock options, as well as the grant of stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of our service providers with those of our shareholders.
This section summarizes material features of the Amended 2023 Plan. The summary is qualified in its entirety by reference to the complete text of the 2023 Plan, attached as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and Amendment No. 1 to the 2023 Plan, attached hereto as Annex A, which are both incorporated by reference into this Proposal 3.
The only material changes to the 2023 Plan as a result of the Proposed Amendments will be to (i) increase the aggregate number of shares of Common Stock available for issuance under the 2023 Plan by 2,150,000 shares of Common Stock, (ii) increase the aggregate number of shares of Common Stock that may be issued or used with respect to ISOs by 2,150,000 shares of Common Stock and (iii) prohibit recycling of shares (a) tendered as payment for the exercise of an award, (b) withheld to cover taxes or (c) shares covered by a stock-settled Stock Appreciation Right or other stock-settled Award that were not issued upon the settlement of the Award, as described in further detail below.
Securities to be Offered
The aggregate number of shares of Common Stock that may be issued pursuant to the Amended 2023 Plan will not exceed 6,175,000 shares of Common Stock (subject to any increase or decrease pursuant to the Amended 2023 Plan) (the “Share Reserve”). The aggregate number of shares of Common Stock that may be issued or used with respect to any ISO will not exceed the Share Reserve. The closing price per share of our Common Stock on March 15, 2024 was $25.47. Any award under the Amended 2023 Plan settled in cash will not be counted against the Share Reserve. Notwithstanding anything to the contrary contained in the Amended 2023 Plan, shares of Common Stock subject to an award under the Amended 2023 Plan or an award that was outstanding under the 2018 Plan as of the effective date of the 2023 Plan (a “Prior Plan Award”) will not again be made available for issuance or delivery under the Amended 2023 Plan if such shares of Common Stock are (i) delivered, withheld or surrendered in payment of the exercise or purchase price of an award or a Prior Plan Award, (ii) delivered, withheld, or surrendered to satisfy any tax withholding obligation or (iii) shares covered by a stock-settled Stock Appreciation Right or other stock-settled Award that were not issued upon the settlement of the Award. Shares of Common Stock subject to a Prior Plan Award that was granted pursuant to an exception under Section 303A.08 of the NYSE Listed Company Manual that become available for issuance under the Amended 2023 Plan will remain subject to the terms and conditions set forth in such exception. The number of shares of Common Stock available for issuance under the Amended 2023 Plan will not be reduced by shares issued pursuant to awards issued or assumed in connection with a merger or consolidation, except that shares acquired by exercise of substitute ISOs will count against the maximum number of shares that may be issued pursuant to the exercise of ISOs under the Amended 2023 Plan.
Administration
The Amended 2023 Plan will be administered by a committee of the Board that has been authorized to administer the Amended 2023 Plan, except if no such committee is authorized by the Board, the Board will administer the Amended 2023 Plan (as applicable, the “Committee”). The Committee will have broad discretion to administer the Amended 2023 Plan, including the power to determine the eligible individuals to whom awards will be granted, the number of awards to be
32Owens & Minor, Inc.●2024 Proxy Statement
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
granted and the terms and conditions of awards. The Committee may also accelerate the vesting or exercise of any award and make all other determinations and take all other actions necessary or advisable for the administration of the Amended 2023 Plan. To the extent the Committee is not the Board, the Board will still retain the authority to take all actions permitted by the Committee under the Amended 2023 Plan.
Eligibility
Teammates, consultants and non-employee directors of our Company and its affiliates will be eligible to receive awards under the Amended 2023 Plan. As stated above, the basis for participation in the Amended 2023 Plan is the Committee’s decision to select, in its sole discretion, participants from among those eligible. The Company and its affiliates have approximately 350 teammates, and eight non-employee directors who will be eligible to participate in the Amended 2023 Plan.
Non-Employee Director Compensation Limits
The fair value of any awards granted under the Amended 2023 Plan to a non-employee director as compensation for services on the Board, during any one calendar year, taken together with any cash fees paid to such non-employee director during such period in respect of the non-employee director’s services as a member of the Board during such year, may not exceed $750,000, provided that (i) the Committee may make exceptions to this limit, except that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous decisions involving compensation for non-employee directors and (ii) for any calendar year in which a non-employee director serves as lead director or non-executive chair of the Board, such limit will be increased to $1,500,000; provided, further, that such limit will be applied without regard to awards or other compensation, if any, provided to a non-employee director during any period in which such individual was an employee of the Company or any affiliate or was otherwise providing services to the Company or to any affiliate other than in the capacity as a non-employee director.
Minimum Vesting Term
A vesting period of at least one year will apply to all awards issued under the Amended 2023 Plan; provided that (i) up to 5% of the shares of Common Stock reserved for issuance under the Amended 2023 Plan may be issued pursuant to awards that do not comply with such minimum one year vesting period and (ii) an award granted to a non-employee director may vest on the earlier of (a) the date that is one year following the date on which such award is granted or (b) the first annual meeting of the Company’s shareholders that occurs following the date such award is granted,provided that such vesting period may not be less than 50 weeks following the date such award is granted. Notwithstanding the foregoing, the Committee retains the ability to accelerate the vesting of any award for any reason.
Prohibition on Repricing
Except in the event of certain equitable adjustments or a change in control, as described in the Amended 2023 Plan, without the approval of the shareholders of the Company, no amendment may be made to the Amended 2023 Plan that would (i) increase the aggregate number of shares of Common Stock that may be issued under the Amended 2023 Plan; (ii) change the classification of individuals eligible to receive awards under the Amended 2023 Plan; (iii) reduce the exercise price of any option or stock appreciation right; (iv) grant any new option, stock appreciation right, or other award in substitution for, or upon the cancellation of, any previously granted option or stock appreciation right that has the effect of reducing the exercise price thereof; (v) exchange any option or stock appreciation right for Common Stock, cash, or other consideration when the exercise price per share under such option or stock appreciation right exceeds the fair market value of a share; or (vi) take any action that would be considered a “repricing” of an option or stock appreciation right under the applicable listing standards of the national exchange on which the Common Stock is listed.
Types of Awards
Options
The Amended 2023 Plan provides for the grant of both ISOs intended to qualify under Section 422 of the Code and non-qualified stock options. We may grant options to eligible persons, except that ISOs may only be granted to persons who
Owens & Minor, Inc.●2024 Proxy Statement33
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
are our teammates or teammates of one of our subsidiaries, in accordance with Section 422 of the Code. The exercise price of an option cannot be less than 100% of the fair market value of a share of Common Stock on the date on which the option is granted and the option must not be exercisable for longer than ten years following the date of grant. However, in the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our equity securities, the exercise price of the option must be at least 110% of the fair market value of a share of Common Stock on the date of grant and the option must not be exercisable more than five years from the date of grant.
Options granted under the Amended 2023 Plan generally must be exercised by the optionee before the earlier of the expiration of such option or at such time or times as will be determined by the Committee at the time of grant.The exercise price for the option may be paid upon such terms and conditions as established by the Committee and set forth in the applicable award agreement. The Committee may establish payment terms for the exercise of options pursuant to which the Company may withhold a number of shares that otherwise would be issued to the participant in connection with the exercise of the option having a fair market value on the date of exercise equal to the exercise price, or that permit the participant to deliver cash or shares with a fair market value equal to the exercise price on the date of payment, or through a simultaneous sale through a broker of shares acquired on exercise, all as permitted by applicable law.
Stock Appreciation Rights
A stock appreciation right is the right to receive an amount equal to the excess of the fair market value of one share of Common Stock on the date of exercise over the grant price of the stock appreciation right. The grant price of a stock appreciation right cannot be less than 100% of the fair market value of a share of Common Stock on the date on which the stock appreciation right is granted. The term of a stock appreciation right may not exceed ten years. The Committee has the discretion to determine other terms and conditions of a stock appreciation right award.
Restricted Stock Awards
A restricted stock award is a grant of shares of Common Stock subject to the restrictions on transferability and risk of forfeiture imposed by the Committee. Unless otherwise determined by the Committee and specified in the applicable award agreement, the holder of a restricted stock award has rights as a shareholder, including the right to vote the shares of Common Stock subject to the restricted stock award or to receive dividends on the shares of Common Stock subject to the restricted stock award during the restriction period. In the discretion of the Committee, dividends distributed prior to vesting may be subject to the same restrictions and risk of forfeiture as the restricted shares with respect to which the distribution was made.
Restricted Stock Units
A restricted stock unit is a right to receive cash, shares of Common Stock or a combination of cash and shares of Common Stock at the end of a specified period equal to the fair market value of one share of Common Stock on the date of vesting. Restricted stock units may be subject to the restrictions, including a risk of forfeiture, imposed by the Committee. The Committee may determine that a grant of restricted stock units will provide a participant a right to receive dividend equivalents, which entitles the participant to receive the equivalent value (in cash or shares of Common Stock) of dividends paid on the underlying shares of Common Stock. Dividend equivalent rights may be paid currently or credited to an account, settled in cash or shares, and may be subject to the same restrictions as the restricted stock units with respect to which the dividend equivalent rights are granted.
Performance Awards
A performance award is an award that vests and/or becomes exercisable or distributable subject to the achievement of certain performance goals during a specified performance period, as established by the Committee. Performance awards may be granted alone or in addition to other awards under the Amended 2023 Plan, and may be paid in cash, shares of Common Stock, other property, or any combination thereof, in the sole discretion of the Committee.
Other Stock-Based Awards
Other stock-based awards are awards payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of shares of Common Stock.
34Owens & Minor, Inc.●2024 Proxy Statement
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
Cash Awards
Cash awards may be granted in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as determined by the Committee. Cash awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of such awards at any time in its sole discretion.
Substitute Awards
In connection with an entity’s merger or consolidation with the Company or the Company’s acquisition of an entity’s property or stock, the Committee may grant awards in substitution for any options or other stock, or stock-based awards granted before such merger or consolidation by such entity or its affiliate.
Dividends and Dividend Equivalents Rights
Dividends and dividend equivalent rights may be granted at the discretion of the Committee. Dividend equivalent rights represent the right to receive the value of dividends, if any, paid by in respect of the number of shares of Common Stock underlying an award. Any dividend or dividend equivalent rights credited with respect to an award (except for dividends paid following the grant of an award of unrestricted (i.e., fully vested) shares) will be subject to the same restrictions on transferability and forfeitability to the same extent as the award with respect to which such shares of Common Stock or other property has been distributed and subject to such other terms and conditions as set forth in the relevant award agreement. Any dividends or dividend equivalent rights granted with respect to an award will be payable to the participant only if, when and to the extent such underlying award vests. The dividend equivalent rights granted with respect to awards that do not vest will be forfeited.
Certain Transactions
If the Company effects any merger, consolidation, statutory exchange, spin-off, reorganization, sale or transfer of all or substantially all the Company’s assets or business, or other corporate transaction or event in such a manner that the Company’s outstanding shares of Common Stock are converted into the right to receive (or the holders of Common Stock are entitled to receive in exchange therefor), securities or other property of the Company or other entity, then, (i) the aggregate number or kind of securities that thereafter may be issued under the Amended 2023 Plan, (ii) the number or kind of securities or other property (including cash) to be issued pursuant to awards granted under the Amended 2023 Plan, or (iii) the exercise or purchase price thereof, will be adjusted by the Committee to prevent dilution or enlargement of the rights granted to, or available for, participants under the Amended 2023 Plan.
Change in Control
The Amended 2023 Plan does not provide for the automatic acceleration of vesting of outstanding awards upon a change in control event solely with respect to the occurrence of the change in control unless the successor company fails to assume or replace the awards in connection with that change in control event, unless otherwise provided in an award agreement or any applicable employment agreement, or similar agreement. To the extent the successor company fails to assume or replace the awards, any performance-based awards will be deemed earned at the greater of (i) the target level of performance as set forth in the award agreement, and (ii) the actual performance achieved, measured and calculated as of the date of the change in control pursuant to a shortened performance period ending on the occurrence of the change in control.
Unless the individual award agreement or any applicable employment agreement, or similar agreement provides otherwise, if the successor company assumes the awards, vesting of the award will be accelerated upon a subsequent termination of the participant’s service, consulting relationship or employment without cause, or, if the participant resigns for good reason, in each case, within 24 months following the change in control, with any performance-based awards will be deemed earned at the greater of (i) the target level of performance as set forth in the award agreement, and (ii) the actual performance achieved, measured and calculated as of the date of the change in control pursuant to a shortened performance period ending on the occurrence of the change in control.
Owens & Minor, Inc.●2024 Proxy Statement35
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
Tax Withholding
The Company and any of its affiliates have the right to withhold, or require payment of, the amount of any applicable income tax, social insurance contribution or other applicable taxes that are required to be withheld in respect of an award. The Committee may, in its sole discretion, permit or require a participant to satisfy all or any portion of the applicable taxes that are required to be withheld with respect to an award by (i) the delivery of shares that have been both held by the participant and vested for at least six months (or such other period as established by the Committee) having an aggregate fair market value equal to such withholding liability (or portion thereof); (ii) having the Company withhold from the shares otherwise issuable or deliverable to, or that would otherwise be retained by, the participant upon the grant, exercise, vesting, or settlement of the award, as applicable, a number of shares with an aggregate fair market value equal to the amount of such withholding liability; or (iii) by any other means specified in the applicable award agreement or otherwise determined by the Committee.
Limitations on Transfer of Awards
Participants may not transfer options or stock appreciation rights granted under the Amended 2023 Plan other than by will or by the laws of descent and distribution, and all options and stock appreciation rights will be exercisable, during the participant’s lifetime, only by the participant. The Committee may determine, in its sole discretion, that a non-qualified stock option that is otherwise not transferable is transferable to a family member of the participant under certain circumstances.
Restricted stock awarded under the Amended 2023 Plan may not be transferred by participants during the period or periods set by the Committee, commencing on the date of such award, as set forth in the applicable award agreement.
Shares of Common Stock subject to other stock-based awards may not be transferred prior to the date on which the shares are issued or, if later, the date on which any applicable restriction, performance, or deferral period lapses, subject to the applicable provisions of the relevant award agreement and the Amended 2023 Plan.
All certificates for shares delivered under the Amended 2023 Plan will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the SEC, any stock exchange upon which the Common Stock is then listed or any national securities exchange system upon whose system the Common Stock is then quoted, and any applicable law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
Clawback
All awards granted under the Amended 2023 Plan are subject to the Company’s clawback policy, as described in more detail on page 58.
Plan Amendment and Termination
The Board or the Committee may amend or terminate any award, award agreement or the Amended 2023 Plan at any time, provided that the rights of a participant granted an award prior to such amendment or termination may not be materially impaired without such participant’s consent. In addition, shareholder approval will be required for any amendment to the extent necessary to comply with applicable law or exchange listing standards. The Committee will not have the authority, without the approval of shareholders, to amend any outstanding option or share appreciation right to reduce its exercise price per share. The Amended 2023 Plan will remain in effect until May 11, 2033 (unless earlier terminated by the Board).
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal U.S. federal income tax consequences related to awards under the Amended 2023 Plan. This summary describes the general federal income tax principles that apply, as based on current law and interpretational authorities which are subject to change at any time and is provided only for
36Owens & Minor, Inc.●2024 Proxy Statement
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
general information. This summary does not purport to be complete discussion of all potential tax effects relevant to recipients of awards under the Amended 2023 Plan. No attempt has been made to discuss any potential non-U.S., state, or local tax consequences. This summary is not intended as tax advice to participants, who should consult their own tax advisors. Non-qualified stock options or stock appreciation rights with an exercise price less than the fair market value of shares of our Common Stock on the date of grant, stock appreciation rights payable in cash, restricted stock units, and certain other awards that may be granted pursuant to the Amended 2023 Plan, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder.
Tax Consequences to Participants under the Amended 2023 Plan
Non-Qualified Stock Optionsand Stock Appreciation Rights
If a participant is granted a non-qualified stock option or stock appreciation right under the Amended 2023 Plan, the participant should not have taxable income on the grant of the non-qualified stock option or stock appreciation right. Upon the exercise of a non-qualified stock option or stock appreciation right, a participant will recognize ordinary compensation income, subject to withholding obligations for a teammate, in an amount equal to the fair market value of the shares acquired on the date of exercise, less the exercise price paid for the shares. The participant’s basis in the Common Stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of our Common Stock on the date the participant exercises such option or stock appreciation right. When a participant sells the Common Stock acquired as a result of the exercise of a non-qualified stock option or stock appreciation right, any appreciation or depreciation in the value of the Common Stock after the exercise date will be taxable as a long-term or short-term capital gain or loss for federal income tax purposes, depending on the holding period. The Common Stock must be held for more than twelve months to qualify for long-term capital gain treatment. Subject to the discussion under “Tax Consequences to the Company” below, the Company and its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
Incentive Stock Options
A participant receiving ISOs should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value of the shares of our Common Stock received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we believewill not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that all reports requireddoes not meet the requirements of the Code for ISOs and the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. The Company and its subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
Other Awards
A participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is otherwise made available for the participant to draw upon. Individuals will not have taxable income at the time of grant of a restricted stock unit, but rather, will generally recognize ordinary compensation income at the time he or she receives cash or a share of Common Stock in settlement of the restricted stock unit, as applicable, in an amount equal to the cash or the fair market value of the Common Stock received. The current federal income tax consequences of other awards authorized under the Amended 2023 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant through a Section 83(b) election); dividend equivalents and other stock or cash based awards are
Owens & Minor, Inc.●2024 Proxy Statement37
Proposal 3: Approval of Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan |
generally subject to tax at the time of payment. We or our subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the award recipient recognizes ordinary income.
A participant who is a teammate will be subject to withholding for federal, and generally for state and local, income taxes at the time he or she recognizes income under the rules described above. The tax basis in the Common Stock received by a participant will equal the amount recognized by the participant as compensation income under the rules described in the preceding paragraph, and the participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse. Subject to the discussion below under “Tax Consequences to the Company,” we will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the foregoing rules.
Tax Consequences to the Company
Reasonable Compensation
For the amounts described above to be fileddeductible by the Company, such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
Golden Parachute Payments
The Company’s ability (or the ability of one of our directors and executive officerssubsidiaries) to obtain a deduction for future payments under the Amended 2023 Plan could also be limited by the golden parachute rules of Section 16(a)280G of the Exchange Act were filed on a timely basis during 2020, except that for Mr. Jeffrey Jochims, EVP, Chief Operating Officer & President, Medical Distribution, and Mr. Mark Zacur, EVP, Chief Commercial Officer, Form 4s were inadvertently filed late to reportCode, which prevent the shares surrendered to the Company to satisfy tax withholding obligationsdeductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation.
Compensation of Covered Employees
Our ability to obtain a deduction for amounts paid under the vestingAmended 2023 Plan could be limited by Section 162(m) of restricted stock.the Code. Section 162(m) of the Code limits our ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m) of the Code) in excess of $1,000,000.
Grants under the Amended 2023 Plan will be made at the discretion of the Committee, and therefore, the benefits or number of shares subject to awards that may be granted in the future to our executive officers, teammates and non-employee directors is not currently determinable. Therefore, a New Plan Benefits Table is not provided.
Equity Compensation Plan Information
The information regarding plans and other arrangements required by Item 10(c) of Schedule 14a can be found below in the section entitled “Equity Compensation Plan Information”.
Vote Required for Approval
Approval of this Proposal 3 requires the affirmative vote of a majority of the votes cast on this proposal. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the results of this vote.
The Board of Directors recommends a vote FOR the approval of
Amendment No. 1 to the Owens & Minor, Inc. 2023 Omnibus Incentive Plan.
38Owens & Minor, Inc.●2024 Proxy Statement
Stock Ownership Information
Stock Ownership by Management and the Board of Directors
The following table shows, as of March 5, 2021,14, 2024, the number of shares of Common Stock beneficially owned by each director and director nominee, the executive officers identified as our “NEOs” in the Summary Compensation Table in this Proxy Statement and all current directors and executive officers of the Company as a group.
Name of Beneficial Owner | Sole Voting and Investment Power(1) | Other(2) | Aggregate Percentage | ||||||||||||
Aster Angagaw |
| 610 |
| — |
|
| * | ||||||||
Mark A. Beck(3) |
| — |
| — |
|
| * | ||||||||
Gwendolyn M. Bingham |
| 20,755 |
| — |
|
| * | ||||||||
Robert J. Henkel(3) |
| 21,000 |
| — |
|
| * | ||||||||
Stephen W. Klemash |
| 610 |
| — |
|
| * | ||||||||
Mark F. McGettrick(3) |
| — |
| — |
|
| * | ||||||||
Eddie N. Moore, Jr.(3) |
| 61,893 |
| — |
|
| * | ||||||||
Michael C. Riordan |
| 24,609 |
| 20,000 |
|
| * | ||||||||
Robert C. Sledd |
| 91,990 |
| 200,000 |
|
| * | ||||||||
Edward A. Pesicka |
| 1,609,455 |
| — |
| 2.19 | % | ||||||||
Andrew G. Long |
| 120,985 |
| — |
|
| * | ||||||||
Jeffrey T. Jochims |
| 128,436 |
| — |
|
| * | ||||||||
Christopher M. Lowery |
| 339,465 |
| — |
|
| * | ||||||||
All Executive Officers and Directors as a group (18 persons) |
| 3,196,659 |
|
| 4.65 | % | |||||||||
Name of Beneficial Owner | Sole Voting and Investment Power(1) | Other(2) | Aggregate Percentage | |||||||
Mark A. Beck(3) |
| 9,344 |
| — |
| * | ||||
Gwendolyn M. Bingham |
| 22,184 |
| — |
| * | ||||
Kenneth Gardner-Smith |
| 14,854 |
| — |
| * | ||||
Robert J. Henkel(3) |
| 37,344 |
| — |
| * | ||||
Rita F. Johnson-Mills |
| 14,057 |
| — |
| * | ||||
Stephen W. Klemash |
| 18,983 |
| — |
| * | ||||
Teresa L. Kline |
| 14,057 |
| — |
| * | ||||
Edward A. Pesicka |
| 857,796 |
| — |
| 1.12% | ||||
Carissa L. Rollins |
| 13,834 |
| — |
| * | ||||
Perry A. Bernocchi |
| 209,537 |
| — |
| * | ||||
Alexander J. Bruni |
| 65,808 |
| — |
| * | ||||
Andrew G. Long |
| 272,565 |
| 115,555 | * | |||||
Daniel J. Starck |
| 105,058 |
| — |
| * | ||||
All Executive Officers and Directors as a group (16 persons) |
| 1,891,169 |
|
|
| 2.62% | ||||
| * | Represents less than 1% of the total number of shares outstanding. |
| (1) | No officer or director of the Company has the right to acquire any shares through the exercise of stock options within 60 days following March |
| (2) | Includes: (a) shares held by certain relatives or in estates; (b) shares held in various fiduciary capacities; and (c) shares for which the shareholder has shared power to dispose or to direct disposition. These shares may be deemed to be beneficially owned under the rules and regulations of the SEC, but the inclusion of such shares in the table does not constitute an admission of beneficial ownership. |
| (3) | The following directors hold shares in the |
22Owens & Minor, Inc. ● 2021 Proxy Statement
|
Stock Ownership by Certain Shareholders
The following table shows, as of March 5, 2021,14, 2024, any person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) who, to our knowledge, was the beneficial owner of more than 5% of our Common Stock.
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percentage Owned | ||||||||
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 11,385,387 | (1) | 15.49 | % | ||||||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | 5,916,724 | (2) | 8.05 | % | ||||||
Dimensional Fund Advisors LP 6300 Bee Cave Road, Building One, Austin, TX 78746 | 4,381,747 | (3) | 5.96 | % | ||||||
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percentage Owned | ||
BlackRock, Inc. 50 Hudson Yards, New York, NY 10001 | 12,273,657(1) | 16.02% | ||
FMR LLC 245 Summer Street, Boston, MA 02210 | 10,431,010(2) | 13.62% | ||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | 8,587,684(3) | 11.21% | ||
Deerfield Partners, L.P. 345 Park Avenue South, 12th Floor, New York, NY 10010 | 5,229,779(4) | 6.83% | ||
Dimensional Fund Advisors LP 6300 Bee Cave Road, Building One, Austin, TX 78746 | 4,211,031(5) | 5.50% | ||
| (1) | Based upon a Schedule 13G report or amendment filed by BlackRock Inc. with the SEC on January |
Owens & Minor, Inc.●2024 Proxy Statement39
Stock Ownership Information |
| (2) | Based upon a Schedule 13G report or amendment filed by FMR LLC with the SEC on February 9, 2024. |
| (3) | Based upon a Schedule 13G report or amendment filed by Vanguard Group, Inc. with the SEC on February |
Based upon a Schedule 13G report or amendment filed by Deerfield Partners, L.P. with the SEC on February 12, 2024. |
| (5) | Based upon a Schedule 13G report or amendment filed by Dimensional Fund Advisors LP with the SEC on February |
Equity Compensation Plan Information
The following table shows, as of December 31, 2020,2023, information with respect to compensation plans under which shares of Common Stock are authorized for issuance.
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and | (b) Weighted-average exercise price of outstanding options, warrants and rights(1) | (c) Number of securities | (a) Number of securities to be issued upon exercise of outstanding options, warrants and | (b) Weighted-average exercise price of outstanding options, warrants and rights(1) | (c) Number of securities issuance under equity | |||||||||||||||
Equity compensation plans approved by | 1,309,444 | — | 4,155,959 | 866,989 | — | 4,051,626(3) | |||||||||||||||
Equity compensation plans not approved by | — | — | — | ||||||||||||||||||
Equity compensation plans not approved by shareholders(4) | — | — | — | ||||||||||||||||||
Total | 1,309,444 | — | 4,155,959 | 866,989 | — | 4,051,626 | |||||||||||||||
| (1) | There are no outstanding options, warrants or rights as of December 31, |
| (2) | These equity compensation plans are the 2023 Omnibus Incentive Plan adopted and approved by shareholders on May 11, 2023, and the 2018 Stock Incentive Plan (the “2018 Plan”) adopted and approved by shareholders on May 8, 2018 (as amended May 10, 2019 and May 1, 2020) |
| (3) | Includes 3,216,759 shares of Common Stock that were assumed from the Apria Plan under the 2018 Plan pursuant to an exception under Section 303A.08 of the NYSE Listed Company Manual that remain subject to the terms and conditions set forth in such exception. |
| (4) | The Company does not have any equity compensation plans that have not been approved by shareholders. |
40Owens & Minor, Inc.●20212024 Proxy Statement23
The Company is both an accelerated filer and a smaller reporting company under the rules promulgated by the SEC, and is providing disclosure regarding executive officer compensation pursuant to the rules applicable to smaller reporting companies. Therefore, the Executive Compensation Overview below is not comparable to the “Compensation Discussion and Analysis” that is required of SEC reporting companies that are not smaller reporting companies.
The following table summarizes for the years ended December 31, 2020 and 2019 as applicable, the total compensation of our named executive officers (“NEOs”), who include our President & Chief Executive Officer, Edward A. Pesicka, and our two other most highly compensated executive officers as of December 31, 2020, Andrew G. Long, Executive Vice President & Chief Financial Officer, and Christopher M. Lowery, President, Global Products. For enhanced disclosure, we have also included compensation information for Jeffrey T. Jochims, Executive Vice President, Chief Operating Officer & President, Medical Distribution. We have chosen to include Mr. Jochims as an NEO because he has profit and loss responsibility for our medical distribution business.1
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock ($) | Option ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Value and Non-Qualified | All Other Compensation(4) ($) | Total ($) | |||||||||||||||||||||||||||
Edward A. Pesicka President & Chief Executive Officer | | 2020 2019 |
| $
| 912,000 718,385 |
| $
| — — |
| $
| 4,400,000 4,000,004 |
| | — — |
| $
| 2,280,000 760,000 |
| | — — |
| $
| 36,179 92,100 |
| $
| 7,628,179 5,570,489 |
| |||||||||
| ||||||||||||||||||||||||||||||||||||
Andrew G. Long Executive Vice President & Chief Financial Officer | 2020 | $ | 500,000 | $ | 250,000 | $ | 700,000 | — | $ | 800,000 | — | $ | 89,266 | $ | 2,339,266 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Jeffrey T. Jochims Executive Vice President, Chief Operating Officer & President, Medical Distribution | 2020 | $ | 534,296 | $ | — | $ | 800,000 | — | $ | 872,435 | — | $ | 25,276 | $ | 2,232,007 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Christopher M. Lowery President Global Products | 2020 | $ | 579,600 | $ | — | $ | 700,000 | — | $ | 927,361 | — | $ | 54,169 | $ | 2,261,130 | |||||||||||||||||||||
| 2019 | 565,323 | — | 700,006 | — | 539,028 | — | 32,763 | 1,837,120 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
|
|
Mr. Pesicka, $2,200,000; Mr. Long, $350,000; Mr. Jochims, $400,000, Mr. Lowery $350,000.
The grant date value of the above performance-based awards for 2020 would equal the following for each officer assuming achievement of the highest level of performance conditions:
Mr. Pesicka, $4,400,000; Mr. Long, $700,000; Mr. Jochims, $800,000, Mr. Lowery $700,000.
Assumptions used in the calculation of the stock awards included in column (e) are included in note 12 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated herein by reference. The actual value an NEO may receive for stock awards depends on market prices, and there can be no assurance that the amounts shown are the amounts that will be realized.
A Message from Our People & Culture Committee The The OP&C Committee also oversees programs relating to the culture of the Company, and, during 2023, was engaged with executive leadership in the evolution of the Company’s corporate culture through the introduction of our Purpose and Vision, which is vital to our continued growth and long term success. Guided by our executive leadership team, we delivered on our commitments in 2023 and closed an outstanding year. Our Patient Direct segment continued to outperform the market and continues to position itself as a leader amid healthy demand for home-based care. Likewise, our Products & Healthcare Services (“P&HS”) segment overachieved in both revenue and adjusted operating income as compared to our expectations, which resulted from our intense focus on and execution of our strategic initiatives. In 2023, the OP&C Committee approved annual equity award grants to executive management in a mix of 50% time-based restricted stock units (“RSUs”) vesting over a three-year period and 50% performance share units (“PSUs”). The 2023 PSU grant design consists of a three-year performance period and the PSU metric is three-year cumulative adjusted EPS; also included in |
A key focus area in More details are provided on the following pages, and we look forward to getting shareholder feedback in The Our People & Culture Committee Robert J. Henkel, Chair Mark A. Beck Kenneth Gardner-Smith |
24Owens & Minor, Inc.●20212024 Proxy Statement41
Executive Compensation |
|
Tax Return | Dividends on Restricted Stock Awards | Life Insurance Premiums | Deferred Company | Annual Physical/ Medical Access | Other(a) | Total | |||||||||||||||||||||||||||||
Edward A. Pesicka | $ | 15,000 | $ | — | $ | 1,242 | $ | 16,387 | $ | 1,050 | $ | 2,050 | $ | 36,179 | |||||||||||||||||||||
Andrew G. Long | $ | 3,500 | $ | — | $ | 2,322 | $ | 13,077 | $ | — | $ | 70,367 | $ | 89,266 | |||||||||||||||||||||
Jeffrey T. Jochims | $ | 3,500 | $ | — | $ | 1,242 | $ | 19,484 | $ | — | $ | 1,050 | $ | 25,276 | |||||||||||||||||||||
Christopher M. Lowery | $ | 645 | $ | 37,878 | $ | 2,322 | $ | 12,052 | $ | — | $ | 1,272 | $ | 54,169 | |||||||||||||||||||||
|
Executive Compensation OverviewDiscussion and Analysis
This Executive Compensation OverviewDiscussion and Analysis (“CD&A”) describes our executive compensation philosophy and programs, elements of executive compensation, the role of our Compensation & BenefitsOP&C Committee and its independent consultant, the compensation decisions made by the OP&C Committee under these programs and the compensation awardsconsiderations that went into our decisions as a result of the Company’s operational and financial performance in 20202023, all as they relate to our NEOs — Messrs. Pesicka, Long, Jochims and Lowery.
Review of 2020 Company Performance & Significant Accomplishments
The past 12-plus months have presented challenges never before seen in our Company’s nearly 140-year history. A deadly, widespread global pandemic put tremendous stress on the entire healthcare industry from product manufacturing to supply chains to healthcare providers on the frontline caring for their patients. Overrun ICUs, quarantining, mounting COVID-19 cases, demand for product in excess of supply, and supply chain interruptions became the norm. However, Owens & Minor was uniquely positioned to assist in the global response to this unprecedented event, and against this backdrop and in an incredibly difficult operating environment, our Company consistently delivered for our customers, our teammates, our shareholders and the communities where we operate.
Delivering for Our Customers
At the outset of the pandemic, Owens & Minor acted swiftly to ensure our customers and front-line healthcare workers received critical personal protective equipment (“PPE”) and other medical supplies necessary to combat COVID-19 and care for their patients. Our teammates responded to the pandemic with relentless focus on serving our customers and delivering on our mission of ‘Empowering Our Customers to Advance Healthcare’, while exemplifying our IDEAL values. Specifically, we:NEOs.
Significantly increased facial protection PPE production capacity and output at our Americas-based locations to enhance supply available to healthcare providers:
Over 1000% increase in N95 production
Nearly 100% increase in surgical and procedure mask production through new capital investment and improving efficiency of operations
Over 600% increase in face shield production through new capital investment
Added a new dedicated melt blown fabric manufacturing line to ensure end-to-end control of our supply chain, providing self-sufficiency from base material to finished mask to better meet our customers’ needs —unlike other suppliers who rely on supply from Asia
Delivered over 12 billion units of PPE to healthcare workers in the fight against COVID-19, of which approximately 5 billion units were produced with materials manufactured in our American factories or Owens & Minor owned facilities
Partnered with federal and state agencies to strengthen the nation’s response to the pandemic through investment in PPE manufacturing capacity, distribution of PPE to frontline healthcare workers and replenishment of the strategic national stockpile
Owens & Minor, Inc. ● 2021 Proxy Statement25
Our Executive Compensation Philosophy Our executive compensation programs are designed to reflect a pay-for-performance philosophy that aligns with the business’s strategy and goals, both short and long-term, and pays for sustained performance, profitable growth, and achievement of results. We generally target the 50th percentile of our peer group and the relevant market as a reference point for positioning target total compensation for our executives1,with the ability to earn above or below the 50th percentile based on Company and/or individual performance. Key considerations when determining an executive’s compensation include experience, size and scope of role, pay position relative to the market, internal equity, and talent retention. We designed our executive compensation program framework to reward for Company and individual performance, with a focus on the following objectives: • Reasonable but market-competitive base salaries to attract, motivate, and retain executives. • Appropriate balance between short- and long-term incentives and fixed and at-risk incentive compensation, to weigh cost against expected benefit and to align with the creation of shareholder value, including: • Annual cash incentives to drive critical business results each year; and • Long-term equity awards to retain management and incentivize executives to focus on longer-term financial performance and execution of our operational and strategic plans. • Retirement, severance, and other market-competitive benefits to attract executive talent and encourage retention. 1 This is a reference point, not a policy, and actual compensation may be above or below the target level based on Company and/or individual performance. |
Improved shipping accuracy of products to customers and maintained average of 99.9% throughout 2020 to ensure our customers received the products they needed
Improved on-time delivery of products to customers and maintained average of 99% throughout 2020 to ensure our customers received products when needed
Maintained close contact with supplier partners and customers to maintain the vital supply chain
Taking Care of Our Teammates2023 CD&A At-a-Glance
The pandemic has had a profound impact on many of our teammates and their families, yet our more than 18,000 global teammates answered the call and responded to serve our customers. Our teammates worked tirelessly in 2020 as many of our distribution centers and manufacturing facilities operated nearly around the clock in order to meet the needs of our customers.
Our teammates are critical to our success and at the heart of our mission. Top priorities of the Company in 2020 included keeping our teammates employed and safe and reducing the stress caused by the pandemic however we could. We took the following actions to demonstrate our appreciation of our teammates’ work and the value we place on their commitment:
Ensured safe working conditions in our distribution centers and manufacturing facilities through regular temperature checks, social distancing protocols, and provision of gloves, masks and goggles
Increased routine cleaning/sanitizing, as well as enhanced industrial cleaning and disinfecting
Enhanced communications, training and support for our teammates
Enhanced teammate benefits, including covering all costs for COVID-19 testing, providing free telemedicine and relaxing our attendance policies
Ensured job security in this uncertain time; we did not engage in mass reductions-in-force or furloughs
Held healthcare premiums flat for our teammates for 2021
Made an additional 401(k) contribution to all eligible teammates equal to 2% of the teammate’s salary (in addition to our standard Company provided 4.0% match)
Paid mid-year special bonuses to all hourly teammates in consideration of their extraordinary efforts
Allowed teammates to carry-over or cash out much of their paid-time-off balances, rather than lose those balances at year’s end
For our Honduran teammates who suffered through devastating hurricane-caused flooding, we provided additional compensation, clothing, beds and household items to lessen the severity of the impact
Creating Value for our Shareholders
In 2020, we significantly improved the financial performance of our business, strengthened our balance sheet through deleveraging and improved cash flow, and delivered outsized returns for our shareholders. We also established a solid foundation for future profitability. In 2020, our laser-focus and execution produced the following:
Strong earnings performance
|
Record Adjusted Earnings Per Share (“EPS”) of $2.26 as compared to a 2020 goal of $0.50 per share and representing an over 260% increase from 2019
Year-over-year gross margin expansion of 285 basis points and AOI margin expansion of 173 basis points
|
26Owens & Minor, Inc. ● 2021 Proxy Statement
|
Strong Balance Sheet and Improved Cash Flow
Total debt reduced by $534 million or 34% reduction in total debt during 2020
Substantial reduction in interest expense of 15% for the full year
Renegotiated our credit agreement to provide greater financial flexibility
Completed an over-subscribed equity offering and used proceeds to reduce debt
Operating cash flow more than doubled in 2020 to $339 million when compared to 2019
Shareholder Return
Owens & Minor stock price increased over 424% in 2020 from $5.16 to $27.05
Ranked #1 performer in the S&P Small Cap 600 Index for 2020
Foundation for Future Profitability
In conjunction with our Board of Directors, developed a three-year strategic plan
Continued to re-invest in the business across technology, infrastructure and services
Expanded PPE manufacturing capacity to address future needs of our customers
Maintained our industry leading customer service levels
Invested in and continued to drive growth in our home healthcare direct to patient business in response to population health trends
Reconfirmed our status as valuable partner to our customers, including government agencies, and an integral part of the global PPE and medical/surgical supply chain
Divested non-core assets, Movianto and Fusion5
Enriching our Communities
Owens & Minor teammates are active members of the communities where we operate. In 2020, in light of our successful financial performance, we enhanced our financial giving to organizations focused on health & wellness, education and civic/community matters. In addition to the charitable activities described on pages 8-9 we also assisted many of our local communities through COVID-19 by providing PPE and volunteering our time and efforts.
2020 was, by nearly every measure, a successful year for Owens & Minor in an incredibly challenging environment. Under the leadership ofsection identifies our NEOs and the broader Owens & Minor executive team, the Company successfully delivered on numerous fronts for its constituents in 2020. The Company far exceeded its financial goals and, as discussed below, the NEOs successfully performed their respective management business objectives (“MBOs”), focused on profit improvement, revenue performance,operational excellence and service expansion, and developing, retaining and attracting top talent. This outperformance has positioned the Company well for the future and resulted in compensation awards at the maximum level allowed under2023, highlights our plans.
Review of 2020 Compensation Plan Design & Key Decisions
The Compensation Committee took the following noteworthy actions:
The Committee structured our annual cash incentive plan (“AIP”) to be heavily weighted on financial performance for our NEOs, including our President & Chief Executive Officer whose 2020 cash incentive compensation was determined 70% by the Company’s financial performance against its AOI from continuing operations goals and 30% against MBOs.
The Committee chose AOI as the financial metric for Company performance for the 2020 AIP because it believes AOI is one ofyear, and discusses considerations in the most relevant measure ofresulting compensation approved by the financial and operational performance of the Company.
The Committee developed MBOs for our NEOs, including our President & Chief Executive Officer, focused on profit improvement, revenue performance, operational excellence and service expansion, and developing, retaining and attracting top talent based on the Committee’s determination that these objectives would drive 2020 performance and establish a strong foundation for future profitability.
Owens & Minor, Inc. ● 2021 Proxy Statement27
|
The Committee granted long-term equity incentive awards comprised 50% of restricted stock that vests over three years and 50% performance shares that are earned, if at all, based on the Company’s adjusted EPS performance over the two year period 2020-2021 and then subject to a one-year time based vesting period.
When setting 2020 total target compensation for our NEOs, the Committee determined to hold NEO base salaries constant, unless an adjustment was necessary to recognize additional responsibilities, and to put more emphasis on annual incentive compensation to drive and incentivize performance. Accordingly, the Committee increased AIP targets for Messrs. Long, Jochims and Lowery from 75% of base salary to 80%, and approved an annual salary increase to Mr. Jochims of 7% to recognize the additional duties he had undertaken in his role as Chief Operating Officer, including overseeing the Company’s information technology, corporate development and communications departments.
Following the end of 2020, the Compensation Committee determined that the consolidated AOI was $283.4 million, or greater than 200% achievement, as compared to the Company’s AOI goal of $139.6 million.
Following the end of 2020, the Compensation Committee determined that each of Messrs. Pesicka, Long, Jochims and Lowery had earned annual bonuses at 200% of target. The Compensation Committee based this determination on both the Company’s superior financial and operational performance in 2020 and the outstanding performance of our NEOs with respect to their MBOs as more fully described below.
Following the end of 2020, the Compensation Committee determined that the respective performance metrics for performance shares granted to Mr. Lowery upon his joining the Company in 2018 and to Messrs. Pesicka and Lowery in 2019 as part of their annual incentive awards had been earned at a level that would equate to 200% performance.
Our Executive Compensation Philosophy
The fundamental principle underlying our executive compensation program is pay for sustained performance, profitable growth and achievement of results. We reward for Company and individual performance within a framework that allows us to attract, retain and motivate our executives. We designed our executive compensation programs to create the appropriate balance between short- and long-term incentives and between fixed and at-risk incentive compensation, to weigh cost against expected benefit and to align with the creation of shareholder value while providing market-competitive compensation packages that promote executive retention. These components include:
Reasonable but market-competitive base salaries to attract and retain executives;
Annual cash incentives to drive critical business results each year;
Long-term incentive equity awards to retain management and focus executives on longer-term financial performance and execution of our operational and strategic plans; and
Retirement, severance and other benefits to attract executive talent and encourage retention.
OP&C Committee. We believe the OP&C Committee’s actions taken by the Compensation Committee in 20202023 and outcomes of the 20202023 incentive programs were in-line with the Company’s compensation philosophy. Further, we believe the 20202023 pay results illustrate and emphasize the strong link between actualexecutive pay and the actual results of our Company. In 2020, the Company’s financial performance far exceeded its AOI goals delivering results in excess of 100% of goal. Additionally, the NEOs successfully outperformed all of their MBOs (discussed below) and led the Company to significant financial and operational accomplishments through the difficult operating environment created by the COVID-19 pandemic. As a result, the Compensation Committee approved annual bonuses at 200% of target for our NEOs.
28Owens & Minor, Inc. ● 2021 Proxy Statement
|
Our2023 Named Executive Compensation Governance Practices
We design our compensation programs and practices to align with our compensation philosophy, meet compensation best practice standards and to drive performance that creates long-term shareholder value.Officers
| Named Executive Officer | Role | 2023 Time in Role | |||
| Edward A. Pesicka | President and Chief Executive Officer (CEO) | Full Year | |||
| Alexander J. Bruni | Executive Vice President & Chief Financial Officer (CFO) | Full Year | |||
| Andrew G. Long | Executive Vice President, CEO, Products & Healthcare Services | Full Year | |||
| Perry A. Bernocchi1 | President & CEO, Byram Healthcare
Executive Vice President, CEO, Patient Direct |
March—December | |||
| Daniel J. Starck2 | Executive Vice President, President – Patient Direct & CEO of Apria, Inc.
|
| |||
January – February
|
| ||||
|
| ||||
|
| ||||
|
| ||||
|
| ||||
|
| ||||
| ||
| 1 |
|
|
| |
|
| |
|
| |
|
| |
Say-On-Pay Vote
In May 2020, our shareholders approved the compensation of our NEOs for 2019 in our say-on-pay advisory vote with over 92% of votes cast in support of the program. Based on this support, the Compensation Committee made no material changes to the core structure and philosophy behind our executive compensation program in 2020 but continues to evaluate our compensation programs and practices to ensure that they are both market competitive and drive performance. At our upcoming 2021 Annual Meeting, our shareholders will provide an advisory vote to approve 2020 executive compensation, and the Compensation Committee will continue to consider results from these advisory votes in setting executive compensation.
Our Process for Setting 2020 Executive Compensation
Role of the Compensation Committee. The Compensation Committee establishes, approves and administers the Company’s executive compensation programs. The Compensation Committee solicits the views of its independent consultant and senior management on incentive compensation and plan design. In addition, the Compensation Committee sets performance goals and evaluates the performance of our Chief Executive Officer on an annual basis jointly with our Governance & Nominating Committee. Our Chief Executive Officer recommends to the Compensation Committee for its
Owens & Minor, Inc. ● 2021 Proxy Statement29
| 2 |
Mr. Starck was appointed Executive |
approval the compensation levels, performance goals and performance evaluations of our other executive officers42Owens & Minor, Inc.●2024 Proxy Statement
Executive Compensation |
2023 Business Highlights Even in the face of challenges, the Company achieved strong cash flow and Adjusted Operating Income1 in 2023 and continued to build on our culture as well as focus on DE&I. Highlights for 2023 include: Income • Generated Revenue of $10.3 billion in 2023 • Achieved Adjusted Operating Income1 of $305 million in 2023 including over $40 million of benefit from the OMR Program • Achieved Adjusted EBITDA1 of $526 million in 2023 • Adjusted net income per common share1 of $1.36 Balance Sheet and Cash Flows • Reduced total debt by $403 million and reduced net debt1 by $577 million in 2023 • Generated $741 million of operating cash flow in 2023 Business Achievements • Launched our purpose: Life Takes Care – capturing the company’s unique approach to caring for both the business and the humanity at the heart of healthcare • Unveiled Vision 2028, our five-year strategic plan to drive growth and profitability • Our Byram Healthcare division was awarded Verywell Health’s “Best Overall Diabetic Supply Company” for the fourth year in a row • The Owens & Minor Foundation named Ronald McDonald House Charities© its flagship charity partner and our teammates have supported more than 1,800 RMHC families through over 1,000 hours of volunteer time |
Compensation Committee recommends the compensation of our Chief Executive Officer and other officers to the independent directors for Board approval. Our Chief Executive Officer does not make recommendations to the Compensation Committee with respect to his compensation and does not participate in Committee meetings when the Committee reviews his compensation.Components
Role of the Independent Compensation Consultant. The Compensation Committee has the authority under its charter to retain independent consultants to assist it in making decisions. In 2020, the Compensation Committee engaged Semler Brossy as its independent consultant to, among other things, (1) analyze competitive levels of each element of compensation and total compensation for each of the executive officers relative to our peer group and industry trends; (2) provide information regarding executive compensation trends and regulatory changes and developments; and (3) provide input on annual and long-term incentive design. The Compensation Committee has analyzed whether the work of Semler Brossy raised any conflict of interest and has concluded that the work of our advisor, including the individuals employed by our advisor who provide consulting services to the Committee, has not created any conflict of interest. The Compensation Committee also considered and confirmed the independence of legal advisors retained by the Compensation Committee during 2020.
Short-Term Compensation Cash | • Base salary • Annual Incentive Plan (AIP) | |
Long-Term Compensation Equity | • Stock Incentive Plan2 • 50% restricted stock units (RSUs) • 50% performance stock units (PSUs), with relative TSR modifier | |
Other | • Retirement Savings (401(k)) & Executive Deferred Compensation & Retirement Plan • Health & Welfare benefits • Termination-related pay | |
Factors We Use to Determine Executive Compensation. The Compensation Committee considered a variety of factors in making decisions regarding compensation targets for our NEOs in 2020, including:
Performance-Based Compensation.We base a significant portion of compensation on the achievement of objective financial measures in order to create a strong link between pay and performance. We have no specific policies on the percentage of total compensation that should be “performance-based,” but consider this relationship in determining the overall balance and reasonableness of the executives’ total direct compensation packages. In 2020,2023, our President & Chief Executive Officer’sCEO’s total target compensation was 52%87% performance-based and 48%13% fixed, and our other NEOs’ total target compensation was 50%81% performance-based and 50%19% fixed.
Short-Term vs. Long-Term Compensation.
| 1 | Adjusted Operating Income (“AOI”), Adjusted EBITDA, and other non-GAAP financial measures included in this Proxy Statement and a reconciliation to the most comparable GAAP equivalent financial measure are described in the Company’s Current Report on Form 8-K filed with the SEC on February 20, 2024. |
| 2 | On May 11, 2023, our shareholders approved the 2023 Omnibus Incentive Plan, replacing the 2018 Stock Incentive Plan. |
Owens & Minor, Inc.●2024 Proxy Statement43
Executive Compensation |
Because the successful operation of our business requires near-term execution and a long-term approach, one significant element of our executive compensation program is designed to enhance both short- and long-term incentive compensation.performance. We consideredconsider the relationship of short-term to long-term compensation in determining the overall balance and reasonableness of our executives’ total direct compensation packages. We believe that short-term compensation is a necessary in conjunction withcomplement to long-term compensation to provide remuneration for performancethe attainment of short-termnear-term goals that ultimately lead to the achievement of our long-term objectives and strategic initiatives. In 2020,2023, our President & Chief Executive Officer’sCEO’s total target compensation was 68%consisted of 69% long-term and 32%31% short-term compensation, and our other NEOs’ total target compensation was 40%consisted of 63% long-term and 60% short-term.
Cash vs. Non-Cash Compensation. We consider both the cost and the motivational value of the various components of37% short-term compensation. We consider the relationship of cash to equity compensation in determining the overall balance of the executives’ total direct compensation packages and the alignment that equity compensation can have with the creation of shareholder value. In 2020, our President & Chief Executive Officer’s total cash and non-cash compensation components were 32% and 68% of total target compensation, respectively and our other NEOs’ total cash and non-cash components were 60% and 40% of total target compensation, respectively.
30Owens & Minor, Inc. ● 2021 Proxy Statement
|
Taking into account the above factors, our Chief Executive Officer and other NEOs had the following proportionate mix of performance-based opportunities, short vs. long-term compensation and cash vs. non-cash compensation target opportunities in 2020:
 |  |
We believe our proportionate mix of compensation opportunities is appropriate in that we provide a slightly greater relative percentage of incentive-based compensation tied to financial performance and long-term compensationobjectives to the CEO versus other NEOs because the CEO is in a positionable to more directly impact financial results and the creation of long-term shareholder value.
Peer Group Comparisons. Each year, we evaluate our compensation levelsPerformance Goals and programs through comparisons to available information for a group of peer companies selected by the Compensation Committee based in part on recommendations from and analyses prepared by the Compensation Committee’s independent consultant. This evaluation helps us to assess whether our level and mix of executive pay is competitive and reasonable when compared to certain industry standards.Results
In general, we select peer companies after consideration of one or more of the following factors:
| Target | Actual1 | Achievement | ||||||
2023 AIP (Paid in March 2024) | 2023 Revenue (20%) 2023 AOI (60%) OMR Program AOI Benefit (20%) | $10,346.0 million | $10,337.6 million | 98% | ||||
| 1 | Shown on a constant currency basis. Revenue was $10,334 million for the year-ended December 31, 2023 and was unfavorably impacted by foreign currency of $3.7 million based on foreign currency rates as of December 31, 2022 and AOI was $304.7 million for the year-ended December 31, 2023 and was unfavorably impacted by foreign currency of $4.3 million based on foreign currency rates as of December 31, 2023. Adjusted Operating Income (non-GAAP), or AOI, and other non-GAAP financial measures included in this Proxy Statement and a reconciliation to the most comparable GAAP equivalent financial measure are described in the Company’s Current Report on Form 8-K filed with the SEC on February 20, 2024. |
| 2 | In determining achievement of the AOI performance metric under the 2023 AIP, the OP&C Committee considered a portion (approximately $6.4 million) of the costs associated with the Company’s accounts receivable sales program for 2023, which reduced our 2023 AOI but were not contemplated when the OP&C Committee established the original target performance levels. The actual AIP achievement for 2023 AOI would have been approximately 82% had those costs been excluded, resulting in total funding of 109% of target. Accordingly, the actual 2023 AOI metric used for calculating the 2023 AIP achievement is different from the 2023 AOI used for other purposes. |
Quantitative Factors: revenue, net income, total assets, and/or market capitalization
Say-on-Pay Voting History
2021 | 98% | |
2022 | 96% | |
2023 | 97% |
Qualitative Factors: business model (health care services and products, health care distribution and companies from other distribution industries) and geographic scaleLearn more about recent shareholder input on compensation on page 48.
44Owens & Minor, Inc.●20212024 Proxy Statement31
Executive Compensation |
Summary of Our 2023 Decisions
The OP&C Committee makes decisions regarding NEO total compensation (base salary, annual bonus objectives and payments, and annual equity grants) in connection with our annual performance review process. The table below summarizes the OP&C Committee’s considerations and their decisions for 2023.
Factors That Guided Compensation Decisions | • Executive compensation philosophy • Degree of achievement of key strategic financial and operational goals for 2022 (for base salary, annual bonus payments and equity grant decisions made in early 2023) and for 2023 (for base salary, annual bonus payments and equity grant decisions made in early 2024) • Recommendations of our President and CEO (other than with respect to his own compensation) • Advice of an independent compensation consultant • Shareholder input • Market pay practices • Current and historical Owens & Minor compensation | |
2023 Compensation Program Changes | Annual Incentive Plan: A third financial metric was added to the Annual Incentive Plan, OMR Program AOI benefit. This metric was intended to accelerate profit improvement and reduce costs. The OMR Program AOI benefit had a weighting of 20%. Adjusted AOI remained a metric with an increased weighting at 60%, and Revenue remained as well, with a reduced weighting of 20%. There were no other changes to the compensation program for our NEOs in 2023. | |
Key 2023 | Base Salary Decisions Effective March 1, 2023, Mr. Bernocchi’s base salary increased 16% to $570,000 when he was appointed Executive Annual Incentive Plan Decisions As a result of business performance as summarized herein in 2023, the overall annual bonus pool was funded at 100% of the target performance level. The NEOs were awarded annual bonus payments of approximately 100% of their individual target opportunities and were paid in March 2024. Mr. Pesicka’s target annual bonus opportunity increased from 130% of base salary to 145% and Mr. Bernocchi’s target annual bonus opportunity increased from 70% of base salary to 90%. Both increases better align these NEOs’ target annual bonus opportunities to the 50th percentile of the market. Equity Grant Decisions In 2023, the Company granted RSUs and PSUs to the NEOs that can be earned in an amount ranging from 0% to 200% of the number of awarded shares based on the Company’s adjusted EPS performance for the three-year period from January 1, 2023 through December 31, 2025, and modified based on relative TSR as measured against performance of the Russell 3000 Medical Equipment and Services Sector Index. In addition to his annual award, Mr. Long received a one-time equity award with a grant value of $1,000,000 in March 2023 in recognition of his recent appointment as CEO, Products & Healthcare Services in October of 2022. This award was delivered in RSUs. |
The Compensation Committee periodically reviewsOwens & Minor, Inc.●2024 Proxy Statement45
Executive Compensation |
Aligning Pay with Performance
In 2023, our executive compensation structure consisted of three primary components: base salary, annual cash incentives and long-term incentives. We emphasize variable pay rather than fixed pay, with target opportunities based on market practices and payments based on performance. Further, the peer group to ensure it remains appropriate and relevantstructure of our executive compensation program ensures that as an executive’s scope of responsibility increases, a market reference and modifiesgreater portion of his or her compensation comes from performance-based pay. For 2023, the peer groupperformance-based components of our executive compensation program were designed as necessary to reflect changes at the Company, among the peers or within the industry. The peer companies we used in 2020 were:follows:
|
|
| ||||
|
| |||||
| Annual Bonus | Performance-based Equity | Time-based Equity | ||||
Objective | Reward achievement of short-term (annual) corporate performance goals | Reward long-term financial results and drive shareholder value creation | Reward long-term financial results and drive shareholder value creation Reinforce ownership in the Company Support retention of executives | |||
Form | Cash | PSUs (50%) | RSUs (50%) | |||
Time Horizon | 1 year | 3 years | 3 years | |||
Metrics |
| |||||
OMR Program AOI Benefit (20% weighting) |
Relative TSR as a modifier | Continued employment | ||||
46Owens & Minor, Inc.●2024 Proxy Statement
Executive Compensation |
Compensation Factors and Governance
The OP&C Committee applies several corporate governance features related to executive compensation, which are summarized below. We believe that these mechanisms help to ensure the alignment of executive and shareholder interests.
WHAT WE DO | ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
WHAT WE DON’T DO | ||||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
| ||
Tally Sheets.The OP&C Committee also considers several factors in designing and implementing compensation programs and setting pay for executives, which are outlined in detail below.
Market Compensation Survey Data. In addition to peer data, the OP&C Committee also considers broader survey data with a focus on executives within healthcare and distribution industries in benchmarking and setting compensation.
Executive Summary Compensation Statements. To review total compensation levels for executive officers, the CompensationOP&C Committee reviews tally sheetsexecutive summary compensation statements that quantify each element of direct compensation provided to individual executives and the portion of the executive’s total compensation represented by each element of compensation. This annual review also includes information on the value of executives’ outstanding equity awards, as well as an evaluation of the payments and benefits that would be paid to executive officers in the event of termination of employment, including following a change in control of the Company.
Total Program Cost. We consider the cost (including aggregate share usage and dilution) of the various components of our compensation program in evaluating the overall balance and reasonableness of our executives’ total direct compensation packages.
Owens & Minor, Inc.●2024 Proxy Statement47
Executive Compensation |
Risk Considerations. In setting executive compensation, the CompensationOP&C Committee structures the various components of our program to promote the achievement of our business goals without encouraging the taking of unnecessary risks. We believe that several elements of our program mitigate risks associated with performance-based compensation, including the following:
Limits on Incentive Compensation. We cap our annual incentive program awards at 200% of the executive’s target award to protect against excessive short-term incentives, and the Compensation Committee has discretion to reduce awards based on factors it deems appropriate, including whether officers took unnecessary risks.
| • | Limits on Incentive Compensation. We cap our AIP awards at 200% of the executive’s target award to protect against excessive focus on short-term incentives, and the OP&C Committee has discretion to reduce awards based on factors it deems appropriate, including whether officers took unnecessary risks. |
Performance Metrics.We use financial performance metrics for our AIP that emphasize profitable and disciplined growth and require responsible and risk-based decision-making by our executives. We also use operational metrics and specific MBOs to reward executives for appropriate decision-making and accomplishment of non-financial goals.
| • | Performance Metrics. We use financial performance metrics for our AIP that emphasize profitable and disciplined growth and require responsible and risk-based decision-making by our executives. We also use operational metrics and specific Management by Objectives (“MBO”s) to reward executives for appropriate decision-making and accomplishment of non-financial goals. |
Performance Shares/Long-Term Equity Awards.
| • | PSUs/Long-Term Equity Awards. At least half of an executive’s annual equity compensation consists of PSUs with a multi-year performance cycle which focuses management on sustaining the Company’s long-term performance. The other portion of an executive’s annual equity compensation consists of RSU awards that vest over a period of three years and, accordingly, further encourage a focus on long-term performance and support executive retention. |
| • | Share Ownership Guidelines. Our share ownership guidelines ensure that our executives have a substantial stake tied to long-term holdings in Company stock. |
| • | Recoupment Policy. Performance-based cash compensation and equity-based compensation (including both time- and performance-vesting equity awards) granted or paid to our current and former executive officers and other senior executives and employees as the O&PC Committee may from time to time designate are subject to recoupment under circumstances involving a restatement of our financial statements. |
Shareholder Input on Executive Compensation
| In evaluating the design of our executive compensation and the compensation decisions for each of our NEOs, the OP&C Committee considers shareholder input, including the advisory “say-on-pay” vote at our annual meeting. | In 2023, approximately 97% of the “say-on-pay” shareholder votes cast approved the compensation for our NEOs. | |||
In 2023, approximately 97% of the votes cast approved the compensation for our NEOs. We believe that this support resulted largely from the improvements that we have made and continue to make to our executive compensation programs and the effect that they have had on the Company’s performance.
Owens & Minor held an Investor Day event in December and 78 unique investment firms participated either in-person or via webcast. During the event, key members of the management team presented the Company’s strategic vision, operating and growth strategies and multi-year financial targets. Additionally, members of the management team participated in four institutional investor conferences and held in-person or telephonic discussions with more than 100 individual firms. Key feedback included:
| • | Understanding the primary drivers behind the macro-economic conditions and competitive landscape impacting the P&HS Segment and the outlook for both; |
| • | Acknowledgement of the strong organic growth and strong operational execution in the Patient Direct Segment and the outlook for future growth and margin expansion; and |
| • | Recognition that the balance sheet strength of the Company improved throughout the year driven by exceptionally strong cash flow generation and debt reduction. |
To strengthen our pay-for-performance culture, the OP&C Committee considered the feedback obtained from our investor outreach when making decisions relating to compensation for our NEOs for 2023.
48Owens & Minor, Inc.●2024 Proxy Statement
Executive Compensation |
Role of the OP&C Committee
The OP&C Committee establishes, approves, and administers the Company’s executive compensation programs. This process ensures that performance metrics are consistent with the financial, operational, and strategic goals set by the Board. The following table provides the steps the OP&C Committee follows to ensure the total compensation for our NEOs is competitive, appropriately tied to performance, and does not promote undue risk taking.
Role of the Independent Compensation Consultant
The OP&C Committee has the authority under its charter to retain independent consultants to assist it in making decisions regarding compensation. In 2023, the OP&C Committee engaged Willis Towers Watson (“WTW”) as its independent consultant to, among other things:
| • | Analyze competitiveness of each element of compensation and total compensation for each of the NEOs relative to our peer group and industry trends; |
| • | Provide information regarding executive compensation trends and regulatory changes and developments; and |
| • | Provide input on annual and long-term incentive design |
Our consultant reports directly to the OP&C Committee, and, aside from its work with the OP&C Committee and Governance & Nominating Committee, performs no other work for the Company. The OP&C Committee has analyzed whether the work of WTW raised any conflict of interest and has concluded that the work of our advisors, including the individuals employed by our advisors who provide consulting services to the OP&C Committee, have not created, nor are they encumbered by, any conflict of interest. The OP&C Committee also considered and confirmed the independence of legal advisors retained by the OP&C Committee during 2023.
Owens & Minor, Inc.●2024 Proxy Statement49
Executive Compensation |
Risk Assessment in Compensation Programs
In December 2023, the OP&C Committee reviewed a risk assessment of our compensation policies and practices conducted by management. Management prepares both a top-down and bottom-up assessment and reviews findings with the Committee’s independent consultant, WTW. Based on this review, WTW determined that the Company’s compensation programs promote and reward prudent business judgment without encouraging undue risk. The risk assessment included a global inventory of incentive plans and programs and considered factors such as plan eligibility, the variety of plan metrics, threshold and maximum payments, and the mix of short- and long-term compensation. Based on the review, the OP&C Committee concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Role of the Executive Compensation Peer Group
Each year, we evaluate our compensation levels and programs through comparisons to available information for a group of peer companies selected by the OP&C Committee based in part on recommendations from and analyses prepared by the OP&C Committee’s independent consultant. This evaluation helps us to assess whether our level and mix of executive pay is competitive and reasonable when compared to certain industry standards. The OP&C Committee periodically reviews the peer group to ensure it remains appropriate and relevant as a market reference and modifies the peer group as necessary to reflect changes at the Company, among the peers or within the industry. In 2023, the following primary considerations were evaluated when reviewing existing peers and developing recommendations: •Refine focus on distribution companies. Focus comparisons to health care distribution and/or broader distribution companies as relevant. •Recognize broader healthcare industry. The Company’s long-term focus on the growth of its Global Products and Patient Direct businesses increases the relevance of healthcare equipment/supplies companies, including from an executive talent market perspective. •Balance financials/size criteria. Ensure comparability of peer companies across a range of relevant financial criteria to ensure the Company is appropriately positioned relative to the peer group. | Owens & Minor is reasonably aligned with median revenues when compared to the peer group. We generally target total compensation packages for NEOs to reflect the 50th percentile of our peer group of companies when financial and operational goals are achieved. We design our total compensation packages to provide pay above or below the 50th percentile compared to our peer group when results exceed or do not meet financial and operational goals. | |||
The 12 peer companies we used to inform 2023 compensation decisions are outlined below. Covetrus, Inc. was acquired in October 2022 and is no longer a publicly traded company; as a result, it was removed from our peer group in 2023.
2023 Peer Companies | ||
Baxter International Inc. | ResMed Inc. | |
Boston Scientific Corporation | STERIS PLC | |
C.H. Robinson Worldwide, Inc. | TD SYNNEX Corporation | |
DENTSPLY SIRONA Inc. | WESCO International, Inc. | |
Henry Schein, Inc. | Quest Diagnostics Incorporated | |
Patterson Companies, Inc. | Zimmer Biomet Holdings, Inc | |
50Owens & Minor, Inc.●2024 Proxy Statement
Executive Compensation |
Elements of the Executive Compensation Program
Owens & Minor executive compensation consists of performance shares with a multi-year performance cyclefixed pay and an additional yearvariable pay, including cash and non-cash components. The chart below summarizes the various elements of service-based vesting, which focuses management on sustaining the Company’s long-term performance. The other portion of an executive’s annual equity compensation consists of restricted stock awards that vest over a period of three years and, accordingly, further encourages a focus on long-term performance.
Share Ownership Guidelines. Our share ownership guidelines ensure that our executives have a substantial stake tied to long-term holdings in Owens & Minor stock.
32Owens & Minor, Inc. ● 2021 Proxy Statement
|
Recoupment Policy. Performance-based cash and equity compensation to our executive officers is subject to recoupment under circumstances involving misconduct that result in a restatement of our financial statements.
The following table summarizes the key elements of our 2020Minor’s executive compensation program:and their purpose:
Element | ||||||
Base Salary Cash | • Reflects individual skills, experience, responsibilities, and • Influences annual bonus opportunity | |||||
Cash | • Performance-based reward tied to achievement of short-term corporate and individual performance goals • Pays only if threshold performance levels are met or exceeded | |||||
Long-Term Incentives |
| Rewards performance that enhances shareholder value | • Links value to stock price • Composed of 50% PSUs and 50% RSUs • PSUs are tied to achievement of long-term corporate performance goals; executives earn shares (ranging from 0% to 200% of target) if the Company meets certain operational, financial, or shareholder return metrics as selected by the OP&C Committee over a three-year period, also subject to a relative TSR modifier • RSUs vest ratably over three years from date of grant | |||
Retirement Savings & Deferred Compensation Plan | Benefit | Provides a tax efficient opportunity to save for retirement and to ensure that our executive compensation program remains competitive in the marketplace for key executive talent | • Executives may participate in the Company’s 401(k) Plan, and may defer salary and cash bonuses into an executive deferred compensation plan that provides for investment options similar to the Company’s 401(k) Plan | |||
Post-Termination Compensation
| • Severance provisions to protect the | |||||
NEO Employment Events
In March 2023, Mr. Starck became the Company’s Executive Vice President, Business Excellence, to lead the Company’s OMR Program. At that time, Mr. Bernocchi was promoted to Executive Vice President, CEO of the Patient Direct segment, succeeding Mr. Starck as head of the Patient Direct segment.
Owens & Minor, Inc.●20212024 Proxy Statement3351
Executive Compensation |
In 2020, our executive compensation structure consistedAnalysis of three primary components: base salary, annual incentives and long-term incentives. Within the long-term incentive component, we utilized a balanced portfolio of 50% time-based restricted stock that vests over three-years and 50% performance-based stock awards. 2023 Compensation Decisions
Base Salary
A number of key 2020 compensation-related decisions resulted from our achievements as described in this overview. The following section describes actual compensation received by our NEOs in 2020 and the rationale for the Compensation Committee’s decisions.
2020 Base Salaries
Our executive officers are employed on an “at will” basis and do not have employment agreements. We review base salaries annually or in the connection with promotion. The CompensationOP&C Committee generally considers the following factors when making base salary decisions: (1) individual attributes of each NEO (such as responsibilities, skills, leadership and experience), (2) individual and overall Company performance levels, (3) the officer’s expected future contributions to the Company, and (4) overall market-competitiveness of the officer’s base salary. In April 2020, taking into account the foregoing factors, the Compensation Committee increased Mr. Jochims’ base salary by 7%. Base salaries for our NEOs were:
NEO | 2019 Base Salary | 2020 Base Salary | ||
Edward A. Pesicka, President & Chief Executive Officer | $912,000 | $912,000 | ||
Andrew G. Long, Executive Vice President & Chief Financial Officer | $500,000 | $500,000 | ||
Jeffrey T. Jochims, Executive Vice President, Chief Operating Officer & President, Medical Distribution | $509,600 | $545,272 | ||
Christopher M. Lowery, President, Global Products | $579,600 | $579,600 | ||
34Owens & Minor, Inc. ● 2021 Proxy Statement
| • | |
|
| • | Individual and overall Company performance levels; |
| • | The officer’s expected future contributions to the Company; and |
| • | Overall market-competitiveness of the officer’s base salary. |
2023 Base Salary Decisions
With the exception of Mr. Bernocchi, in consideration of his appointment as the Executive Vice President, CEO, Patient Direct, the OP&C Committee did not increase base salaries of the NEOs in 2023.
NEO | 2022 Salary | 2023 Salary | Percent Change | |||
Edward A. Pesicka | $1,000,000 | $1,000,000 | n/a | |||
Alexander J. Bruni | $ 525,000 | $ 525,000 | n/a | |||
Andrew G. Long | $ 650,000 | $ 650,000 | n/a | |||
Perry A. Bernocchi | n/a1 | $ 570,000 | n/a | |||
Daniel J. Starck | $ 650,000 | $ 650,000 | n/a | |||
| 1 | Mr. Bernocchi became an NEO effective March 1, 2023. |
Annual Performance-Based Cash Incentives
We provide annual performance-based cash incentive opportunities to executive officers to motivate their performance in achievingincentivize them to achieve our current-year business and financial goals. Each year, the Board approves an annual operating plan, or AOP, that includes financial, strategic, and other goals, and we base annual incentive goals for the executive officers on the approved plan.AOP. The goals include both Company performance and individual management business objective (“MBOs”)MBOs specific to each executive. In 2020,For 2023, the CompensationOP&C Committee again selected a blend of Company financial goals (2020 AOI) and individual MBOs formetrics to assess our NEOs as follows:NEOs’ performance:
NEO | 2020 Cash Incentive | 2020 Cash Target | 2020 Cash Incentive as a Percentage of Base Salary | |||||
Edward A. Pesicka, President & Chief Executive Officer | Blend of 2020 AOI (70%) and Individual MBOs (30%) | $1,140,000 | 125% | |||||
Andrew G. Long, Executive Vice President & Chief Financial Officer | Blend of 2020 AOI (70%) and Individual MBOs (30%) | $ 400,000 | 80% | |||||
Jeffrey T. Jochims, Executive Vice President, Chief Operating Officer & President, Medical | Blend of 2020 AOI (70%) and Individual MBOs (30%) | $ 436,218 | 80% | |||||
Christopher M. Lowery, President, Global Products | Blend of 2020 AOI (60%) and Global Products AOI (40%) | $ 463,380 | 80% | |||||
| • | 2023 Revenue |
2020
| • | 2023 AOI |
| • | 2023 OMR Program AOI Benefit |
The OP&C Committee also structured our 2023 AIP to include MBOs as performance metrics that allow for a modifier of incentive compensation earned by the NEOs. The relative weighting of each of these metrics is set forth in the table below.
|
Corporate Performance |
|
| Individual Performance | ||||||||
| Measure | Revenue | AOI | OMR Program AOI Benefit | modified by | MBOs | |||||||
| Weighting | 20% | 60% | 20% | +/- 35% | ||||||||
52Owens & Minor, Inc.●2024 Proxy Statement
Executive Compensation |
2023 Company Financial (AOI) Metrics and Performance
For 2020, the CompensationThe OP&C Committee selected Revenue, AOI and OMR Program AOI benefit as the metric on whichappropriate metrics for Company performance would be measured and, as further discussed below, the metric on which our NEOs’ 2020 annual incentive compensation would be primarily based. The Compensation Committee selected AOI as the primary performance metric because it:for a variety of reasons, including:
is a common metric to all of our business units,
| • | Each metric is applicable across our segments and to overall company performance; |
is widely understood by our teammates and is the internal metric of greatest focus,
| • | The measurements are widely understood by our teammates and are the internal metrics of greatest focus throughout the year; |
is one of the most important underlying drivers of business performance and other financial metrics (such as revenue, adjusted EPS, operating cash flow and return on invested capital);
| • | They are among the most important underlying drivers of business performance and other key financial metrics (such as adjusted EPS, operating cash flow, and return on invested capital); |
is aligned with creating shareholder value as sustained AOI is both highly correlated with share price growth and a key driver of free cash flow which is also highly correlated to equity value;
| • | These metrics are closely aligned with the creation of shareholder value as sustained AOI and revenue growth are both highly correlated with share price growth and are key drivers of cash flow, which is also highly correlated to equity value; |
is aligned with our investor communications and the area of focus of our investor base; and
| • | They are an important area of focus for our investor base and feature prominently in our investor communications; and |
is in part driven by our performance against our NEOs’ MBOs.
| • | These metrics are in part driven by our NEOs’ performance to their respective MBOs. |
In setting 20202023 annual cash incentive program goals, including Revenue, AOI, goals inand OMR Program contributions, the first quarter of 2020,OP&C Committee considered the Committee took into account several factors including:following:
2019
