| •Reintroduced Adjusted Operating Income and Free Cash Flow. Our CEO’s 2023 long-term incentive grant mix reflects increased emphasis on performance-based awards with a weighting of 76% Performance Shares and 24% RSUs.
An Adjusted Return on Invested Capital improvement (“ROIC Improvement”) performance measure has been incorporated into the 2023- 2025 performance period. ROIC had previously been a performance measure, but we temporarily suspended it as a measure from 2020 through 2022 as the Company and the automotive industry managed through the macroeconomic challenges described
| | above. We also recognize that ROIC has a strong correlation to performance and stockholder returns. For the 2023-2025 performance cycle, we have reintroduced ROIC Improvement as a performance measure. The Performance Shares grantedmeasure for the 2023-2025 performance period
| | •Delivered strong Adjusted Annual Pretax Income result for the 2021-2023 performance period of 139% of target | | •Re-weighted performance measures with reintroduction of Adjusted ROIC Improvement as a performance measure, maintaining heaviest weighting on Adjusted Annual Pretax Income | | •Delivered Relative TSR result for the 2021-2023 performance period of 76% of target | | •Maintained Relative TSR as a performance measure with performance measured against a group of 24 companies that are primarily automotive suppliers | | | | | | | | Governance Policies and Practices | | •Adopted a Supplemental Clawback Policy for recovery of incentive-based compensation for material financial, operational or reputational harm to the Company | | •Amended our existing Clawback Policy covering accounting restatements as required by law, regulation or applicable listing standard | | •Met with shareholders representing 65% of our shares outstanding with an active management orientation | | •Support from shareholders on Say-on-Pay was 85% in 2023 will be earned based on three financial performance measures – Annual Adjusted Pretax Income, relative TSR, and ROIC Improvement. See further in this discussion for details on changes to incentives for 2023.with a five-year average of over 93% |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Decision-Making Framework Our executive compensation program is designed to reward financial performance, strong leadership and operational excellence, all of which are key elements in driving sustainable growth and shareholder value. Our executive compensation program allows us to compete for top talent and build a management team that is well positioned to drive Lear's performance. The restbasic foundational concepts of our executive compensation program are grounded in best practices. Total Rewards Philosophy and Compensation Principles The underlying total rewards philosophy is to provide attractive, performance-based and market competitive programs tied to performance and aligned with the interests of our shareholders. Our objective is to attract, motivate and retain the caliber of executive officers and other key employees necessary to deliver sustained long-term performance for our shareholders in a challenging and dynamic industry. The P&C Committee strives to create a pay-for-performance culture and strongly believes that executive compensation should be tied to the successful execution of our long-term corporate strategy. Our total rewards programs are an important part of delivering on this “Compensation Discussionoverall value proposition. Our pay-for-performance structure and Analysis” provides detailed discussionthe resulting compensation provided to our executives are guided by the following principles: •Align with Our Shareholders: Our incentive plans and analysisresulting compensation paid are designed to align directly with the long-term interests of our shareholders. •Enable Company Strategy: Compensation earned is based on the achievement of challenging goals that drive the Company's strategies both for the short-term and the long-term. •Drive Business Performance: The performance measures utilized in our incentive plans are selected and weighted based on our strategy to drive and reward annual and long-term business performance. As a result, incentive payouts and the resulting total realized or potentially realized pay are commensurate with the Company's performance relative to goals set prior to the start of the 2022respective performance periods, and the value of equity awards directly aligns with the experience of our shareholders. •Avoid Excessive Risk-Taking: Our incentive compensation plans have an appropriate mix of short-term and long-term pay programs,components with varying performance measures, weightings and goal ranges, and other elements. Our governance practices ensure we avoid risks that are reasonably likely to have a material adverse effect on the Company. •Be Market Competitive: Target compensation opportunities and the resulting compensation earned are competitive with that provided to executives at peer companies so as wellto attract, motivate and retain key talent and be reflective of our global business structure and market conditions. Compensation Governance We believe our executive compensation practices drive performance and serve our shareholders’ long-term interests. We avoid certain practices that do not adhere to our compensation principles or further our shareholders’ interests. The following table summarizes the key governance and design features of our executive compensation program.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
| | | | | | | | | | | | | | | | What We Do | | What We Do Not Do | | ✓ | Pay program aligned with business strategy | | ✘ | No single-trigger change in control vesting of equity awards | | ✓ | Balanced mix of performance measures | | ✘ | No single-trigger change in control severance benefits | | ✓ | High percentage of performance-based pay | | ✘ | No repricing of stock options | | ✓ | Individual incentive compensation payouts are capped | | ✘ | No hedging or pledging of Company stock | | ✓ | Incentive compensation payouts vary and are commensurate with results | | ✘ | No excise tax gross-ups in employment agreements | | ✓ | Annual market practices and comprehensive compensation risk review | | ✘ | No guarantee of regular incentive plan awards | | ✓ | Robust stock ownership guidelines | | ✘ | No excessive perquisites | | ✓ | Clawback of incentive compensation for financial restatements and other improper conduct | | ✘ | No payouts of dividend equivalents on equity awards during vesting or performance periods | | ✓ | Fully independent compensation consultant retained for the P&C Committee | | | | | ✓ | Lengthy holding period for Career Shares (underlying shares generally not distributed until the earlier of age 62 or three years after retirement) to drive retention and shareholder alignment | | | |
Total Compensation Process and Review The P&C Committee oversees the executive compensation program design and decision-making process for our NEOs. The P&C Committee is comprised of independent, non-employee members of the Board and works very closely with its independent consultant and management to review the effectiveness of the Company’s executive compensation program throughout the year. The P&C Committee’s charter, which reflects the specific details of its authority and responsibilities, may be accessed on our website at https://ir.lear.com/corporate-governance. 
The P&C Committee annually reviews key elements of our executive compensation program, including the various components of compensation for our NEOs and a summary of market practices and emerging trends, and discusses potential implications to the Company in the context of our business strategy and talent needs. This includes a specific review of dollar amounts for pay elements and potential payment obligations under our executive employment agreements and pay tally sheets for our NEOs. In addition, although each component is assessed independently, the
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
total complement of the components must work in harmony to achieve a proper balance, which, in turn, helps manage compensation risk. We also annually complete a comprehensive compensation risk assessment with assistance from our outside legal counsel and independent compensation consultant. Our human resources staff supports the P&C Committee in its work, in partnership with our compensation consultant, accountants, legal counsel and other advisors, as further contextnecessary, and works to implement the P&C Committee’s decisions, monitor evolving competitive practices and make compensation recommendations to the P&C Committee. The P&C Committee has engaged Pay Governance as independent, outside consultant and advisor for recentrigorous review, analysis and future changes. Lateradvice related to the compensation of the NEOs and other executive compensation-related matters. Pay Governance takes direction from and is solely responsible to the P&C Committee. A representative from Pay Governance attended all P&C Committee meetings, either in this proxy, we have includedperson or virtually, consulted with and advised P&C Committee members on executive compensation, developed executive benchmarking and other executive compensation data, and advised on the structure, design and amounts of the various compensation elements. For most compensation topics for which the P&C Committee is responsible, it has directed Pay Governance to work with management to develop recommendations that reflect the P&C Committee’s objectives for the compensation program. Pay Governance performs no other services for the Company. The P&C Committee annually reviews the services provided, independence, performance, fees paid and other factors when assessing the independence and performance of Pay Governance. The P&C Committee typically meets in executive session after each of its regularly scheduled meetings to discuss and decide executive compensation matters. Compensation decisions are anchored in a new Pay Versus Performance section, as mandated byclearly articulated compensation philosophy with strong pay-for-performance alignment, recommendations and market data from the SEC,independent compensation consultant, shareholder feedback, assessment of NEO performance and achievement of Company goals, and the P&C Committee’s assessment of business climate and industry factors. Authority of P&C Committee Under Incentive Plans Under the AIP and the LTI plans, the P&C Committee retains the authority to select a range of award types, performance measures and weightings and to apply adjustments to the financial measures utilized for annual and long-term incentive awards. Such adjustments may exclude the impact of gains or losses on the sale of assets, the effects of changes in accounting principles or the application thereof, or unusual or non-recurring items, including the impact of significant differences from the assumptions contained in the financial budget upon which isthe applicable performance targets were established. Any such adjustments to financial measures are intended to illustrate howbetter reflect the actual performance of approximately 7,800 AIP and over 130 performance-based LTI award participants, align award payments with decisions that support the Company’s long-term financial plan and strategies, avoid unintended inflation or deflation of awards due to unusual or non-recurring items during the performance period, and emphasize the Company’s preference for long-term, sustainable growth. Benchmarking Methodology and Peer Group Selection The P&C Committee targets base salaries, annual incentive awards, long-term incentive awards and total direct compensation of our NEOs and other executive officers on average to be within a competitive range (i.e., +/- 15%) of the median of the Company’s compensation comparator group (the “Comparator Group”) and other comparably sized general industry companies. We believe the Comparator Group represents the industries and companies with which we currently compete with for executive talent and/or business. In addition to reviewing annual market pay benchmarking, other factors (including our business strategy, talent needs, executives’ experience levels and cost) are considered in setting target pay which may result in some positions having target pay higher or lower than the competitive range. Actual compensation relative to target pay opportunities will vary based on performance and, for long-term incentive awards, the value of common stock at payment. The P&C Committee regularly assesses the composition of the Comparator Group.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
See below for our peer group selection process: The Company supplements its review of the Comparator Group with a broader survey of general industrial companies (not individually selected or identified) for benchmarking of executive compensation levels and, as appropriate, compensation design practices. The companies in the Comparator Group for 2023 are shown below. The revenues for this group in their most recently reported fiscal year ranged from $13.6 billion to $61.2 billion, with a median of $19.4 billion. Lear’s 2023 revenues of $23.5 billion are 21% higher than the Comparator Group median. | | | | | | | | | | | | | | | | | | | | | | 2023 Comparator Group | | Adient plc (ADNT) | | Deere & Company (DE) | | Illinois Tool Works Inc. (ITW) | | Parker-Hannifin Corporation (PH) | | Aptiv PLC (APTV) | | Eaton Corporation plc (ETN) | | L3Harris Technologies, Inc. (LHX) | | TE Connectivity Ltd. (TEL) | | BorgWarner Inc. (BWA) | | Emerson Electric Co. (EMR) | | Magna International Inc. (MGA) | | Textron Inc. (TXT) | | Cummins Inc. (CMI) | | Goodyear Tire & Rubber Company (GT) | | PACCAR Inc. (PCAR) | | Whirlpool Corporation (WHR) |
The above companies were used to inform the NEO target annual and long-term incentive changes effective January 2023. Tenneco Inc. was removed from the 2023 Comparator Group as it was taken private by Apollo Global Management in November 2022. A second peer group consisting of 24 companies that are primarily automotive suppliers (the "Relative TSR Peer Group") is used to assess our performance versus our peers for incentive awards. The Relative TSR Peer Group is described in more detail on page 48. Pay Setting Process and Cycles Tally Sheets When recommending compensation for the CEO and other NEOs, is directly alignedthe P&C Committee reviews tally sheets that detail the various elements of compensation for each executive officer. These tally sheets are used to evaluate the appropriateness of the total compensation package, to compare each NEO’s total compensation opportunity with stockholder returns. 2022 Incentive Payouts
Incentive payouts are alignedthe actual aggregate payment and to and directly commensurate withensure that the compensation appropriately reflects the compensation program’s focus on pay for performance. Tally sheets provide for an overall assessment of our financial results. Earned equity awards are also subjectcompensation program, while ensuring the proper linkage to changes in our stock price over a multi-year period. Our strategic, operational and financial performance and shareholder interests.
Say-on-Pay Results The P&C Committee reviewed the results of the shareholder advisory vote on NEO compensation and incorporated these results as one of the many factors considered in connection with the overall review of our compensation program. Our compensation practices have been consistently supported by our shareholders, as evidenced by our Say-on-Pay results. In 2023, we received 85% shareholder support, and our average Say-on-Pay shareholder support over timethe prior five years is reflected in our results and returns to stockholders. In 2022, two performance-based incentive cycles, each of which covered different time periods, were completed, as summarized below (detailed discussion follows later in this “Compensation Discussion and Analysis”):over 93%. As shown below, the annual incentive was earned at 124% of target, reflecting our performance (including certain | | | adjustments as described on page 46) against 2022 Adjusted Operating Income and Free Cash Flow goals.
As shown below, the 2020-2022 cycle of Performance Shares was earned at 111% of target, reflecting our performance (including certain adjustments as described on page 48) against Cumulative Adjusted Pretax Income and relative TSR three-year goals.
For information regarding changes to the Company’s annual incentive and long-term incentive plans for 2023, see pages 38 to 40.
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| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | | |
| | | 2022 Annual Incentive Program
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| | | 2020-2022 Performance Shares
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| | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
(See “Pay for Performance,” “Annual Incentives” and “Long-Term Incentives” below for more information regarding these financial measures.)
Long-term incentive awards granted in January 2022 to our NEOs were solely in the form of equity to directly link the
| | interests of our executives with those of our stockholders. We awarded Performance Shares (weighted 70%), which require achievement of financial and relative TSR goals over a three-year period and RSUs (weighted 30%).
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Compensation Governance and Alignment with Stockholders
As part of a market-based pay program, we maintain many design features and corporate governance practices to ensure a strong link between executive pay, Company performance and stockholder interests:
| | | Pay for Performance | | More information
on page 74 | • We utilize a high percentage of performance-based pay, with 91% of 2022 total target annual compensation for the CEO at risk and 77% granted in equity, while, on average, 80% of 2022 target annual compensation for the other NEOs is at risk and 61% is granted in equity.
| | | | | • Our pay program is aligned with our business strategy; earnings is a key driver in the Company achieving its business strategy goals, which we capture for purposes of our incentive-based compensation with the measures of Adjusted Operating Income for our annual cash incentive plan and Annual Pretax Adjusted Income for our Performance Shares.
| | | | | • We include relative TSR as a market measure for our Performance Shares to align stockholders’ interests with our executives’ pay outcomes.
| | | | | • We do not provide excise tax gross-ups or any guarantees of regular incentive pay.
| | | | | • Our plans and awards do not provide for automatic vesting of equity awards in connection with a single-trigger change in control event.
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| | | Compensation Governance | | More information
on page 68 | • We conduct annual reviews of our compensation programs to ensure continued alignment to our strategy and market practices.
| | | | | • We annually evaluate our compensation programs to ensure they are designed to discourage risk and safeguard stockholder value.
| | | | | • The P&C Committee engages an independent compensation consultant.
| | | | | • We do not provide single-trigger change in control severance benefits.
| | | | | • We maintain post-termination restrictive covenants, clawback, anti-hedging and anti-pledging policies.
| | | | | • We maintain robust stock ownership guidelines for our executives and directors.
| | | | | • We have a retention requirement as part of our Stock Ownership Guidelines until the ownership guideline is met/maintained.
| | | | | • We prohibit repricing of stock option awards.
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Target Pay Mix for CEO and Other NEOs
Base salary and annual and long-term incentive award opportunities (as more fully described below) are the elements of our NEOs’ total direct compensation. To support our compensation philosophy, our NEOs’ total direct compensation opportunity is heavily weighted toward at-risk compensation within our annual incentive and long-term incentive programs. Our annual incentive awards and the performance-based component of our long-term incentive awards are considered performance-based pay, as the payouts are dependent on the achievement of specific financial performance measures. Our long-term incentive program utilizes time-based RSU awards that are subject to 3-year cliff vesting, further aligning the NEOs with our stockholders as the final value realized is based on the Company’s share price after the 3-year period.
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| | | COMPENSATION DISCUSSION AND ANALYSIS | | |
The significant portion of performance-based pay aligns our NEOs with our stockholders’ interests. The compensation mix for our CEO and for our other NEOs on average is shown below for 2022:
| | | Target Total Direct Compensation Allocation
(Assuming Performance-Based Components at Target and not including Career Shares)
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We continuously monitor our executive compensation programs and consider appropriate modifications that allow us to drive achievement of our business strategy and targeted financial results, meet our talent needs and maintain fully competitive compensation programs and practices to
maximize long-term stockholder value. As part of such review, the Company amended our CEO’s compensation mix to increase the portion of his target total direct compensation that is considered at-risk, performance-based pay from 70% in 2022 to 73% starting in 2023.
Compensation Alignment with StockholdersShareholders The executive compensation program is designed to drive the execution of our business strategy by strongly aligning pay opportunities with performance outcomes. The P&C Committee considers multiple perspectives in assessing the achievement of this critical objective, including a multi-year history of incentive payouts as a percentage of target, financial and TSR results, and the NEOs’ pay relative to the Comparator Group (as defined below)(see page 38). These analyses found that relative to the Comparator Group: 1. | The NEOs’ target pay levels are in the competitive range of market median, on average, with an emphasis on performance-based pay opportunities.
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2. | Lear’s incentive plan performance measures are well-aligned to its business strategy, correlative to TSR and are generally consistent with the measures used by the Comparator Group (and the broader industrial market).
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3. | Lear’s annual incentive and performance share payouts are directionally aligned with performance relative to the Comparator Group.
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•The NEOs’ target pay levels are in the competitive range of market median with an emphasis on performance-based pay opportunities. •Lear’s incentive plan performance measures are well-aligned to its business strategy, correlative to TSR and generally consistent with the performance measures used by the Comparator Group (and the broader industrial market). •Lear’s annual incentive and performance share payouts are directionally aligned with performance relative to the Comparator Group. Consistent with the Company’s pay-for-performance philosophy, challenging goals are set for the annual incentive and performance share award opportunities. As such, in some years, payouts will be above target (when our results exceed the target for the performance period), and in other years, payouts will be below target (when our results are below the target for the performance period). Our last threefour completed incentive cyclesperformance periods reflect this pay-performancepay-for-performance alignment with payouts varying commensurate with results. Due to the challenges during this time, payouts have ranged from 22% to 124% of target.Annual incentive payouts: 2020, 60% of target; 2021, 100% of target; and 2022, 124% of target
• | | Performance Share payouts: 2018-20, 22% of target; 2019-21, 74% of target; and 2020-22, 111% of target |
results, as shown below: | | | | | | | | | | | | | | | | Historical Performance Payouts | | AIP | 2020 | 2021 | 2022 | 2023 | | 60% | 100% | 124% | 170% | | Performance Shares | 2018-2020 | 2019-2021 | 2020-2022 | 2021-2023 | | 22% | 74% | 111% | 118% |
| | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
Our typical pay administration approach for promoted executives is to move target pay levels to the market median over several years, while emphasizing at-risk, performance-based incentive award opportunities. For example, our CFO was first promoted into his role in 2019. As he has developed in the role, his target pay has moved closer to market median with the majority of the increase in target pay provided in at-risk performance share award opportunities (with a three-year performance period), as well as stock options prior to 2022. The actual valuesamounts realized, if any, from performance share award opportunities (and stock option awards prior to 2022) can vary significantly, (duedue to performance and the Company’s stock price)price, from the grant amounts shown in the Stock Awards column of the Summary Compensation Table. This is reflected in the CEO’s target pay mix, with 91%92% of total pay at-risk and 56%59% of total pay from performance share opportunities. 2022 Advisory Vote on Executive Compensation
The P&C Committee reviewed the results of the 2021 stockholder advisory vote on NEO compensation and incorporated the results as one of the many factors considered in connection with the discharge of its responsibilities. Our compensation practices have been consistently supported by
stockholders, as evidenced by our Say-on-Pay results. In 2022, we received 89% stockholder support on our Say-on-Pay advisory vote, and our average result has been 96.4% for the period 2015 through 2022.
| | | | | | | | | | | | | | | | | | Say-on-Pay Stockholder Support | Vote Year | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | Stockholder Support (%) | | 89.0% | | 97.0% | | 97.0% | | 97.2% | | 98.3% | | 96.5% | | 98.3% | | 98.2% |
Engaging with StockholdersShareholders to Continue to Enhance our Compensation Program Our directors and management recognize the benefits fromof robust dialogue with stockholdersshareholders and we have engaged consistently in broad, direct, governance-focused stockholdershareholder outreach. We continue to solicit the perspectives of our investors andwhich we share such perspectives with the P&C Committee. Among other topics, we invite dialogue with our stockholdersshareholders regarding best practices and policy issues, our compensation programs, the financial measures that drive our business strategy and other issues to inform our compensation program review process. Feedback From Our Stockholdersfrom our Shareholders Considered as Part of the Actions Taken by the Committee The predominant feedback we have received from investors with respect to our compensation programs and practices was that they were satisfied with them.our compensation programs and practices. During October 2022,fall 2023, we talked with nine stockholdersreached out to 16 shareholders whose holdings represent approximately 50%80% of our shares outstanding related to ESG matters,gather feedback on various topics, including our executive compensation programs. Some stockholders asked questions about recentprogram. Certain shareholders favorably acknowledged the changes we made in response to their suggestions, including the following: •The reintroduction of ROIC to the financial measures and weightings in our annual and long-term incentive plans, specifically requestingplan; •The request for additional narrative in the “Compensation Discussion and Analysis” describing the drivers and decision-making regarding the incentive plan measures and weightings. weightings; and •The return to the traditional establishment of all three-year goals for all performance measures in the LTI award. The P&C Committee and the management team reviewedreview and discussed thediscuss feedback as part of theirour comprehensive review and discussion of the compensation programs’program’s alignment to our business strategy, support of our talent needs, and relative to market practices and other factors. When the P&C Committee assessed the incentive plan structure and performance measures, this feedback was one of the factors considered. considered when deciding to set all three-year goals for the performance measures relative to the 2024-2026 LTI award in November 2023, prior to the start of the performance period.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
In addition to the formal outreach discussed above, members of management continue to have regular and extensive interaction with our investors throughout the year to discuss our business segments, end markets, financial results and operational execution at investor conferences, Company-hosted events, non-deal roadshows and quarterly conference calls. In 2022,2023, Lear met with 10462 institutional investors for a total of 218340 interactions. We have also shared financial and ESGsustainability information relevant to our shareholders through our Sustainability Report, our Investor Relations website, our 20222023 Annual Report on Form 10-K and this proxy statement. What We Pay and Why: Elements of Executive Compensation | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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| | | COMPENSATION DISCUSSION AND ANALYSIS | | |
2023 Incentive Plans
The following changes were made to the 2023 incentive programs:
• | | Annual Incentive Plan (AIP): Lear had historically weighted the financial measures in its AIP at 50% Adjusted Operating Income and 50% Free Cash Flow. Due to the higher levels of volatility caused by the pandemic and ongoing supply chain challenges, the 2022 AIP weightings were set at 80% Adjusted Operating Income and 20% Free Cash Flow. This change was made to manage the ongoing volatility (which tends to have a greater impact on Free Cash Flow) as well as ensure payouts aligned with performance. Although supply chain and other operations pressures persist, the Committee and management team determined that reverting to the historical equal weighting for the two financial measures was appropriate for 2023. |
• | | Long-Term Incentive Plan (LTI): ROIC had been a measure in the Lear LTI until the 2020 performance cycle, when it was removed due to the challenges caused by the |
| | global pandemic, significant volume reductions and supply chain constraints. As part of our ongoing discussions with the Board and key stockholders, management engaged Frederic W. Cook as a compensation consultant to perform an analysis of key Lear financial measures and their impact on long-term stockholder value creation. In addition to the financial measures that were already part of the LTI, ROIC was found to be strongly correlated with stockholder value creation, and the Company’s long-term performance. The P&C Committee and management team determined that ROIC is a relevant incentive measure for evaluating the long-term performance of the company and subsequently included an ROIC Improvement measure for the 2023 – 2025 LTI performance cycle.
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These changes ensure an ongoing strong tie to stockholders’ interests and investment experience in a challenging market. A detailed depiction of the 2023-2025 performance period measures can be found in “Long-Term Incentives” on page 47.
Total Compensation Process and Review
The P&C Committee oversees the executive compensation program design and decision-making process for our NEOs. The P&C Committee is comprised of independent, non-employee members of the Board. The P&C Committee works very closely with its independent consultant and management to review the effectiveness of the Company’s executive compensation program throughout the year. The P&C Committee’s charter which reflects the specific details of its authority and responsibilities may be accessed on our website at https://ir.lear.com/corporate-governance.
The P&C Committee annually reviews key elements of our executive compensation program, including materials setting forth the various components of compensation for our NEOs and a summary of market practices and emerging trends, and discusses potential implications to the Company in the context of our business strategy and talent needs. This includes a specific review of dollar amounts for pay elements and potential payment obligations under our executive employment agreements, including an analysis of the resulting impact created by a change in control of the Company. The
P&C Committee reviews total compensation summaries or tally sheets for our NEOs on an annual basis. Tally sheets provide for an overall assessment of our compensation program while ensuring the proper linkage to financial performance and stockholder interests. In addition, although each component is assessed independently, the total complement of the components must work in harmony to achieve a proper balance, which, in turn, helps manage compensation risk. We also annually complete a comprehensive compensation risk assessment with assistance from our outside legal counsel and Pay Governance.
Compensation decisions are anchored in a clearly articulated compensation philosophy with strong pay-for-performance alignment, recommendations and market data from the independent compensation consultant, stockholder feedback, assessment of NEO performance and achievement of Company goals, and the P&C Committee’s assessment of business climate and industry factors.
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Compensation Considerations
The P&C Committee, with the support of the independent compensation consultant and management, considers many factors when making executive compensation decisions including, but not limited to:
Company performance
Financial and operational performance
Performance relative to present goals and financial guidance
Historic absolute and relative performance
Stockholder value
Long-term stockholder value creation
Performance relative to peers and competitors
Talent development and retention
Development, motivation and retention of a diverse team of top talent
Skills, experience and tenure of executive incumbents
Market pay levels and practices for comparably situated executives among our peer group and other industrial companies
Benchmarking Methodology
The P&C Committee targets base salaries, annual incentive awards, long-term incentive awards and total direct compensation of our NEOs and other executive officers on average to be within a competitive range (i.e., +/- 10%) of the median of the Company’s comparator group (the “Comparator Group”) and other comparably sized companies in the same general industry. In addition to reviewing annual market pay benchmarking, other factors (including our business strategy, talent needs, executives’ experience levels and cost) are considered in setting target pay which may result in some positions having target pay higher or lower than the
competitive range. Actual compensation relative to target pay opportunities will vary based on performance and, for long-term incentive awards, the value of common stock at payment. The P&C Committee regularly assesses the composition of the Comparator Group.
The 17 peer companies in our Comparator Group are focused on automotive parts and equipment, industrial machinery, heavy trucks and other durable goods manufacturing and have the following characteristics: (i) annual revenues typically ranging from 0.5 times to 2.0 times the Company’s revenues;
(ii) global companies typically with U.S. headquarters; (iii) market capitalization typically ranging from 0.2 times to 5.0 times the Company’s market capitalization; and (iv) companies that are considered by independent proxy advisors to be the Company’s proxy peers. The Company
supplements its review of the Comparator Group with a broader survey of general industrial companies (not individually selected or identified) for benchmarking of executive compensation levels and, as appropriate, compensation design practices.
The companies in the Comparator Group for 2022 are shown below. The revenues for this group in their most recently reported fiscal year ranged from $11.0 billion to $52.6 billion, with a median of $17.5 billion. Lear’s revenues for 2022 were $20.9 billion.
| | | | | | | 2022 Comparator Group | | | | | Adient plc (ADNT)
| | Eaton Corporation plc (ETN)
| | Magna International Inc. (MGA)
| | Textron Inc. (TXT)
| | | | | Aptiv PLC (APTV)
| | Emerson Electric Co. (EMR)
| | PACCAR Inc. (PCAR)
| | Whirlpool Corporation
(WHR)
| | | | | BorgWarner Inc. (BWA)
| | Goodyear Tire & Rubber Company (GT)
| | Parker-Hannifin Corporation (PH)
| | | | | | | Cummins Inc. (CMI)
| | Illinois Tool Works Inc. (ITW)
| | TE Connectivity Ltd. (TEL)
| | | | | | | Deere & Company (DE)
| | L3Harris Technologies, Inc. (LHX)
| | Tenneco Inc. (TEN)
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The above companies were used to inform the NEO base salary changes effective December 1, 2022, and target annual and long-term incentive changes effective January 2023.
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| | | COMPENSATION DISCUSSION AND ANALYSIS | | |
Role of Management in Setting Compensation Levels
Our human resources staff supports the P&C Committee in its work. They also work with compensation consultants, whose engagements have been approved by the P&C Committee, and with accountants, legal counsel and other advisors, as necessary, to implement the P&C Committee’s decisions, to monitor evolving competitive practices and to make compensation recommendations to the P&C Committee. The P&C Committee has engaged Pay Governance as its independent compensation consultant to assist with the ongoing review of our executive and director compensation programs and to ensure that our programs are competitive and appropriate given the Company’s objectives and prevailing market practices. For most compensation topics for which the P&C Committee is responsible, it has directed Pay Governance to work with management to develop recommendations that reflect the P&C Committee’s objectives for the compensation program. Pay Governance performs no other services for the Company. The P&C Committee has final authority to approve, modify or reject these recommendations and to make its decisions in executive session. Our President and CEO provides input with respect to compensation of the executive officers (other than himself) but is otherwise not involved in decisions of the P&C Committee affecting the compensation of our executive officers. While our CFO, General Counsel and Chief Administrative Officer and other members of our human resources management attend such meetings to provide information, present materials to the P&C Committee and answer related questions, they are not involved in decisions of the P&C Committee affecting the compensation of our executive officers. The P&C Committee typically meets in executive session after each of its regularly scheduled meetings to discuss and decide executive compensation matters.
Authority of P&C Committee Under Incentive Plans
Under the Annual Incentive Plan (“AIP”) and the 2019 Long-Term Stock Incentive Plan (the “LTSIP”), the P&C Committee retains the authority to provide for adjustments to the financial measures utilized for annual and long-term incentive awards, such as excluding the impact of gains or losses on the sale of assets, the effects of changes in accounting principles or the application thereof, or unusual or non-recurring items, including the impact of significant differences from the assumptions contained in the financial budget upon which the applicable performance targets were established. Any such adjustments to financial measures are intended to better reflect the actual performance of approximately 7,500 AIP and over 130 Performance-Vested LTI Award participants, align award payments with decisions that support the Company’s
long-term financial plan and strategies, avoid unintended inflation or deflation of awards due to unusual or non-recurring items during the performance period, and emphasize the Company’s preference for long-term, sustainable growth.
Adjustments are limited in number and, when considered and applied, take into account our overarching objectives of ensuring strong alignment of pay decisions and Company performance results in support of stakeholder value creation and talent attraction, retention and motivation.
In addition, the P&C Committee generally has the discretion to make and, if permissible under the terms of the plans, modify awards under the AIP and the LTSIP to our executive officers, including the NEOs.
Executive Compensation Objectives and Core Elements Our executive compensation programs reflectprogram reflects our pay-for-performance philosophy and encourageencourages executives to make decisions that drive the creation of stockholdershareholder value for the short-short and long-term. long term. The P&C Committee utilizes a mix of fixed and variable compensation elements in order to achieve the following objectives of our compensation program: •link executive pay to Company performance; •optimize profitability, cash flow and revenue growth, as well as return on investment; •align the interests of management with those of stockholders; shareholders;•utilize multi-year vesting periods and performance measures aligned to long-term stockholdershareholder value creation including stock performance; •align management’s compensation with our business strategy and goals; •promote teamwork within our group of global managers (our “One Lear” concept); and •attract, motivate, reward and retain the best executive talent with market-based competitive compensation opportunities.
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To achieve these objectives, we provide a total compensation program for executive officers that consists of base salary, annual and long-term incentive award opportunities, which are summarized below for 2022,2023, as well as certain benefits (covered later). | | | | | | | | | | | | | | | | | | | | | | | | | | | | Element | | Base Salary | | 2023 Annual Incentive Plan (AIP) | | Long-Term Incentive Plan (LTI) RSUs(1) (2) | | | | | | | Long-Term Incentive Plan (LTI) 2023-2025 Performance Shares(1) | Element
| | Purpose | | Performance Measure(s) | | Fixed vs.
Variable
| | Cash vs.
Equity
| | Payout
Range
| | | | | | | Base Salary
| | Provide a competitive rate of pay to attract, motivate and retain key executive officers of the Company | | Individual performance, responsibilities, experience, time in position and critical skills | | Fixed | | Cash | | n/a | | | | | | | 2022 AIP
| | Align a portion of annual pay to performance against key goals and objectives for the year | | Adjusted Operating Income (80%)
Free Cash Flow (20%)
| | Variable | | Cash | | 0-200% of target | | | | | | | Performance Shares under LTSIP (2022-2024)
| | Align executive pay with long-term stockholdershareholder interests through equity-based compensation tied to key performance measures of the Company over a three-year periodand value creation | | Annual Adjusted Pretax Income (66.7%)
Relative TSR (33.3%)
| | Variable | | Equity | | 0-200% of target number of
shares; Performance Share value fluctuates with stock price movement
| | | | | | | RSUs under LTSIP
| | Align executive pay with performance against key financial goals and long-term stockholdershareholder interests through equity-based compensationand value creation | | | | | | | | | | | Fixed vs. Variable | | Fixed Cash | | Variable Cash | | Variable Equity | | Variable Equity | | | | | | | | | | | Performance Period | | -- | | One Year: 01/01/2023 - 12/31/2023 | | Three-Year Cliff Vesting | | Three Years: 01/01/2023 - 12/31/2025 | | | | | | | | | | | Performance Measure(s) | | Individual Performance | | Two financial measures:
50% Adjusted Operating Income
50% Free Cash Flow | | Stock Price Alignment | | Three financial measures: 50% Adjusted Annual Pretax Income
25% Adjusted ROIC Improvement
25% Relative TSR(3) | | | | | | | | | | | Award Opportunity | | Merit Increases | | 0% - 200% | | Stock price alignmentPrice Appreciation | | 0% - 200% | | Variable | | Equity | | Fluctuates with | | | | | | (1) An RSU represents the right to receive a share of common stock price movementwhen the restriction period ends under the 2019 Long-Term Stock Incentive Plan as determined by the P&C Committee | | | (2) RSUs and Performance Shares granted in 2023 will be settled in shares of Lear common stock if earned | | | (3) Relative TSR is capped at target (i.e., 100%) if Lear's TSR is negative over the performance period |
The P&C Committee routinely reviews
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Pay for Performance Our incentive plans are designed to optimize long-term financial returns for our shareholders and reward our NEOs for delivering on the elements noted above. In general, the P&C Committee monitors compensation levelsCompany’s strategy. As part of a market-based pay program, we maintain many design features and corporate governance practices to ensure that a higher proportionstrong link between executive pay, Company performance and shareholder interests: •We utilize a high percentage of an executive’s total compensation is awarded in the form of variable and performance-based components (dependent on Company performance) as the executive’s responsibilities increase. Narrative descriptionspay, with 92% of the individual elements2023 target annual compensation for the CEO at risk including 78% granted in equity, and, on average, 82% of the 2023 target annual compensation are included below. Design changes made for 2023 are summarizedthe other NEOs at risk including 65% granted in equity.
•Our compensation program is aligned with our business strategy, and earnings is the endkey driver for us to achieve our business strategy goals. •To drive these results, our incentive plans use key performance measures including Adjusted Operating Income, Free Cash Flow, Adjusted Annual Pretax Income and Adjusted ROIC Improvement. •We use Relative TSR as a Performance Share market measure to align shareholder interests with executive pay outcomes. Our strategic, operational and financial performance over time is reflected in our results and returns to shareholders. All of the annual incentive opportunity and the majority of the long-term incentive opportunity are determined based on specific performance measures that drive achievement of our business strategy, while ensuring sharp focus on critical results. In addition, as part of the Company’s long-term strategy to provide competitive retirement benefits, the Company has historically granted time-based Career Shares, including in 2023. See page 51 for more detailed information on Career Shares.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
In order to drive profitable growth with efficient capital management, we selected complementary performance measures (which assess earnings and capital management, as well as relative TSR, over annual or three-year periods) to use in our 2023 incentive plans: | | | | | | | | | | Measure | Weighting | Background, Definition and Rationale | | Annual Incentive Plan (AIP) | | Adjusted Operating Income | 50% | • Pretax income before equity income, interest expense, other income/expense, restructuring costs, and certain transactions and non-recurring items. • Adjusted Operating Income is a well understood operating metric that can be influenced by all levels of employees of the Company. • Provides motivation to maximize earnings from current operations. | | Free Cash Flow | 50% | • Net cash provided by operating activities, less capital expenditures, excluding certain transactions and other non-recurring items. • Free Cash Flow is a well understood operating metric that can be influenced by all levels of employees of the Company. • Provides motivation to maximize cash flow through earnings and appropriate management of working capital and investments. | | Long-Term Stock Incentive Plan (LTI) | | Adjusted Annual Pretax Income | 50% for Performance Shares | • Annual net income for each year in the performance period (2023, 2024 and 2025) before provision for income taxes, income attributable to non-controlling interests, restructuring costs, and certain transactions and non-recurring items. • Focuses on earnings generated from products sold, encouraging profitable revenue growth and efficient management of costs over time. • Performance results for each year are independently assessed and then averaged to determine the three-year payout. | | Adjusted ROIC Improvement | 25% for Performance Shares | •Adjusted Operating Income less taxes divided by average invested capital. • Focuses on the basis point improvement over the baseline of 2022 Adjusted ROIC. • Performance goals for all years were set prior to the beginning of the three-year performance period. Performance results for each year are independently assessed and then averaged to determine the three-year payout. | | Relative TSR | 25% for Performance Shares | • Relative TSR for the Performance Share awards for the three-year performance period (2023-2025) based on the three-year TSR achieved by the Company relative to the three-year TSR achieved by a group of automotive suppliers and industrial companies over the performance period (starting TSR assessment period in December 2022 compared to ending TSR assessment period in December 2025). • Focuses on alignment of executive pay with value creation for our shareholders relative to our peers. • Target award earned for median Relative TSR, with maximum award of 200% of target for Relative TSR of at least the 75th percentile. Award is capped at target if the Company’s TSR is negative for the performance period. |
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Compensation Mix Target Pay Mix for CEO and Other NEOs Base salary and annual and long-term incentive sections below.award opportunities are the elements of our NEOs’ total direct compensation. To support our compensation philosophy, our NEOs’ total direct compensation opportunity is heavily weighted toward at-risk compensation within our annual incentive and long-term incentive plans. Our annual incentive awards and the performance-based component of our long-term incentive awards are considered performance-based pay, as the payouts are dependent on the achievement of specific financial performance measures. Our long-term incentive plan also utilizes time-based RSU awards that are subject to three-year cliff vesting, further aligning the NEOs with our shareholders as the final value realized is based on the Company’s share price after the three-year period. The significant portion of performance-based pay aligns our NEOs with our shareholders’ interests. The 2023 target compensation mix for our CEO and our other NEOs on average is shown below: 2023 Performance Results and Compensation Decisions Base salaries for our NEOs are targeted, on average, around the median level for comparable positions based on market benchmarking, as well asbenchmarking. The process of determining base salaries includes a review of scope, duties and responsibilities along withfor each NEO role, an evaluation of NEO performance and experience, and attention to internal equity. Merit increases in base salary for our senior executives are also determined by the results of the Board’s annual leadership review. At this review, our CEO assesses the performance of our top executives and presents his perspectives to our Board.equity considerations. Our CEO’s base salary and total compensation are reviewed by the P&C Committee following the annual CEO performance review. Generally, in February of each year, the CEO and P&C Committee reach agreement on his goals and objectives for the upcoming year, and the P&C Committee evaluates his performance for the prior year against the prior year’s agreed goals and objectives. Our CEO has traditionally received a lower percentage of his total compensation in the form of fixed amounts like base salary relative to our other executives in order to link more closely link his compensation to the performance of the Company. Merit increases in base salary for our senior executives are also determined by the results of the Board’s annual leadership review. At this review, our CEO assesses the performance of our top executives and presents his perspectives to our Board. | | | | | | | | | | | | | | | | | | | | | The 2022 and 2023 Proxy Statement | | |
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| | | COMPENSATION DISCUSSION AND ANALYSIS | | |
The 2021 and 2022 base salaries of our NEOs are summarized in the table below. The annual base salaries for our NEOs remained unchanged from the May 2021 annual base salary rates until the newDecember 1, 2022. No increases to base pay waswere approved effective Decemberduring 2023 or as of January 1, 2022.
2024. | | | | | | | | | | | | | | | | 2021 Base Salary Rate (Effective May 1, 2021) | | | 2022 Base Salary Rate
(Effective December 1, 2022) | | | % Change | | Raymond E. Scott | | $ | 1,270,000 | | | $ | 1,300,000 | | | | 2.4 | % | Jason M. Cardew | | $ | 824,000 | | | $ | 850,000 | | | | 3.2 | % | Frank C. Orsini | | $ | 824,000 | | | $ | 850,000 | | | | 3.2 | % | Thomas A. DiDonato | | $ | 721,000 | | | $ | 721,000 | | | | 0 | %* | Carl A. Esposito | | $ | 700,000 | | | $ | 725,000 | | | | 3.6 | % |
*2024 Proxy Statement | | Mr. DiDonato did not receive a base salary adjustment due to his planned retirement in 2023.
| | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
2022 Incentive Programs
Pay for Performance
Our strategic, operational and financial performance over time is reflected in our results and returns to stockholders. All of the annual incentive opportunity and the majority of the long-term incentive opportunity are determined based on specific performance measures that drive achievement of our business strategy while ensuring sharp focus on critical results. In addition, as part of the Company’s long-term strategy for providing competitive retirement benefits, the Company has historically granted time-based Career Shares, including in 2022. In order to drive profitable growth with efficient capital management, we selected complementary performance measures (which assess earnings and capital management over annual or three-year periods, as well as relative TSR) to use in our incentive plans for 2022:
| | | | | | | Measure | | Plan | | Weighting | | Background, Definition and Rationale | | | | | Adjusted Operating Income
| | AIP | | 80% | | • Pretax income before equity income, interest, other income/expense, restructuring costs and certain transactions and non-recurring items.
• Adjusted Operating Income is a well understood operating metric that can be influenced by all levels of employees of the Company.
• Provides motivation to maximize earnings from current operations.
| | | | | Free Cash Flow
| | AIP | | 20% | | • Net cash provided by operating activities, less capital expenditures, excluding certain transactions and other non-recurring items.
• Free Cash Flow is a well understood operating metric that can be influenced by all levels of employees of the Company.
• Provides motivation to maximize cash flow through earnings and appropriate management of working capital and investments.
| | | | | Annual Adjusted
Pretax Income
| | LTSIP | | 66.7% for Performance Shares | | • Annual net income for each year in the performance period (2022, 2023 and 2024) before provision for income taxes, restructuring costs and certain transactions and non-recurring items.
• Focuses on earnings generated from products sold, encouraging profitable revenue growth and efficient management of costs over time.
• Performance results for each year are independently assessed to calculate an annual payout factor, which is averaged to determine the three-year payout.
| | | | | Relative TSR
| | LTSIP | | 33.3% for Performance Shares | | • Relative TSR for the 2022 Performance Share awards for the three-year performance period (2022-2024) based on the three-year TSR achieved by the Company relative to the three-year TSR achieved by a group of auto suppliers and industrial companies over the performance period (starting TSR assessment period in December 2021 compared to ending TSR assessment period in December 2024).
• Focuses on alignment of executive pay with value creation for our stockholders relative to our peers.
• Target award earned for median relative TSR, with maximum award of 200% of target for relative TSR of at least 75th percentile. Award is capped at target if the Company’s TSR is negative for the performance period.
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| | | COMPENSATION DISCUSSION AND ANALYSIS | | |
| | | | | | | | | | | | | | | | | | | Base Salaries | | 2022 Base Salary Rate(1) | | 2023 Base Salary Rate | | % Change | | Raymond E. Scott | $ | 1,300,000 | | | $ | 1,300,000 | | | — | % | | Jason M. Cardew | $ | 850,000 | | | $ | 850,000 | | | — | % | | Frank C. Orsini | $ | 850,000 | | | $ | 850,000 | | | — | % | | Carl A. Esposito | $ | 725,000 | | | $ | 725,000 | | | — | % | | Harry A. Kemp | $ | 700,000 | | | $ | 700,000 | | | — | % |
(1)Effective as of 12/01/2022 Annual Incentive Plan (AIP) Our NEOs and nearly 7,5007,800 other employees are eligible to participate in the AIP, which provides annual cash incentive award opportunities based upon the achievement of financial performance goals important to the Company’s success. Awards, if earned, are typically paid early in the following year based on our performance achieved in the prior fiscal year. Target Annual Incentive. 2023 Award Opportunity
Each NEO is assigned an annual target opportunity under the AIP expressed as a percentage of such officer’shis or her base salary. An executive’s target annual incentive percentage generally increases as his or her ability to affect the Company’s performance increases. Consequently, as an executive’s responsibilities increase, his or her variable compensation in the form of an annual incentive, which is dependent on Company performance, generally makes up a larger portion of the executive’s total compensation.For 2022,compensation opportunity.
| | | | | | | | | | | | | | | | | | | 2023 Target Annual Incentive Opportunity | | 2023 Base Salary Rate | | Target AIP (% of Base Salary) | | Target AIP Opportunity | | Raymond E. Scott | $ | 1,300,000 | | | 160% | | $ | 2,080,000 | | | Jason M. Cardew | $ | 850,000 | | | 100% | | $ | 850,000 | | | Frank C. Orsini | $ | 850,000 | | | 100% | | $ | 850,000 | | | Carl A. Esposito | $ | 725,000 | | | 80% | | $ | 580,000 | | | Harry A. Kemp | $ | 700,000 | | | 90% | | $ | 630,000 | |
AIP awards, if any, are determined solely based on the Company's final financial performance. The potential payouts range from 0 to 200 percent of target annual incentive opportunity for each of Messrs. Scott, Orsini, DiDonato, Cardew and Esposito was 150%, 100%, 100%, 100% and 80%, respectively, of their base salaries. For AIP opportunity. 2023 Mr. Scott’s target annual incentive opportunity has been increased to 160% of his base salary. Mr. DiDonato will not participate in thePerformance Measures Our 2023 AIP due to his retirement from the Company.Financial Measures. Our 2022 AIP, which was approved in December 2021,November 2022, utilized Adjusted Operating Income and Free Cash Flow because they are highly visible and important measures of operating performance that are relied upon by investors.
•Adjusted Operating Income weighted at 50%, measures our profit realized from operations. It aligns with how we communicate performance to investors and is a strong indicator of the Company’s financial success.operations •Free Cash Flow weighted at 50%, measures our ability to generate cash through earnings and the efficient managementuse of working capital to support our capital allocation priorities which and fixed assets | | include organic and inorganic investments to facilitate growth and strengthen our business segments, as well as returning cash to stockholders through our quarterly dividends and share repurchase program.
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For more information on these performance measures including background, definition and rationale, see below. 2023 Performance Goals The Company operates in a highly cyclical industriesindustry with volatility and uncertainty having increased significantly since 2020. Forecasts of industry and macro conditions are part of the Company’s budgeting process that is the basis for the target financial goals which are set each year to have comparable degrees of difficulty based on the challenges and opportunities forecasted at the start of the year. As a result, in many years, this yields target goals above the prior year actual results (particularly in upward automotive industry cycles), and in other years, the target goals aremay be below the prior year actual; in all years reflectingactual results, with the intent of havingsetting appropriately challenging target goals each year. At
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
The 2023 AIP performance goals and payout calculation are shown below: For the start of 2022 industry and macro conditions, including higher costs forecasted in many areas, resulted in2023 performance period, the forecasted performance used to set 2022 target goals being somewhat below 2021 actual results.were set as follows: •Adjusted Operating Income goal set at $963 million •The 2023 goal was set 10% higher than the 2022 Adjusted Operating Income target of $875 million and higher than the 2022 Adjusted Operating Income result of $886 million(1) •Free Cash Flow goal set at $453 million •The 2023 goal was set 65% higher than the 2022 Free Cash Flow target of $275 million and higher than the 2022 Free Cash Flow result of $419 million(1) (1) The P&C Committee excluded from these results the impact of our 2022 acquisitions, which were not contemplated when the 2022 goals were established. For the 2023 AIP, we reverted to equally weighted performance measures. Prior to 2022, these two key financial measures have been used in the AIP and historically were weighted equally.equally weighted. For the 2022 AIP, the P&C Committee determined that the measures would be weighted 80% Adjusted Operating Income and 20% Free Cash Flow. TheIn 2022, the P&C Committee chose to place a larger focus on Adjusted Operating Income since it is a key indicator of business strength and reducedto reduce the focus on Free Cash Flow due to fluctuations in working capital that resulted from ongoing macroeconomic uncertainty that may resultwhich could have resulted in misalignment of actual performance and payouts. The goals applicableP&C Committee reviews the annual and long-range financial plans, recommendations from management, input from the independent compensation consultant and performance of the open incentive performance periods prior to approving the 2022targets for the AIP performance measures. The 2023 AIP goals were set based on the Board-approved budget, with the target goals reflecting a stretch level of performance which at the time was anticipated to be challenging but achievable; the threshold goals reflecting a level of performance at which the P&C Committee believed a portion of the award should be earned;achievable and the maximum goals establishedset well above target, requiring significant achievements and reflecting a level of performance at which the P&C Committee believed a 200% of target award was warranted. The P&C Committee approves the AIP performance measures each November, prior to the start of the performance period. Because the performance measures and targets are set and approved in November, the actual results for the current year and current performance period are not known. Therefore, the P&C Committee must rely on projected year-end results as a comparison when setting the goals for the upcoming year.2023 Performance Results and Corresponding Payouts
| | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
Payouts. Our actual 2022AIP payouts are aligned and directly commensurate with our financial results. As shown below, the AIP was earned at 170% of target, reflecting our performance against 2023 Adjusted Operating Income and Free Cash Flow (as reflected ingoals (including certain adjustments as described on pages 90-91).
2023 results: •Adjusted Operating Income of $1,115 million(1) was above the chartstarget goal of $963 million •Free Cash Flow of $638 million was above under the heading “Executive Summary — Executive Compensation Highlights — 2022 Annual Incentive Program”) resulted in annual incentive awards being earned at 124%target goal of target, as shown below for each NEO. $453 million and above the maximum goal of $633 million (1) The P&C Committee excluded from these results the impact of 2022 acquisitions as significant unplanned, unbudgeted items. Factoring in such exclusions, 2022 Adjusted Operating Incomea divestiture, which was slightlycontemplated when the 2023 goals were established but did not occur.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
The Company achieved above target and 2022 Free Cash Flow exceeded the maximum. Our 2022 financial results on a weighted average basis, for these performance measures earned payouts at 124% of target. | | | | | | | | | | | | | | | | | 2022 Annual Incentives | | | | | Target Opportunity (as % of Base) | | | Target Amount(1) | | | Results | | | 2022 Incentive Amount(2) | | Raymond E. Scott | | | 150 | % | | $ | 1,950,000 | | | | 124 | % | | $ | 2,418,000 | | Jason M. Cardew | | | 100 | % | | $ | 850,000 | | | | 124 | % | | $ | 1,054,000 | | Frank C. Orsini | | | 100 | % | | $ | 850,000 | | | | 124 | % | | $ | 1,054,000 | | Thomas A. DiDonato | | | 100 | % | | $ | 721,000 | | | | 124 | % | | $ | 894,040 | | Carl A. Esposito | | | 80 | % | | $ | 580,000 | | | | 124 | % | | $ | 719,200 | |
(1) | Reflects target opportunity as a percentage of 12/31/22 base salary.
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(2) | The 2022 Incentive amount represents the amount actually earned, which is calculated as the Target Amount multiplied by the Actual Performance (124%).
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Changes for 2023 Annual Incentive Plan
In November 2022, the P&C Committee determined to revert to our historical equal weightings the for the 2023 AIP. Adjusted Operating Income composes 50% of the 2023 AIP (down from 80% in the 2022 AIP), while Free Cash Flow composes 50% of the 2023 AIP (up from 20% in the 2022
AIP). These keyboth financial measures had been weighted differentlyas a result of higher than anticipated industry volumes combined with strong operating performance in 2022 dueboth business segments. In 2023, both businesses improved operating margins significantly compared to the expected ongoing volatility & uncertainty in Lear’s macroeconomicprior year and global operating environment. converted those earnings to free cash flow through a combination of improved working capital management and better capacity utilization, which allowed the Company to reduce capital spending.
| | | | | | | | | | | | | | | | | | | | | | 2023 Annual Incentive Plan Goals & Results | | Weight | Threshold | Target | Maximum | Performance Result | Performance Result as % of Target | | Adjusted Operating Income | 50% | $577M | $963M | $1,347M | $1,115M | 140% | | Free Cash Flow | 50% | $271M | $453M | $633M | $638M | 200% | | | | | Final Performance | 170% |
The AIP award for each NEO is shown below: | | | | | | | | | | | | | | | | | | | | | | | | | 2023 Annual Incentive Plan Payouts | | Target Opportunity (as % of Base) | | Target Amount(1) | | Results | | 2023 Incentive Amount(2) | | Raymond E. Scott | 160% | | $ | 2,080,000 | | | 170% | | $ | 3,536,000 | | | Jason M. Cardew | 100% | | $ | 850,000 | | | 170% | | $ | 1,445,000 | | | Frank C. Orsini | 100% | | $ | 850,000 | | | 170% | | $ | 1,445,000 | | | Carl A. Esposito | 80% | | $ | 580,000 | | | 170% | | $ | 986,000 | | | Harry A. Kemp | 90% | | $ | 630,000 | | | 170% | | $ | 1,071,000 | |
(1)Reflects target opportunity as a percentage of 12/31/23 base salary. (2)The 2023 incentive amount represents the amount actually earned, which is calculated as the target amount multiplied by the Actual Performance (170%). For information regarding the Company’s 2024 AIP, bonus will be paid in early 2024.see page 50. Long-Term IncentivesIncentive (LTI) Compensation The long-term incentive component of our executive compensation program is designed to provide our senior management with performance-based award opportunities, to drive superior long-term performance and to align the interests of our senior management with those of our stockholders. To achieve these goals, we have adopted a “portfolio” approach that recognizes the strengths and weaknesses that various forms of long-term incentives provide. shareholders. 2022 Awards.2023 Award Opportunity
In November 2021,2022, the P&C Committee approved changes to the award mix for the long-term equity incentive compensation programCEO. The 2023 award mix for the January 2022 awards. The 2021 awards consisted of 60%CEO was approximately 75% Performance Shares 20%and 25% RSUs, as compared to approximately 70% Performance Shares and 20% Stock Options.30% RSUs in prior years. The 2022 awards were granted in a2023 award mix of approximatelyfor the other NEOs remained unchanged at 70% Performance Shares and 30% RSUs. Our weighting onof Performance Shares is higher than most of the Comparator Group and many other large industrial companies, which often assign Performance Shares a lower weighting (e.g., 50% to 60% of the regular annual equity award mix). TheOur heavy weighting towardof Performance Shares increases the sensitivity of the value of our NEOs’ long-term equity incentives to Company performance – not only does the underlying value of a Performance Share fluctuate generally with changes toin the Company’s stock price, but the number of shares earned varies based on the Company’s achievement of financial and relative TSR goals. The Performance Shares granted in 2022 are earned based on two performance measures, the three-year average of Annual Adjusted Pretax Income (66.7% of the award) and the 3-year Relative TSR (33.3% of the award). | • | | | | | | | | | | | | 46 | | | | Annual Adjusted Pretax Income goals and performance will be set and measured annually, with final award payouts being determined based on the three-year average results. The use of Annual Adjusted Pretax Income goals set at the start of each year, instead of a cumulative goal with each annual component set at the start of each of the three years in the performance period. This was implemented due to the ongoing uncertainty resulting from the COVID-19LEAR CORPORATION pandemic and persistent supply chain challenges that have created extreme volatility in commodity prices and availability of key components used in our products which has significantly impacted our customer production schedules. The long-term nature of the award opportunity is maintained with three-year cliff vesting to further align with stockholder goals. |
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| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | | |
| | | | | | | | | | | | | | | | | | | 2023-2025 Target Long-Term Incentive Opportunity | | 2023 Base Salary Rate | | Target LTI (% of Base Salary) | | Target LTI Opportunity(1) | | Raymond E. Scott | $ | 1,300,000 | | | 900% | | $ | 11,700,000 | | | Jason M. Cardew | $ | 850,000 | | | 400% | | $ | 3,400,000 | | | Frank C. Orsini | $ | 850,000 | | | 400% | | $ | 3,400,000 | | | Carl A. Esposito | $ | 725,000 | | | 280% | | $ | 2,030,000 | | | Harry A. Kemp | $ | 700,000 | | | 255% | | $ | 1,785,000 | |
(1)The values represented in the Summary Compensation Table and the 2023 Grants of Plan-Based Awards table, both shown in "Executive Compensation Tables" beginning on page 55, may differ from these stated target values, particularly for the Relative TSR component, due to the determination of fair value under the accounting standards. 2023-2025 Performance Measures and Goals The Performance Shares granted for the performance period are earned based on three performance measures. •Adjusted Annual Pretax Income goals and performance targets were set and will be measured annually, with final award payouts being determined based on the average of the annual results. The use of Adjusted Annual Pretax Income goals set annually at the start of each year was used due to the uncertainty resulting from the COVID-19 pandemic and persistent supply chain challenges that created extreme volatility in commodity prices and availability of key components used in our products which has significantly impacted our customer production schedules. The long-term nature of the award opportunity is maintained with three-year cliff vesting to further align with shareholders. Effective for the 2024-2026 award, we moved to setting all three years of goals prior to the start of the three-year performance period. See page 50 for more information on 2024 changes. •Adjusted ROIC Improvement goals and performance targets were set for the full three-year performance period and will be measured annually, with final award payouts being determined based on the average of the annual results. •Relative TSR performance will be measured based on the Company’s three-year TSR achieved relative to the TSR achieved by the peer group. The Relative TSR Peer Group which is a group of approximately 25 auto24 automotive suppliers and industrial companies, (listed below).as shown below. Unlike the Comparator Group that is selected, byin part, based on comparable revenues thisand is used for compensation benchmarking and pay decisions, the Relative TSR Peer Group includes companies with a wider range of revenues and with a focus on companies with strong historical stock price correlation to Lear’s common stock.stock and is used to assess performance versus peer companies. Awards are capped at target performance(i.e., 100%) if the Company’s TSR is negative for the performance period.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
Relative TSR performance is measured against a group of competitors in the current marketplace. Companies in the Relative TSR Peer Group may vary slightly cycle-to-cycle, reflecting mergers and acquisitions, significant changes in company structure and other factors. The Relative TSR Peer Group for the 2023-2025 cycle is as follows: | | | | | | | | | | | | | 2023-2025 Performance Shares – Relative TSR Peer Group | | Adient plc | Continental Aktiengesellschaft | Gentex Corporation | PACCAR Inc. | | Allison Transmission Holdings, Inc. | Cooper-Standard Holdings Inc. | Gentherm Incorporated | Standard Motor Products, Inc. | | American Axle & Mfg. Holdings, Inc. | Cummins Inc. | Goodyear Tire & Rubber Company | TE Connectivity Ltd. | | Aptiv PLC | Dana Incorporated | LCI Industries | Textron Inc. | | Autoliv, Inc. | Eaton Corporation plc | Magna International Inc. | Valeo SA | | BorgWarner Inc. | Faurecia S.E. (now Forvia SE) | Modine Manufacturing Company | Visteon Corporation |
The specific amounts and terms of the 20222023-2025 long-term incentive awards are shown in and following the “20222023 Grants of Plan-Based Awards”Awards table below.on page 58. The target levels ofPerformance Share Adjusted Annual Adjusted Pretax Income goals for 2023 and the Performance Share Adjusted ROIC Improvement and Relative TSR performancegoals for the Performance Shares2023-2025 performance period were set in November 2021 by reference2022, prior to the Board-approved 2022 Company budget based onstart of the forecast for the period reflecting a level of performance which at the time was anticipated to be challenging, but achievable.period. The threshold level wasgoals were set to be reflective of a level of performance at which the P&C Committee believedbelieves a portion of the target award opportunity should be earned.is warranted. The maximum level wasgoals were set significantlywell above the target, requiring significant achievements and reflecting a level of performance at which the P&C Committee believedbelieves a 200% of target award is warranted. The Performance Share Adjusted Annual Pretax Income goals for 2024 and 2025 will be set annually prior to the start of each year. For information regarding the Company’s 2024-2026 LTI, see page 50. 2021-2023 Performance Results and Corresponding Payouts LTI payouts are aligned and directly commensurate with our financial results. Earned equity awards are also subject to changes in our stock price over a multi-year period. Our strategic, operational and financial performance over time is reflected in our results and returns to shareholders. At the end of 2023, the 2021-2023 performance-based incentive cycle was warranted. Thecompleted, as summarized below, and was earned at 118% of target, reflecting our performance against three years of Adjusted Annual Pretax Income goals and our Relative TSR peer group for these awards isthree-year performance (including certain adjustments as follows:
| | | | | | | | 2022-2024 Performance Shares – Relative TSR Peer Group | Adient plc
| | Cooper-Standard Holdings Inc.
| | Gentherm Incorporated
| | Valeo SA
| Allison Transmission Holdings, Inc.
| | Cummins Inc.
| | Goodyear Tire & Rubber Co.
| | Visteon Corporation
| American Axle & Mfg. Holdings, Inc.
| | Dana Incorporated
| | LCI Industries
| | Standard Motor Products, Inc.
| Aptiv PLC
| | Dorman Products, Inc.
| | Magna International Inc.
| | Tenneco Inc.
| Autoliv, Inc.
| | Eaton Corporation plc
| | Meritor, Inc.
| | | BorgWarner Inc.
| | Faurecia S.A.
| | Modine Manufacturing Company
| | | Continental Aktiengesellschaft
| | Gentex Corporation
| | PACCAR Inc.
| | |
described on pages 90-91).Vesting of 2020 Performance Share Awards. In 2020, each of our NEOs received grants ofThe 2021-2023 Performance Shares vested on February 7, 2024, based on Company performance for the 2020-2022three-year performance period withbeginning January 1, 2021. Final LTI performance vesting terms based on Cumulative Adjusted Pretax Income (66.7% ofapproved by the award) and relative TSR (33.3% of the award). The RSUs and stock options that were granted at the same time as the 2020 Performance Shares (which each represented 20% of the total equity award value at target) vested in January 2023.
P&C Committee is shown below:The threshold, target, maximum and actual Cumulative Adjusted Pretax Income levels and relative TSR for the 2020-2022 performance period are shown above under the heading “Executive Summary — 2020-2022 Performance Shares.” If the threshold, target or maximum goals for these measures were attained during the performance period, 50%, 100% or 200% of the target Performance Shares for each executive, respectively, would be earned.
| | | | | | | | | | | | | | | | | | | | | | 2021-2023 Performance Shares | | Weight | Threshold | Target | Maximum | Performance Result | Performance Results as % of Target | | Adjusted Annual Pretax Income ($) | 66.7% | $1,485M | $2,315M | $2,892M | $2,497M(1) | 139% | | Relative TSR (Percentile) | 33.3% | 25th | 50th | 75th | 38th | 76% | | | | | Final Performance | 118% |
(1) In determining the payouts, of the 2020 Performance Shares, consistent with our pay-for-performance philosophy of providing incentive payouts for delivering operating results relative to the three-year goals, the P&C Committee deemed it appropriate to exclude a portion of the estimated impact of the COVID-19 pandemicfrom our 2020 financial performance results as a significant unplanned, unbudgeted item. Similarly, the P&C Committee excluded the impact of acquisitions made during the three-year period. Factoringperiod and a divestiture, which was anticipated but did not occur and which would have resulted in such exclusions, Cumulative Adjusted Pretax Income was achieved at 102% of target and Relative TSR was achieved at 129% of target. Based on the weighting of the performance measures, the overall award was earned at 111% of target (see the charts above under the heading “Executive Summary — Executive Compensation Highlights — 2020-2022 Performance Shares” for our Cumulative Adjusted Pretax Income and Relative TSR results). a larger payout.
| | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
The resulting share amounts earned by our NEOs are shown below: | | | | | | | | | | | | | | | | | | | | | | 2021-2023 Performance Shares | | Target Shares (#) | | Result | | Actual Shares Earned (#) | | | Raymond E. Scott | 32,012 | | | 118% | | 37,773 | | | | Jason M. Cardew | 8,003 | | | 118% | | 9,442 | | | | Frank C. Orsini | 9,146 | | | 118% | | 10,790 | | | | Carl A. Esposito | 6,688 | | | 118% | | 7,890 | | | | Harry A. Kemp | 4,401 | | | 118% | | 5,192 | | |
Summary of Outstanding Performance Periods Each Performance Share award reflects a three-year performance period resulting in overlapping awards. The potential payout for each Performance Share ranges from 0 to 200 percent of the table below: | | | | | | | | | | | | | 2020-2022 Performance Shares | | | | | Target
Shares (#) | | | Result | | | Actual
Shares
Earned (#) | | Raymond E. Scott | | | 35,976 | | | | 111 | % | | | 39,933 | | Jason M. Cardew | | | 8,094 | | | | 111 | % | | | 8,984 | | Frank C. Orsini | | | 10,279 | | | | 111 | % | | | 11,409 | | Thomas A. DiDonato | | | 8,544 | | | | 111 | % | | | 9,483 | | Carl A. Esposito | | | 7,516 | | | | 111 | % | | | 8,343 | |
Changes•Ongoing industry volatility, supply chain disruptions and other macroeconomic conditions for 2023 Equity Awards.the performance periods prior to 2024 necessitated one-year Adjusted Annual Pretax Income performance goals for the 2022-2024 and 2023-2025 performance periods. In
•For each one-year period, the Adjusted Annual Pretax Income target goal is set higher than the prior year's target goal. These annual goals are set each November, 2022,before actual results for the P&C Committeecurrent year are known, and are based on the approved certain changesbusiness plan. •The outstanding 2022-2024 and 2023-2025 performance periods are tracking below target with respect to Relative TSR and slightly above target for Adjusted Annual Pretax Income. For the 2023-2025 performance period, Adjusted ROIC Improvement is tracking slightly above target. •For the 2024-2026 Performance Shares, we returned to the long-term equity incentive compensation programtraditional approach of setting all goals for 2023. As described above, an ROIC Improvement financial measure was added. Thethe three-year performance period in November, prior to the start of the performance period. Such goals will be reported upon completion of the three-year performance period. •For the 2024-2026 Performance Shares, granted in 2023 will be earned based onthe target goals for each financial performance measure were set higher than the prior year's target goals. The chart below reflects the performance period for the three outstanding Performance Share awards as of the filing date of this proxy statement, including the corresponding performance measures Annual Adjusted Pretax Income (50% of the award), relative TSR (25% of the award) and ROIC Improvement (25% of the award). Our NEOs received these awards in January 2023 forweightings. the 2023 – 2025 performance period. For additional information on the changes made to the financial measures and weightings for 2023, see pages 38 – 40.
Effective as of January 1, 2023, the target value award mix of the 2023 long-term incentive opportunity for Mr. Scott changed to 24% RSUs and 76% Performance Shares, further linking his compensation to Company performance and our stockholder returns.
| | | | | | | | | | | | | | | | | | | | | 20232024 Proxy Statement
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| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
2024 Incentive Plans The following reflects highlights of the 2024 incentive plans: •Annual Incentive Plan (AIP): ▪A strategic scorecard modifier, intended to incentivize innovation, was added and can impact final payouts by -10% to +10% (awards remain capped at 200%). Once the AIP performance factor is determined based on the results of the two financial measures, the Driving Innovation strategic scorecard modifier will be applied based on our 2024 performance against a series of innovation milestones. ▪The Adjusted Operating Income goal for the 2024 performance period was approved by the P&C Committee at the November 2023 meeting, and the target goal was set higher than the 2023 target goal and higher than the 2023 actual result of $1.115 billion. ▪The Free Cash Flow goal for the 2024 performance period was approved by the P&C Committee at the November 2023 meeting, and the target goal was set higher than the 2023 target goal and near the 2023 actual result of $638 million. •Long-Term Incentive Plan (LTI): ▪For the 2024-2026 performance period, the goals for all performance measures were approved by the P&C Committee in November 2023, prior to the start of the three-year performance period, reverting back to traditional goal setting for the full three-year performance period. ▪The target goals for the three-year performance period for Adjusted Annual Pretax Income and Adjusted ROIC Improvement were set higher than the target goals for the two outstanding performance periods. These changes ensure an ongoing strong tie to shareholders’ interests and investment experience in a challenging market.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Health, Welfare and Certain Other Benefits To remain competitive in the market for a high-caliber management team, the Company has traditionally provided its executive officers, including our CEO, with health, welfare and other fringe benefits. In addition, personal use of our corporate aircraft has been eliminated except with respect to our CEO, with approval of the Chairperson of the Board or Chairperson of the P&C Committee. The Company does not provide tax gross-up payments for the imputed income associated with personal use of corporate aircraft. There was limited personal use of corporate aircraft in 2023. Summary of Retirement BenefitsOur NEOs participate in our retirement savings plan, qualified pension plan, pension equalization plan and supplemental savings plan, as eligible. These benefits provide rewards for long-term service to the Company and an income source in an executive’s post- employmentpost-employment years. The various components of our retirement benefit program (including our frozen defined benefit pension plans) disclosed in this proxy statement are summarized in the table below. The general terms of these plans and formulas for calculating benefits are summarized following the 2022 Summary Compensation Table, 20222023 Pension Benefits table and 20222023 Nonqualified Deferred Compensation table, respectively, in “Executive Compensation.” Compensation” beginning on page 55. | | | | | | | | | | | | | | | Summary of Retirement Benefits | | Type | | Plan/Program | | Component/Feature | Purpose | | Purpose | | Pages for Further Details | | Defined Contribution | | | | | Defined
Contribution
| | Salaried Retirement Program (Qualified) | Deferral | Deferral
| | Standard 401(k) plan and matching contribution | | 62 | | Company Match
| | Company Match | | | | Pension Savings Plan | | Company contribution | | | | | | | | Salaried Retirement Restoration Program (Non-Qualified) | Deferral | Deferral
| | Excess programs for amounts above qualified plan limits | | 62-63 | | | Company Match | | | | | Pension Savings Plan | | | | | | Defined Benefit
(frozen (frozen as of 12/31/06) | | Lear Corporation Pension Plan | | Qualified Pension Plan (frozen) | N/A | n/a | | 61-62 | | Pension Equalization Program | | Part of SERP (frozen(frozen)) | | 62 | | Salaried Retirement Restoration Program (Pension Makeup) | | Part of SERP (frozen(frozen)) | | 62-63 | | Additional | | | | | Additional
| | Time-Based Career Shares (described (described below) | | Shares not distributed until earlier of age 62 or 3 years after retirement | | Intended to facilitate a very long-term stockholdershareholder perspective by the NEOs and other senior executives | | 50; 57; 67
|
Each November, the P&C Committee grants awards of Career Shares, which are RSUs that generally must be held until after retirement. The annual granting of Career Shares is an integral component of the Company’s strategy to align NEOs and other senior executives with the mindset of a very long-term stockholder.shareholder. The grants are also intended to motivate and retain key talent during industry cycles and support long-term talent initiatives and succession planning. Individual awards are differentiated by position level, performance and other factors. On November 14, 2022,13, 2023, the P&C Committee approved grants of Career Shares pursuant to the LTSIP for theour NEOs, in the amounts reported in “Executive Compensation —the Summary Compensation Table”Table on page 55 and “—the 2023 Grants of Plan-Based Awards Table” below (the “Time-Based Career Shares”),table on page 58, and other senior leaders. Career Shares are generally required to be held until retirement, since they are not distributed until the later of age 62 or the vesting date. For purposes of illustration, our NEOs are required to hold the earned Time-Based Career Shares for an average of at least eightseven years from the grant date (based on the number of years until the earliest distribution opportunity), during which time the Time-Based Career Shares will remain subject to forfeiture in the event of a voluntary resignation before achievement of retirement eligibility has been achieved. | | | | | | | | | | | | | 50 2024 Proxy Statement | | | | | LEAR CORPORATION
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| | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
Management Stock Ownership Guidelines
The management stock ownership guidelines create a strong link between our long-term successGovernance Policies and the ultimate pay of our executive officers through specified stock ownership levels based on a multiple of base salary, as shown in the table below. Under the guidelines, unvested awards generally do not count towards the ownership goal; however, once they are within 24 months of vesting, (i) for all executive officers, 60% of RSUs awarded count towards the goal, and (ii) for retirement-eligible executive officers only, 60% of Career Shares awarded count towards the goal. Until an executive meets the goal, he or she must hold 50% of the net shares acquired upon the vesting of equity awards. Share ownership targets for executives reaching age 60 are reduced by 10% annually up to a maximum reduction of 50%.
| | | | | PositionPractices
| | Required Share Ownership Level
(multiple of base salary) | | CEO
| | | 6X
| | Executive Vice Presidents
| | | 3X
| | Senior Vice Presidents
| | | 3X
| | Other Executive Officers
| | | 1.5X
| |
Our stock ownership guidelines are reviewed periodically to ensure ongoing market competitiveness and reasonableness. As of our latest measurement date (December 31, 2022), all of our NEOs who were subject to the guidelines have met their respective required ownership levels, other than Mr. Cardew,
who became subject to the guidelines upon his transition to the role of Senior Vice President and CFO during 2019 and continues to build his ownership as he retains at least 50% of the net shares acquired upon the vesting of equity awards.
Equity Award Policy We do not time the grant of equity awards in coordination with the release of material non-public information. Our equity awards are generally approved on the dates of our regularly scheduled P&C Committee meetings and are effective as of such dates or specified prospective dates. The P&C Committee has approved and formalized our equity award policy. It provides that the effective grant date of equity awards must be either the date of P&C Committee or other committee approval or some future date specifically identified in such approval. If such awards are granted, the exercise price of stock options and grant price of Stock Appreciation Rights stock appreciation rights shall be the closing market price of our common stock on the grant date. The P&C Committee must approve all awards to our executive officers. The policy also allows the P&C Committee to delegate to the CEO the ability to grant equity awards to non-executive officer employees who are newly hired or promoted or deemed to be deserving of special retention or recognition awards. In addition, theThe aggregate award pool for these awards to non-executive officers must be approved by the P&C Committee but may be allocated to individual employees by the CEO. Committee.Employment Agreements/Termination/Change in Control Benefits As described in detail and quantified in “Executive Compensation — Potential Payments Upon Termination or Change in Control,”Control” on page 65, our NEOs receive certain benefits under their employment agreements upon their termination by the Company without “cause” or upon their resignation for “good reason,” including such terminations following a change in control of the Company. The employment agreements also provide for restrictive covenants relating to non-competition, confidential information and non-solicitation of the Company’s employees and customers. These benefits are intended to ensure that members of senior management are not influenced by their personal situations and are able to be objective in evaluating a potential change in control transaction. The P&C Committee regularly reviews termination and change in control benefits and continues to believe that the severance benefits in connection with certain terminations of employment constitute reasonable levels of protection for our executives. The LTSIPLTI provides all participants, including NEOs, double-trigger vesting (i.e., qualifying termination of employment following a change in control) of equity awards (that are not assumed or replaced by the successor company), which protects employees and supports andan orderly transition of leadership. | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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| | 51 |
| | | COMPENSATION DISCUSSION AND ANALYSIS | | |
None of the employment agreements with the Company’s executive officers contains an excise tax gross-up provision. gross-up
provision.As previously announced, Mr. DiDonato will retire from employment with
Compensation and Risk Annually, the Company, effective September 30, 2023. In anticipationP&C Committee reviews the potential impact of his retirement, Mr. DiDonato also tendered written notice of his resignation as Senior Vice President and Chief Administrative Officer, effective January 15, 2023. Mr. DiDonato will continue to serve as a non-executive employeeour compensation programs on organizational risk. The risk assessment was conducted by senior leaders of the Company, inincluding representatives from finance, legal and human resources, and included a transitionreview of the employee compensation structures and advisory role, until his retirement date (the “DiDonato Transition”). In connectionpay administration practices. The P&C Committee, external legal advisors and independent compensation consultant reviewed and discussed the findings of the assessment and concluded that our employee compensation programs are designed with the DiDonato Transition,appropriate balance of risk and reward in relation to our overall business strategy and do not incent executives or other employees to take unnecessary or excessive risks. As a result, we believe that risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. In reaching these conclusions, we considered the attributes of all of our programs, including: •Appropriate compensation mix between fixed (base salary) and variable (annual and long-term incentive) pay opportunities; •Review of market data and competitive practices for elements of executive compensation; •Performance measures tied to key Company short-term and long-term performance measures and correlated to total shareholder returns; Mr. DiDonato entered into an Amended•Alignment of annual and Restated Employment Agreement, which sets forthlong-term award objectives to ensure that both types of awards encourage consistent behaviors and sustainable performance results;
•Balanced mix of performance measures for incentive awards (Adjusted Operating Income, Free Cash Flow, Adjusted Annual Pretax Income, Adjusted ROIC Improvement, Relative TSR) that encourage value creation, retention and stock price appreciation; •Long history of pay outcomes aligning to our performance with incentive opportunities and payouts varying commensurate with our financial and TSR performance results; •Stock Ownership Guidelines; and •Robust clawback policies for accounting restatements or improper conduct.
| | | | | | | COMPENSATION DISCUSSION AND ANALYSIS |
We also reviewed our compensation programs for certain design features that may have the termspotential to encourage excessive risk-taking, including: over-weighting towards annual incentives, highly leveraged payout curves, unreasonable performance thresholds and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds. We concluded that our compensation programs do not include such elements. Stock Ownership Guidelines The management stock ownership guidelines create a strong link between our long-term success and the ultimate pay of Mr. DiDonato’s employment in a non-executive capacity until his retirement. During this period, Mr. DiDonato will receive a base salary of $10,000 per month. He will not be eligible for a pro-rata payout under the 2023 AIP, and he did not receive any awards under the LTSIP in 2023. In the event that Mr. DiDonato’s employment terminates for any reason during the term, Mr. DiDonato will not be entitled to receive any cash severance benefits. Health, Welfare and Certain Other Benefits
To remain competitiveour executive officers, as shown in the market for a high-caliber management team, the Company has traditionally provided itstable below.
•Covers all executive officers including our CEO,and establishes a multiple of each executive officer's base salary. •Includes only actual share holdings and a portion of unvested RSUs (60%). •Excludes unvested performance share awards. •Excludes vested but unexercised stock options. •Requires each executive to hold 50% of the net shares acquired upon the vesting of equity awards until the ownership requirement is achieved. •Share ownership targets for executives reaching age 60 are reduced by 10% annually up to a maximum reduction of 50%. Our stock ownership guidelines are reviewed periodically to ensure ongoing alignment with health, welfaremarket practice and other fringe benefits. In addition, personal usefor reasonableness. As of our corporate aircraft has been eliminated except with respectlatest measurement date (December 31, 2023), all NEOs have met their respective ownership requirement, other than Mr. Cardew, who became subject to our CEO, with approvalthe guidelines in 2019, and Mr. Kemp, who became subject to the guidelines in 2023; each continues to build their ownership as they retain at least 50% of the Chairmannet shares acquired upon the vesting of the Board or Chairman of the P&C Committee. The Company does not provide tax gross-up payments for the imputed income associated with personal use of corporate aircraft. There was personal use of corporate aircraft in 2022 by our CEO on a limited basis.
equity awards.ClawbackExecutive Officer and Director Hedging Policy
The Company maintains a formal clawback policy (the “Clawback Policy”) that applies to all incentive-based cash and equity compensation awards granted on or after February 7, 2013 (“Incentive Compensation”) to any current or former executive officer of the Company (collectively, the “Covered Recipients”). In the event that the Company is required by applicable U.S. federal securities laws to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under such securities laws where such accounting restatement was caused or substantially caused by the intentional misconduct of the Covered Recipient, the Company will recover from such Covered Recipient who received Incentive Compensation
during the three-year period preceding the date on which the Company is required to prepare an accounting restatement, based on the erroneous data, the amount, if any, in excess of what would have been paid to the Covered Recipient under the accounting restatement.
The Clawback Policy is administered by the P&C Committee, which has the sole discretion in making all determinations under the Clawback Policy. The Company intends to amend its existing clawback policy consistent with the requirements of the final NYSE listing standards implementing Rule 10D-1 of the Exchange Act within the prescribed time period.
Hedging and Pledging
The Company maintains a formal policy, set forth below, prohibiting officers and directors from (i) entering into hedging or monetization transactions involving our Company stock and (ii) holding our Company stock in a margin account or pledging our Company stock as collateral for a loan. The policy was most recently revised effective September 13, 2017 Hedging Transactions. Certain forms of hedging or monetization transactions, such as prepaid variable forward contracts, equity swaps, collars and exchange funds, allow an officer or director to eliminatelock in much of the General Counsel’s discretionvalue of their stock holdings, often in exchange for all or part of the potential upside appreciation of the stock. These transactions allow the officer or director to grant exceptionscontinue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the officer or director may no longer have the same objectives as our other shareholders. For this reason, our NEOs, other executive officers and directors are prohibited from entering into hedging or monetization transactions involving our stock. Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or is otherwise not permitted to trade in our securities, our NEOs, other executive officers and directors are prohibited from holding our securities in a margin account or pledging prohibition. our securities as collateral for a loan. | | | | | | | | | | | | | 52 2024 Proxy Statement | | | | | LEAR CORPORATION
| | | | | | | | 53 |
| | | | | | | | | COMPENSATION DISCUSSION AND ANALYSIS | |
Effective October 2, 2023, the Board adopted a new Incentive Based Compensation Recoupment Policy (the “Recoupment Policy”), in accordance with Rule 10D-1 of the Exchange Act as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which applies to the Company's current and former executive officers. The Recoupment Policy is overseen and administered by the P&C Committee. Under the Recoupment Policy, the Company is required to recoup the amount of any erroneously received compensation (as defined in the Recoupment Policy) on a pre-tax basis in the event of any accounting restatement of the Company, subject to limited impracticability exceptions set forth in the Recoupment Policy. The full text of the Recoupment Policy is included as Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. Also effective October 2, 2023, the Board adopted a new Improper Conduct Compensation Recoupment Policy (the “Improper Conduct Recoupment Policy”), which applies to all current or former participants in the 2019 Long-Term Stock Incentive Plan, as amended. The Improper Conduct Recoupment Policy provides for the recovery of incentive compensation paid within the three-year period preceding any improper conduct including, but not limited to, conduct that causes or is likely to cause material financial, operational or reputational harm to the Company and that relates to: acts of fraud, bribery or embezzlement; certain criminal acts (such as a violation of the Foreign Corrupt Practices Act); breaches of obligations under the Company’s Code of Business Conduct & Ethics; breaches of a restrictive covenant under any agreement with the Company; violations of certain Company internal policies (e.g., the Harassment-Free Workplace Policy, the Romantic Relations Policy, the Equal Employment Opportunities Policy); or the creation of a hostile work environment. The policy is overseen by the P&C Committee. Tax Treatment of Executive Compensation One of the factors the P&C Committee considers when determining executive compensation is the anticipated tax treatment to the Company and to the executives of the various payments and benefits. Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally provides that a publicly held company may not deduct compensation paid to certain covered executive officers to the extent that such compensation exceeds $1,000,000 per executive officer in any year. While the P&C Committee generally considers this limit when determining compensation, the P&C Committee has concluded, and reserves the discretion to conclude in the future, that it is appropriate to exceed the limitation on deductibility under Section 162(m) to ensure that executive officers are compensated in a manner that it believes to be consistent with the Company’s best interests and those of its stockholders.shareholders. Furthermore, interpretations of and changes in the tax laws, and other factors beyond the P&C Committee’s control, may also affect the deductibility of compensation. Impact of Accounting Treatment We have generally considered the accounting treatment of various forms of awards in determining the components of our overall compensation program. We have generally sought to grant stock-settled equity awards to executives, which receive fixed accounting treatment, as opposed to cash-settled equity awards, which receive variable accounting treatment. We intend to continue to evaluate these factors in the future.
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| | | | | 53 LEAR CORPORATION |
EXECUTIVE COMPENSATION TABLES The following table shows information concerning the annual compensation for services to the Company and its subsidiaries in all capacities of the CEO, CFO and the other NEOs during the last three completed fiscal years. The footnotes accompanying the 2022 Summary Compensation Table generally explain amounts reported for 2022,2023, unless otherwise noted. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 Summary Compensation Table | | Name and
Principal Position(a) | | Year(b) | | | Salary(c) | | | | | | Stock Awards (1)(e) | | | Option
Awards(f) | | | Non-Equity
Incentive
Plan
Compensation(2)(g) | | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(3)(h) | | | All Other
Compensation(4)(i) | | | Total
Compensation(j) | | Raymond E. Scott, President and Chief Executive Officer | | | 2022 | | | $ | 1,272,500 | | | | | | | $ | 11,118,747 | | | $ | — | | | $ | 2,418,000 | | | $ | — | | | $ | 567,097 | | | $ | 15,376,344 | | | | | 2021 | | | $ | 1,246,667 | | | | | | | $ | 8,057,060 | | | $ | 1,680,012 | | | $ | 1,905,000 | | | $ | — | | | $ | 417,636 | | | $ | 13,306,375 | | | | | | 2020 | | | $ | 1,144,000 | | | | | | | $ | 10,020,830 | | | $ | 1,680,001 | | | $ | 1,080,000 | | | $ | 366,594 | | | $ | 423,344 | | | $ | 14,714,769 | | Jason M. Cardew, Senior Vice President and Chief Financial Officer | | | 2022 | | | $ | 826,167 | | | | | | | $ | 2,990,707 | | | $ | — | | | $ | 1,054,000 | | | $ | — | | | $ | 268,735 | | | $ | 5,139,609 | | | | | 2021 | | | $ | 782,667 | | | | | | | $ | 2,076,637 | | | $ | 420,003 | | | $ | 824,000 | | | $ | — | | | $ | 168,989 | | | $ | 4,272,296 | | | | | 2020 | | | $ | 683,667 | | | | | | | $ | 2,720,077 | | | $ | 378,030 | | | $ | 378,000 | | | $ | 97,873 | | | $ | 149,485 | | | $ | 4,407,132 | | Frank C. Orsini, Executive Vice President, and President, Seating | | | 2022 | | | $ | 826,167 | | | | | | | $ | 2,990,707 | | | $ | — | | | $ | 1,054,000 | | | $ | — | | | $ | 244,717 | | | $ | 5,115,591 | | | | | 2021 | | | $ | 816,000 | | | | | | | $ | 2,337,543 | | | $ | 480,029 | | | $ | 824,000 | | | $ | — | | | $ | 188,767 | | | $ | 4,646,339 | | | | | 2020 | | | $ | 781,333 | | | | | | | $ | 3,610,431 | | | $ | 480,026 | | | $ | 480,000 | | | $ | 164,954 | | | $ | 190,045 | | | $ | 5,706,789 | | Thomas A. DiDonato, Former Senior Vice President and Chief Administrative Officer(5) | | | 2022 | | | $ | 721,000 | | | | | | | $ | 2,236,802 | | | $ | — | | | $ | 894,040 | | | $ | — | | | $ | 217,104 | | | $ | 4,068,946 | | | | | 2021 | | | $ | 714,000 | | | | | | | $ | 1,885,109 | | | $ | 399,017 | | | $ | 721,000 | | | $ | — | | | $ | 168,601 | | | $ | 3,887,727 | | | | | 2020 | | | $ | 683,667 | | | | | | | $ | 2,634,758 | | | $ | 399,011 | | | $ | 420,000 | | | $ | — | | | $ | 145,316 | | | $ | 4,282,752 | | Carl A. Esposito, Senior Vice President and President, E-Systems | | | 2022 | | | $ | 702,083 | | | | | | | $ | 2,307,087 | | | $ | — | | | $ | 719,200 | | | $ | — | | | $ | 150,111 | | | $ | 3,878,481 | | | | | 2021 | | | $ | 683,333 | | | | | | | $ | 1,776,488 | | | $ | 351,004 | | | $ | 560,000 | | | $ | — | | | $ | 116,388 | | | $ | 3,487,213 | | | | | 2020 | | | $ | 634,833 | | | | | | | $ | 2,202,704 | | | $ | 351,015 | | | $ | 312,000 | | | $ | — | | | $ | 134,190 | | | $ | 3,634,742 | |
(1) | The amounts reported in this column for 2022 reflect the aggregate value of Career Shares, RSUs and Performance Shares under the LTSIP awarded in the year. The 2022 values by award type are shown below. The grant date fair value of the Career Shares and RSUs has been determined in accordance with ASC 718, “Compensation – Stock Compensation.” The award date value of Performance Shares is based upon the probable outcome of the performance conditions and is consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the award date, excluding the effect of estimated forfeitures. For purposes of the Summary Compensation Table, we have assumed that the probable outcome of the performance conditions would result in the award vesting at target and the best estimate available for the aggregate compensation cost to be recognized over the service period as of the award date would reflect the value of each performance share at the Company’s stock price on the award date. There can be no assurance that these values will ever be realized. See Note 13, “Stock-Based Compensation,” to the Company’s consolidated financial statements included in our 2022 Annual Report on Form 10-K for the assumptions made in determining these values.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Career
Share
RSU Grant
Date Value | | | RSU Grant
Date Value | | | 2022 Performance
Shares Award
Date Value | | | Total Grant
Date Value | | | 2022 Performance
Shares at
Maximum Value | | | | | | | | Raymond E. Scott | | $ | 749,999 | | | $ | 2,857,444 | | | $ | 7,511,304 | | | $ | 11,118,747 | | | $ | 15,022,608 | | | | | | | | Jason M. Cardew | | $ | 299,882 | | | $ | 741,547 | | | $ | 1,949,278 | | | $ | 2,990,707 | | | $ | 3,898,556 | | | | | | | | Frank C. Orsini | | $ | 299,882 | | | $ | 741,547 | | | $ | 1,949,278 | | | $ | 2,990,707 | | | $ | 3,898,556 | | | | | | | | Thomas A. Di Donato | | $ | — | | | $ | 616,414 | | | $ | 1,620,388 | | | $ | 2,236,802 | | | $ | 3,240,776 | | | | | | | | Carl A. Esposito | | $ | 249,902 | | | $ | 566,861 | | | $ | 1,490,324 | | | $ | 2,307,087 | | | $ | 2,980,648 | |
(2) | The amounts reported in this column for 2022 represent the amounts earned under the AIP, based on achievement of the 2022 AIP targets, as described above under the heading “Compensation Discussion and Analysis –- Elements of Compensation —- Annual Incentives.”
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(3) | Represents the aggregate annualized change in the actuarial present value of each applicable NEO’s accumulated benefit under all defined benefit pension plans (including supplemental plans), all of which have been frozen since December 31, 2006. For 2022, there was an actuarial decrease in the present value of the benefits under these plans for Mr. Scott in the amount of ($633,875); for Mr. Cardew in the amount of ($184,440); and for Mr. Orsini in the amount of ($296,141). Because these amounts are negative, they are not reported in this column or in column (j).
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary Compensation Table | Year
(b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards(2) ($) (e) | Option Awards ($) (f) | Non-Equity Incentive Plan Compensation(3) ($) (g) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) ($) (h) | All Other Compensation(5) ($) (i) | Total Compensation ($) (j) | | | | | | | | | | Raymond E. Scott(1) President and CEO | | 2023 | 1,300,000 | | — | | 13,349,215 | | — | | 3,536,000 | | 41,649 | | 664,508 | | 18,891,372 | | | 2022 | 1,272,500 | | — | | 11,118,747 | | — | | 2,418,000 | | — | | 567,097 | | 15,376,344 | | | 2021 | 1,246,667 | | — | | 8,057,060 | | 1,680,012 | | 1,905,000 | | — | | 417,636 | | 13,306,375 | | Jason M. Cardew(1) Senior Vice President and Chief Financial Officer | | 2023 | 850,000 | | — | | 3,914,999 | | — | | 1,445,000 | | 35,123 | | 310,215 | | 6,555,337 | | | 2022 | 826,167 | | — | | 2,990,707 | | — | | 1,054,000 | | — | | 268,735 | | 5,139,609 | | | 2021 | 782,667 | | — | | 2,076,637 | | 420,003 | | 824,000 | | — | | 168,989 | | 4,272,296 | | Frank C. Orsini(1) Executive Vice President and President, Seating | | 2023 | 850,000 | | — | | 3,914,999 | | — | | 1,445,000 | | 32,755 | | 282,456 | | 6,525,210 | | | 2022 | 826,167 | | — | | 2,990,707 | | — | | 1,054,000 | | — | | 244,717 | | 5,115,591 | | | 2021 | 816,000 | | — | | 2,337,543 | | 480,029 | | 824,000 | | — | | 188,767 | | 4,646,339 | | Carl A. Esposito(1) Senior Vice President and President, E-Systems | | 2023 | 725,000 | | — | | 2,408,258 | | — | | 986,000 | | — | | 173,442 | | 4,292,700 | | | 2022 | 702,083 | | — | | 2,307,087 | | — | | 719,200 | | — | | 150,111 | | 3,878,481 | | | 2021 | 683,333 | | — | | 1,776,488 | | 351,004 | | 560,000 | | — | | 116,388 | | 3,487,213 | | Harry A. Kemp(1) Senior Vice President, Chief Administrative Officer & General Counsel | | 2023 | 700,000 | | — | | 2,147,667 | | — | | 1,071,000 | | — | | 181,464 | | 4,100,131 | |
(1)For each NEO, information is included for the year(s) they were an NEO. (2)The amounts reported in this column for 2023 reflect the aggregate value of Career Shares, RSUs and Performance Shares under the LTI awarded in the year. The 2023 values by award type are shown below. The grant date fair value of the Career Shares and RSUs has been determined in accordance with ASC 718, "Compensation - Stock Compensation." The award date value of Performance Shares is based on the probable outcome of the performance conditions and is consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the award date, excluding the effect of estimated forfeitures. For purposes of the Summary Compensation Table, we have assumed that the probable outcome of the performance conditions would result in the award vesting at target and the best estimate available for the aggregate compensation cost to be recognized over the service period as of the award date would reflect the value of each performance share at the Company's stock price on the award date. There can be no assurance that these values will ever be realized. See Note 13, "Stock-Based Compensation," to the Company's consolidated financial statements included in our 2023 Annual Report on Form 10-K for more information related to determining these values. | | | | | | | | | | | | | | | | | | | Name | Career Share RSU Grant Date Value ($) | RSU Grant Date Value ($) | 2023 Performance Shares Award Date Value ($) | Total Grant Date Value ($) | 2023 Performance Shares at Maximum Value ($) | | Raymond E. Scott | 849,925 | | 2,857,375 | | 9,641,915 | | 13,349,215 | | 19,283,830 | | | Jason M. Cardew | 299,951 | | 1,019,925 | | 2,595,123 | | 3,914,999 | | 5,190,246 | | | Frank C. Orsini | 299,951 | | 1,019,925 | | 2,595,123 | | 3,914,999 | | 5,190,246 | | | Carl A. Esposito | 249,895 | | 608,959 | | 1,549,404 | | 2,408,258 | | 3,098,808 | | | Harry A. Kemp | 249,895 | | 535,451 | | 1,362,321 | | 2,147,667 | | 2,724,642 | |
| (4) | | | | | | | | | | | | 2024 Proxy Statement | | The amounts reported in this column for 2022 for each NEO include:
| | 55 |
(3) The amounts reported in this column for 2023 represent the amounts earned under the AIP, based on achievement of the 2023 AIP targets, as described in "Compensation Discussion and Analysis - Annual Incentive Plan (AIP)" above. (4) Represents the aggregate annualized change in the actuarial present value of each applicable NEO's accumulated benefit under all defined benefit pension plans (including supplemental plans), all of which have been frozen since December 31, 2006. (5) The amounts reported in this column for 2023 for each NEO include: •Matching contributions allocated by the Company to each of the NEOsNEO pursuant to the Retirement Savings Plan, Company contributions under the Pension Savings Plan (described below) and contributions to the Lear Corporation Salaried Retirement Restoration Program as follows: | | | | | | | | | | | | | | | | | | | | | | Name | | Pension Savings
Plan Qualified
Contribution | | | Salaried Retirement
Restoration Program
Nonqualified Contribution | | | Retirement Savings
Plan Qualified
Matching Contribution | | | Retirement Savings
Plan Nonqualified
Matching Contribution | | | | | | | Raymond E. Scott | | $ | 26,775 | | | $ | 348,645 | | | $ | 13,725 | | | $ | 129,263 | | | | | | | Jason M. Cardew | | $ | 26,775 | | | $ | 165,365 | | | $ | 13,725 | | | $ | 60,533 | | | | | | | Frank C. Orsini | | $ | 26,775 | | | $ | 141,347 | | | $ | 13,725 | | | $ | 60,533 | | | | | | | Thomas A. DiDonato | | $ | 26,775 | | | $ | 119,490 | | | $ | 13,725 | | | $ | 51,165 | | | | | | | Carl A. Esposito | | $ | 13,689 | | | $ | 77,292 | | | $ | 10,418 | | | $ | 46,375 | |
imputed | | | | | | | | | | | | | | | | Name | Retirement Savings Plan Qualified Matching Contribution ($) | Pension Savings Plan Qualified Contribution ($) | Retirement Savings Plan Nonqualified Matching Contribution ($) | Salaried Retirement Restoration Program Nonqualified Contribution ($) | | Raymond E. Scott | 14,850 | | 28,650 | | 152,460 | | 411,102 | | | Jason M. Cardew | 14,850 | | 28,650 | | 70,830 | | 193,422 | | | Frank C. Orsini | 14,850 | | 28,650 | | 70,830 | | 165,663 | | | Carl A. Esposito | 14,850 | | 20,745 | | 50,139 | | 83,565 | | | Harry A. Kemp | 14,850 | | 24,894 | | 39,243 | | 100,686 | |
•Imputed income with respect to life insurance coverage in the following amounts: Mr. Scott $3,612;$3,612, Mr. Cardew $1,932;$1,932, Mr. Orsini $1,932;$1,932, Mr. DiDonato, $5,544;Esposito $3,612 and Mr. Esposito, $1,932Kemp $1,260. $405 in life•Life insurance premiums paid by the Company on behalf of each NEO in the amount of our NEOs$531.
the•The aggregate incremental cost relating to Mr. Scott’sScott's personal use of the Company’sCompany's aircraft of $44,672.$49,080. The value of the personal use of the corporate aircraft is calculated based on the incremental variable cost to the Company, including fuel, aircraft maintenance expenses, flight crew travel expenses, landing fees, ground transportation fees, catering, and other miscellaneous variable expenses related to the air travel. Fixed costs, which do not change based on usage, such as lease expense, insurance, and aviation management service fees, are excluded as the Company’sCompany's aircraft is used predominantly for business purposes.
•Limited security services and costs related to an executive physical for Mr. Scott of less than $10,000. | (5) | | | | | | | | | | | | 56 | Mr. DiDonato resigned as an executive officer of the Company, effective January 15, 2023, and will continue to serve as a non-executive| employee of the Company through his retirement from the Company on September 30, 2023.
| | LEAR CORPORATION |
We have entered into employment agreements with each of our NEOs. Each employment agreement specifies the annual base salary for the executive, which may be increased at the discretion of the P&C Committee. In addition, the employment agreements specify that the executives are eligible for an annual incentive compensation bonus and participation in the Company’s long-term incentive plan. Under the terms of the employment agreements, each NEO is also eligible to participate in the welfare, retirement and other benefit plans, practices, policies and programs, as may be in effect from time to time, for senior executives of the Company generally. Under the employment agreements, if the Company reduces an executive’s base salary, adversely changes the manner of computing an executive’s incentive compensation opportunity, defers payment of his or her compensation or eliminates or substantially modifies his or her benefits, the executive would have a basis to invoke his or her rights under the agreement for termination for good reason. For a description of the severance provisions of the employment agreements, see “—“Compensation Discussion and Analysis — Potential Payments upon Termination or Change in Control.” As disclosed above, Mr. DiDonato entered into an amended and restated employment agreement in 2022 related to the DiDonato Transition (for a description of his arrangement, see “—Employment Agreements/Termination/Change in Control Benefits” above)Control” beginning on page 65. Lear Corporation Salaried Retirement Program The Lear Corporation Salaried Retirement Program (“Retirement Program”) is comprised of two components: (i) the Retirement Savings Plan (deferral and match) and (ii) the Pension Savings Plan. We established the Retirement Program pursuant to Section 401(a) of the Internal Revenue Code for eligible employees. Under the Retirement Savings Plan, each eligible employee may elect to contribute, on a pretax and/or Roth basis, a portion of his or her eligible compensation in each year. The Company provides a matching contribution of 100% of an employee’s contribution up to the first 3% of the employee’s eligible compensation, plus 50% of an employee’s contribution up to the next 3% of the employee’s eligible compensation, regardless of service. In addition, the Retirement Savings Plan allows for discretionary Company matching contributions. Company matching contributions are initially invested in accordance with the Participant’s deferral contributions and can be transferred by the participant to other funds under the Retirement Savings Plan at any time. Company matching contributions generally become vested under the Retirement Savings Plan at a rate of 20% for each full year of service. | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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| | 55 |
Under the Pension Savings Plan, we make contributions to each eligible employee’s Pension Savings Plan account based on the employee’s “points,” which are the sum total of the employee’s age and years of service as of January 1 of the plan year. Based on an employee’s points, we contribute: (i) from 3% to 8% of eligible compensation up to the Social Security Taxable Wage Base and (ii) from 4.5% to 12% of eligible compensation over the Social Security Taxable Wage Base. All Pension Savings Plan contributions are generally allocated semi-annually. Contributions Company matching contributions and Pension Savings Plan contributions generally become vested under the Pension Savings Plan at a rate of 20% for each full year of service. | | | | | | | | | | | | | 2022 Grants of Plan-Based Awards |
The following table discloses the grants of plan-based awards made to our NEOs in 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name(a) | | Type of
Award | | Grant
Date (b) | | | Estimated Possible Payouts
Under Non-Equity Incentive Plan
Awards(1) | | | Estimated Future Payouts
Under Equity Incentive Plan
Awards | | | All
Other
Stock
Awards:
Number of
Shares
of Stock
or Units
(i)(#) | | | Grant
Date
Value of
Stock
Awards(2)
(j) | | | | Threshold
(c) | | | Target
(d) | | | Maximum
(e) | | | Threshold
(f)(#) | | | Target
(g)(#) | | | Maximum
(h)(#) | | | | | | | | | | | | | | Raymond E. Scott | | Annual Incentive Award | | | — | | | $ | 975,000 | | | $ | 1,950,000 | | | $ | 3,900,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Share Award(3) | | | 1/4/2022 | | | | | | | | | | | | | | | | 17,290 | | | | 34,580 | | | | 69,160 | | | | | | | $ | 7,511,304 | | | | | | | | | | | | | | | RSU Award(4) | | | 1/4/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,820 | | | $ | 2,857,444 | | | | | | | | | | | | | | | | RSU Award
(Career Shares)(5) | | | 11/14/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,117 | | | $ | 749,999 | | | | | | | | | | | | | Jason M. Cardew | | Annual Incentive Award | | | — | | | $ | 425,000 | | | $ | 850,000 | | | $ | 1,700,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Share Award(3) | | | 1/4/2022 | | | | | | | | | | | | | | | | 4,487 | | | | 8,974 | | | | 17,948 | | | | | | | $ | 1,949,278 | | | | | | | | | | | | | | | RSU Award(4) | | | 1/4/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,846 | | | $ | 741,547 | | | | | | | | | | | | | | | | RSU Award
(Career Shares)(5) | | | 11/14/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,046 | | | $ | 299,882 | | | | | | | | | | | | | Frank C. Orsini | | Annual Incentive Award | | | — | | | $ | 425,000 | | | $ | 850,000 | | | $ | 1,700,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Share Award(3) | | | 1/4/2022 | | | | | | | | | | | | | | | | 4,487 | | | | 8,974 | | | | 17,948 | | | | | | | $ | 1,949,278 | | | | | | | | | | | | | | | RSU Award(4) | | | 1/4/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,846 | | | $ | 741,547 | | | | | | | | | | | | | | | | RSU Award
(Career Shares)(5) | | | 11/14/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,046 | | | $ | 299,882 | | | | | | | | | | | | | Thomas A. DiDonato | | Annual Incentive Award | | | — | | | $ | 360,500 | | | $ | 721,000 | | | $ | 1,442,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Share Award(3) | | | 1/4/2022 | | | | | | | | | | | | | | | | 3,730 | | | | 7,460 | | | | 14,920 | | | | | | | $ | 1,620,388 | | | | | | | | | | | | | | | RSU Award(4) | | | 1/4/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,197 | | | $ | 616,414 | | | | | | | | | | | | | Carl A. Esposito | | Annual Incentive Award | | | — | | | $ | 290,000 | | | $ | 580,000 | | | $ | 1,160,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Share Award(3) | | | 1/4/2022 | | | | | | | | | | | | | | | | 3,430 | | | | 6,861 | | | | 13,722 | | | | | | | $ | 1,490,324 | | | | | | | | | | | | | | | RSU Award(4) | | | 1/4/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,940 | | | $ | 566,861 | | | | | | | | | | | | | | | | RSU Award
(Career Shares)(5) | | | 11/14/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,705 | | | $ | 249,902 | |
(1)2024 Proxy Statement | | For the Annual Incentive Award, the threshold, target and maximum amounts represent 50%, 100% and 200%, respectively, of the total bonus opportunity for each NEO. If actual performance falls between threshold and target or between target and maximum, the award would be calculated using linear interpolation. For the Annual Incentive Award, the target bonus opportunity for the NEOs was also based on a percentage of base salary, which is 150% for Mr. Scott, 100% for Messrs. Cardew, Orsini and DiDonato, and 80% for Mr. Esposito. The Target Amount is generally the NEO’s base salary multiplied by his respective Target Opportunity.
(2) | The amounts reported in this column for 2022 reflect the aggregate value of Performance Shares, RSUs and Career Shares under the LTSIP awarded in the year. There can be no assurance that these values will ever be realized. See Note 13, “Stock-Based Compensation,” to the Company’s consolidated financial statements included in our 2022 Annual Report on Form 10-K for the assumptions made in determining values.
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(3) | See “— Performance Shares” below for an explanation regarding the vesting and distribution of the Performance Shares.
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(4) | The RSUs generally vest and are paid in shares of Lear common stock on the third anniversary of the grant date.
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(5) | See “— Career Shares” below for an explanation regarding the vesting and distribution of the Career Shares.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2023 Grants of Plan-Based Awards | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts
Under Equity Incentive Plan
Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (i) | Grant Date Value of Stock Awards(2) ($) (l) | Name (a) | Type of Award | Grant Date (b) | Threshold ($) (c) | Target ($) (d) | Maximum ($) (e) | | Threshold (#) (f) | Target (#) (g) | Maximum (#) (h) | | Raymond E. Scott | Annual Incentive Award | — | $1,040,000 | $2,080,000 | $4,160,000 | | | | | | | | Performance Share Award(3) | 1/3/2023 | | | | | 35,125 | 70,251 | 140,502 | | $9,641,916 | | RSU Award(4) | 1/3/2023 | | | | | | | | 22,701 | $2,857,375 | | | RSU Award (Career Shares)(5) | 11/13/2023 | | | | | | | | 6,639 | $849,925 | | Jason M. Cardew | Annual Incentive Award | — | $ | 425,000 | | $ | 850,000 | | $ | 1,700,000 | | | | | | | | | Performance Share Award(3) | 1/3/2023 | | | | | 9,454 | 18,908 | 37,816 | | $2,595,123 | | RSU Award(4) | 1/3/2023 | | | | | | | | 8,103 | $1,019,925 | | | RSU Award (Career Shares)(5) | 11/13/2023 | | | | | | | | 2,343 | $299,951 | | Frank C. Orsini | Annual Incentive Award | — | $ | 425,000 | | $ | 850,000 | | $ | 1,700,000 | | | | | | | | | Performance Share Award(3) | 1/3/2023 | | | | | 9,454 | 18,908 | 37,816 | | $2,595,123 | | RSU Award(4) | 1/3/2023 | | | | | | | | 8,103 | $1,019,925 | | | RSU Award (Career Shares)(5) | 11/13/2023 | | | | | | | | 2,343 | $299,951 | | Carl A. Esposito | Annual Incentive Award | — | $ | 290,000 | | $ | 580,000 | | $ | 1,160,000 | | | | | | | | | Performance Share Award(3) | 1/3/2023 | | | | | 5,644 | 11,289 | 22,578 | | $1,549,404 | | RSU Award(4) | 1/3/2023 | | | | | | | | 4,838 | $608,959 | | | RSU Award (Career Shares)(5) | 11/13/2023 | | | | | | | | 1,952 | $249,895 | | Harry A. Kemp | Annual Incentive Award | — | $ | 315,000 | | $ | 630,000 | | $ | 1,260,000 | | | | | | | | | Performance Share Award(3) | 1/3/2023 | | | | | 4,963 | 9,926 | 19,852 | | $1,362,321 | | RSU Award(4) | 1/3/2023 | | | | | | | | 4,254 | $535,451 | | | RSU Award (Career Shares)(5) | 11/13/2023 | | | | | | | | 1,952 | $249,895 |
(1)For the annual incentive award, the threshold, target and maximum amounts represent 50%, 100% and 200%, respectively, of the total bonus opportunity for each NEO. If actual performance falls between threshold and target or between target and maximum, the award would be calculated using linear interpolation. For the annual incentive award, the target bonus opportunity for the NEOs was also based on a percentage of base salary, which is 160% for Mr. Scott, 100% for Messrs. Cardew and Orsini, 80% for Mr. Esposito and 90% for Mr. Kemp. The target amount is generally the NEO’s base salary multiplied by his respective target opportunity. (2)The amounts reported in this column for 2023 reflect the aggregate value of Performance Shares, RSUs and Career Shares under the LTI awarded in the year. There can be no assurance that these values will ever be realized. See Note 13, “Stock-Based Compensation,” to the Company’s consolidated financial statements included in our 2023 Annual Report on Form 10-K for more information related to determining these values. (3)See “Performance Shares” below for an explanation regarding the vesting and distribution of the Performance Shares. (4)The RSUs generally vest and are paid in shares of Lear common stock on the third anniversary of the grant date. (5)See “Career Shares” below for an explanation regarding the vesting and distribution of the Career Shares. A summary description of the Company’s AIP is included above under the headingin “Compensation Discussion and Analysis — Elements of Compensation — Annual Incentives.Incentive Plan (AIP)” beginning on page 44.Long-Term Incentives The Performance Shares and RSUs were all granted pursuant to the LTSIP,LTI, a summary description of which is included above under the headingin “Compensation Discussion and Analysis — ElementsLong-Term Incentive (LTI) Compensation” beginning on page 46.
Payment of each Performance Share award is contingent on the Company attaining certain levels of Adjusted Annual Adjusted Pretax Income, Adjusted ROIC Improvement and Relative TSR in the 2022-20242023-2025 performance period. Two-thirds (66.7%Fifty percent (50%) of each Performance Share award can be earned based on Adjusted Annual Adjusted Pretax Income performance, twenty-five percent (25%) of each Performance Share award can be earned based on Adjusted ROIC Improvement, and one-third (33.3%twenty-five percent (25%) of each Performance Share award can be earned based on Relative TSR performance. Adjusted Annual Adjusted Pretax Income goals and performance will be set and measured annually, with final award payouts being determined based on the average of the three annual results. Adjusted ROIC Improvement goals were set for the full three-year performance period and performance will be measured annually, with final award payouts being determined based on the average of the three annual results. If threshold, target or maximum performance goals are attained in a performance period, 50%, 100% or 200% of the target amount, respectively, may be earned. If actual performance falls between threshold and maximum, the award would be calculated using linear interpolation. For a description of the effect of a termination of employment or a change in control on the vesting of Performance Shares, please see “Executive Compensation — Potential Payments Upon Termination or Change in Control.”Control” beginning on page 65. Dividend equivalents are credited with respect to Performance Shares at the same time as dividends are paid on the Company’s common stock; however, the dollar amount of these dividend equivalents is not paid unless and until the performance goals are met with respect to the underlying Performance Shares. In general, the RSUs vest and settle in shares of common stock on the third anniversary of the grant date, generally subject to the executive’s continued employment. For a description of the effect of a termination of employment or a change in control on the vesting of RSUs, please see “Executive Compensation — Potential Payments Upon Termination or Change in Control.” Dividend equivalents are accrued with respect to RSUs at the same time as dividends are paid on the Company’s common stock. However, the dollar amount of these dividend equivalents is not paid unless and until the underlying RSUs vest and are paid. In 2020 and 2021, Lear awarded stock options to its executives as part of its long-term incentive program. In general, theplan. These stock options vest over three years on each anniversary of the grant date, generally subject to the executive’s continued employment.with all options vested as of January 4, 2024. For a description of the effect of a termination of employment or a change in control on the vesting of stock options, please see “Executive Compensation — Potential Payments Upon Termination or Change in Control.” Retirement Benefits In general, the underlying shares of common stock for the vested Career Shares are not distributed until the later of (i) age 62 or (ii) the vesting date. If the executive terminates due to a Career Share “qualifying retirement” (i.e., voluntary termination at or after age 62 or the date that the executive attains a combined number of age and years of service of 65, with a minimum age of 55 and minimum service of five years), the underlying shares of common stock for the vested Career Shares are not distributed until the earlier of (i) age 62 (or such later vesting date) or (ii) three years after the executive’s qualifying retirement. If the executive has attained a combined number of age and years of service of at least 65, with a minimum age of 55 and minimum service of five years, or the executive is terminated without “cause” or resigns for “good reason,” in each case after the first anniversary of the grant date, the underlying shares of common stock for the vested Career Shares are not distributed until the later of (i) age 62 (or such later vesting date) or (ii) three years after the executive’s termination of employment.
| | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
| | |
| | 57 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding Equity Awards at December 31, 2023 | | Option Awards | | Stock Awards | Name (a) | Number of Shares Underlying Unexercised Options Exercisable (#) (b) | Number of Shares Underlying Unexercised Options Unexercisable (#) (c) | Option Exercise Price ($) (e) | Option Expiration Date (f) | | Number of Shares or Units of Stock That Have Not Vested(3) (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested(4) ($) (h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5) (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(5) ($) (j) | | Raymond E. Scott | 31,702 | | 15,850 | | 157.44 | | 1/4/2031 | (1) | 64,091 | | 9,368,705 | | 209,662 | | 30,509,251 | | | 55,409 | | — | | 140.09 | | 1/2/2030 | (2) | | | | | | Jason M. Cardew | 7,926 | | 3,962 | | 157.44 | | 1/4/2031 | (1) | 20,386 | | 2,973,144 | | 55,764 | | 8,113,053 | | | 12,468 | | — | | 140.09 | | 1/2/2030 | (2) | | | | | | Frank C. Orsini | 9,058 | | 4,529 | | 157.44 | | 1/4/2031 | (1) | 20,767 | | 3,030,227 | | 55,764 | | 8,113,053 | | | 15,832 | | — | | 140.09 | | 1/2/2030 | (2) | | | | | | Carl A. Esposito | 6,624 | | 3,311 | | 157.44 | | 1/4/2031 | (1) | 15,045 | | 2,197,136 | | 36,300 | | 5,288,199 | | | 11,577 | | — | | 140.09 | | 1/2/2030 | (2) | | | | | | Harry A. Kemp | — | | — | | — | | — | | | 11,143 | | 1,620,516 | | 30,288 | | 4,408,916 | |
(1)The stock options vest ratably over three years, starting on the first anniversary of January 4, 2021. (2)The stock options vested ratably over three years, starting on the first anniversary of January 2, 2020. (3)The figures in column (g) represent the following RSU awards granted under the LTI: | | | | | | | | | | | | | | | | | | | | | | | | | Name | Number of 2021 RSUs vesting January 4, 2024 (#) | Number of 2022 RSUs vesting January 4, 2024 (#) | Number of 2022 RSUs vesting January 4, 2025 (#) | Number of 2023 RSUs vesting January 4, 2026 (#) | Number of 2021 Career Shares Vesting November 17, 2024 (#) | Number of 2022 Career Shares Vesting November 14, 2025 (#) | Number of 2023 Career Shares Vesting November 13, 2026 (#) | | Raymond E. Scott | 10,670 | | — | | 14,820 | | 22,701 | | 4,144 | | 5,117 | | 6,639 | | | Jason M. Cardew | 2,667 | | — | | 3,846 | | 8,103 | | 1,381 | | 2,046 | | 2,343 | | | Frank C. Orsini | 3,048 | | — | | 3,846 | | 8,103 | | 1,381 | | 2,046 | | 2,343 | | | Carl A. Esposito | 2,229 | | — | | 2,940 | | 4,838 | | 1,381 | | 1,705 | | 1,952 | | | Harry A. Kemp | 978 | | 745 | | 745 | | 4,254 | | 1,105 | | 1,364 | | 1,952 | |
(4)The total values in column (h) equal the total number of RSUs held by each NEO multiplied by the market price of Company common stock at the close of the last trading day in 2023, which was $141.21 per share, plus the following accrued dividend equivalents and interest at the prime rate (which are paid if and when the underlying RSUs vest and are distributed): Mr. Scott - $318,415, Mr. Cardew - $94,437, Mr. Orsini - $97,719, Mr. Esposito - $72,632 and Mr. Kemp - $47,013. (5)The total amounts and values in columns (i) and (j) represent the total number of Performance Shares, at the maximum level for the 2023-2025 and 2022-2024 performance periods, held by each NEO multiplied by the market price of Company common stock at the close of the last trading day in 2023, which was $141.21 per share, plus the following accrued dividend equivalents and interest at the prime rate (which are paid if and when the underlying Performance Shares vest and are distributed): Mr. Scott - $902,880, Mr. Cardew - $238,619, Mr. Orsini - $238,619, Mr. Esposito - $162,276 and Mr. Kemp - $131,947. These amounts exclude Performance Shares for the 2021-2023 performance period that vested based on performance through December 31, 2023, and are reported in the 2023 Options Exercised and Stock Vested table below. | | | | | | | | | | | | | 60 | | | | 2022 Outstanding Equity Awards At Fiscal Year-EndLEAR CORPORATION |
| | | | 2023 Options Exercised and Stock Vested |
| | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized on Exercise ($) (c) | | Number of Shares Acquired on Vesting(1) (#) (d) | Value Realized on Vesting(1)(2) ($) (e) | | Raymond E. Scott | — | — | | | 71,015 | 9,909,768 | | | Jason M. Cardew | — | — | | | 20,640 | 2,891,516 | | | Frank C. Orsini | — | — | | | 26,258 | 3,680,084 | | | Carl A. Esposito | — | — | | | 34,006 | 5,042,906 | | | Harry A. Kemp | — | — | | | 11,408 | 1,589,971 | |
(1)For all NEOs, this consists of 2020 RSU awards that vested on January 2, 2023, 2020 Career Shares that vested on November 18, 2023, and Performance Shares that vested based on performance during the three-year period ended December 31, 2023 (which were paid in 2024); for Mr. Esposito, this also consists of the third tranche of his 2019 RSU award that vested on September 3, 2023; and for Mr. Kemp, this also consists of the second tranche of his 2021 RSU award that vested on January 4, 2023, and the first tranche of his 2022 RSU award that vested on January 4, 2023, in the following amounts: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of 2019 RSU Shares Acquired on Vesting (#) | 2019 RSU Value Realized on Vesting ($) | Number of 2020-2022 RSU Shares Acquired on Vesting (#) | 2020-2022 RSU Value Realized on Vesting ($) | Number of 2020 Career Shares Acquired on Vesting (#) | 2020 Career Share Value Realized on Vesting ($) | Number of 2021 Performance Shares Acquired on Vesting (#) | 2021 Performance Shares Value Realized on Vesting ($) | | Raymond E. Scott | — | | — | | 11,992 | | 1,487,248 | | 21,250 | | 2,851,538 | | 37,773 | | 4,999,257 | | | Jason M. Cardew | — | | — | | 2,698 | | 334,606 | | 8,500 | | 1,140,615 | | 9,442 | | 1,249,649 | | | Frank C. Orsini | — | | — | | 3,426 | | 424,893 | | 12,042 | | 1,615,916 | | 10,790 | | 1,428,057 | | | Carl A. Esposito | 18,299 | | 2,671,288 | | 2,505 | | 310,670 | | 5,312 | | 712,817 | | 7,890 | | 1,044,242 | | | Harry A. Kemp | — | | — | | 2,675 | | 341,115 | | 3,541 | | 475,167 | | 5,192 | | 687,161 | |
(2)For all NEOs, includes dividend equivalent payments, including interest, in the following amounts: Mr. Scott - $571,725, Mr. Cardew - $166,646, Mr. Orsini - $211,218, Mr. Esposito - $303,889 and Mr. Kemp - $86,528.
| | | | | | | | | | | | | | | | | | | 2023 Pension Benefits | Name (a) | Plan Name (b) | Number of Years Credited Service (#) (c) | Number of Years of Vesting Service(1) (#) | Present Value of Accumulated Benefit(2) ($) (d) | Payments During Last Fiscal Year ($) (e) | | Raymond E. Scott | Pension Plan (tax-qualified plan) | 18.4 | 35.4 | 493,210 | — | | | Pension Equalization Program | 18.4 | 35.4 | 535,090 | — | | | Salaried Retirement Restoration Program | 18.4 | 35.4 | 346,970 | — | | | Jason M. Cardew | Pension Plan (tax-qualified plan) | 14.5 | 31.5 | 278,298 | — | | | Pension Equalization Program | 14.5 | 31.5 | 5,322 | — | | | Salaried Retirement Restoration Program | 14.5 | 31.5 | 17,886 | — | | | Frank C. Orsini | Pension Plan (tax-qualified plan) | 12.7 | 29.7 | 239,137 | — | | | Pension Equalization Program | 12.7 | 29.7 | 74,720 | — | | | Salaried Retirement Restoration Program | 12.7 | 29.7 | 95,579 | — | | Carl A. Esposito(3) | — | — | — | — | | — | | Harry A. Kemp(3) | — | — | — | — | | — | |
(1)The following table shows outstanding equity awardspension programs were frozen with respect to any new benefits as of December 31, 2022,2006, but vesting service continues to accrue after such date towards vesting requirements. As a result of their vesting service and/or age and service, all participating NEOs are vested in their pension benefits. (2)Present values determined using a December 31, 2023 measurement date and reflect benefits accrued based on service and pay earned through such date. Figures for each NEO. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name(a) | | Number of
Shares
Underlying
Unexercised
Options (#)
Exercisable
(b) | | | Number of
Shares
Underlying
Unexercised
Options (#)
Unexercisable
(c) | | | Option
Exercise
Price
($)(d) | | | Option
Expiration
Date (e) | | | Number of
Shares or
Units of Stock
That Have Not
Vested(2) (g) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested(3)
(h) | | | Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights that
have Not
Vested(4) (i) | | | Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units or
Other Rights
that have
Not Vested(4) (j) | | | | | | | | | | | Raymond E. Scott | | | 15,851 | | | | 31,701 | | | $ | 157.44 | | | | 1/4/2031 | (1) | | | 67,993 | | | $ | 8,738,680 | | | | 133,184 | | | $ | 17,055,781 | | | | | | | | | | | | | | 36,940 | | | | 18,469 | | | $ | 140.09 | | | | 1/2/2030 | (2) | | | | | | | | | | | | | | | | | | | | | | | | | | Jason M. Cardew | | | 3,963 | | | | 7,925 | | | $ | 157.44 | | | | 1/4/2031 | (1) | | | 21,138 | | | $ | 2,715,473 | | | | 33,954 | | | $ | 4,347,619 | | | | | | | | | | | | | | 8,312 | | | | 4,156 | | | $ | 140.09 | | | | 1/2/2030 | (2) | | | | | | | | | | | | | | | | | | | | | | | | | | Frank C. Orsini | | | 4,529 | | | | 9,058 | | | $ | 157.44 | | | | 1/4/2031 | (1) | | | 25,789 | | | $ | 3,317,372 | | | | 36,240 | | | $ | 4,642,586 | | | | | | | | | | | | | | 10,555 | | | | 5,277 | | | $ | 140.09 | | | | 1/2/2030 | (2) | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas A. DiDonato | | | 3,765 | | | | 7,529 | | | $ | 157.44 | | | | 1/4/2031 | (1) | | | 16,490 | | | $ | 2,125,994 | | | | 30,124 | | | $ | 3,859,083 | | | | | | | | | | | | | | 8,774 | | | | 4,386 | | | $ | 140.09 | | | | 1/2/2030 | (2) | | | | | | | | | | | | | | | | | | | | | | | | | | Carl A. Esposito | | | 3,312 | | | | 6,623 | | | $ | 157.44 | | | | 1/4/2031 | (1) | | | 34,371 | | | $ | 4,460,944 | | | | 27,098 | | | $ | 3,470,871 | | | | | | | | | | | | | | | 7,718 | | | | 3,859 | | | $ | 140.09 | | | | 1/2/2030 | (2) | | | | | | | | | | | | | | | | |
(1) | The stock options vest ratably over three years, starting on the first anniversary of January 4, 2021.
|
(2) | The stock options vest ratably over three years, starting on the first anniversary of January 2, 2020.
|
(3) | The figures in column (g) represent the following RSU awards granted under the LTSIP, including the 2020 Performance-Based Career Shares since the award’s applicable performance goals were all met at target:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of
2020
RSUs
Vested
January 2,
2023 | | | Number of
2021
RSUs
Vesting
January 4,
2024 | | | Number of
2022
RSUs
Vesting
January 4,
2025 | | | Number of
2019 RSUs
Vesting
September 3,
2023 | | | Number of
2020
Performance-
Based Career
Shares
Vesting
November 18,
2023 | | | Number of
2021
Career
Shares
Vesting
November 17,
2024 | | | Number of
2022
Career
Shares
Vesting
November 14,
2025 | | | | | | | | | | Raymond E. Scott | | | 11,992 | | | | 10,670 | | | | 14,820 | | | | — | | | | 21,250 | | | | 4,144 | | | | 5,117 | | | | | | | | | | Jason M. Cardew | | | 2,698 | | | | 2,667 | | | | 3,846 | | | | — | | | | 8,500 | | | | 1,381 | | | | 2,046 | | | | | | | | | | Frank C. Orsini | | | 3,426 | | | | 3,048 | | | | 3,846 | | | | — | | | | 12,042 | | | | 1,381 | | | | 2,046 | | | | | | | | | | Thomas A. DiDonato | | | 2,848 | | | | 2,534 | | | | 3,197 | | | | — | | | | 7,083 | | | | 828 | | | | — | | | | | | | | | | Carl A. Esposito | | | 2,505 | | | | 2,229 | | | | 2,940 | | | | 18,299 | | | | 5,312 | | | | 1,381 | | | | 1,705 | |
(3)Messrs. Esposito and Kemp are not participants in the Pension Plan, Pension Equalization Program or Salaried Retirement Restoration Program pension make-up account (“Pension Make-Up Account”).
(4) | The total values in column (h) equal the total number of RSUs held by each NEO multiplied by the market price of Company common stock at the close of the last trading day in 2022, which was $124.02 per share, plus the following accrued dividend equivalents and interest at the prime rate (which are paid if and when the underlying RSUs vest and are paid):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 RSU
Dividend
Equivalents | | | 2020 RSU
Dividend
Equivalents | | | 2021 RSU
Dividend
Equivalents | | | 2022 RSU
Dividend
Equivalents | | | 2020
Performance-
Based Career
Share RSU
Dividend
Equivalents | | | 2021
Career
Share RSU
Dividend
Equivalents | | | 2022
Career
Share RSU
Dividend
Equivalents | | | Total RSU
Dividend
Equivalents | | | | | | | | | | | Raymond E. Scott | | $ | — | | | $ | 73,572 | | | $ | 53,474 | | | $ | 46,594 | | | $ | 112,234 | | | $ | 16,371 | | | | 3,943 | | | $ | 306,188 | | | | | | | | | | | Jason M. Cardew | | $ | — | | | $ | 16,553 | | | $ | 13,366 | | | $ | 12,092 | | | $ | 44,894 | | | $ | 5,456 | | | | 1,577 | | | $ | 93,938 | | | | | | | | | | | Frank C. Orsini | | $ | — | | | $ | 21,019 | | | $ | 15,275 | | | $ | 12,092 | | | $ | 63,601 | | | $ | 5,456 | | | | 1,577 | | | $ | 119,020 | | | | | | | | | | | Thomas A. DiDonato | | $ | — | | | $ | 17,473 | | | $ | 12,699 | | | $ | 10,051 | | | $ | 37,410 | | | $ | 3,271 | | | | — | | | $ | 80,904 | | | | | | | | | | | Carl A. Esposito | | $ | 127,645 | | | $ | 15,368 | | | $ | 11,171 | | | $ | 9,243 | | | $ | 28,056 | | | $ | 5,456 | | | | 1,314 | | | $ | 198,253 | |
(5) | The total amounts and values in columns (i) and (j) represent the total number of Performance Shares, at the maximum level for the 2022-2024 and 2021-2023 performance periods, held by each NEO multiplied by the market price of Company common stock at the close of the last trading day in 2022, which was $124.02 per share. These amounts exclude Performance Shares for the 2020-2022 performance period that vested based on performance through December 31, 2022, and are reported below in the “2022 Option Exercises and Stock Vested” table. These amounts also exclude the 2020 Performance-Based Career Shares that are no longer subject to performance goals, but which remain subject to the NEO’s continued service through November 14, 2023, subject to certain exceptions described above under “Career Shares.” In calculating the number of Performance Shares and their value, we are required by SEC rules to compare our performance through 2022 under the Performance Share grant against the threshold, target and maximum performance levels for the grant and report in these columns the applicable potential share number and payout amount. If the performance is between levels, we are required to report the potential payout at the next highest level. Based on performance through the end of the first year of the 2022-2024 performance period and the second year of the 2021-2023 performance period, we have reported the Performance Shares at the maximum award level for each of these two performance periods. Amounts also include the following accrued dividend equivalents for the Performance Shares, at the maximum level, which are not paid unless the performance goals are met with respect to the underlying Performance Shares:
|
| | | | | | | | | | | | | | | | | | | | | | | | Number of
2021
Performance
Shares
(Maximum) | | | Number of
2022
Performance
Shares
(Maximum) | | | 2021
Performance
Share
Dividend
Equivalents
(2021-2023
Awards) | | | 2022
Performance
Share
Dividend
Equivalents
(2022-2024
Awards) | | | Total
Dividend
Equivalents | | | | | | | | Raymond E. Scott | | | 64,024 | | | | 69,160 | | | $ | 320,862 | | | $ | 217,439 | | | $ | 538,301 | | | | | | | | Jason M. Cardew | | | 16,006 | | | | 17,948 | | | $ | 80,215 | | | $ | 56,429 | | | $ | 136,644 | | | | | | | | Frank C. Orsini | | | 18,292 | | | | 17,948 | | | $ | 91,672 | | | $ | 56,429 | | | $ | 148,101 | | | | | | | | Thomas A. DiDonato | | | 15,204 | | | | 14,920 | | | $ | 76,196 | | | $ | 46,909 | | | $ | 123,105 | | | | | | | | Carl A. Esposito | | | 13,376 | | | | 13,722 | | | $ | 67,035 | | | $ | 43,142 | | | $ | 110,177 | |
| | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
| | |
| | 59 |
| | 2022 Option Exercises and Stock Vested |
The following table sets forth certain information regarding stock-based awards that vested during 2022 for our NEOs. No options were exercised during 2022.
| | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name(a) | | Number of
Shares
Acquired on
Exercise
(#)(b) | | | Value
Realized on
Exercise
($)(c) | | | Number of
Shares Acquired
on Vesting
(d)(1) | | | Value
Realized on
Vesting
(e)(1)(2) | | | | | | | Raymond E. Scott | | | — | | | | — | | | | 60,482 | | | $ | 9,575,532 | | | | | | | Jason M. Cardew | | | — | | | | — | | | | 12,839 | | | $ | 1,982,983 | | | | | | | Frank C. Orsini | | | — | | | | — | | | | 17,886 | | | $ | 2,833,355 | | | | | | | Thomas A. DiDonato | | | — | | | | — | | | | 15,961 | | | $ | 2,522,175 | | | | | | | Carl A. Esposito | | | — | | | | — | | | | 27,870 | | | $ | 4,017,671 | |
(1) | For Messrs. Scott, Cardew, Orsini and DiDonato, consists of 2019 RSU awards that vested on January 2, 2022, for Mr. Esposito, consists of the second tranche of his 2019 RSU award that vested on September 3, 2022, and for all of the NEOs, consists of 2019 Career Shares that vested on November 14, 2022, and Performance Shares that vested based on performance during the three-year period ended December 31, 2022 (which were paid in 2023), in the following amounts:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of
2019
RSU
Shares
Acquired
on
Vesting | | | 2019 RSU
Value
Realized
on
Vesting | | | Number of
2019
Career
Shares
Acquired
on
Vesting | | | 2019
Career
Shares
Value
Realized
on
Vesting | | | Number of
2020
Performance
Shares
Acquired
On Vesting
(2020-2022
Awards) | | | 2020
Performance
Share Value
Realized on
Vesting
(2020-2022
Awards) | | | Total
RSU, Career
Share and
Performance
Share Value | | | | | | | | | | Raymond E. Scott | | | 16,456 | | | $ | 3,010,625 | | | | 4,093 | | | $ | 599,911 | | | | 39,933 | | | $ | 5,592,217 | | | $ | 9,202,753 | | | | | | | | | | Jason M. Cardew | | | 2,218 | | | $ | 405,783 | | | | 1,637 | | | $ | 239,935 | | | | 8,984 | | | $ | 1,258,119 | | | $ | 1,903,837 | | | | | | | | | | Frank C. Orsini | | | 4,840 | | | $ | 885,478 | | | | 1,637 | | | $ | 239,935 | | | | 11,409 | | | $ | 1,597,716 | | | $ | 2,723,129 | | | | | | | | | | Thomas A. DiDonato | | | 4,023 | | | $ | 736,008 | | | | 2,455 | | | $ | 359,829 | | | | 9,483 | | | $ | 1,327,999 | | | $ | 2,423,836 | | | | | | | | | | Carl A. Esposito | | | 18,300 | | | $ | 2,499,048 | | | | 1,227 | | | $ | 179,841 | | | | 8,343 | | | $ | 1,168,354 | | | $ | 3,847,243 | |
(2) | For all NEOs, includes dividend equivalent payments, including interest, in the following amounts:
|
| | | | | | | | | | | | | | | | | | | | 2019 RSU Dividend
Equivalents | | | 2019
Career Share
Dividend
Equivalents | | | 2020
Performance
Share Dividend
Equivalents
(2020-2022
Awards) | | | Total
Dividend
Equivalent
Payments | | | | | | | Raymond E. Scott | | $ | 101,094 | | | $ | 25,131 | | | $ | 246,554 | | | $ | 372,779 | | | | | | | Jason M. Cardew | | $ | 13,626 | | | $ | 10,051 | | | $ | 55,469 | | | $ | 79,146 | | | | | | | Frank C. Orsini | | $ | 29,733 | | | $ | 10,051 | | | $ | 70,441 | | | $ | 110,225 | | | | | | | Thomas A. DiDonato | | $ | 24,714 | | | $ | 15,075 | | | $ | 58,550 | | | $ | 98,339 | | | | | | | Carl A. Esposito | | $ | 111,383 | | | $ | 7,534 | | | $ | 51,511 | | | $ | 170,428 | |
| | | | | | | | | | | | | | | | | | | Name(a) | | Plan Name(s)(b) | | Number
of Years
Credited
Service
(c) | | | Number
of Years
of
Vesting
Service(1) | | | Present
Value of
Accumulated
Benefit(2)(d) | | | Payments
During
Last Fiscal
Year(e) | | | | | | | | Raymond E. Scott | | Pension Plan (tax-qualified plan) | | | 18.4 | | | | 34.4 | | | $ | 439,124 | | | | N/A | | | | | | | | | | Pension Equalization Program | | | 18.4 | | | | 34.4 | | | $ | 542,635 | | | | N/A | | | | | | | | | | | Salaried Retirement Restoration Program | | | 18.4 | | | | 34.4 | | | $ | 351,862 | | | | N/A | | | | | | | | Jason M. Cardew(3) | | Pension Plan (tax-qualified plan) | | | 14.5 | | | | 30.5 | | | $ | 243,199 | | | | N/A | | | | Pension Equalization Program | | | 14.5 | | | | 30.5 | | | $ | 5,317 | | | | N/A | | | | | | | | | | | Salaried Retirement Restoration Program | | | 14.5 | | | | 30.5 | | | $ | 17,867 | | | | N/A | | | | | | | | Frank C. Orsini | | Pension Plan (tax-qualified plan) | | | 12.7 | | | | 28.7 | | | $ | 207,592 | | | | N/A | | | | | | | | | | Pension Equalization Program | | | 12.7 | | | | 28.7 | | | $ | 74,189 | | | | N/A | | | | | | | | | | | Salaried Retirement Restoration Program | | | 12.7 | | | | 28.7 | | | $ | 94,900 | | | | N/A | | | | | | | | Thomas A. DiDonato(3) | | N/A | | | | | | | | | | | | | | | | | | | | | | | Carl A. Esposito(3) | | N/A | | | | | | | | | | | | | | | | |
(1) | The pension programs were frozen with respect to any new benefits as of December 31, 2006, but vesting service continues to accrue after such date towards vesting requirements. As a result of their vesting service and/or age and service, all participating NEOs are vested in their pension benefits.
|
(2) | Present values determined using a December 31, 2022 measurement date and reflect benefits accrued based on service and pay earned through such date. Figures for the tax-qualified pension plan are determined based on post-commencement valuation mortality (white collar Pri-2012 retiree mortality table with 96.9% multiplier, projected generationally using MP-2020 improvement scale, modified by using the Long-Term Improvement Rates (LTIR) based on the proxy SSA rates released by the SOA), commencement of benefits at age 65 and an assumed discount rate of 5.55% as of the measurement date (up from 3.00% as of last year’s December 31, 2021 measurement date). Figures for the Pension Equalization Program and the Salaried Retirement Restoration Program (collectively, the “SERP”) are determined based on the mortality prescribed by Revenue Ruling 2001-62, commencement of benefits at the later of age 60 and full vesting and an assumed discount rate of 5.30% as of the measurement date (up from 1.90% as of last year’s December 31, 2020 measurement date). The assumed future SERP present value conversion rate for those not yet in payment is 4.00% (up from 1.94% last year).
|
(3) | Messrs. DiDonato and Esposito are not participants in the Pension Plan, Pension Equalization Program or Salaried Retirement Restoration Program pension make-up account (“Pension Make-Up Account”).
|
Qualified Pension Plan The NEOs (as well as other eligible employees), other than Messrs. DiDonatoEsposito and Esposito,Kemp, participate in the Lear Corporation Pension Plan (the “Pension Plan”), which was frozen with respect to any new benefits as of December 31, 2006. The Pension Plan is intended to be a qualified pension plan under the Internal Revenue Code, and its benefits are integrated with Social Security benefits. In general, an eligible employee became a participant on July 1st or January 1st after completing one year of service (as defined in the plan). Benefits are funded by employer contributions that are determined under accepted actuarial principles and the Internal Revenue Code. The Company may make contributions in excess of any minimum funding requirements when the Company believes it is financially advantageous to do so and based on its other capital requirements and other considerations. The Pension Plan contains multiple benefit formulas. Under the principal formula, which applies to all applicable NEOs, pension benefits are based on a participant’s “final average pay,” which is the average of the participant’s compensation for the five calendar years in the last ten years of employment in which the participant had the highest earnings. Compensation is generally defined under the plan to mean (i) all cash compensation reported for federal income tax purposes other than long-term incentive bonuses, and (ii) any elective contributions that are not includable in gross income under Internal Revenue Code Section 125 or 401(k). A participant’s annual retirement benefit, payable as a life annuity at age 65, equals the greater of: •(a) 1.10% times final average annual earnings times years of credited service before 1997 (to a maximum of 35 years), plus (b) 1.00% times final average annual earnings times | | | | | | | | | | | | | | | | | | | | | • 2023 Proxy Statement | | |
| | 61 |
• | | years of credited service after 1996 (with a maximum of 35 years reduced by years of credited service before 1997), plus (c) 0.65% times final average annual earnings in excess of covered compensation (as defined in IRS Notice 89-70) times years of credited service (with a maximum of 35 years); and |
$360.00 times years of credited service.
Any employee who on December 31, 1996, was an active participant and age 50 or older earned benefits under the 1.10% formula for years of credited service through 2001. Mr. Scott is currently eligible for early retirement as defined under the Pension Plan. A participant who has attained age 55 and has 10 years of service is deemed eligible for early retirement and may commence receipt of his or her annual retirement benefit (calculated in accordance with the above) prior to reaching age 65, but such benefit will be reduced to account for payment over a longer period. Credited service under the Pension Plan includes all years of pension service under the Lear Siegler Seating Corp. Pension Plan, and a participant’s retirement benefit under the Pension Plan is reduced by his or her benefit under the Lear Siegler Seating Corp. Pension Plan. The benefits under the Pension Plan became vested once the participant accrued five years of vesting service under the plan. Service performed after December 31, 2006, continued to count towards vesting credit even though no additional benefits accrued under the plan after that date. All remaining Pension Plan participants are 100% vested. Pension Equalization Program The Pension Equalization Program, which was frozen as to anyfor new benefits as of December 31, 2006, provides benefits in addition to the Pension Plan. The Pension Plan is subject to rules in the Internal Revenue Code that restrict the level of retirement income that can be provided to, and the amount of compensation that can be considered for, highly paid executives under the Pension Plan. The Pension Equalization Program is intended to supplement the benefits under the Pension Plan for certain highly paid executives whose Pension Plan benefits are limited by those Internal Revenue Code limits. A participant’s Pension Equalization Program benefit equals the difference between the executive’s actual vested accrued Pension Plan benefit and the Pension Plan benefit the executive would have accrued under the Company’s formula if the Internal Revenue Code limits on considered cash compensation and total benefits did not apply. Highly compensated executives and other employees whose compensation exceeds the Internal Revenue Code limits for at least three years are eligible to participate in the Pension Equalization Program. Each of theThe NEOs, other than Messrs. DiDonatoEsposito and Esposito,Kemp, participated in the Pension Equalization Program. The benefits under the Pension Equalization Program become vested once the participant has either (i) attained age 55 and has 10 years of vesting service, attained age 65, or becomes eligible for disability retirement under the Pension Plan, or (ii) attained 20 years of vesting service. Vesting service will continue to accrue after December 31, 2006. On December 18, 2007, the Pension Equalization Program was amended to provide for its termination and the wind down of the Company’s obligations pursuant thereto. All distributions will be completed within five years after the last participant vests or turns age 60, whichever is later. For an active participant who is eligible to receive benefits, amounts that would otherwise be payable will be used to fund a third-party annuity or other investment vehicle. In such event, the participant will not receive any cash payments until the participant retires or otherwise terminates employment with the Company. Lear Corporation Salaried Retirement Restoration Program We have established the Lear Corporation Salaried Retirement Restoration Program, which was previously named the Lear Corporation PSP Excess Plan and before that, the Lear Corporation Executive Supplemental Savings Plan. The Salaried Retirement Restoration Program has both defined benefit and defined contribution elements. The defined benefit element has been quantified and described in the 20222023 Pension Benefits table and in the narrative below. The 20222023 Nonqualified Deferred Compensation table below identifies the defined contribution components of the Salaried Retirement Restoration Program. The Salaried Retirement Restoration Program was most recently amended and restated effective December 29, 2017. The amended and restated plan provides greater flexibility to participants to determine distribution dates for their deferrals, permits participants to defer up to 75% of base salary and up to 90% of their AIP awards and allows participants to modify distribution dates. Defined Benefit Element The Salaried Retirement Restoration Program (through a Pension Make-up Account) provides retirement benefits that would have been accrued through December 31, 2006, under the Pension Plan and/or the Pension Equalization Program if the participant had not elected to defer compensation under the Salaried Retirement Restoration Program as from time to time was in effect.
Defined Contribution Element In 2022,2023, the defined contribution component of the Salaried Retirement Restoration Program generally provided a defined contribution benefit of an amount that the participant would have received under the Pension Savings Plan but could not receive due to Internal Revenue Code limits applicable to the Pension Savings Plan, as well as the opportunity to make deferrals of salary and bonus and to receive Company matching contributions above Internal
Revenue Code limits. Participants generally become vested in excess Pension Savings Plan and Company matching contributions under the Salaried Retirement Restoration Program after three years of vesting service. Distributions of the excess Pension Savings Plan contributions, deferral contributions and Company matching contributions are made in accordance with the participant’s deferral election. Plan earnings under the excess Pension Savings Plan contributions, deferral contributions and Company matching contributions are generally tied to rates of return on investments available under the qualified Retirement Program generally, as directed by plan participants.
| | | | | | | | | | | | | | | | | | | | | | | | | 2022 Nonqualified Deferred Compensation | | | | | | | | | Name(a) | | Plan Name | | Executive
Contributions
in Last FY(b) | | | Company
Contributions
in Last
FY(1)(c) | | | Aggregate
Earnings
in Last
FY(d)(2) | | | Aggregate
Withdrawals/
Distributions(e)(3) | | | Aggregate
Balance at
Last FYE(f)(4) | | Raymond E. Scott | | Salaried Retirement Restoration Program | | $ | 190,650 | | | $ | 477,908 | | | $ | (1,363,352 | ) | | $ | — | | | $ | 6,809,388 | | | | Vested Career Shares | | $ | — | | | $ | 625,042 | | | $ | (1,153,500 | ) | | $ | — | | | $ | 3,253,848 | | Jason M. Cardew | | Salaried Retirement Restoration Program | | $ | 99,010 | | | $ | 225,897 | | | $ | (415,014 | ) | | $ | — | | | $ | 2,424,363 | | | | Vested Career Shares | | $ | — | | | $ | 249,986 | | | $ | (436,426 | ) | | $ | — | | | $ | 1,245,336 | | Frank C. Orsini | | Salaried Retirement Restoration Program | | $ | 99,010 | | | $ | 201,880 | | | $ | (694,445 | ) | | $ | — | | | $ | 3,674,163 | | | | Vested Career Shares | | $ | — | | | $ | 249,986 | | | $ | (649,194 | ) | | $ | — | | | $ | 1,785,633 | | Thomas A. DiDonato | | Salaried Retirement Restoration Program | | $ | 86,520 | | | $ | 170,655 | | | $ | (647,791 | ) | | $ | — | | | $ | 2,451,608 | | | | Vested Career Shares(5) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Carl A. Esposito | | Salaried Retirement Restoration Program | | $ | 1,030,563 | | | $ | 123,668 | | | $ | (415,326 | ) | | $ | — | | | $ | 2,965,269 | | | | | Vested Career Shares | | $ | — | | | $ | 187,375 | | | $ | (26,643 | ) | | $ | — | | | $ | 160,732 | |
(1) | Salaried Retirement Restoration Program amounts are included in column (i) of the 2022 Summary Compensation Table. For Vested Career Shares, amounts represent the value of the Vested Career Shares (and accrued dividend equivalents) on November 14, 2022, the vesting date.
|
(2) | For Vested Career Shares, amounts represent accrued dividend equivalents plus stock price appreciation or depreciation.
|
(3) | For Vested Career Shares, amounts reflect the closing price of the Company’s common stock on the last trading day in 2022, which was $124.02, and accrued dividend equivalents (see the 2022 Options Exercised and Stock Vested table for more information).
|
(4) | All amounts reflected in this table are vested.
|
(5) | Because Mr. DiDonato is over the age of 62, the shares of the Company’s common stock underlying the Career Shares that vested on November 14, 2022, were distributed to him immediately upon vesting.
|
| | | | | | | | | | | | | | | | | | | | | | 2023 Nonqualified Deferred Compensation | Name (a) | Plan Name | Executive Contributions in Last FY ($) (b) | Company Contributions in Last FY(1) ($) (c) | Aggregate Earnings in Last FY(2) ($) (d) | Aggregate Withdrawals/ Distributions ($) (e) | Aggregate Balance at Last FYE(3)(4) ($) (f) | | Raymond E. Scott | Salaried Retirement Restoration Program | 223,080 | | 563,562 | | 1,289,460 | | — | | 8,885,490 | | | Vested Career Shares | — | | 3,021,983 | | 673,978 | | — | | 6,949,809 | | | Jason M. Cardew | Salaried Retirement Restoration Program | 114,240 | | 264,252 | | 438,180 | | — | | 3,241,035 | | | Vested Career Shares | — | | 1,208,793 | | 260,416 | | — | | 2,714,545 | | | Frank C. Orsini | Salaried Retirement Restoration Program | 114,240 | | 236,493 | | 668,704 | | — | | 4,693,600 | | | Vested Career Shares | — | | 1,712,504 | | 372,145 | | — | | 3,870,282 | | | Carl A. Esposito | Salaried Retirement Restoration Program | 1,009,780 | | 133,704 | | 597,686 | | — | | 4,706,439 | | | Vested Career Shares | — | | 755,424 | | 67,706 | | — | | 983,862 | | | Harry A. Kemp | Salaried Retirement Restoration Program | 44,924 | | 139,929 | | 149,326 | | — | | 1,268,425 | | | | Vested Career Shares | — | | 503,569 | | 53,705 | | — | | 718,006 | |
(1)Salaried Retirement Restoration Program amounts are included in column (i) of the Summary Compensation Table. For Vested Career Shares, amounts reflect the value of the Vested Career Shares (and accrued dividend equivalents) on November 18, 2023, the vesting date. (2)For Vested Career Shares, amounts reflect accrued dividend equivalents plus stock price appreciation or depreciation. (3)For Vested Career Shares, amounts reflect the closing price of the Company’s common stock on the last trading day in 2023, which was $141.21, and accrued dividend equivalents and interest on these awards. (4)All amounts reflected in this table are vested. Salaried Retirement Restoration Program The defined contribution element of the Salaried Retirement Restoration Program is described in the narrative accompanying the 20222023 Pension Benefits table above and is quantified in the 20222023 Nonqualified Deferred Compensation table. Vested Career Shares We have included the Vested Career Shares are included in the 20222023 Nonqualified Deferred Compensation table because theysuch awards vested in a previous year(s)years but distribution of the underlying
shares of common stock is deferred, as described above in the narrative on the Career Shares program accompanying the 20222023 Grants of Plan-Based Awards table. table above.
| | | | | | | | | | | | | | 64 | | | | | | | | 2023 Proxy Statement
| | | | | 63 LEAR CORPORATION |
Potential Payments Upon Termination or Change in Control The table below shows estimates of the compensation payable to each of our NEOs upon their termination of employment with the Company. The amount payable is shown for each of six categories of termination triggers. All amounts are calculated as if the executive terminated effective December 31, 2022.2023. Values of accelerated equity awards are based on the closing price of ourthe Company's common stock on the last trading day of the year, December 30, 2022,in 2023, which was $124.02. $141.21. The actual amounts due to any one of the NEOs upon termination of employment can only be determined at the time, and depending on the circumstances, of the termination. There can be no assurance that a termination or change in control would produce the same or similar results as those described below if it occurs on any other date or at any other stock price, or if any assumption is not, in fact, correct.
Accrued amounts under the Company’s pension and deferred compensation plans are not included in this table. For these amounts, see the 20222023 Pension Benefits table above and the 20222023 Nonqualified Deferred Compensation table above. | | | | | | | | | | | | | | | | | NEO and Triggering Event | | Cash Severance(1) | | | Continuation of
Medical/Welfare
Benefits (Present
Value)(2) | | | Accelerated
Vesting or
Payout of
Equity
Awards(3) | | | Total
Termination
Benefits | | | | | | | Raymond E. Scott | | | | | | | | | | | | | | | | | | | | | | • Involuntary Termination without Cause (or for Good Reason) With Change in Control | | $ | 6,500,000 | | | $ | 32,812 | | | $ | 17,266,570 | | | $ | 23,799,382 | | | | | | | • Involuntary Termination without Cause (or for Good Reason) | | $ | 6,500,000 | | | $ | 32,812 | | | $ | 12,319,482 | | | $ | 18,852,294 | | | | | | | • Retirement(4) | | $ | — | | | $ | — | | | $ | 10,434,912 | | | $ | 10,434,912 | | | | | | | • Voluntary Termination (or Involuntary Termination for Cause) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | • Disability or Death(5) | | $ | — | | | $ | — | | | $ | 12,958,035 | | | $ | 12,958,035 | | | | | | | Jason M. Cardew | | | | | | | | | | | | | | | | | | | | | | • Involuntary Termination without Cause (or for Good Reason) With Change in Control | | $ | 3,400,000 | | | $ | 29,621 | | | $ | 4,889,282 | | | $ | 8,318,903 | | | | | | | • Involuntary Termination without Cause (or for Good Reason) | | $ | 3,400,000 | | | $ | 29,621 | | | $ | 3,528,883 | | | $ | 6,958,504 | | | | | | | • Retirement | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | | • Voluntary Termination (or Involuntary Termination for Cause) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | • Disability or Death(5) | | $ | — | | | $ | — | | | $ | 3,784,205 | | | $ | 3,784,205 | | | | | | | Frank C. Orsini | | | | | | | | | | | | | | | | | | | | | | • Involuntary Termination without Cause (or for Good Reason) With Change in Control | | $ | 3,400,000 | | | $ | 29,621 | | | $ | 5,638,665 | | | $ | 9,068,286 | | | | | | | • Involuntary Termination without Cause (or for Good Reason) | | $ | 3,400,000 | | | $ | 29,621 | | | $ | 4,229,105 | | | $ | 7,658,726 | | | | | | | • Retirement | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | | • Voluntary Termination (or Involuntary Termination for Cause) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | • Disability or Death(5) | | $ | — | | | $ | — | | | $ | 4,484,427 | | | $ | 4,484,427 | | | | | | | Thomas A. DiDonato | | | | | | | | | | | | | | | | | | | | | | • Involuntary Termination without Cause (or for Good Reason) With Change in Control | | $ | 2,884,000 | | | $ | 36,482 | | | $ | 4,055,536 | | | $ | 6,976,018 | | | | | | | • Involuntary Termination without Cause (or for Good Reason) | | $ | 2,884,000 | | | $ | 36,482 | | | $ | 3,096,052 | | �� | $ | 6,016,534 | | | | | | | • Retirement(4) | | $ | — | | | $ | — | | | $ | 2,689,509 | | | $ | 2,689,509 | | | | | | | • Voluntary Termination (or Involuntary Termination for Cause) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | • Disability or Death(5) | | $ | — | | | $ | — | | | $ | 3,096,052 | | | $ | 3,096,052 | | | | | | | Carl A. Esposito | | | | | | | | | | | | | | | | | | | | | | • Involuntary Termination without Cause (or for Good Reason) With Change in Control | | $ | 2,610,000 | | | $ | 29,621 | | | $ | 6,196,380 | | | $ | 8,836,001 | | | | | | | • Involuntary Termination without Cause (or for Good Reason) | | $ | 2,610,000 | | | $ | 29,621 | | | $ | 5,114,097 | | | $ | 7,753,718 | | | | | | | • Retirement | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | | • Voluntary Termination (or Involuntary Termination for Cause) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | • Disability or Death(5) | | $ | — | | | $ | — | | | $ | 5,326,865 | | | $ | 5,326,865 | |
| | | | | | | | | | | | | | | | NEO and Triggering Event | Cash Severance(1) ($) | Continuation of Medical/ Welfare Benefits (Present Value)(2) ($) | Accelerated Vesting or Payout of Equity Awards ($) | Total Termination Benefits ($) | | Raymond E. Scott | | Involuntary Termination without Cause (or for Good Reason) With Change in Control | 6,760,000 | | 99,907 | | 24,685,388 | | 31,545,295 | | | Involuntary Termination without Cause (or for Good Reason) | 6,760,000 | | 99,907 | | 14,554,043 | | 21,413,950 | | Retirement(3) | — | | 67,024 | | 8,598,284 | | 8,665,308 | | | Voluntary Termination (or Involuntary Termination for Cause) | — | | — | | — | | — | | Disability(4) | — | | 67,024 | | 16,219,226 | | 16,286,250 | | Death(5) | — | | — | | 16,219,226 | | 16,219,226 | | | Jason M. Cardew | | Involuntary Termination without Cause (or for Good Reason) With Change in Control | 3,400,000 | | 29,682 | | 7,043,636 | | 10,473,318 | | | Involuntary Termination without Cause (or for Good Reason) | 3,400,000 | | 29,682 | | 4,159,630 | | 7,589,312 | | | Retirement | N/A | N/A | N/A | N/A | | Voluntary Termination (or Involuntary Termination for Cause) | — | | — | | — | | — | | Disability or Death(5) | — | | — | | 4,781,207 | | 4,781,207 | | | Frank C. Orsini | | Involuntary Termination without Cause (or for Good Reason) With Change in Control | 3,400,000 | | 29,682 | | 7,104,487 | | 10,534,169 | | | Involuntary Termination without Cause (or for Good Reason) | 3,400,000 | | 29,682 | | 4,220,480 | | 7,650,162 | | | Retirement | N/A | N/A | N/A | N/A | | Voluntary Termination (or Involuntary Termination for Cause) | — | | — | | — | | — | | Disability or Death(5) | — | | — | | 4,842,058 | | 4,842,058 | | | Carl. A Esposito | | Involuntary Termination without Cause (or for Good Reason) With Change in Control | 2,610,000 | | 32,883 | | 4,854,202 | | 7,497,085 | | | Involuntary Termination without Cause (or for Good Reason) | 2,610,000 | | 32,883 | | 2,911,576 | | 5,554,459 | | | Retirement | N/A | N/A | N/A | N/A | | Voluntary Termination (or Involuntary Termination for Cause) | — | | — | | — | | — | | Disability or Death(5) | — | | — | | 3,429,486 | | 3,429,486 | | | Harry A. Kemp | | Involuntary Termination without Cause (or for Good Reason) With Change in Control | 2,660,000 | | 28,402 | | 3,824,972 | | 6,513,374 | | | Involuntary Termination without Cause (or for Good Reason) | 2,660,000 | | 28,402 | | 2,142,455 | | 4,830,857 | | | Retirement | N/A | N/A | N/A | N/A | | Voluntary Termination (or Involuntary Termination for Cause) | — | | — | | — | | — | | Disability or Death(5) | — | | — | | 2,612,212 | | 2,612,212 | |
(1)Cash severance (in an amount equal to two times the sum of base salary plus target annual incentive bonus amount) is paid in a lump sum to each NEO on the date that is six months after the date of termination, consistent with the requirements of Section 409A of the Internal Revenue Code. In addition to the amounts shown in the table, the executive would receive any accrued salary, bonus and all other amounts to which he is entitled under the terms of any compensation or benefit plans of the Company upon termination for any reason and would receive a pro-rated bonus based on actual performance in the event of termination without “cause” or for “good reason.” (2)Consists of continuation of health insurance, life insurance premium, imputed income amounts, and for Mr. Scott, the value of his Retiree Health Reimbursement Account, which totals $67,024.
| (1) | | | | | | | | | | | | 2024 Proxy Statement | | Cash severance (in an amount equal to two times the sum of base salary plus target annual incentive bonus amount) is paid in a lump sum to each NEO on the date that is six months after the date of termination (other than Mr. DiDonato, who would receive cash severance payments in installments over 24 months), consistent with the requirements of Section 409A of the Internal Revenue Code. In addition to the amounts shown in the table, the executive would receive any accrued salary, bonus and all other amounts to which he is entitled under the terms of any compensation or benefit plans of the Company upon termination for any reason, and would receive a
pro-rated| bonus based on actual performance in the event of termination without “cause” or for “good reason.” | 65 |
| (2) | | | | | | EXECUTIVE COMPENSATION | | Consists of continuation of health insurance, life insurance premium and imputed income amounts.
(3) | Represents accelerated or pro rata (as applicable) vesting of RSUs and stock options and payout of Performance Shares (at target level) and any associated dividend equivalents with interest. Unvested Career Shares become vested and the underlying shares are immediately distributed (along with those for vested Career Shares) upon the executive’s (i) death, (ii) disability or (iii) involuntary “without cause” or “good reason” termination of employment within 24 months following a change in control. Payments under any of the plans of the Company that are determined to be deferred compensation subject to Section 409A of the Internal Revenue Code are delayed by six months to the extent required by such provision. Accelerated and pro rata portions of the RSUs, stock options and Performance Shares are valued based on the December 31, 2022, closing price of the Company’s common stock.
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(4) | As of December 31, 2022, Messrs. Scott and DiDonato were retirement-eligible, and therefore, qualify for accelerated vesting of certain incentive awards upon retirement. The Company does not provide for enhanced early retirement benefits under its pension programs.
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(5) | Messrs. Scott, Cardew and Orsini are fully vested in their pension benefits, and as such, there would be no pension vesting enhancement with respect to death benefits for them. Messrs. DiDonato and Esposito do not participate in the Pension Plan, and as such, they are not eligible for such death benefit.
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(3)As of December 31, 2023, Mr. Scott is retirement-eligible, and therefore, qualifies for accelerated vesting of certain incentive awards upon retirement. The Company does not provide for enhanced early retirement benefits under its pension programs. (4)Mr. Scott is retirement eligible, and therefore, qualifies for coverage under the Executive Retiree Health Reimbursement Plan with respect to disability benefits. (5)Messrs. Scott, Cardew and Orsini are fully vested in their pension benefits, and as such, there would be no pension vesting enhancement with respect to death benefits. Messrs. Esposito and Kemp do not participate in the Pension Plan, and as such, are not eligible for such death benefits.
Executive Retiree Health Reimbursement Account Plan The Executive Retiree Health Reimbursement Plan (Retiree HRA) was adopted effective January 1, 2023, to provide a limited class of eligible retirees the means to obtain reimbursement of eligible health care expenses incurred by the eligible retiree, subject to an annual indexed maximum of $10,000. Benefits, if any, are provided by the Company out of its general assets. Termination or Change in Control Payments and benefits to a NEO upon termination or a change in control of the Company are determined according to the terms of his or her employment agreement and equity or incentive awards and the Company’s compensation and incentive plans. The severance benefit payments shown in the table and discussed below are generally available to our executive officers, including the NEO,NEOs, who currently have employment agreements with the Company. The amounts due to an executive upon his or her termination of employment depend largely on the circumstances of his or her termination, as described below. Change in Control The employment agreements do not provide benefits solely upon a change in control. The LTSIPLTI provides for accelerated vesting or payout of awards immediately upon a “change in control” (as defined in the LTSIP)LTI) only if the successor company does not agree to assume or replace such existing awards with an equivalent award upon the change in control. Otherwise, awards will only receive accelerated vesting if a change in control occurs and the executive is terminated by the Company without “cause” (as defined in the LTSIP)LTI) or resigns for “good reason” (as defined in the executive’s employment agreement, if applicable) within 24 months of such change in control. Payments Made Upon Involuntary Termination (or for “Good Reason”) with a Change in Control If a change in control occurs, the awards are assumed or replaced with equivalent awards, and the NEO is terminated by the Company without “cause” (as defined in the LTSIP)LTI) or resigns for “good reason” (as defined in the NEO’s employment agreement) within 24 months of such change in control, the NEO will receive accelerated vesting with respect to outstanding and unvested equity awards, as disclosed in the table above. Unvested Performance Shares will vest at target, any unvested RSUs (other than Career Shares) and unvested stock options that were granted less than 12 months prior to the NEO’s termination of employment will vest on a pro rata basis. Vested stock options will remain exercisable for 60 days post-termination. None of our NEOs is a party to an employment agreement containing a provision which would reimburse the executive for any excise taxes he becomesthey become subject to under Section 4999 of the Internal Revenue Code upon a change in control. Instead, the employment agreements for each of our NEOs contains a provision that reduces their change in control benefits below the level at which an excise tax is triggered, but only if the reduction results in greater after-tax proceeds to the executive. | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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Payments Made Upon Involuntary Termination (or for “Good Reason”) Upon termination of employment by the executive for “good reason” (as defined in the employment agreements) or by the Company other than for “cause” or “incapacity” (each as defined in the employment agreement), the executive will receive base salary (at the higher of the rate in effect upon termination or the rate in effect 90 days prior to termination) through the date of termination, plus all other amounts owed under any compensation or benefit plans, including a bonus pro-rated for the portion of the performance period occurring prior to the date of termination. If the executive executes a release relating to his or her employment, he or she will also receive a lump sum payment equal to two times the sum of his or her annual base salary rate and annual target bonus amount, each as in effect as of the termination date. In the event of an involuntary termination for any reason other than cause, or by the executive for good reason, the award agreements under the LTSIPLTI provide that (i) all unvested RSUs (other than Career Shares) and stock options that were granted at least 12 months prior to the termination of employment become vested in their entirety, (ii) all unvested RSUs (other than Career Shares) and stock options that were granted less than 12 months prior to the termination of employment vest on a pro rata basis, and (iii) a pro rata amount of Performance Shares may be earned
through the termination date if actual performance during the performance period meets the pre-established performance requirements. Each NEO’s employment agreement provides more favorable treatment than items (i) and (ii) in the foregoing sentence, and instead, any unvested awards that vest based on the passage of time would immediately vest in their entirety upon a termination by the NEO for good reason or by the Company for incapacity or other than for cause. In addition, executives would receive all dividend equivalents with interest associated with the accelerated RSUs and any Performance Shares earned at the time of vesting. Vested stock options will remain exercisable for 60 days post-termination. Payments Made Upon Retirement The employment agreements do not distinguish between retirement and voluntary termination for other reasons, but under the LTSIP,LTI, an executive who retires with a combined number of age and years of service of at least 65, with a minimum age of 55 and minimum service of five years when he or she terminates, is entitled to additional vesting credit for RSU and stock option awards. The executive will be entitled to receive the shares underlying the RSUs and will be entitled to exercise the portion of any stock option, in each case, that would have vested if the date of termination had been 24 months later than it actually occurred. A pro rata amount of Performance Shares may be earned through the retirement date if actual performance during the performance period meets the pre-established performance requirements. In addition, executives would receive all dividend equivalents with interest associated with the accelerated RSUs and any Performance Shares earned at the time of vesting. Each vested stock option will remain exercisable until its normal expiration date. Payments Made Upon Voluntary Termination (or for “Cause”) An executive who voluntarily resigns or whose employment is terminated by the Company for “cause” (as defined in the employment agreement) will receive unpaid salary and benefits, if any, he or she has accrued through the effective date of his or her termination. If an executive terminates voluntarily and has not attained a combined number of age and years of service of at least 65, with a minimum age of 55 and minimum service of five years, he or she will be entitled to receive all of the shares underlying his or her vested RSUs and associated dividend equivalents with interest and will be entitled to exercise any then-vested stock options for 60 days post-termination, but all unvested RSUs and Performance Shares and any associated dividend equivalents with interest, and any unvested stock options, will be forfeited. If an executive is terminated for cause, he or she will forfeit all RSUs, stock options, and Performance Shares along with any associated dividend equivalents with interest (if applicable). Payments Made Upon Termination for Disability Following termination of the executive’s employment for disability, the executive will receive all base salary and other accrued amounts then payable through the date of termination. The executive will also receive compensation payable under the Company’s disability and medical plans. In the event of the executive’s termination for disability, all unvested RSUs and stock options become vested in their entirety upon termination and a pro rata amount of Performance Shares may be earned through the termination date if actual performance during the performance period
meets the pre-established performance requirements. In addition, executives would receive all dividend equivalents with interest associated with the accelerated RSUs and any Performance Shares earned at the time of distribution. Each vested stock option will remain exercisable until 12 months following the termination of employment. Treatment of Career Shares All Career Shares (vested and unvested) are forfeited by the executive upon a voluntary termination by the executive prior to the Career Share qualifying retirement date (i.e., age 62 or the date that the executive attains a combined number of age and years of service of 65, with a minimum age of 55 and minimum service of five years) or for violating non-competition and non-solicitation covenants prior to distribution of the shares. If the executive has a Career Share qualifying retirement or is terminated without “cause” or resigns for “good reason,” in each case within 24 months of the vesting date, any Career Shares will continue to vest as originally scheduled, subject to achievement of any applicable performance goals for the Performance-Based Career Shares. In general, the underlying shares of common stock for the vested Career Shares are not distributed until the later of (i) age 62 or (ii) the vesting date. If the executive terminates due to a qualifying retirement, the underlying shares of common stock for the vested Career Shares are not distributed until the earlier of (i) age 62 (or such later vesting date) or (ii) three years after the executive’s qualifying retirement. If the executive has attained a combined number of age and years of service of at least 65, with a minimum age of 55 and minimum service of five years, and the executive is terminated without “cause” or resigns for “good reason,” the underlying shares of common stock for the vested RSUs are not distributed until the earlier of (i) age 62 (or such later vesting date) or (ii) three years after the executive’s termination of employment. Unvested Career Shares become vested (subject to achievement of any applicable performance goals) and the underlying shares are immediately distributed (along with those for vested Career Shares) upon the executive’s (i)
death, (ii) disability or (iii) involuntary or “good reason” termination of employment within 24 months following a change in control. The Career Shares do not automatically vest nor are the underlying shares distributed upon a change in control unless the successor company does not assume or replace the awards with awards of equivalent terms and value. Following the death of the executive, we will pay to his or her estate or designated beneficiary a pro rata portion of any bonus earned prior to the date of death. In the event of the executive’s death, all unvested RSUs and stock options become vested in their entirety and a pro rata amount of Performance Shares may be earned through the date of death if actual performance during the performance period meets the pre-established performance requirements. In addition, the estate or designated beneficiary would receive all dividend equivalents with interest associated with the accelerated RSUs and any Performance Shares earned at the time of vesting. Each vested stock option will remain exercisable untilfor 12 months following the termination of employment. Conditions and Obligations of the Executive Each executive who has entered into an employment agreement with the Company is obligated to: • | | •comply with confidentiality, non-competition and non-solicitation covenants during employment; •comply with non-competition and non-solicitation covenants for one year after the date of termination (extended to two years in the case of termination upon disability, termination by the Company without “cause” or by the executive for “good reason”); •non-competition and non-solicitation covenants during employment; |
• | | comply with non-competition and non-solicitation covenants for one year after the date of termination (extended to two years in the case of termination upon disability, termination by the Company without “cause” or by the executive for “good reason”); |
in order to receive severance payments due under the employment agreement, sign a general release relating to his or her employment (applies only in the case of termination by the Company without “cause” or by the executive for “good reason”); | | relating to his or her employment (applies only in the case of termination by the Company without “cause” or by the executive for “good reason”);
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•return data and materials relating to the business of the Company in his or her possession; •make himself or herself reasonably available to the Company to respond to periodic requests for information regarding the Company or his or her employment; and •cooperate with litigation matters or investigations as the Company deems necessary. | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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Compensation and Risk
We have conducted a risk assessment of our employee compensation policies and practices, including our executive compensation programs and measures. The risk assessment was conducted by senior leaders of the Company, including representatives from finance, legal and human resources, and included a review of the employee compensation structures and pay administration practices. The P&C Committee and its independent compensation consultant reviewed and discussed the findings of the assessment and concluded that our employee compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and do not incent executives or other employees to take unnecessary or excessive risks. As a result, we believe that risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. In reaching these conclusions, we considered the attributes of all of our programs, including:
Appropriate compensation mix between fixed (base salary) and variable (annual and long-term incentive) pay opportunities;
Review of market data and competitive practices for elements of executive compensation;
Performance measures that are tied to key Company short and long-term performance measures and are correlated to total stockholder returns;
Alignment of annual and long-term award objectives to ensure that both types of awards encourage consistent behaviors and sustainable performance results;
Balanced mix of performance measures for incentive awards (Adjusted Operating Income, Free Cash Flow, Annual Adjusted Pretax Income, Relative TSR) that encourage value creation, retention and stock price appreciation; and
Long history of pay outcomes aligning to our performance with incentive opportunities and payouts varying commensurate with our financial and TSR performance results.
We also reviewed our compensation programs for certain design features that may have the potential to encourage excessive risk-taking, including: over-weighting towards annual incentives, highly leveraged payout curves, unreasonable performance thresholds and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds. We concluded that our compensation programs do not include such elements.
CEO Pay Ratio As required by Section 953(b) ofUnder the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K,we are providingrequired to disclose the following information about the relationshipmedian of the annual total compensation of ourall employees, and the annual total compensation of our principal executive officer, Raymond E. Scott, and the ratio of these two amounts. Lear's global employee population is approximately 186,600 employees, with 11,600 employees located in the United States and 175,000 employees located in countries outside the United States.
For 2023, we used the following methodology to identify our Presidentmedian employee: •Calculated annualized base salaries (our consistently applied compensation measure) as of October 1, 2023, for all employees, excluding the CEO; •Identified the middle 51 employees using annualized base salaries converted to U.S. dollars as a consistently applied compensation measure; •Calculated annual total compensation for the 51 middle employees using the same SEC requirements used to determine total compensation in the Summary Compensation Table; and •Re-ranked the middle 51 employees based on annual total compensation and selected the median employee. Using this methodology, we determined that the estimated median employee was an hourly employee located outside of the United States. We determined the 2023 CEO in 2022.For 2022, our last completed fiscal year:
Pay Ratio based on the following: •The median of the annual total compensation of all employees, ofexcluding the Company (other than our CEO)CEO, was $8,943;$11,388; and •The annual total compensation of our CEO was $15,376,344.$18,891,372. Based on this information, for 2022,2023, our CEO’s annual total compensation was approximately 1,7191,659 times that of the annual total compensation of the median employee (as determined below).Thisemployee.
The majority of Mr. Scott's 2023 total compensation is directly linked to the performance of the Company, as discussed in the "Compensation Discussion and Analysis" above. Our CEO pay ratio is a reasonable estimate calculated in good faith, in a manner consistent with Item 402(u) of Regulation S-K, based on our payroll and employment records and the methodology described below. TheSEC rules. SEC rules for identifying the “median employee”median employee and calculating the CEO pay
ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies to apply certain exclusions,identify the median employee. SEC rules also allow companies to exclude up to 5% of their total employees who are located in a particular country or countries outside of the United States and to make reasonable estimates and assumptions that reflectregarding their compensation practices.employee populations. As such,a result, the CEO pay ratiosratio reported by other companies may not be comparable to the CEO pay ratio set forth above, as otherreported above. Other companies may have different employmentemployee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own CEO pay ratios. To identify the median of the annual total compensation of all of our employees, as well as to determine the annual total compensation of the “median employee,” the methodology and the material assumptions, adjustments and estimates that we used were as follows:
1. | In accordance with Instruction 2 to Item 402(u) of Regulation S-K, because there has been no change in our employee population or employee compensation arrangements in the past fiscal year that we reasonably believe would result in a significant change to our pay ratio disclosure, we elected to utilize the same median employee that we had identified in 2020 to calculate our 2022 CEO pay ratio. The process that we used to determine our median employee in 2020 is summarized below:
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| i) | We determined that, as of October 1, 2020, our employee population consisted of approximately 171,000 individuals working at the Company and its consolidated subsidiaries, with approximately 10,000 of these individuals located in the United States and approximately 161,000 of these individuals located outside of the United States.
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| ii) | We employed a proportionate stratified statistical sampling methodology to help simplify the identification of the median employee. The sample size used was approximately 1,500 employees.
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| iii) | We utilized 2020 base pay as our consistently applied compensation measure to identify the median employee from our employee population, which we applied to all employees included in our analysis. We did not make any cost of living adjustments in identifying the median employee. Using this methodology, we determined that the estimated median employee was an hourly employee located outside of the United States.
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2. | With respect to the annual total compensation of the median employee, we identified and calculated the elements of such employee’s compensation for 2022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $8,943.
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3. | With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column (column (j)) of our “2022 Summary Compensation Table” included in this proxy statement and incorporated by reference under Item 11 of Part III of our 2022 Annual Report on Form 10-K.
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Pay Versus Performance ("PVP") Disclosures In August 2022, the SEC adopted a new Pay Versus Performance (“PVP”) disclosure rule as mandatedAs required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance with the new rules is required for fiscal years
ending on or after December 16, 2022. The final rules were codified under Item 402(v) of RegulationS-K
(together with other official guidance, “Item 402(v)”) and require us to provide the following tabular and narrative disclosures.The following section has been prepared in accordance with the new PVP disclosure rule, which requires public companies to disclose information reflecting the relationship between the company’s financial performance and two newly defined terms,Act, we have calculated Compensation Actually Paid (“CAP”("CAP") and Average Compensation Actually Paid (“Average CAP”). Wethe relationship of CAP to certain financial performance metrics of the Company.
Background The amounts set forth below in the required table are calculated pursuant to SEC rules but do not represent amounts that have calculated CAPactually been earned or realized by our NEOs, including Performance Share awards. For many of these awards, performance conditions have not yet been satisfied and Average CAP in accordance with the PVP disclosure rule whichapplicable performance period is not yet complete. As a result, this information does not reflect the actualcompensation that has actually been paid or average amount of compensation paid to, received by, or earned by our Principal Executive Officer (“PEO”) and ournon-PEO
NEOs during the applicable years.realized. To calculate the CAP for the PEOCEO and the Average CAP for the non-PEO
non-CEO NEOs, adjustments are made to TotalCompensationtotal compensation reported in the Summary Compensation Table
for the applicable years. These adjustments are described in the tables below the PVP Table. The P&C Committee does not use CAP or Average CAP as a basis for making compensation decisions,nor does it use the performance measures defined by the SEC for the PVP Table to measure performance for incentive plan purposes. Refer to pages 74Paying for how we align pay with performance is a key element of both our compensation philosophy and pages 41-43 for a description of howcompensation principles. As detailed in the "Compensation Discussion and Analysis" above, the P&C Committee approachesplaces substantial importance on the designassessment of Company performance when determining NEO compensation. We believe that the structure of our executive compensation
program.Pay Versus Performance Table Our long-term incentive equity award mix is heavily weighted toward Performance Shares, resulting in more compensation at risk. These awards are impacted directly by the Company’s performance and stock price. See the “Compensation Discussion and Analysis” for details regarding the equity award mix. CAP and Average CAP amounts can vary significantly from The key drivers of this volatility for Lear include: •Point in time measurements, reflecting value only on certain specific and required dates; •Stock price; •Changes in expected performance year-over-year (to a lesser extent); and •Stock volatility. Base salary, annual bonus, non-equity incentive plan compensation and all other compensation are each calculated in the same manner for both summary compensation tableSummary Compensation Table (“SCT”) and CAP purposes. The difference between SCT and CAP total compensation is due primarily to changes in the fair value of equity awards and, to a lesser extent, changes in the expected or actual performance of performance-based equity awards. The CAP table includes changes in the fair value of equity awards and does not represent the PEO’sCEO’s and non-PEO
non-CEO NEOs’ actual compensation received or earned.
The difference between SCT and CAP total compensation reflects differences in the value assigned to equity awards under each calculation as described below:
| | | | | | | | | | | | | | | | Grant date fair value of equity awards granted during the current year | | | | SCT and CAP calculations use the same methodologies to determine the fair value of equity awards. However, CAP total compensation includes changes in the fair value of equity awards during each year as a result of changes in stock price and expected or actual performance of each equity award (which is not included in SCT total compensation). 1.End of year fair value of equity awards outstanding at the end of the year and/or vesting date fair value of equity awards that vested during the year 2.Prior Awards that Remain Outstanding : 3.Awards that Vested During the Year : |
| CAP reflects the end of year and/or vesting date fair value of the current year award (1), as summarized in the right column above. CAP also adds two other categories of equity awards that are not part of the SCT (2 and 3), as summarized above.
|
InThe table below reflects CAP in accordance with the PVP disclosure rule the following table sets forth (i) the total and average total compensation set forth in the SCT for the previous four years.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based on(4): | | | Year(1) (a) | SCT Total for CEO ($) (b) | CAP to CEO(2) ($) (c) | Average SCT Total for non-CEO NEOs(3) ($) (d) | Average CAP to non-CEO NEOs(2) ($) (e) | Total Shareholder Return(4) ($) (f) | Peer Group Total Shareholder Return(4)(5) ($) (g) | Net Income ($) in millions (h) | Adjusted Operating Income(6) ($) in millions (i) | | 2023 | 18,891,372 | | 25,295,686 | | 5,368,345 | | 7,211,982 | | 110 | | 95 | | 573 | | 1,115 | | | 2022 | 15,376,344 | | 4,822,793 | | 4,550,657 | | 530,131 | | 94 | | 86 | | 328 | | 886 | | | 2021 | 13,306,375 | | 23,444,040 | | 4,073,394 | | 6,711,337 | | 136 | | 128 | | 374 | | 958 | | | 2020 | 14,714,769 | | 16,162,189 | | 4,507,854 | | 5,697,177 | | 117 | | 117 | | 159 | | 614 | |
(1) Mr. Scott served as CEO and theMessrs. Cardew, Orsini, Esposito and Kemp served as non-CEO NEOs for 2023. Mr. Scott served as CEO and Messrs. Cardew, Orsini, DiDonato and Esposito served as non-CEO NEOs for 2022, 2021 and 2020. Mr. DiDonato retired in 2023. (2) Represents CAP for our CEO and Average CAP for our non-CEO NEOs as a group, (excluding the CEO), respectively; (ii) the total and average total CAP (as determined in accordance with Item 402(v)) for the CEO and the NEOs as a group (excluding the CEO), respectively; (iii) the Company’scumulative
TSR (“Cumulative TSR”) and the cumulative TSR (“Peer Group Cumulative TSR”) of our Item 402(v) peer group (“PVP Peer Group”), as determined in accordance with Item 402(v) ; of Regulation S-K, and (iv) Net Incomedoes not reflect the compensation ultimately earned or realized by our CEO or non-CEO NEOs.(3) Reflects the average SCT total of our non-CEO NEOs (determined as set forth below). (4) Reflects our Cumulative TSR and our Peer Group Cumulative TSR for each measurement period from December 31, 2019 through December 31, 2023. Dividends are assumed to be reinvested, and the returns of each company in our PVP Peer Group are weighted to reflect relative stock market capitalization. Results assume that $100 was invested on December 31, 2019, in each of our common stock and the stocks comprising our PVP Peer Group. (5) Our PVP Peer Group is the same peer group used in the Performance Graph for purposes of Item 201(e)(1)(ii) of Regulation S-K in our Annual Report on Form 10-K (“10-K Peer Group”). Our 10-K Peer Group was selected because we do not believe that there is a single published industry or line of business index that is appropriate for comparing total shareholder returns. As a result, our selected 10-K Peer Group is comprised of representative independent automotive suppliers whose common stock is publicly traded. For 2023, 2022, 2021 and 2020, column (g) reflects the four-year, three-year, two-year and one-year Peer Group Cumulative TSR, respectively, of our 2023 10-K Peer Group, which is comprised of the following companies: Adient plc, American Axle & Manufacturing Holdings Inc., Aptiv PLC, Autoliv, Inc., BorgWarner Inc., Continental AG, Dana Incorporated, Forvia SE (formerly known as Faurecia SE), Gentex Corporation, Gentherm Incorporated, Magna International Inc., Valeo and Visteon Corporation. Cooper-Standard Holdings Inc. was included in our 2022 peer group but was removed in 2023 as it no longer met our defined criteria or provided a meaningful comparison of stock performance vs. other automotive suppliers. The 2023, 2022, 2021 and 2020 Peer Group Cumulative TSR would have been $95, $85, $128 and $117, respectively, if Cooper- Standard would have been included. (6) Adjusted Operating Income is a performance measure in the AIP and highly correlated to the other financial measures used in the annual and long-term incentive plans. See the “Compensation Discussion and Analysis” above for a description of how this measure was determined in 2023 and the previous three years. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $100 Investment Based on (4) : | | | | | | | | | | | | | Compensation Actually Paid to PEO(c) (2)(3) | | | Average SCT Total for Non-PEO NEOs(d) (3) | | | Average Compensation Actually Paid to Non-PEO NEOs(e) (2)(3) | | | Total
Shareholder
Return(f) | | | Peer Group Total Shareholder Return(g) (5) | | | | | | | | | 2022 | | $ | 15,376,344 | | | $ | 4,822,793 | | | $ | 4,550,657 | | | $ | 530,131 | | | $ | 94 | | | $ | 86 | | | $ | 328 | | | $ | 886 | | | 2021 | | $ | 13,306,375 | | | $ | 23,444,040 | | | $ | 4,073,394 | | | $ | 6,711,337 | | | $ | 136 | | | $ | 128 | | | $ | 374 | | | $ | 958 | | | 2020 | | $ | 14,714,769 | | | $ | 16,162,189 | | | $ | 4,507,854 | | | $ | 5,697,177 | | | $ | 117 | | | $ | 117 | | | $ | 159 | | | $ | 614 | |
(1) | Mr. Scott served as PEO and Messrs. Cardew, Orsini, DiDonato and Esposito served asnon-PEO
NEOs for 2022, 2021 and 2020. |
(2) | Represents CAP for our PEO and average CAP for ournon-PEO
NEOs as a group, as determined in accordance with Item 402(v) and does not reflect the compensation ultimately earned or realized by our PEO ornon-PEO
NEOs. |
(3) | Reflects the average SCT and CAP “Total Compensation” of each of thenon-PEO
NEOs (determined as set forth below). |
(4) | Reflects our Cumulative TSR and our Peer Group Cumulative TSR for each measurement period from December 31, 2019 through December 31, 2022. Dividends are assumed to be reinvested, and the returns of each company in our PVP Peer Group are weighted to reflect relative stock market capitalization. Results assume that $100 was invested on December 31, 2019, in each of our common stock and the stocks comprising our PVP Peer Group. |
(5) | Our PVP Peer Group is the same peer group used in thePerformance
Graph forpurposes
of Item 201(e)(1)(ii) of RegulationS-K
in our Annual Report on Form10-K
(“10-K
Peer Group”). Our10-K
Peer Group was selected because we do not believe that there is a single published industry or line of business index that is appropriate for comparing total shareholder returns. As a result, our selected10-K
Peer Group is |
and 45 and Appendix A "Reconciliation of Non-GAAP Financial Measures" on page 90 for more information on this financial measure and how it is used. | | | | | | | | | | | | | 70 | comprised of representative independent automotive suppliers whose common stock is publicly traded. For 2022, column (g) reflects the three-year Peer Group Cumulative TSR, that was determined using our 202210-K
Peer Group, which is comprised of the following companies: Adient plc, American Axle & Manufacturing Holdings Inc., Aptiv PLC, Autoliv, Inc., BorgWarner Inc., Continental AG, Cooper-Standard Holdings Inc., Dana Incorporated, Faurecia, Gentex Corporation, Gentherm Incorporated, Magna International Inc., Valeo and Visteon Corporation. For 2021 and 2020, column (g) reflects thetwo-year
andone-year
Peer Group Cumulative TSR, respectively, of our10-K
Peer Group used in 2021 and 2020. This prior10-K
Peer Group included the same companies as our 202210-K
Peer Group, plus Tenneco Inc. In 2022, Tenneco Inc. was acquired and is no longer a publicly traded company. As such, Tenneco Inc. is excluded from our10-K
Peer Group. The 2022 three-year Peer Group Cumulative TSR reportable in column (g) would have been $85 if Tenneco Inc. had not been acquired and thus removed from our 202210-K
Peer Group.| | | LEAR CORPORATION |
| (6) | Adjusted Operating Income is a performance measure in the annual incentive plan and highly correlated to the other financial measures used in the annual and long-term incentive plans. See “Compensation Discussion and Analysis” for a description of how this measure is determined in 2022 and our “Compensation Discussion and Analysis” sections from our 2021 and 2022 proxies for how this value is determined for 2020 and 2021, respectively. | | | | | EXECUTIVE COMPENSATION |
Reconciliations of SCT Total Compensation to CAP Total Compensation for our PEOCEO and Average SCT Total Compensation to Average CAP Total Compensation for our non-PEO
non-CEO NEOs is shown below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Valuation Adjustments | Equity Award Adjustments(2) | | Year | Executive(s) | Reported SCT Total ($) | Deduct Change in Pension Value ($)(1) | Deduct Stock Awards ($) | Add Year-End Value of Unvested Equity Awards Granted in Year ($) | Change in Value of Unvested Equity Awards Granted in Prior Years ($) | Change in Value of Equity Awards Granted in Prior Years Which Vested in Year ($) | CAP Total ($) | | 2023 | CEO | 18,891,372 | | (41,649) | | (13,349,215) | | 17,035,840 | | 1,363,813 | | 1,395,525 | | 25,295,686 | | | Non-CEO NEO | 5,368,345 | | (16,970) | | (3,096,481) | | 3,904,657 | | 670,357 | | 382,074 | | 7,211,982 | | | 2022 | CEO | 15,376,344 | | — | | (11,118,747) | | 7,283,518 | | (3,867,535) | | (2,850,787) | | 4,822,793 | | | Non-CEO NEO | 4,550,657 | | — | | (2,631,326) | | 1,730,867 | | (2,238,827) | | (881,241) | | 530,131 | | | 2021 | CEO | 13,306,375 | | — | | (9,737,072) | | 12,089,428 | | 1,757,058 | | 6,028,251 | | 23,444,040 | | | Non-CEO NEO | 4,073,394 | | — | | (2,431,458) | | 3,009,472 | | 1,110,158 | | 949,771 | | 6,711,337 | | | 2020 | CEO | 14,714,769 | | (366,594) | | (11,700,831) | | 14,420,251 | | 126,205 | | (1,031,611) | | 16,162,189 | | | Non-CEO NEO | 4,507,854 | | (65,707) | | (3,194,013) | | 3,909,610 | | 506,184 | | 33,249 | | 5,697,177 | |
(1)Reflects a deduction for the aggregate change in the actuarial present value of the amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table. For all years, there was no pension value attributable to “service cost” or “prior service cost,” so no adjustments are reflected for these values required to be added as part of the CAP pension valuation adjustments. | | | | | | | | | | | | | Adjustments to Determine CAP for PEO | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 15,376,344 | | | $ | 13,306,375 | | | $ | 14,714,769 | | | | “Change in Actuarial Present Value” reported in the SCT | | $ | 0 | | | $ | 0 | | | ($ | 366,594 | ) | | | grant date fair value reported in the “Stock Awards” and “Option Awards” columns in the SCT | | ($ | 11,118,747 | ) | | | (9,737,072 | ) | | | (11,700,831 | ) | 1. Granted During the Year : end of year fair value of equity awards granted during the year that remain unvested as of year-end | | $ | 7,283,518 | | | $ | 12,089,428 | | | $ | 14,420,251 | | 2. Prior Awards that Remain Outstanding : the change in fair value during the year of equity awards granted in a prior year that remain outstanding and unvested as of year-end | | ($ | 3,867,535 | ) | | $ | 1,757,058 | | | $ | 126,205 | | 3. Prior Awards that Vested During the Year : the change in fair value of equity awards that vested during the year from the last day of the prior year to the vesting date | | ($ | 2,850,787 | ) | | $ | 6,028,251 | | | ($ | 1,031,611 | ) | | | ($ | 10,553,551 | ) | | $ | 10,137,665 | | | $ | 1,447,420 | | | | | | | | | | | | | | | | | | $ | 4,822,793 | | | $ | 23,444,040 | | | $ | 16,162,189 | |
Table(2)For all years, (a) no equity awards vested in the year of Contentsgrant, (b) no equity awards granted in prior years were forfeited, (c) no equity awards were modified during the year, and (d) no dividends or other earnings were paid prior to the applicable vesting date that were not otherwise accounted for in total compensation for the year, so no adjustments are reflected for these values required to be added as part of the CAP equity award adjustments. The fair value of option and stock awards is determined in accordance with ASC 718, “Compensation – Stock Compensation.” The fair value of outstanding performance-based stock awards reflects the expected performance results as of year-end. | | | | | | | | | | | | | Adjustments to Determine Average CAP for Non-PEO NEOs | | | | | | | | | | | | | | | | | | | | | | | | | | Average SCT Total for Non-PEO NEOs | | $ | 4,550,657 | | | $ | 4,073,394 | | | $ | 4,507,854 | | | | “Change in Actuarial Present Value” reported in the SCT | | $ | 0 | | | $ | 0 | | | ($ | 65,707 | ) | | | grant date fair value reported in the “Stock Awards” and “Option Awards” columns in the SCT | | ($ | 2,631,326 | ) | | ($ | 2,431,458 | ) | | | (3,194,013 | ) | 1. Granted During the Year : end of year fair value of equity awards granted during the year that remain unvested as of year-end | | $ | 1,730,867 | | | $ | 3,009,472 | | | $ | 3,909,610 | | 2. Prior Awards that Remain Outstanding : the change in fair value during the year of equity awards granted in a prior year that remain outstanding and unvested as of year-end | | ($ | 2,238,827 | ) | | $ | 1,110,158 | | | $ | 506,184 | | 3. Prior Awards that Vested During the Year : the change in fair value of equity awards that vested during the year from the last day of the prior year to the vesting date | | ($ | 881,241 | ) | | $ | 949,771 | | | $ | 33,249 | | | | ($ | 4,020,526 | ) | | $ | 2,637,943 | | | $ | 1,189,323 | | | | | | | | | | | | | | | | Average CAP Total for Non-PEO NEOs | | $ | 530,131 | | | $ | 6,711,337 | | | $ | 5,697,177 | |
(1) | For all years, there was no pension value attributable to “service cost” or “prior service cost,” so no adjustments are reflected for these values required to be added as part of the CAP pension adjustments. |
(2) | For all years, (a) no equity awards vested in the year of grant, (b) no equity awards granted in prior years were forfeited, (c) no equity awards were modified during the year, and (d) no dividends or other earnings were paid prior to the applicable vesting date that were not otherwise accounted for in total compensation for the year, so no adjustments are reflected for these values required to be added as part of the CAP equity award adjustments. The fair value of option and stock awards is determined in accordance with ASC 718, “Compensation – Stock Compensation.” The fair value of outstanding performance-based stock awards reflects the expected performance results as ofyear-end.
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In the tables above, changes in our stock price following the grant date of an equity award impact reported CAP values. The values reported above in each year, and over the three-yearfour-year cumulative period, reflect how the awarded compensation can fluctuate year-over-year, largely as a result of our year-end stock price, among other factors. This illustrates our pay-for-performance philosophy, as well as the design of our compensation program. The values in the table above reflect that the compensation of our PEOCEO and our non-PEO
non-CEO NEOs is higher when our stock price increases and lower when the stock price decreases, demonstrating the clear alignment of the interests of our PEOCEO and non-PEO
non-CEO NEOs and our stockholders.shareholders.The values in the table above are based on our year-end stock price, as required under the PVP disclosure rule. Since 2020, most industries including automotive have been significantly impacted by the ongoing challenges of the COVID-19 pandemic and supply chain disruptions, and our stock price fluctuated significantly during this period with the low stock price, high stock price and year-end stock price during each applicable year shown in the table below: | | | | | | | | | | | | | Year | Stock Price Low ($) | Stock Price High ($) | Stock Price at Year-End ($) | | 2023 | 118.93 | 155.51 | 141.21 | | 2022 | 119.69 | 192.81 | 124.02 | | 2021 | 146.17 | 203.13 | 182.95 | | 2020 | 70.00 | 164.99 | 159.03 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 119.69 | | | $ | 192.81 | | | $ | 124.02 | | | | | | | | | $ | 146.17 | | | $ | 203.13 | | | $ | 182.95 | | | | | | | | | $ | 70.00 | | | $ | 164.69 | | | $ | 159.03 | |
Accordingly, CAP for our PEOCEO and Average CAP for our non-PEO
non-CEO NEOs could have been significantly different if other dates were used to value our stock or if our stock price happened to be higher or lower on the last day of the applicable year. Additionally, the value of performance-based stock awards is impacted to a much lesser extent by the expected performance results which may vary from year to year and from actual performance at the completion of the performance periods. For example, the expected performance results of the Adjusted Pretax Income portion of the 2020–2022 Performance Share award was 111% of target at the end of 2020, 100% of target at the end of 2021 and was earned at102
% of target at the end of 2022.
Most Important Measures Used to Determine 20222023 CAP The threefour items listed below represent the most important measures used to determine CAP for 2022.2023. While we utilize several financial performance measures to align executive compensation with Lear’s performance, not all of those measures are represented in the table below. For further information on these measures, see the “Compensation Discussion and Analysis.” Analysis” on page 31. | | | Most Important Performance Measures | Adjusted Operating IncomeIncome* | Adjusted Pretax IncomeIncome* | Free Cash FlowFlow* | | Adjusted ROIC Improvement* |
*See page 42 and Appendix A "Reconciliation of Non-GAAP Financial Measures" on page 90 for more information on these non-GAAP financial measures and how they are used. For the performance period beginning January 1, 2023, the P&C Committee reintroduced a three-year Adjusted ROIC Improvement measure to the long-term incentive program.plan. ROIC is strongly correlated to long-term stockholdershareholder value creation and multi-year TSR, and our Board, management team and many stockholdersshareholders view ROIC as a key financial measure. As such, we expect that next year an Adjusted ROIC Improvement measure will beis included in the above list of Most Important Performance Measures. For more information on the financial measures in our 2023 annual and long-term incentive plans, see pages 46-4844 and 47 in the “Compensation Discussion and Analysis.”Narrative toDiscussion of the PVP Table
An overview of our compensation philosophy, alignment, and other key features of our compensation programsprogram is below. For more detailed descriptions, as well as data that our P&C Committee finds most valuable in designing and administering our executive compensation program, see the “Compensation Discussion and Analysis.” Compensation Philosophy andAlignment The executive compensation program is designed to drive execution of our business strategy by strongly aligning pay opportunities with performance outcomes. Both our annual and long-term incentive plans consist only of key objective financial measures that are selected to achieve our primary objectives including: •Link executive pay to Company performance; •Optimize profitability, cash flow and revenue growth, as well as return on investment; and •Align the interests of management and our stockholdersshareholders by using annual and multi-year measures that drive stockholdershareholder value. Equity Award Opportunities Are the Largest Component Yielding a Highly Variable, Performance-Based Pay Package For our PEOCEO more than 75% of target compensation is in the form of equity, and for our othernon-PEO
non-CEO NEOs more than 60%65% of target compensation is in the form of equity. This results in stock price changes having a significant impact on the value of pay at each measurement period and the ultimate value received. Our equity award mix consists of 75% Performance Shares and 25% RSUs for our CEO and 70% Performance Shares and 30% RSUs for our non-CEO NEOs, which ties more NEO compensation to Company performance and stock price, as compared to most of the Comparator Group (listed in the “Compensation Discussion and Analysis”) and other large industrial companies which often assign Performance Shares a lower weighting (e.g., 50% to 60% of the regular annual equity award mix). The heavy weighting toward Performance Shares increases the sensitivity of the value of our NEOs’ long-term equity incentives to Company performance – not only does the underlying value of a Performance Share fluctuate generally with changes to the Company’s stock price, but the number of shares earned varies based on the Company’s achievement of financial and relative TSR goals. | | | | | | | | | | | | | 74
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Performance Measures and Granting of Stock Awards Collectively, the performance measures used in the annual and long-term incentive plans are selected to drive long-term stockholdershareholder value. Performance measures span a three-year performance period and include relative TSR. Further for long-term incentives, the underlying value of the award is directly aligned to changes in the Company’s stock price over the performance/vesting period. For annual grants of incentive awards, the Company sets annual and long-term incentive goals in November prior to the start of the performance periods. The number of shares to grant is determined on the first business day in January and is based on the stock price at that point in time (grant date) which is generally the value reflected in the SCT for stock awards. While Performance Shares are outstanding the expected level of performance and corresponding payout will be updated each year until the end of the three-year period when the earned award is paid. Relationship Between CAP and Performance Measures The charts below illustrate the relationship between the PEOCEO and average Non-PEO
non-CEO NEO CAP amounts and the SEC required performance measures for CAP during the period 2020– 2022.2023. Since equity awards are the largest component of CAP, this value will vary over time and by measurement period based on changes in our stock price, financial performance and TSR performance. As such, it remains important to review the “Compensation Discussion and Analysis” for a comprehensive discussion and analysis of industry conditions, busine
ssconditions, business highlights, our pay setting cycle, history of pay-performance alignment and other factors relevant to CEO and other NEO pay. Relationship between CAP and Company Cumulative TSR and Peer Group Cumulative TSR during 2020 - 20222020-2023 The graphchart below reflects the relationship between (1) CAP for the PEOCEO and Average CAP for the non-PEO
non-CEO NEOs and (2) the Company’s Cumulative TSR and the PVP Peer Group Cumulative TSR (assuming an initial fixed investment of $100) for the years ended December 31, 2023, 2022, 2021 and 2020. As shown below, the CAP for the PEOCEO and Average CAP for the non-PEO
non-CEO NEOs are generally aligned with the Company’s Cumulative TSR, primarily due to the Company’s use of equity incentives which are correlated to both the Company’s performance and stock price. The Company’s Cumulative TSR is generally aligned with the PVP Peer Group Cumulative TSR. Our selected 10-K Peer Group (which determines our PVP Peer Group) is comprised of representative independent automotive suppliers whose common stock is publicly traded. Beginning in 2020, the automotive industry, including Lear and the selected peer companies, has been navigating multiple macroeconomic challenges (e.g., theCOVID-19
pandemic, the Russia-Ukraine conflict, supply shortages, elevated inflation levels, higher interest rates, labor and energy shortages in certain markets, etc.) which have impacted financial performance and stock prices.
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73 |
Relationship between CAP and Company Net Income over 2020 - 20222020-2023 As shown below, the Company’s CAP for the PEOCEO and Average CAP for the non-PEO
non-CEO NEO varied significantly each year, primarily due to the Company’s significant emphasis on equity incentives, which are sensitive to changes in stock price. The Company’s Net Incomenet income increased significantly in 2021 (reflecting the COVID-19 pandemic in 2020) and, decreased slightly in 2022 (reflecting the ongoing macroeconomic challenges described above) and increased significantly again in 2023 (reflecting higher than anticipated industry volumes combined with strong operating performance in both business segments). In 2023, both businesses improved operating margins significantly compared to the prior year and converted those earnings to free cash flow through a combination of improved working capital management and better capacity utilization, which allowed the Company to reduce capital spending.As a result, the CAP and Average CAP are generally aligned with the Net Income. Net Incomenet income. Although net income is not used by the Company as a performance measure in either its annual or long-term incentive plans. While the Company does not use Net Income as a performance measure in the overall compensation program, the measure of Net Incomeplans, net income is correlated with other financial measures which we do use in setting goals for both the annual and the long-term incentive programs. plans.
 
Relationship between CAP and Company Adjusted Operating IncomeIncome* over 2020 - 20222020-2023 The chart below illustrates the relationship between the PEOCEO and average Non-PEO
non-CEO NEO CAP amounts and Lear’sthe Company's Adjusted Operating Income for the applicable reporting year.years. We consider Adjusted Operating Income to be the most important financial measure used to link pay to performance during this period because it is both a key measure in our AIP and is the largest portiondriver of a key measure in our LTI (Adjusted Annual Pretax Income). Adjusted Operating Income is a well understood operating metric that can be influenced by all levels of employees of the Company and provides motivation to maximize earnings from current operations. It is substantially correlated with our stock price performance, and thus to CAP.
*Adjusted Operating Income is a Non-GAAP financial measure. See pages Table42 and 45 and Appendix A "Reconciliation of ContentsNon-GAAP Financial Measures" on page 90 for more information on this financial measure and how it is used. All information provided above under thein “Pay Versus Performance Disclosures” headingabove will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference. Executive Officer and Director Hedging Policy
Our executive officer and director hedging policy is set forth in full below. The Company’s NEOs, other executive officers and directors are prohibited from entering into hedging or monetization transactions involving our stock, from holding our securities in a margin account or pledging our securities as collateral for a loan.
Hedging Transactions
. Certain forms of hedging or monetization transactions, such as prepaid variable forward contracts, equity swaps, collars and exchange funds allow an officer or director to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the officer or director to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the officer or director may no longer havethe same objectives as our other stockholders. For this reason, our NEOs, other executive officers and directors are prohibited from entering into hedging or monetization transactions involving our stock.
Margin Accounts and Pledges
. Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in our securities, our NEOs, other executive officers and directors are prohibited from holding our securities in a margin account or pledging our securities as collateral for a loan. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2024 Proxy Statement | | | | | | 77
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P&C COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The following persons served on our P&C Committee during all or a portion of 2022:2023: Messrs. Cheng and Halverson, Dr. Jepsen, and Mses. Lewis and Ligocki, and Messrs. Cheng and Halverson.Ligocki. No member of the P&C Committee was, during the fiscal year ended December 31, 2022,2023, an officer, former officer or employee of the Company or any of our subsidiaries. None of our executive officers served as a member of: •the compensation committee of another entity in which one of the executive officers of such entity served on our P&C Committee; •the board of directors of another entity in which one of the executive officers of such entity served on our P&C Committee; or •the compensation committee of another entity in which one of the executive officers of such entity served as a member of our Board.
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The information contained in this Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C other than as set forth in Item 407 of Regulation S-K, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that the information contained in this Report be treated as soliciting material, nor shall such information be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing. The P&C Committee of the Board has reviewed and discussed the “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K with management, and based on such review and discussions, the P&C Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this proxy statement and the Annual Report on Form 10-K for the year ended December 31, 2022. 2023. This Report is submitted by Messrs. Cheng and Halverson, Dr. Jepsen, and Mses. Lewis and Ligocki, and Messrs. Cheng and Halverson, being all of the current members of the P&C Committee. Kathleen A. Ligocki, Chair
Patricia L. Lewis
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The information contained in this Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as set forth in Item 407 of Regulation S-K, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that the information contained in this Report be treated as soliciting material, nor shall such information be incorporated by reference into any past or future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing. The Audit Committee of the Board is responsible for evaluating audit performance, appointing, compensating, retaining and overseeing the work of our independent registered public accounting firm and evaluating policies and procedures relating to internal accounting functions and controls. The Audit Committee also oversees the audit fee negotiations associated with the retention of Ernst & Young LLP. The Audit Committee has discussed the advantages and disadvantages of independent registered public accounting firm rotation. Further, in connection with the periodic mandated rotation of the independent registered public accounting firm’s lead engagement partner, the Audit Committee is involved in the selection of Ernst & Young LLP’s lead engagement partner. The Audit Committee is currently comprised of Messrs. Cheng, Foster, Halverson, Krone and Mallett, each a non-employee director, and operates under a written charter that was last amended by our Board in November 2020. A copy of the current charter is available on the investor relations page of our website (ir.lear.com)(https://ir.lear.com/) or in printed form upon request. Our Board has determined that all of the members of the Audit Committee are “independent” as defined in the listing standards of the NYSE and under Rule 10A-3 of the Exchange Act and that all such members are financially literate. Our Board also has determined that all members of the Audit Committee are “audit committee financial experts,” as defined in Item 407(D) of Regulation S-K under the Exchange Act and have accounting or related financial management expertise. The Audit Committee members are neither professional accountants nor auditors, and their functions are not intended to duplicate or to certify the activities of management or the independent auditor, nor can the Audit Committee certify that the independent auditor is “independent” under applicable rules. The Audit Committee serves a board-level oversight role in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors and the experience of the Audit Committee’s members in business, financial and accounting matters. Our management has the primary responsibility for the financial statements and reporting process, including our systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, as well as the report of management, for the year ended December 31, 2022,2023, regarding the Company’s internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act. The Audit Committee has retained Ernst & Young LLP as the Company’s independent registered public accounting firm for 2022.2023. Ernst & Young LLP has been the independent registered public accounting firm for the Company since 2002. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders.shareholders. In reaching this conclusion, the Audit Committee considered Ernst & Young LLP’s integrity, controls and processes to ensure Ernst & Young LLP’s independence, objectivity, industry and company-specific experience, quality and effectiveness of personnel and communications, commitment to serving the Company, appropriateness of fees for audit and non-audit services and external data on audit quality and performance, including recent Public Company Accounting Oversight Board (United States) (PCAOB) reports on Ernst & Young LLP and tenure as the Company’s auditors, including the benefits of having a long-tenured auditor. The Audit Committee has discussed with the Company’s internal auditors and Ernst & Young LLP the overall scope and plans of their respective audits. The Audit Committee meets with the Company’s internal auditors and Ernst & Young LLP, with and without management present, to discuss the results of their procedures, their evaluations of the Company’s internal control, including internal control over financial reporting, and the overall quality of the Company’s financial reporting. The Audit Committee reviewed with Ernst & Young LLP, its judgments as to the quality, not just the acceptability, of the Company’s accounting policies and such other matters as are required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee has also received written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding
Ernst & Young LLP’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP its independence from the Company. The Audit Committee has considered whether the provision of non-audit services to the Company is compatible with maintaining the independence of Ernst & Young LLP.
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Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, filed with the SEC on February 9, 2023. 8, 2024. This Report is submitted by Messrs. Cheng, Foster, Halverson, Krone and Mallett, being all of the members of the Audit Committee. Jonathan F. Foster, Chairman
Conrad L. Mallett, Jr. | | | | | | | | | | | | | | | | | | | | | 20232024 Proxy Statement
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FEES OF INDEPENDENT ACCOUNTANTS In addition to retaining Ernst & Young LLP to audit our consolidated financial statements for 2022,2023, we retained Ernst & Young LLP, as well as other accounting firms, to provide tax and other advisory services in 2022.2023. We understand the need for Ernst & Young LLP to maintain objectivity and independence in its audit of our consolidated financial statements. It is also the Audit Committee’s goal that the fees that the Company pays to Ernst & Young LLP for permitted non-audit services in any year should not exceed the audit and audit-related fees paid to Ernst & Young LLP in such year, a goal that the Company achieved in 20222023 and 2021. 2022. In order to assure that the provision of audit and permitted non-audit services provided by Ernst & Young LLP does not impair its independence, the Audit Committee is required to pre-approve the audit and permitted non-audit services to be performed by Ernst & Young LLP, other than de minimis services that satisfy the requirements pertaining to de minimis exceptions for non-audit services described in Section 10A of the Exchange Act. The Audit Committee also has adopted policies and procedures for pre-approving all audit and permitted non-audit work performed by Ernst & Young LLP. Any pre-approval must set forth in detail the particular service or category of services approved and is generally subject to a specific cost limit. All of the fees for audit, audit-related, tax and other services performed by Ernst & Young LLP were pre-approved by the Audit Committee in accordance with the pre-approval policies and procedures described in this paragraph. The Audit Committee has adopted policies regarding our ability to hire employees, former employees and certain relatives of employees of the Company’s independent registered public accounting firm. During 20222023 and 2021,2022, we retained Ernst & Young LLP to provide services in the following categories and amounts (in thousands): | | | | | | | | | | | | 2022 | | | 2021 | | Audit fees(1) | | $ | 11,393 | | | $ | 11,442 | | Audit-related fees(2) | | | 1,048 | | | | 1,374 | | Tax fees(3) | | | 2,747 | | | | 2,372 | | All other fees(4) | | | 560 | | | | 36 | |
| | | | | | | | | | 2023 | 2022 | Audit fees(1) | $12,779 | | $11,393 | | Audit-related fees(2) | 1,261 | | 1,048 | | Tax fees(3) | 2,705 | | 2,747 | | All other fees(4) | 287 | | 560 | |
(1)Audit fees include services related to the annual audit of our consolidated financial statements, the audit of our internal controls over financial reporting, the reviews of our Quarterly Reports on Form 10-Q, international statutory audits and other services that are normally provided by the independent accountants in connection with our regulatory filings. (2)Audit-related fees include services related to the audits of employee benefit plans, an information technology pre-implementation review and agreed-upon procedures related to certain due diligence services in connection with acquisitions and divestitures. (3)Tax fees include services related to tax compliance, tax advice and tax planning. (4)All other fees include services that are not contained in the above categories and consist of permissible non-audit services. These fees include insurance claim services related to a typhoon in the Philippines. | (1) | | | | | | | | | | | | 80 | Audit fees include services related to the annual audit of our consolidated financial statements, the audit of our internal controls over financial reporting, the reviews of our Quarterly Reports on Form 10-Q,| international statutory audits and other services that are normally provided by the independent accountants in connection with our regulatory filings.
| | LEAR CORPORATION |
| (2) | Audit-related fees include services related to the audits of employee benefit plans, an information technology pre-implementation review and agreed-upon procedures related to certain due diligence services in connection with acquisitions and divestitures. In 2021, these fees also include services related to audits in connection with acquisitions.
| (3) | Tax fees include services related to tax compliance, tax advice and tax planning.
| (4) | All other fees include services that are not contained in the above categories and consist of permissible non-audit services. In 2022, these fees include insurance claim services related to a typhoon in the Philippines.
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| | LEAR CORPORATION
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS WeOur Code of Business Conduct & Ethics prohibits activities that conflict with, or have established a written policy that has been broadly disseminated withinthe appearance of conflicting with, the best interests of the Company and its shareholders. Such conflicts of interest may arise when an employee, or a member of such employee’s immediate family, receives improper personal benefits as a result of such employee's position in the Company. We also maintain a Related Party Transaction Policy regarding (i)the identification, review, monitoring and, as necessary, approval of transactions between the Company and related parties. Related parties include directors and director nominees, executive officers and such other employees as may be designated by the Company from time to time (together with related partiesexecutive officers, “senior officers”), significant shareholders and (ii) the employment of immediate family members of directors and executive officers. Thisany of the foregoing. Under the policy, assists us in identifying, reviewing, monitoring and, as necessary, approving transactions witha related parties, and also provides for the identification, monitoring and review of employment of immediate family members of directors and executive officers by our human resources department. The policy requires thatparty transaction includes any transaction, or series of transactions, involving the Company and a related partiesparty in excess of $120,000, whether undertaken in or outside the ordinary course of our business be presented toand where the G&S Committee. When a related party has a material direct or indirect material interest in any such transaction or series of transactions. All related party transactions in excess of $120,000 that otherwise meet the disclosure requirements of Regulation S-K, approval ofmust be reviewed and approved by the G&S Committee must be obtained. TheCommittee.
Under the policy, further provides that all such employment decisions should be made in accordance with the Company’s policies and procedures and that directors and executivesenior officers must not seekare required to improperly influence any employment decisionscomplete an annual questionnaire regarding their immediate family members.We have implemented various procedures to ensure compliance with themembers, related entities and potential related party transaction policy. For example, the Company’s standard purchasing terms and conditions require vendors to advise us upon anytransactions. Following review of such vendor becoming aware of relationships with related parties, including if such person is involved in the vendor’s relationship with the Company or if such person receives any direct or indirect compensation or benefit based on that relationship. Company policy prohibits our employees from simultaneously working for any customer or vendor of the Company. In addition, the policy prohibits our directors, officers and employees from participating in, or seeking to influence, decisions regarding the selection of a vendor or supplier if such person (or any immediate family member) has any personal or financial interest or investment in such vendor or supplier, subject to certain limited exceptions, and advises directors, officers and employees to report any violation of this policy to our legal department immediately upon becoming aware thereof.
Each year, we circulate conflict of interest questionnaires, to all our directors, members of senior management, purchasing personnel and certain other employees. Based on the results of these questionnaires, the legal department reports all known transactions or relationships with related parties to, among others, our Chief Accounting Officer. Payments to vendors identified as related party vendors in North America are processed through a centralized payables system. At least
annually, the list of related parties is updated by directors, members of senior management and certain other employees.
Pursuant to this policy, we have adopted procedures which assist us in identifying and reviewing relationships involving the employment of immediate family members of directors and executive officers. Our directors and executive officers are required to notify the senior human resources executive upon becoming aware that an immediate family member is seeking employment with the Company or any of its subsidiaries. In addition, each year, our directors and executive officers provide the Company with the names of their immediate family members who are employed by the Company. All employment decisions regarding these family members, including, but not limited to, changes in compensation and job title, are reviewed prior to the action. A list of any immediate family members of the Company’s directors or executive officers who are employed by the Company are provided annually to the G&S Committee.
At least annually, the Chief Accounting Officer reports to the Vice President of Audit Services onand Chief Accounting Officer determine whether the Company has engaged in any transactions with the identified individuals and entities. All such transactions, if any, are reviewed by the General Counsel, other members of management and outside counsel, as necessary, to evaluate whether such transactions constitute related party relationships, including those with customers, as well astransactions and are therefore subject to the amountreview and approval of business performed between the Company and each related party year-to-date and for the preceding fiscal year. At least annually, the Vice President of Audit Services prepares an audit plan for reviewing significant transactions with related parties and prepares a report on such audit plan and the results for the G&S Committee. The Chief Accounting Officer, General Counsel and Vice President of Audit Services meet at least annually to confirm the adequate monitoring and reporting of related party transactions. The G&S Committee also receives a summary of all significant relationships with related parties at least annually.
In connection with any required approval of the G&S Committee, approval, a member of our senior management must represent to the G&S Committee that the related party at issue has been held to the same standards as unaffiliated third parties. The G&S Committee assesses the terms of the transaction, the business purpose of the transaction, the benefit to the Company and to the related party, whether the transaction was in the ordinary course of business and any other relevant factors. G&S Committee members having (or having an immediate family member that has) a direct or indirect interest in the transaction must recuse themselves and abstain from considerationvoting on the approval or ratification of the related party transaction. In addition, All related party transactions are disclosed annually in our Codeproxy statement.
Certain Transactions Joshua Scott, a program manager for the Company, is the son of Business Conduct & Ethics prohibits activities that conflict with, or have the appearance of conflicting with, the best interestsRaymond E. Scott, a director of the Company and its stockholders. Such conflictsthe Company’s President and CEO. In 2023, total compensation (base salary and cash bonus) paid to Mr. Scott was approximately $113,000. From January 1, 2024 to the date of interest may arise when an employee, orthis proxy statement, total compensation (base salary and cash bonus) paid to Mr. Scott was approximately $41,000. The compensation paid to Mr. Scott was approved in accordance with the Company’s standard compensation practices for similarly situated employees.
Jacob Scott, a memberpurchasing manager for the Company, is the son of Raymond E. Scott, a director of the employee’s family, receives improper personal benefits as a resultCompany and the Company’s President and CEO. In 2023, total compensation (base salary) paid to Mr. Scott was approximately $87,000. From January 1, 2024 to the date of such individual’s positionthis proxy statement, total compensation (base salary and cash bonus) paid to Mr. Scott was approximately $45,000. The compensation paid to Mr. Scott was approved in accordance with the Company. Company’s standard compensation practices for similarly situated employees. | | | | | | | | | | | | | | | | | | | | | 20222024 Proxy Statement
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RATIFICATION OF RETENTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2023 (PROPOSAL2024 (PROPOSAL NO. 2)
Our Audit Committee has retained Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2023.2024. A proposal will be presented at the Annual Meeting to ratify this retention. Ratification of the retention of our independent registered public accounting firm requires the affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote. If the stockholdersshareholders fail to ratify such selection, another independent registered public accounting firm will be considered by our Audit Committee, but the Audit Committee may nonetheless choose to engage Ernst & Young LLP. Even if the retention of Ernst & Young LLP is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.shareholders. We have been advised that a representative of Ernst & Young LLP will be present at the Annual Meeting and will be available to respond to appropriate questions and, if such person chooses to do so, make a statement. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE RETENTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2023.2024. PROXIES SOLICITED BY THE BOARD WILL BE VOTED “FOR” THE PROPOSAL UNLESS STOCKHOLDERSSHAREHOLDERS SPECIFY A CONTRARY VOTE.
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ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION SET FORTH IN THIS PROXY STATEMENT (PROPOSAL (PROPOSAL NO. 3)
Pursuant to Section 14A of the Exchange Act, we are seeking the advisory approval by stockholdersshareholders of the Company’s executive compensation program and practices as disclosed in this proxy statement. As most recently approved by stockholdersshareholders at the annual meeting of stockholdersshareholders in 20172023 and consistent with the Board’s recommendation, we are submitting this proposal for a non-binding vote on an annual basis. While this vote is advisory, and not binding on the Board, it will provide information to the Board and P&C Committee regarding investor sentiment about our executive compensation programs and practices, which the P&C Committee will carefully review when evaluating our executive compensation program. At the annual meeting of stockholdersshareholders in 2022,2023, our executive compensation program and practices disclosed in our 20222023 proxy statement received a favorable vote by 89%85% of shares voted. Stockholders
Shareholders are being asked to vote on the following advisory resolution: “RESOLVED, that the Company’s stockholdersshareholders approve, on an advisory basis, the compensation of the Company’s executive officers, as disclosed in the 20232024 proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20222023 Summary Compensation Table and the other related tables and disclosures.” The Company is committed to maintaining executive compensation programs and practices that are aligned with the Company’s business strategy. As a result, the Company has a strong pay-for-performance philosophy that greatly impacts its decisions regarding executive compensation. Our executive compensation programs seek to align management’s interests with our stockholders’shareholders’ interests to support long-term value creation and pay for performance. This philosophy and the compensation structure are essential to the Company’s ability to attract, retain and motivate individuals who can achieve superior financial results in the best interests of the Company and its stockholders.shareholders. To that end, our program links pay to performance by delivering a significant majority of the total compensation opportunity of our NEOs in variable or performance-based compensation programs (annual and long-term incentive plans). Performance measures used in the Company’s annual and long-term incentive plans support the Company’s annual operating plan and longer-term strategy and are tied to key Company measures of short and long-term performance. Our program also aligns the NEOs’ financial interests with those of our stockholdersshareholders by delivering a substantial portion of their total compensation in the form of equity awards and other long-term incentive vehicles. We urge our stockholdersshareholders to read the “Compensation Discussion and Analysis” above, which describes in detail how our executive compensation program and practices operate and are designed to achieve our compensation objectives, as well as the accompanying compensation tables which provide detailed information on the compensation of our NEOs. The affirmative vote of a majority of the shares of common stock present in person or represented by proxy and entitled to be voted on the proposal at the Annual Meeting is required for approval of this advisory resolution. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION SET FORTH IN THIS PROXY STATEMENT. PROXIES SOLICITED BY THE BOARD WILL BE VOTED “FOR” THE ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION SET FORTH IN THIS PROXY STATEMENT UNLESS STOCKHOLDERSSHAREHOLDERS SPECIFY A CONTRARY VOTE. | | | | | | | | | | | | | | | | | | | | | 20232024 Proxy Statement
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Table of ContentsADVISORY VOTE TO APPROVE THE FREQUENCY OF THE ADVISORY VOTE ON THE COMPANY’S EXECUTIVE COMPENSATION
(PROPOSAL NO. 4)
Pursuant to Section 14A of the Exchange Act, we are asking stockholders to vote on whether future advisory votes on The Company’s executive compensation of the nature reflected in Proposal 3 above should occur every year, every two years or every three years. Our stockholders previously supported a one-year frequency for this stockholder advisory vote at the annual meeting of stockholders in 2017.
After careful consideration, the Board has determined that holding an advisory vote on the Company’s executive compensation every year is the most appropriate policy for the Company at this time and recommends that stockholders vote for future advisory votes on the Company’s executive compensation to occur every year. While the Company’s executive compensation programs are designed to promote a long-term connection between pay and performance, the Board recognizes the executive compensation decisions and disclosures are made annually. Holding an annual advisory vote on the Company’s executive compensation provides the Company with more direct and immediate feedback on our compensation programs. We believe that an annual advisory vote on the Company’s executive compensation is consistent with our practice of seeking input and engaging in dialogue with our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices.
The advisory vote on the frequency of future advisory votes on the Company’s executive compensation is non-binding on the Board. Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. The frequency alternative that receives the most votes will be the choice of stockholders. Stockholders are not voting to approve or disapprove the Board’s recommendation. While this vote is advisory, and not binding on the Board, the P&C Committee will carefully review the voting results. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on a less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.
THE BOARD RECOMMENDS A VOTE FOR THE “ONE YEAR” FREQUENCY OPTION FOR THE ADVISORY VOTE ON THE COMPANY’S EXECUTIVE COMPENSATION.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE “ONE YEAR” FREQUENCY OPTION FOR THE ADVISORY VOTE ON THE COMPANY’S EXECUTIVE COMPENSATION UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
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VOTE TO APPROVE THE AMENDED PLAN
(PROPOSAL NO. 5)
We are asking that our stockholders approve the Amended Plan, which amends and restates our 2019 LTSIP. The Amended Plan has been approved and adopted by our P&C Committee, subject to approval by our stockholders, and is now being submitted for stockholder approval, with the
amendment and restatement becoming effective on May 18, 2023, in order to, among other items, approve an additional 1,700,000 shares to be authorized for issuance under the Amended Plan. The key terms of the Amended Plan are described in additional detail below.
Key Terms
We are requesting that our stockholders approve the Amended Plan, which would add 1,700,000 shares available for issuance. As of December 31, 2022, we had 1,135,253 shares remaining available for issuance of future awards under the 2019 LTSIP. If this increase is approved, then as of December 31, 2022, we would have had 2,835,253 shares available for issuance for future awards under the Amended Plan. We believe that this increase in shares will allow us to continue to issue shares under the Amended Plan for the next few years based on our current and anticipated grant practices, subject to oversight and approval of the P&C Committee. The Board believes that this increase is necessary for our compensation practices to continue to be aligned with our business strategy and culture to attract and retain talent, and to reward employees for strong business results and individual performance. The closing trading price of a share of Lear common stock on the NYSE on March 24, 2023 was $137.97.
In addition to the increase in shares available for issuance as described above, the Amended Plan would also result in the following material differences to the 2019 LTSIP, as currently in effect:
The Amended Plan provides for the automatic exercise of options and stock appreciation rights (SARs) that are “in the money” at their expiration date and provides that if an expiration date for an option or SAR falls during a blackout period, the expiration date shall automatically be extended until 30 calendar days after the end of the blackout period;
The Amended Plan removes the availability of Tandem SARs; and
The Amended Plan incorporates certain other technical revisions in response to changes in the law and other clarifying changes.
Equity Usage
In developing our share request for the Amended Plan and analyzing the impact of utilizing equity on our stockholders, the Board considered our equity usage and “overhang.” As of December 31, 2022, we had 1,135,253 shares remaining available for issuance of future awards under the 2019 LTSIP.
Equity usage provides a measure of the potential dilutive impact of our annual equity award program. Set forth below is a table that reflects our equity usage for 2020, 2021 and 2022, as well as the average over those years.
| | | | | | | | | | | | | | Year | | Award Shares Granted | | | Basic Weighted Average Number of Common
Shares Outstanding | | | Gross Equity Usage(1) | | | | | | 2022 | | | 433,930 | | | | 59,674,488 | | | | 0.73 | % | | | | | 2021 | | | 438,565 | | | | 60,082,833 | | | | 0.73 | % | | | | | 2020 | | | 623,574 | | | | 60,254,380 | | | | 1.03 | % | | | | | Three-Year Average | | | 498,690 | | | | 60,003,900 | | | | 0.83 | % |
(1) | “Gross Equity Usage” is defined as the number of equity awards granted in the year divided by the basic weighted average number of shares of common stock outstanding.
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Overhang is a measure of potential dilution and is defined as (i) the sum of (a) the total number of shares underlying all equity awards outstanding and (b) the total number of shares
available for future award grants, divided by (ii) the sum of (a) the total number of shares underlying all equity awards outstanding, (b) the total number of shares available for future
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| | | VOTE TO APPROVE THE AMENDED PLAN (PROPOSAL NO. 5) | | |
award grants and (c) the basic weighted average common shares outstanding for the most recently completed fiscal year. Our overhang at December 31, 2022 was 4.1% (excluding the impact of the new share request). If the 1,700,000 shares proposed to be authorized for grant under the Amended Plan are included in the calculation, our
overhang would have been 6.7% at December 31, 2022, which assumes no repurchases under our existing repurchase program.
If we do not obtain requisite stockholder approval of the Amended Plan as described above, the existing 2019 LTSIP will remain in effect.
Summary of Material Terms of Amended Plan
We have provided a brief summary of the material terms of the Amended Plan below, which is also qualified in its entirety by
reference to the full copy of the Amended Plan, attached as Appendix B to this proxy statement.
Purpose
The Amended Plan is designed to provide competitive incentives intended to attract, retain,
motivate and reward eligible participants.
Eligible Participants
Non-employee directors, officers and other key employees of the Company and its subsidiaries are eligible to participate in the Amended Plan. There are currently approximately 133
executives, 700 non-executive employees, and nine non-employee directors who are eligible to receive awards under the Amended Plan.
Plan Administration
The Amended Plan is administered by the P&C Committee. Unless the Board decides otherwise, the P&C Committee’s membership is intended to satisfy the “non-employee director” provisions of Section 16(b) of the Exchange Act so long as the Company is subject to the registration requirements of the Exchange Act. The members of the P&C Committee will be appointed from time to time by, and will serve at the discretion of, the Board. Except as limited by law and subject to the provisions of the Amended Plan, the P&C Committee selects directors and employees to participate in the Amended Plan; determines the sizes and types of awards; determines the terms and conditions of awards in a manner consistent with
the Amended Plan; construes and interprets the Amended Plan and any agreement or instrument entered into under the Amended Plan; establishes, amends or waives rules and regulations for the Amended Plan’s administration; corrects any defect, supplies any omission or reconciles any inconsistency in the Amended Plan or in any award thereunder; and amends the terms and conditions of any outstanding award to the extent that the Amended Plan provides that they are within the discretion of the P&C Committee. Further, the P&C Committee is empowered to make other determinations it deems necessary or advisable to administer the Amended Plan properly.
Available Shares; Award Limits
The number of shares that may be issued or transferred to participants under the Amended Plan will not exceed the sum of (i) 2,491,491 shares, which includes a request for 1,700,000 additional shares and 791,491 shares as of March 24, 2023 authorized and approved for issuance, but not awarded and (ii) any shares under the 2019 LTSIP subject to awards that, after the effective date of the Amended Plan, are forfeited, terminated, lapsed or satisfied thereunder in cash or property other than shares. Subject to adjustment as described below, the maximum number of shares and share-equivalent units that may be granted to any one participant in a calendar year under any Amended Plan awards is 1,000,000. The maximum
number of shares that may be issued pursuant to options that are intended to be ISOs is 1,000,000. The maximum aggregate dollar amount that may be paid to any one participant in a calendar year under performance units or cash incentive awards is $20,000,000. Shares underlying awards that are subject to the achievement of performance goals will be counted against the share reserve and limits based on the target value of such awards unless and until such time as the awards become vested and settled in shares.
Any shares subject to an award under the Amended Plan that, after the effective date thereof, are forfeited, canceled, settled or otherwise terminated without a distribution of shares to a
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participant will thereafter be deemed to be available for awards. However, none of the following shares will be added back to the shares authorized for grant under the Amended Plan: (i) shares otherwise issuable or issued in respect of an award that are withheld to cover taxes or any applicable
exercise price, (ii) shares subject to share-settled SARs that are exercised, or (iii) shares tendered to exercise outstanding options or other awards or to cover applicable taxes on such awards.
Adjustments
If there is any change in the Company’s capitalization resulting from a stock split or a corporate transaction, including a merger, consolidation, separation, or other distribution of stock or property of the Company, a spin-off, or any reorganization, or any partial or complete liquidation of the Company, the P&C Committee will adjust the number and kind of shares of stock or other securities permitted to be delivered under the
Amended Plan, adjust the terms of outstanding awards, including the number and kind of shares of stock or other securities subject to outstanding awards, in each case as and to the extent the P&C Committee determines an adjustment to be appropriate and equitable, to prevent dilution or enlargement of rights.
Non-Employee Directors Limit
Any compensation paid to a non-employee director, including cash fees and awards under the Amended Plan (based on the grant date fair market value of such awards for financial reporting purposes), will not exceed $900,000 per fiscal year
in respect of his or her service as a non-employee director. Compensation will count toward this limit in the Board compensation year in which it is earned.
Minimum Vesting Requirement
Except in the case of substitute awards, awards granted under the Amended Plan are subject to a minimum vesting period of one year from the date of grant. Notwithstanding the foregoing, the P&C Committee may provide that the vesting of an award will accelerate in the event of a participant’s death, disability, retirement or a change in control, and the P&C Committee may grant awards covering 5% or fewer of the shares reserved for issuance under the Amended Plan without
regard to the minimum vesting provision. The vesting of any unvested awards granted to non-employee directors will be deemed to satisfy the one-year minimum vesting provision if the awards vest on the earlier of the one-year anniversary of the date of grant and the next regular annual meeting of stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting.
Awards
Under the Amended Plan, the P&C Committee is authorized to grant stock options (including nonqualified stock options (“NQSOs”) and incentive stock options (“ISOs”), SARs, restricted stock, RSUs, restricted units, performance units, Performance Shares and other awards, each of which may be made subject to the achievement of specified performance measures established by the P&C Committee. The P&C Committee may also grant substitute awards under the Amended Plan. The P&C determines the terms and conditions of each award at the time of grant, including whether payment of awards will be subject to the achievement of performance goals, consistent with the provisions of the Amended Plan, and the extent to which awards will be retained following the termination of employment or service.
Options and SARs. An option entitles the holder thereof to purchase a specific number of shares at a specified exercise price. A SAR entitles the holder thereof to, upon exercise,
receive a payment in an amount determined by multiplying the excess (or a specified portion of the excess), if any, of the fair market value on the date of exercise over the grant price specified in the award agreement, by the number of shares as to which the SAR is exercised. Payment of a SAR may be made in cash, shares, or a combination of the two.
The applicable exercise or grant price of an option or a SAR must be equal to at least 100% of the fair market value on the date of grant, unless granted through a substitute award. The term of an option or SAR will be set by the P&C Committee at the time of grant, but no option or SAR will be exercisable more than 10 years after the date of grant. At the time of exercise of an option, the exercise price must be paid in full and may be paid in cash, by tendering shares already owned, through a “cashless” exercise, or through a combination of any of the foregoing.
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ISOs are subject to additional limitations set forth in the Amended Plan and the Code.
Restricted Stock, RSUs, and Restricted Units. Restricted stock awards are shares that are issued to a participant subject to transfer and other restrictions as the P&C Committee may determine. RSUs and restricted units entitle a participant to receive, at a specified future date, shares or an amount equal to the fair market value of a specified number of shares (or other unit of measurement). The P&C Committee may impose any conditions or restrictions that it deems advisable on restricted stock, RSU and restricted unit awards, including performance- and/or time-based vesting conditions. While awards of restricted stock, RSUs and restricted units are subject to restrictions, unless otherwise determined by the P&C Committee and set forth in an award agreement, participants will be credited with regular cash dividends or dividend equivalents with respect to such awards. No dividends or dividend equivalents will be paid on unvested awards, but to the extent that such awards contain the right to receive dividends or dividend equivalents during the restriction period, such dividends or dividend equivalents will be accumulated and paid once and to the extent that the underlying award vests.
Performance Units and Performance Shares. Performance units and Performance Shares have an initial value that is established by the P&C Committee at the time of grant (for Performance Shares, such value per performance share is equal to the fair market value of a share at the time of grant). The P&C Committee will set performance periods and performance objectives that, depending to the extent to which they are met, will determine the number and/or value of the performance units or Performance Shares that will be earned by a participant. These awards may be paid in cash, shares, or a combination of the two, as determined by the P&C
Committee. Unless otherwise determined by the P&C Committee and set forth in an award agreement, participants will be credited with dividend equivalents with respect to awards of Performance Shares. The P&C Committee may, in its sole discretion, provide that dividend equivalents will be paid on awards of performance units. No dividend equivalents will be paid on unvested awards, but to the extent that such awards contain the right to receive dividend equivalents during the performance period, such dividend equivalents will be accumulated and paid once and to the extent that the underlying award vests.
Substitute Awards. Substitute awards are awards that may be granted in replacement of stock or stock-based awards from another business held by current and former employees or non-employee directors of such business that is, or whose stock is, acquired by the Company, in order to preserve the economic value of all or a portion of a substituted award on such terms and conditions (including price) as the P&C Committee determines. Substitute awards will not reduce the shares authorized for issuance under the Amended Plan.
Other Awards. In addition to the awards described above, and subject to the terms of the Amended Plan, the P&C Committee may grant other incentives payable in cash or shares under the Amended Plan as it determines to be in the best interests of the Company and subject to such other terms and conditions as it deems appropriate. The P&C Committee may, in its sole discretion, provide that dividend equivalents will be paid on such other awards. No dividend equivalents will be paid on unvested awards, but to the extent that such awards contain the right to receive dividend equivalents during the performance period, such dividend equivalents will be accumulated and paid once and to the extent that the underlying award vests.
Performance Measures
The P&C Committee may establish performance goals for performance-based awards under the Amended Plan, which may be based on any performance measures selected by the P&C Committee. Such performance measures may include, but are not limited to, any of the following: earnings (including, without limitation, earnings before interest and taxes, earnings before taxes, and net earnings); operating earnings or income; earnings growth; net sales growth; net income (absolute or competitive growth rates comparative); net income applicable to common stock; cash flow, including operating cash flow, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital; earnings per share;
return on stockholders’ equity (absolute or peer-group comparative); stock price (absolute or peer-group comparative); absolute and/or relative return on common stockholders’ equity; absolute and/or relative return on capital; absolute and/or relative return on assets; economic value added (income in excess of cost of capital); customer satisfaction; quality metrics; expense reduction; and ratio of operating expenses to operating revenues. If the P&C Committee determines that any events or circumstances render performance goals to be unsuitable, the P&C Committee may modify such goals as it deems appropriate.
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Change in Control
The Amended Plan provides for accelerated vesting or payout of awards immediately upon a change in control (as defined in the Amended Plan) only if the successor company does not agree to assume or replace such existing awards with an equivalent award upon the change in control. Otherwise,
awards will only receive accelerated vesting if a change in control occurs and the participant is terminated by the Company without cause or resigns for good reason (each as defined in the Amended Plan) within 24 months of such change in control.
Amendment, Modification, and Termination
The P&C Committee or Board may amend, modify or terminate the Amended Plan. However, the P&C Committee or Board may not increase the number of shares that may be issued under the Amended Plan (subject to adjustment as described in the Amended Plan). No termination, amendment, or modification of the Amended Plan may affect adversely in any material way any award already granted under the Amended Plan, without the written consent of the participant who holds the award. Except for certain capitalization adjustments or adjustments upon events described in the Amended Plan, the P&C Committee will not modify any
outstanding option or SAR so as to specify a lower exercise price or grant price (and will not cancel an option or SAR and substitute for it an option or SAR with a lower exercise price or grant price) without the approval of the Company’s stockholders. In addition, except for certain capitalization adjustments or adjustments upon certain events described in the Amended Plan, the P&C Committee may not cancel an outstanding option or SAR whose exercise price or grant price is equal to or greater than the current fair market value of a share and substitute for it another award or cash payment without the prior approval of the Company’s stockholders.
Incentive Compensation Recoupment Policy
All awards granted under the Amended Plan are subject to the Company’s incentive compensation recoupment policy, as in
effect from time to time.
Effective Date and Plan Term
The P&C Committee approved the Amended Plan on March 21, 2023, and the Amended Plan will become effective on May 18, 2023, provided that stockholder approval is
obtained at the Annual Meeting. The Amended Plan will expire on May 16, 2029, the ten year anniversary of the date stockholders approved the 2019 LTSIP.
U.S. Federal Income Tax Considerations
The following is a brief description of the federal income tax treatment that generally applies to Amended Plan awards. The description is based on current federal tax laws, rules and regulations, which are subject to change, and does not purport to be a complete description of the federal income tax aspects of the Amended Plan. A participant may also be subject to state and local taxes.
Awards. In general, a participant will not recognize taxable income at the time a stock option is granted. Upon exercise of an NQSO, a participant will recognize compensation, taxable as ordinary income, equal to the excess of the value of the shares purchased over the exercise price. In the case of an “incentive stock option,” within the meaning of Code Section 422, a participant will not recognize ordinary income at the time of exercise (except for purposes of the alternative minimum tax), and if the participant observes certain holding period requirements, then when the shares are sold, the entire gain over the exercise price will be taxable at capital gains
rates. A participant has no taxable income at the time SARs, Performance Shares and performance units are granted, but will recognize compensation taxable as ordinary income upon exercise or settlement in an amount equal to the value of any shares delivered and the amount of cash paid by the Company. A participant who is granted shares of restricted stock, RSUs and restricted units generally will not recognize taxable income at the time the of grant, but will recognize compensation taxable as ordinary income at the time the restrictions lapse in an amount equal to the excess of the value of the shares at such time over the amount, if any, paid for such shares. However, a participant instead may elect to recognize compensation taxable as ordinary income on the date the restricted stock is granted in an amount equal to the value of the shares on that date over the amount, if any, paid for such shares.
Subject to the deduction limitation, described below, contained in Code Section 162(m), the Company may deduct, as a
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compensation expense, the amount of ordinary income recognized by a participant in connection with the Amended Plan at the time such ordinary income is recognized by that participant.
Code Section 162(m). In general, Code Section 162(m) denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year per covered employee.
Deferrals and Code Section 409A. The P&C Committee may, consistent with the requirements of Code Section 409A, permit a participant to defer receipt of cash or shares that would
otherwise be due to him or her by virtue of an option or SAR exercise, the lapse or waiver of restrictions on restricted stock, RSUs, restricted units or other awards, or the satisfaction of any requirements or objectives with respect to performance units, Performance Shares or other awards. If any such deferral election is permitted, the P&C Committee will, in its sole discretion, establish rules and procedures for such deferrals consistent with the requirements of Code Section 409A.
New Plan Benefits
Future awards under the Amended Plan will be made at the discretion of the P&C Committee. Therefore, other than with respect to annual stock grants to our non-employee directors, it is not currently possible to determine the benefits or amounts that may be received by such persons or groups pursuant to the Amended Plan in the future. Grants under the
Amended Plan in 2022 to our NEOs are shown in the 2022 Grants of Plan-Based Awards table above. Stock grants to be issued under the Amended Plan to our non-employee directors following the Annual Meeting in accordance with our outside directors’ compensation program are shown in the table below.
| | | | | | | | | | Name and Position | | | Dollar Value (1) | | | | | | Raymond E. Scott President, Chief Executive Officer | | | N/A | | | | | | Jason Cardew Senior Vice President and Chief Financial Officer | | | N/A | | | | | | Frank C. Orsini Executive Vice President and President, Seating | | | N/A | | | | | | Carl Esposito Senior Vice President and President, E-Systems | | | N/A | | | | | | Thomas A. DiDonato Former Senior Vice President and Chief Administrative Officer | | | N/A | | | | | | | Executive Officers as a Group | | | N/A | | | | | | | Non-Executive Directors as a Group | | $ | 1,695,000 | | | | | | | Non-Executive Officer Employees as a Group | | | N/A | | | | | |
(1) | The amount disclosed is equal to the total dollar value of all annual stock grants to be issued to our non-employee directors following the Annual Meeting. Share figures will be determined by dividing the dollar value by the average of the high and low stock prices on the date of the Annual Meeting.
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Equity Compensation Plan Information
| | | | | | | | | | | | | | As of December 31, 2022 | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | Weighted average exercise price of outstanding options, warrants and rights (b) | | | Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | Equity compensation plans approved by security holders | | | 1,478,152 | (1) | | $ | 20.32 | (2) | | | 1,135,253 | | Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | | Total | | | 1,478,152 | | | $ | 20.32 | | | | 1,135,253 | |
(1) | Includes 494,461 of outstanding RSUs, 780,989 of outstanding Performance Shares and 202,702 of outstanding stock options. Outstanding Performance Shares are reflected at the maximum possible payout that may be earned during the relevant performance periods.
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(2) | Reflects outstanding RSUs and Performance Shares at a weighted average price of zero. Reflects outstanding stock options at a weighted average exercise price of $148.16.
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Updated Share Information
The following table presents updated information as of March 24, 2023 about the number of shares that were subject to outstanding equity awards previously granted and shares remaining available for issuance. On the record date, March 24, 2023, the total number of shares of common stock outstanding was 59,060,758.
| | | | | | | | As of March 24, 2023 | | Number of stock options outstanding | | | 202,702 | | Weighted average exercise price of outstanding stock options | | $ | 148.16 | | Weighted average remaining term of outstanding stock options | | | 7.21 years | | Number of RSUs outstanding | | | 550,188 | | Number of Performance Shares outstanding | | | 799,774 | | Shares remaining available for issuance under the 2019 LTSIP | | | 791,491 | | Additional shares requested for issuance under the Amended Plan | | | 1,700,000 | | Total shares available for issuance under the Amended Plan | | | 2,491,491 | |
The affirmative vote of a majority of the shares of common stock present in person or represented by proxy and entitled to be voted on the proposal at the Annual Meeting is required for approval of this proposal.
THE BOARD RECOMMENDS A VOTE “FOR” THE AMENDED PLAN.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE “FOR” THE AMENDED PLAN UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING Why did you send me this proxy statement? We sent you this proxy statement because the Board is soliciting your proxy to vote at the Annual Meeting to be held on May 18, 2023,16, 2024, at 9:00 a.m. (Eastern Time) and at any postponements or adjournments of the Annual Meeting. This proxy statement summarizes information that is intended to assist you in making an informed vote on the proposals described in this proxy statement. Who can vote at the Annual Meeting? Only stockholdersshareholders of record as of the record date are entitled to vote at the Annual Meeting. The record date to determine stockholdersshareholders entitled to notice of and to vote at the Annual Meeting is the close of business on March 24, 2023.18, 2024. On the record date, there were 59,060,75856,952,094 shares of our common stock, par value $0.01 per share, outstanding. Our common stock is the only class of voting securities outstanding. How many shares must be present to conduct the Annual Meeting? We must have a quorum present in person or by proxy to conduct the Annual Meeting. A quorum is established when a majority of shares entitled to vote is present in person or represented by proxy at the Annual Meeting. Abstentions and broker non-votes (as described below) are counted for purposes of determining whether a quorum is present. What matters are to be voted on at the Annual Meeting? The agenda for the Annual Meeting is to: 1. | elect ten directors named in this proxy statement;
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2. | ratify the retention of Ernst & Young LLP as our independent registered public accounting firm for 2023;
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3. | provide an advisory vote to approve our executive compensation;
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4. | provide an advisory vote to approve the frequency of the advisory vote on our executive compensation;
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5. | approve the Amended Plan; and
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6. | conduct any other business properly brought before the Annual Meeting or any adjournments or postponements thereof.
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1.elect ten directors named in this proxy statement; 2.ratify the retention of Ernst & Young LLP as our independent registered public accounting firm for 2024; 3.provide an advisory vote to approve our executive compensation; and 4.conduct any other business properly brought before the Annual Meeting or any adjournments or postponements thereof. As of the date of this proxy statement, we do not know of any other matters to be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, however, the persons named as proxies will be authorized to vote or otherwise act in accordance with their judgment. How does the Board recommend that I vote? The Board recommends that you vote: 1. | FOR the election of each of Lear’s director nominees named in this proxy statement;
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2. | FOR the ratification of the retention of Ernst & Young LLP as our independent registered public accounting firm for 2023;
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3. | FOR the approval, on an advisory basis, of our executive compensation;
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4. | FOR future advisory votes on our executive compensation to occur EVERY ONE YEAR; and
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1.FOR the election of each of Lear’s director nominees named in this proxy statement; 2.FOR the ratification of the retention of Ernst & Young LLP as our independent registered public accounting firm for 2024; and 3.FOR the approval, on an advisory basis, of our executive compensation. How do I vote at the Annual Meeting? If you do not request printed copies of the proxy materials by mail, you will receive a Notice of Internet Availability of Proxy Materials. StockholdersShareholders that receive a Notice of Internet Availability of Proxy Materials may vote via the Internet in the following ways: • | | Prior to the Annual Meeting — You can vote via the Internet by navigating to www.proxyvote.com and entering the 16-digit control number included on the Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form previously distributed; or |
• | | At the Annual Meeting — You may vote via the Internet at the Annual Meeting by attending the live meeting at www.virtualshareholdermeeting.com/LEA2023 and entering the 16-digit control number included on the Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form previously distributed. |
1.Prior to the Annual Meeting — You can vote via the Internet by navigating to www.proxyvote.com and entering the 16-digit control number included on the Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form previously distributed; or 2.At the Annual Meeting — You may vote via the Internet at the Annual Meeting by attending the live meeting at www.virtualshareholdermeeting.com/LEA2024 and entering the 16-digit control number included on the Notice of Internet Availability of Proxy Materials, proxy card or voting instructions form previously distributed. If you request printed copies of the proxy materials by mail, you will receive a proxy card or a voting instruction form and will be able to vote in the following ways in addition to the methods of voting via the Internet described above: 1.By Telephone — You can vote by proxy by calling the toll-free number found on your proxy card or voting instruction form. You will need to use the 16-digit control number included on the proxy card to vote by | • | | | | | | | | | | | | 84 | | | | By Telephone — You can vote by proxy by calling the toll-free number found on your proxy card or voting instruction form. You will need to use the 16-digitLEAR CORPORATION control number included on the proxy card to vote by telephone. The availability of telephone voting may depend on the voting process of the organization that holds your shares; or |
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telephone. The availability of telephone voting may depend on the voting process of the organization that holds your shares; or 2.By Mail — You can vote by completing, dating, signing and returning the proxy card or voting instruction form. Telephone and Internet voting facilities will be available 24 hours a day. You may vote over the telephone or via the Internet onat www.proxyvote.com until 11:59 p.m. on May 17, 2023.15, 2024. Even if you plan to attend the Annual Meeting, we recommend that you vote in advance of the meeting via Internet or submit your proxy or voting instructions as described above so that your vote will be counted if you later decide not to attend the Annual Meeting. Your proxy will be voted in accordance with your instructions so long as, in the case of a proxy card returned by mail, such card has been signed and dated. If you vote your shares via the Internet, by telephone or by executing and returning a proxy card by mail but you do not provide specific instructions with respect to the proposals, your shares will be voted FOR the director nominees named in this proxy statement, FOR the ratification of the retention of our independent registered public accounting firm and FOR the advisory approval of executive compensation described in this proxy statement, ONE YEAR for the frequency of future advisory votes on executive compensationand FOR the Amended Plan.statement. As of the date of this proxy statement, we do not know of any matters to be presented at the Annual Meeting except those described in this proxy statement. If any other matters properly come before the Annual Meeting, however, the persons named as proxies will be authorized to vote or otherwise act in accordance with their judgment. What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials? You may receive more than one Notice of Internet Availability of Proxy Materials, more than one e-mail or multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate Notice of Internet Availability of Proxy Materials, a separate e-mail or a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholdershareholder of record and your shares are registered in more than one name, you may receive more than one Notice of Internet Availability of Proxy Materials, more than one e-mail or more than one proxy card. To vote all of your shares by proxy, you must complete, sign, date and return each proxy card and voting instruction card that you receive and vote over the Internet the shares represented by each Notice of Internet Availability of Proxy Materials that you receive (unless you have requested and received a proxy card or voting instruction card for the shares represented by one or more of those Notices of Internet Availability of Proxy Materials). May I change my vote? Yes. You may revoke your proxy at any time before it is voted at the Annual Meeting. To change your vote, you may vote your shares electronically as described above, submit another later dated proxy by telephone or mail or submit new voting instructions to your bank, broker, trustee or nominee. Your attendance at the Annual Meeting will not, by itself, revoke your proxy; you must vote via the Internet during the meeting to revoke your proxy. Holders of shares of our common stock do not have appraisal rights under Delaware law or under the Company's governing documents in connection with this solicitation. | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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What vote is required to elect directors and approve the other matters described in this proxy statement? Because this is an uncontested election, the director nominees must receive the affirmative vote of a majority of the votes cast to be elected (i.e., the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee) (Proposal No. 1). Abstentions and broker non-votes will have no effect on the outcome of the election of directors. In an uncontested election, our Bylaws provide that any incumbent director that fails to receive a majority of votes cast shall immediately tender his or her resignation. Our Board, in a process managed by the G&S Committee and following a recommendation by that committee, must decide whether or not to accept the tendered resignation. For the ratification of the retention of Ernst & Young LLP as our independent registered public accounting firm (Proposal No. 2), and the advisory approval of our executive compensation (Proposal No. 3) and the Amended Plan (Proposal No. 5), the affirmative vote of the holders of a majority of the shares represented in person or by proxy and entitled to vote on the proposal will be required for approval. For Proposal No. 2 and Proposal No. 3, and Proposal No. 5 abstentions and broker non-votes will be counted as shares represented and entitled to vote for the purposes of determining whether there is a quorum. Abstentions will have the same effect as a vote against Proposal No. 2 Proposal No. 3 and Proposal No. 5.3. Absent specific instructions on Proposal No. 2, brokers are permitted to exercise voting discretion with respect to such proposal. Broker non-votes will have no effect on Proposal No. 3 and No. 5. The frequency receiving the highest number of votes cast on the advisory vote on the frequency of the advisory vote on our executive compensation (Proposal No. 4) will be deemed to be the frequency selected by the stockholders. Abstentions and broker non-votes will have no effect on Proposal No. 4.3. For additional information about broker non-votes see “How do I vote if my bank or broker holds my shares in ‘street name’?”
What is the difference between holding shares as a stockholdershareholder of record and as a beneficial owner? If your shares are registered in your name on the Company’s books and records or with our transfer agent, you are the “stockholder“shareholder of record” of those shares, and this proxy statement and accompanying materials have been provided directly to you by the Company. On the other hand, if you purchased your shares through a brokerage or other financial intermediary, the brokerage or other financial intermediary will automatically put your shares into “street name” which means that the brokerage or other financial intermediary will hold your shares in its name or another nominee’s name and not in your name but will keep records showing you as the “beneficial owner.” If you hold shares beneficially in street name, this proxy statement and accompanying materials have been forwarded to you by your broker, bank or other holder of record. How do I vote if my bank or broker holds my shares in “street name”? If you hold your shares in “street name” through a bank, broker or other nominee, such bank, broker or nominee will vote those shares in accordance with your instructions. To so instruct your bank, broker or nominee, you should refer to the information provided to you by such entity. Without instructions from you, a bank, broker or nominee will be permitted to exercise its own voting discretion with respect to so-called routine matters (Proposal No. 2 (ratification- ratification of auditors)) but will not be permitted to exercise voting discretion with respect to non-routine matters (Proposals No. 1 (director elections),- director elections and No. 3 (advisory vote on our executive compensation), No. 4 (advisory vote on the frequency of the- advisory vote on our executive compensation) and No. 5 (vote on the Amended Plan). Thus, if you do not give your bank, broker or nominee specific instructions with respect to Proposal No. 2, your shares will be voted in such entity’s discretion. If you do not give your bank, broker or nominee specific instructions with respect to the remaining proposals, your shares will not be voted on such proposals. This is called a “broker non-vote.” Shares represented by such broker non-votes will be counted in determining whether there is a quorum and will have no effect on the non-routine proposals. We urge you to promptly provide your bank, broker or nominee with appropriate voting instructions so that all your shares may be voted at the Annual Meeting.
| | | | | | | | QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING | |
How many votes do I have? Each share of common stock that you hold as of the record date entitles you to one vote, without cumulation, on each matter to be voted upon at the Annual Meeting. How will the votes be counted at the Annual Meeting? The votes will be counted by the inspector of election appointed for the Annual Meeting. How will the Company announce the voting results? The Company will report the final results of the voting at the Annual Meeting in a filing with the SEC on a Current Who pays for the Company’s solicitation of proxies? The Board is soliciting your proxy to vote your shares of common stock at our Annual Meeting. We will bear the cost of soliciting proxies on behalf of the Company, including preparing, printing and mailing this proxy statement. Proxies may be solicited personally, by mail, email or by telephone by certain of our directors, officers, employees or representatives. Our directors and employees will not be paid any additional compensation for soliciting proxies. We will reimburse brokerage houses, banks, custodians and other nominees and fiduciaries for out-of-pocket expenses incurred in forwarding our proxy solicitation materials. What is “householding” and how does it work? Under the rules adopted by the SEC, we may deliver a single set of proxy materials to one address shared by two or more of our stockholders.shareholders. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one set of proxy materials to multiple stockholdersshareholders who share an address, unless we received contrary instructions from the impacted stockholdersshareholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the proxy materials, as requested, to any stockholdershareholder at the shared address to which a single copy of these documents was delivered. If you prefer to receive separate copies of the Notice of Internet Availability of Proxy Materials, proxy statement or annual report, contact Broadridge Financial Solutions, Inc. by calling 1-800-542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
| | | | | | | | | | | ADDITIONAL PROXY MATERIALS |
In addition, if you currently are a stockholdershareholder who shares an address with another stockholdershareholder and would like to receive only one copy of future notices and proxy materials for your household, you may notify your broker if your shares are held in a brokerage account or you may notify us if you hold registered shares. Registered stockholdersshareholders may notify us by contacting Broadridge Financial Solutions, Inc. at the above telephone number or address or sending a written request to Lear Corporation, 21557 Telegraph Road, Southfield, Michigan 48033, Attention: Investor Relations. How do I participate in the Annual Meeting? We are hosting the Annual Meeting through a virtual web conference. You will not be able to attend the meeting in person. You will be able to attend the virtual meeting, vote your shares electronically, and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/LEA2023LEA2024 and entering your 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card, or onin any additional voting instructions accompanying these proxy materials. The Annual Meeting will begin promptly at 9:00 a.m. (Eastern Time). Online check-in will be available beginning at 8:30 a.m. (Eastern Time). Please allow ample time for the online check-in process. Please be assured that you will be afforded the same rights and opportunities to participate in the virtual meeting as you would at an in-person meeting.in-person meeting. | | | | | | | | | | | | | | | | | | | | | 2023 Proxy Statement
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| | | QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING | | |
As part of the Annual Meeting, we will hold a question and answer session, during which we intend to answer questions submitted during the meeting in accordance with the Annual Meeting procedures which are pertinent to the Company and the meeting matters, as time permits. Questions may be submitted during the Annual Meeting through www.virtualshareholdermeeting.com/LEA2023.LEA2024. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. There will be technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the Annual Meeting login page.
STOCKHOLDERSHAREHOLDER PROPOSALS FOR 20242025 ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
StockholdersShareholders who intend to present proposals at the Company’s annual meeting of stockholdersshareholders in 20242025 pursuant to Rule 14a-8 under the Exchange Act must send notice of their proposal to us so that we receive it no later than December 5, 2023. Stockholders4, 2024. Shareholders who intend to present proposals at the annual meeting of stockholdersshareholders in 20242025 other than pursuant to Rule 14a-8 must comply with the notice provisions in our Bylaws. The notice provisions in our Bylaws require that, for a proposal to be properly brought before the annual meeting of stockholdersshareholders in 2024,2025, proper notice of the proposal must be received by us not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however that in the event next year’s annual meeting is more than 30 days before or less than 70 days after such anniversary date, notice must be
delivered not less than the later of 90 days prior to next year’s annual meeting or the 10th day following the day the Company first publicly announces next year’s annual meeting date. Under these requirements, the deadline for proposals brought under our Bylaws is no earlier than January 19, 202416, 2025, and no later than February 18, 2024.17, 2025. Additionally, any nominations of directors must comply with the newly enacted universal proxy rules contained in Rule 14a-19. Please note that the notice requirements under Rule 14a-19 are in addition to the applicable notice requirements under the advance notice provisions of our Bylaws as described above. StockholderShareholder proposals should be addressed to Lear Corporation, 21557 Telegraph Road, Southfield, Michigan 48033, Attention: Harry A. Kemp, Senior Vice President, Chief Administrative Officer and General Counsel. | | | | | | | | | | | | | | 88 | | | | | | | | 2023 Proxy Statement
| | | | | 99 LEAR CORPORATION |
| | | | | | | | | | | ADDITIONAL PROXY MATERIALS |
We know of no other matters to be submitted to the stockholdersshareholders at the Annual Meeting. If any other matters properly come before the Annual Meeting, persons named in the proxy intend to vote the shares they represent in accordance with their own judgments. Upon written request by any stockholdershareholder entitled to vote at the Annual Meeting, we will promptly furnish, without charge, a copy of the Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, which we filed with the SEC, including the financial statements and schedule. If the person requesting the report was not a stockholdershareholder of record on March 24, 2023,18, 2024, the request must contain a good faith representation that he or she was a beneficial owner of our common stock at the close of business on that date. Requests should be addressed to Lear Corporation, 21557 Telegraph Road, Southfield, Michigan 48033, Attention: Harry A. Kemp, Senior Vice President, Chief Administrative Officer and General Counsel. YOUR VOTE IS IMPORTANT. WE URGE YOU TO VOTE TODAY BY TELEPHONE, VIA THE INTERNET OR BY MAIL. By Order of the Board of Directors, Harry A. Kemp Senior Vice President, Chief Administrative Officer and General Counsel | | | | | | | | | | | | | 2024 Proxy Statement | | By Order of the Board of Directors,| | |  | Harry A. Kemp | Senior Vice President, | Chief Administrative Officer and General Counsel89 |
Table of Contents | | | | | | | | | | | | | 100 ADDITIONAL PROXY MATERIALS | | | |
| LEAR CORPORATION
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APPENDIX A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES The information presented in this proxy statement under the captionsin “Proxy Summary” and “Compensation Discussion and Analysis — Executive Summary” regarding core operating earnings, adjusted earnings per share and free cash flow does not conform to GAAP and should not be construed as an alternative to the reported financial results of the Company determined in accordance with GAAP. Management believes that the non-GAAP information used in this proxy statement is useful to both management and investors in their analysis of the Company’s financial position and results of operations. In particular, management believes that core operating earnings and adjusted earnings per share are useful measures in assessing the Company’s financial performance by excluding certain items that are not indicative of the Company’s core operating performance or that may obscure trends useful in evaluating the Company’s continuing operating activities. Management also believes that these measures are useful to both management and investors in their analysis of the Company’s results of operations and provide improved comparability between fiscal periods. Management believes that free cash flow is useful to both management and investors in their analysis of the Company’s ability to service and repay its debt. Further, management uses these non-GAAP financial measures for planning and forecasting future periods. The non-GAAP information provided may not be consistent with methodologies used by other companies. All non-GAAP information regarding core operating earnings, adjusted earnings per share and free cash flow is reconciled to the most directly comparable reported GAAP results in the tables below. Core Operating Earnings | | | | | | | | | (unaudited; in millions) | | 2022 | | | 2021 | | Net income attributable to Lear | | $ | 327.7 | | | $ | 373.9 | | Interest expense | | | 98.6 | | | | 91.8 | | Other expense, net | | | 46.4 | | | | 0.1 | | Income taxes | | | 133.7 | | | | 137.7 | | Equity in net income of affiliates | | | (33.1 | ) | | | (15.8 | ) | Net income attributable to noncontrolling interests | | | 81.0 | | | | 87.7 | | Restructuring costs and other special items - | | | | | | | | | Costs related to restructuring actions | | | 158.9 | | | | 119.3 | | Acquisition costs | | | 10.0 | | | | — | | Acquisition-related inventory fair value adjustment | | | 1.1 | | | | — | | Impairments related to Russian operations | | | 19.4 | | | | — | | Intangible asset impairment | | | 8.9 | | | | 8.5 | | Costs related to typhoon in the Philippines, net of insurance recoveries | | | — | | | | 13.2 | | Other | | | 17.9 | | | | 9.6 | | | | | Core operating earnings | | $ | 870.5 | | | $ | 826.0 | |
| | | | | | | | | | (unaudited; in millions) | 2023 | 2022 | | Net income attributable to Lear | $ | 572.5 | | $ | 327.7 | | | Interest expense | 101.1 | | 98.6 | | | Other expense, net | 54.9 | | 46.4 | | | Income taxes | 180.8 | | 133.7 | | | Equity in net income of affiliates | (49.3) | | (33.1) | | | Net income attributable to noncontrolling interests | 73.2 | | 81.0 | | | Restructuring costs and other special items - | | | | Costs related to restructuring actions | 152.4 | | 158.9 | | | Acquisition costs | 0.8 | | 10.0 | | | Acquisition-related inventory fair value adjustment | 1.8 | | 1.1 | | | Impairments related to Russian operations | 2.4 | | 19.4 | | | Intangible asset impairment | 1.9 | | 8.9 | | | Insurance recoveries related to typhoon in the Philippines, net of costs | (3.3) | | — | | | Favorable tax ruling in a foreign jurisdiction | (0.2) | | — | | | Other | 31.0 | | 17.9 | | | Core operating earnings | $ | 1,120.0 | | $ | 870.5 | |
| | | | | | | | | | | | | | | | | | | | | 20232024 Proxy Statement
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| A-1 | | | | | | | | | | ADDITIONAL PROXY MATERIALS |
Adjusted Net Income and Adjusted Earnings Per Share | | | | | | | | | | (unaudited; in millions, except per share amounts) | | 2022 | | | 2021 | | | | | Net income attributable to Lear | | $ | 327.7 | | | $ | 373.9 | | Restructuring costs and other special items - | | | | | | | | | Costs related to restructuring actions | | | 158.9 | | | | 112.6 | | Acquisition costs | | | 10.0 | | | | — | | Acquisition-related inventory fair value adjustment | | | 1.1 | | | | — | | Gain on acquisition-related foreign exchange contract | | | (1.7 | ) | | | — | | Impairments related to Russian operations | | | 19.4 | | | | — | | Intangible asset impairment | | | 8.9 | | | | 8.5 | | Costs (insurance recoveries) related to typhoon in the Philippines, net | | | (1.4 | ) | | | 13.2 | | Foreign exchange losses due to foreign exchange rate volatility related to Russia | | | 9.6 | | | | — | | Favorable tax ruling in a foreign jurisdiction | | | — | | | | (45.1 | ) | Loss on extinguishment of debt | | | — | | | | 24.6 | | Loss related to affiliate | | | — | | | | 2.0 | | Other | | | 23.6 | | | | 4.2 | | Tax impact of special items and other net tax adjustments(1) | | | (33.6 | ) | | | (14.1 | ) | | | | | Adjusted net income attributable to Lear | | $ | 522.5 | | | $ | 479.8 | | | | | Weighted average number of diluted shares outstanding | | | 59.9 | | | | 60.4 | | | | | Diluted net income per share attributable to Lear | | $ | 5.47 | | | $ | 6.19 | | | | | Adjusted earnings per share | | $ | 8.72 | | | $ | 7.94 | |
| (1) | | | | | | | | | | | (unaudited; in millions, except per share amounts) | 2023 | 2022 | | Net income attributable to Lear | $ | 572.5 | | $ | 327.7 | | | Restructuring costs and other special items - | | | | Costs related to restructuring actions | 134.2 | | 158.9 | | | Acquisition costs | 0.8 | | 10.0 | | | Acquisition-related inventory fair value adjustment | 1.8 | | 1.1 | | | Gain on acquisition-related foreign exchange contract | — | | (1.7) | | | Impairments related to Russian operations | 2.4 | | 19.4 | | | Intangible asset impairment | 1.9 | | 8.9 | | | Costs (insurance recoveries) related to typhoon in the Philippines, net | (7.3) | | (1.4) | | | Foreign exchange losses due to foreign exchange rate volatility related to Russia | (1.9) | | 9.6 | | | Favorable tax ruling in a foreign jurisdiction | (0.7) | | — | | | Loss on extinguishment of debt | | — | | | Loss related to affiliate | 7.0 | | — | | | Other | 34.3 | | 23.6 | | Tax impact of special items and other net tax adjustments(1) | (34.7) | | (33.6) | | | Adjusted net income attributable to Lear | $ | 710.3 | | $ | 522.5 | | | Weighted average number of diluted shares outstanding | 59.1 | 59.9 | | Diluted net income per share attributable to Lear | $ | 9.68 | | $ | 5.47 | | | Adjusted earnings per share | $ | 12.02 | | $ | 8.72 | |
(1)Reflects the tax effect of restructuring costs and other special items, as well as several discrete tax items. The identification of these tax items is judgmental in nature, and their calculation is based on various assumptions and estimates. |
Free Cash Flow
| | | | | | | | | | (unaudited; in millions) | | 2022 | | | 2021 | | | | | Net cash provided by operating activities | | $ | 1,021.4 | | | $ | 670.1 | | | | | Capital expenditures | | | (638.2 | ) | | | (585.1 | ) | | | | Free cash flow | | $ | 383.2 | | | $ | 85.0 | |
LEAR CORPORATION
2019 LONG-TERM STOCK INCENTIVE PLAN
(As Amended and Restated as of May 18, 2023)
Article 1. Establishment, Objectives and Duration
1.1 Establishment of the Plan. Lear Corporation, a Delaware corporation (the “Company”), hereby establishes thisLear Corporation 2019 Long-Term Stock Incentive Plan, as set forth in this document and as may be amended or amended and restated from time to time (the “Plan”). Capitalized terms used but not otherwise defined herein will have the meanings given to them in Article 2. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units, Restricted Stock Units, Performance Shares, Performance Units and other cash and equity incentive Awards. The Plan was approved by the Committee on March 26, 2019 and by the Company’s shareholders on May 16, 2019 (the “Effective Date”). The Plan was most recently amended and restated by the Committee on March 20, 2023 and by the Company’s shareholders on May 18, 2023. The Plan will remain in effect thereafter as provided in Section 1.3 hereof. Following the Effective Date, no new awards will be granted under the Lear Corporation 2009 Long-Term Stock Incentive Plan, as amended (the “Prior Plan”). For the avoidance of doubt, the Prior Plan and any applicable award agreements issued thereunder will continue to govern any awards that remain outstanding thereunder on and after the Effective Date.
1.2 Objectives of the Plan. The objectives of the Plan are to optimize the profitability and growth of the Company through long-term incentives that are consistent with the Company’s objectives and that link the interests of Participants to those of the Company’s shareholders; to provide Participants with an incentive for excellence in individual performance; to promote teamwork among Participants; and to give the Company a significant advantage in attracting and retaining officers, key Employees and Directors.
The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make significant contributions to the Company’s success, and to allow Participants to share in the success of the Company.
1.3 Duration of the Plan. The Plan will commence on the Effective Date, as defined in Article 2, and will remain in effect, subject to the right of the Committee to amend or terminate the Plan at any time pursuant to Article 15, until all Shares subject to it pursuant to Article 4 have been issued or transferred according to the Plan’s provisions. In no event may an Award be granted under the Plan on or after the ten (10) year anniversary of the Effective Date.
Article 2. Definitions
Whenever used in the Plan, the following terms have the meanings set forth below, and when the meaning is intended, the initial letter of the word is capitalized:
“Affiliates” means any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company or in which the Company has a significant equity interest, in either case as determined by the Committee; provided, however, that the definition
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of Affiliate shall be limited to entities that are eligible issuers of service recipient stock (as defined in Treas. Reg. Section 1.409A-1(b)(5)(iii)(E), or applicable successor regulation) for Awards that would otherwise be subject to Section 409A, unless the Committee determines otherwise. Notwithstanding the foregoing, for purposes of determining whether a Participant has terminated employment with the Company and all Affiliates, “Affiliates” means any corporation (or partnership, limited liability company, joint venture, or other enterprise) of which the Company owns or controls, directly or indirectly, at least ten percent (10%) of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). The minimum percentage of ownership or control in the previous sentence shall be raised from ten percent (10%) to twenty percent (20%) for purposes of determining timing of payment of an Award, or amount payable with respect to an Award, that is “deferred compensation” for purposes of Code Section 409A, if payment of such Award or amount would be accelerated or otherwise triggered by a Participant’s termination of employment.
“Automatic Exercise Date” means, with respect to an Option or a Stock Appreciation Right, the last business day of the applicable term of the Option pursuant to Section 6.12 or the Stock Appreciation Right pursuant to Section 7.9.
“Award” means, individually or collectively, a grant under this Plan to a Participant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units, Restricted Stock Units, Performance Shares, Performance Units or other types of equity-based or cash-based incentives hereafter approved by the Committee.
“Award Agreement” means an agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award or Awards granted to the Participant.
“Beneficial Owner” or “Beneficial Ownership” has the meaning ascribed to that term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
“Board” or “Board of Directors” means the Board of Directors of the Company.
“Cause” means, unless otherwise set forth in the applicable Award Agreement, with respect to a Participant, “Cause” as defined in any unexpired, written employment or severance or similar agreement between the Participant and the Company or an Affiliate. If there is no such agreement or if such agreement does not define “Cause,” then “Cause” means:
| (a) | the willful and continued failure of the Participant substantially to perform his or her duties with or for the Company or an Affiliate;
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| (b) | the Participant’s engaging in conduct that is significantly injurious to the Company or an Affiliate, monetarily or otherwise;
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| (c) | the Participant’s commission of a crime that is significantly injurious to the Company or an Affiliate, monetarily, reputationally or otherwise;
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| (d) | the Participant’s abuse of illegal drugs or other controlled substances or intoxication that impairs the Participant’s ability to perform his or her duties with or for the Company or an Affiliate; or
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| (e) | the Participant’s breach of any non-competition or non-solicitation covenants contained in any written agreement between the Participant and the Company or an Affiliate.
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Unless otherwise defined in the Participant’s written employment or severance or similar agreement, an act or omission is “willful” for the purpose of determining whether a termination of employment was made for “cause” if it was knowingly done, or knowingly omitted to be done, by the Participant not in good faith and without reasonable belief that the act or omission was in the best interest of the Company or an Affiliate. For purposes of this Plan, if a Participant is convicted of a crime or pleads nolo contendere to a criminal charge, he or she will conclusively be deemed to have committed the crime. The Committee has the discretion, in other circumstances, to determine in good faith, from all the facts and circumstances reasonably available to it, whether a Participant who is under investigation for, or has been charged with, a crime will be deemed to have committed it for purposes of this Plan.
A “Change in Control” of the Company will be deemed to have occurred (as of a particular day, as specified by the Board) as of the first day any one or more of the following paragraphs is satisfied.
| (a) | Any Person (other than the Company or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the Beneficial Owner, directly or indirectly, of securities of the Company, representing more than twenty percent (20%) of the combined voting power of the Company’s then outstanding securities.
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| (b) | During any period of twenty-four (24) consecutive months beginning on or after the Effective Date, individuals who at the beginning of the period constituted the Board cease for any reason (other than death, Disability or Retirement) to constitute a majority of the Board. For this purpose, any new Director whose election by the Board, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds (2/3) of the Directors then still in office, and who either were Directors at the beginning of the period or whose election or nomination for election was so approved, will be deemed to have been a Director at the beginning of any twenty-four (24) month period under consideration.
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| (c) | Consummation of: (i) a sale or disposition of all or substantially all the Company’s assets; or (ii) a merger, consolidation or reorganization of the Company with or involving any other corporation, other than a merger, consolidation or reorganization that results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization.
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| (d) | The shareholders of the Company approve a plan of complete liquidation or dissolution of the Company.
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Notwithstanding the foregoing, if an Award, or amount payable with respect to an Award, is “deferred compensation” for purposes of Code Section 409A, and if a payment of such Award or amount would be accelerated or otherwise triggered upon a “Change in Control,” then the foregoing definition is modified, to the extent necessary to avoid the imposition of an excise tax under Code Section 409A, to mean a “change in control event” as such term is defined for purposes of Code Section 409A. For purposes of clarity, if an Award would, for example, vest and be paid on a “Change in Control” as defined herein but payment of such Award would violate the provisions of Code Section 409A, then the Award shall vest but will be paid only in compliance with its terms and Code Section 409A (i.e., upon a permissible payment event).
“Change in Control Price” means the Fair Market Value of a Share upon a Change in Control. To the extent that the consideration paid in any such Change in Control transaction consists all or in part of securities or other non-cash consideration, the value of such securities or other non-cash consideration shall be determined in good faith by the Committee.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means, as designated in accordance with Section 3.1, the People and Compensation Committee of the Board or such other committee as may be appointed by the Board to administer the Plan.
“Company” has the meaning given to such term in Section 1.1 hereof, and includes, without limitation, any successor thereto as provided in Article 18.
“Director” means any individual who is a member of the Board of Directors and who is not employed by the Company or an Affiliate thereof.
“Disability” means, with respect to any Participant, (a) long-term disability as defined under the long-term disability plan of the Company or an Affiliate that covers such Participant, or (b) if the Participant is not covered by such a long-term disability plan, disability as defined for purposes of eligibility for a disability award under the Social Security Act. Notwithstanding the foregoing, for purposes of determining the period of time after termination of employment during which a Participant may exercise an ISO, “Disability” will have the meaning set forth in Code Section 22(e)(3), which is, generally, that the Participant is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of at least twelve (12) months.
Notwithstanding the foregoing, if an Award, or amount payable with respect to an Award, is “deferred compensation” for purposes of Code Section 409A, and if a payment of such Award or amount would be accelerated or otherwise triggered upon a “Disability,” then the foregoing definition is modified, to the extent necessary to avoid the imposition of an excise tax under Code Section 409A, to refer to a Participant who is “disabled,” as such term is defined for purposes of Code Section 409A. For purposes of clarity, if an Award would, for example, vest and be paid on a “Disability” as defined herein but payment of such Award
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would violate the provisions of Code Section 409A, then the Award shall vest but will be paid only in compliance with its terms and Code Section 409A (i.e., upon a permissible payment event).
“Effective Date” has the meaning given to such term in Section 1.1 hereof.
“Eligible Person” means any Employee or Director.
“Employee” means any employee of the Company or any of its Affiliates.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
“Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
“Fair Market Value” means:
| (a) | the closing trading price of the Shares on the New York Stock Exchange or, if the Shares are not traded on the New York Stock Exchange, on the NASDAQ Stock Market or any other exchange on which they are traded; or
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| (b) | if the Shares are not traded on any exchange, the mean between the closing bid and asked prices of the Shares in the over-the-counter market; or
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| (c) | if those bid and asked prices are not available, then the fair market value as reported by any nationally recognized quotation service selected by the Committee or as determined in good faith by the Committee.
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Notwithstanding the foregoing, for purposes of Awards intended to be exempt from Code Section 409A, the Fair Market Value shall be no less than the “fair market value,” as such term is defined for purposes of Code Section 409A.
“Good Reason” has the meaning set forth in any unexpired, written employment or severance or similar agreement between a Participant and the Company or an Affiliate, solely if and to the extent that such term is defined in such an agreement. If a Participant does not have a written employment or severance or similar agreement with the Company or an Affiliate, or if such agreement does not define “Good Reason,” this term shall not apply to such Participant for purposes of the Plan.
“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422.
“Nonqualified Stock Option” or “NQSO” means an Option to purchase Shares granted under Article 6 that is not intended to meet the requirements of Code Section 422.
“Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.
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“Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan pursuant to Section 5.2 and who has outstanding an Award granted under the Plan.
“Performance Period” means the time period, set by the Committee in its discretion, during which performance objectives must be met in order for a Participant to earn Performance Units or Performance Shares granted under Article 9.
“Performance Share” means an Award with an initial value equal to the Fair Market Value on the date of grant which is based on the attainment of performance objectives, as described in Article 9.
“Performance Unit” means an Award with an initial value established by the Committee at the time of grant which is based on the attainment of performance objectives, as described in Article 9.
“Person” has the meaning ascribed to that term in Section 3(a)(9) of the Exchange Actvarious assumptions and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
estimates. “Plan” has the meaning given to such term in Section 1.1 hereof.“Prior Plan”Free Cash Flow has the meaning given to such term in Section 1.1 hereof.
| | | | | | | | | | (unaudited; in millions) | 2023 | 2022 | | Net cash provided by operating activities | $ | 1,249.3 | | $ | 1,021.4 | | | Settlement of accounts payable in conjunction with acquisition of IGB | 15.4 | | — | | | Capital expenditures | (626.5) | | (638.2) | | | Free cash flow | $ | 638.2 | | $ | 383.2 | |
“Replacement Award”
means an Award resulting from the exchange or substitution specified in Section 14.1 upon a Change in Control and meeting the applicable conditions specified in Section 14.1, provided that such Award is issued by a company (foreign or domestic) the majority of the equity of which is listed under and in compliance with the domestic company listing rules of the New York Stock Exchange or with a similarly liquid exchange which has comparable standards to the domestic listing standards of the New York Stock Exchange.“Restricted Stock” means a contingent grant of Shares awarded to a Participant pursuant to Article 8.
“Restricted Stock Unit” means a Restricted Unit granted to a Participant, as described in Article 8, that is payable in Shares.
“Restricted Unit” means a notional account established pursuant to an Award granted to a Participant, as described in Article 8, that is (a) credited with amounts equal to Shares or some other unit of measurement specified in the Award Agreement, (b) subject to restrictions, including, without limitation, a Restriction Period, and (c) payable in cash or Shares.
“Restriction Period” means the period during which the transfer of shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance objectives, or the occurrence of other events as determined by the Committee, at its discretion) or the shares of Restricted Stock, Restricted Stock Units or Restricted Units are not vested.
“Retirement” means termination of employment or service on or after (a) reaching the age established by the Company as the normal retirement age in any unexpired employment,
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severance or similar agreement between the Participant and the Company or an Affiliate, or, in the absence of such an agreement, the normal retirement age under the tax-qualified defined benefit retirement plan or, if none, the tax-qualified defined contribution retirement plan, sponsored by the Company or an Affiliate in which the Participant participates, (b) attaining a combination of years of age and service with the Company and its Affiliates (including, to the extent applicable and credited by the Company, service with another company prior to it becoming an Affiliate) of at least 65, with a minimum age of 55 and at least five years of service with the Company and its Affiliates (only if an Affiliate at the time of service) or (c) solely with respect to a Director, the Participant’s cessation of service as a Director as a result of being ineligible to stand for re-election after attaining a certain age.
“Shares” means the shares of common stock, $0.01 par value, of the Company, including their associated preferred share purchase rights, if applicable.
“Stock Appreciation Right” or “SAR” means an Award designated as an SAR pursuant to the terms of Article 7.
“Substitute Award” means an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation, or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an Award made in connection with the cancellation and repricing of an Option or SAR.
“Vested Options and SARs” has the meaning given to such term in Section 14.1(a)(i) hereof.
Article 3. Administration
3.1 The Committee. The Plan will be administered by the Compensation Committee of the Board, or by any other Committee appointed by the Board, which Committee (unless otherwise determined by the Board) will satisfy the “non-employee director” requirements of Rule 16b-3 under the Exchange Act and the regulations of Rule 16b-3 under the Exchange Act, or any successor regulations or provisions, so long as the Company is subject to the registration requirements of the Exchange Act. The members of the Committee will be appointed from time to time by, and serve at the discretion of, the Board of Directors. The Committee will act by a majority of its members at the time in office and eligible to vote on any particular matter, and Committee action may be taken either by a vote at a meeting or in writing without a meeting.
3.2 Authority of the Committee. Except as limited by law and subject to the provisions of this Plan, the Committee will have full power to: select Eligible Persons to participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend or waive rules and regulations for the Plan’s administration; correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary to carry out the intent of the Plan; and (subject to the provisions of Section 4.5 and
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Article 15) amend the terms and conditions of any outstanding Award to the extent they are within the discretion of the Committee as provided in the Plan. Further, the Committee will make all other determinations that may be necessary or advisable to administer the Plan. As permitted by law and consistent with Section 3.1, the Committee may delegate some or all of its authority under the Plan.
3.3 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan will be final, conclusive and binding on all persons, including, without limitation, the Company, its Board of Directors, its shareholders, all Affiliates, Employees, Participants and their estates and beneficiaries.
Article 4. Shares Subject to the Plan and Limitations on Awards
4.1 Number of Shares Available for Grants. Subject to adjustment as provided in Sections 4.2 and 4.3, the number of Shares that may be issued or transferred to Participants under the Plan shall not exceed the sum of (a) 2,491,491 Shares, equal to (i) 791,491 Shares authorized for issuance, but not yet awarded, under the Plan as of March 24, 2023 (prior to the Plan being amended and restated), plus (ii) 1,700,000 new Shares for grant; and (b) any Shares under the Prior Plan subject to awards that, after the Effective Date, are forfeited, terminated, lapsed or satisfied thereunder in cash or property other than Shares. Subject to adjustment as provided in Section 4.3, the maximum number of Shares and Share equivalent units that may be granted during any calendar year to any one Participant under Options, SARs, Restricted Stock, Restricted Units, Restricted Stock Units, Performance Shares or any other Award is 1,000,000. The maximum number of Shares that may be issued pursuant to Options intended to be ISOs is 1,000,000. The maximum aggregate dollar amount that may be paid to any one Participant during any calendar year under Performance Units or any cash incentive Award granted under Section 9.10 is $20,000,000. The Shares with respect to which Awards may be made will include authorized but unissued Shares, and Shares that are currently held or subsequently acquired by the Company as treasury Shares, including Shares purchased in the open market or in private transactions. For the avoidance of doubt, Shares underlying Awards that are subject to the achievement of performance goals shall be counted against the share reserve and the limits in this Section 4.1 based on the target value of such Awards unless and until such time as such Awards become vested and settled in Shares.
4.2 Lapsed Awards. Any Shares subject to an Award under the Plan that, after the Effective Date, are forfeited, canceled, settled or otherwise terminated without a distribution of Shares to a Participant will thereafter be deemed to be available for Awards. In applying the immediately preceding sentence, if (a) Shares otherwise issuable or issued in respect of, or as part of, any Award are withheld to cover taxes or any applicable Exercise Price, such Shares shall be treated as having been issued under the Plan and shall not be available for issuance under the Plan, and (b) any Share-settled SARs are exercised, the aggregate number of Shares subject to such SARs shall be deemed issued under the Plan and shall not be available for issuance under the Plan. In addition, Shares tendered to exercise outstanding Options or other Awards or to cover applicable taxes on Awards shall not be available for issuance under the Plan.
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4.3 Adjustments in Authorized Shares.
| (a) | If the Shares, as currently constituted, are changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether because of merger, consolidation, recapitalization, reclassification, split, reverse split, combination of shares, or other similar change in the corporate structure of the Company affecting the Shares) or if the number of Shares is increased through the payment of a stock dividend, then the Committee will substitute for or add to each Share previously appropriated, later subject to, or which may become subject to, an Award, the number and kind of shares of stock or other securities into which each outstanding Share was changed for which each such Share was exchanged, or to which each such Share is entitled, as the case may be. Outstanding Awards will also be appropriately adjusted as to price and other terms, to the extent necessary to reflect the events described above.
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| (b) | Fractional Shares resulting from any adjustment in Awards pursuant to this section may be settled in cash or otherwise as the Committee determines. The Company will give notice of any adjustment to each Participant who holds an Award that has been adjusted and the adjustment (whether or not that notice is given) will be effective and binding for all Plan purposes.
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4.4Limitation on Non-Employee Director Compensation. Notwithstanding anything herein to the contrary, compensation paid to a Director, including cash fees and Awards under the Plan (based on the grant date Fair Market Value of such Awards for financial reporting purposes), shall not exceed $900,000 per fiscal year in respect of his or her service as a Director. For the avoidance of doubt, compensation shall be counted towards this limit for the Board compensation year in which it is earned (and not when it is paid or settled in the event that it is deferred).
4.5 Minimum Vesting Requirements. Except in the case of Substitute Awards granted pursuant to Section 4.6 and subject to the following sentence, Awards granted under the Plan shall be subject to a minimum vesting period of one (1) year. Notwithstanding the foregoing, (a) the Committee may provide that the vesting of an Award shall accelerate in the event of the Participant’s death, Disability, or Retirement, or the occurrence of a Change in Control, and (b) the Committee may grant Awards covering five percent (5%) or fewer of the total number of Shares authorized under the Plan without respect to the above-described minimum vesting requirement. Notwithstanding the foregoing, with respect to Awards to Directors, the vesting of such Awards will be deemed to satisfy the one (1) year minimum vesting requirement to the extent that the Awards vest on the earlier of the one (1) year anniversary of the date of grant and the next annual meeting of the Company’s shareholders that is at least fifty (50) weeks after the immediately preceding year’s annual meeting.
4.6 Substitute Awards.
| (a) | Substitute Awards shall not reduce the Shares authorized for grant under the Plan. In the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to
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| | determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available Shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Affiliates immediately prior to such acquisition or combination.
| | (b) | In the event that the Company or an Affiliate consummates a transaction described in Code Section 424(a) (e.g., the acquisition of property or stock from an unrelated corporation), persons who become Employees or Directors on account of such transaction may be granted Substitute Awards in substitution for awards granted by their former employer, and any such substitute Options or SARs may be granted with an Exercise Price less than the Fair Market Value of a Share on the grant date thereof; provided, however, the grant of such substitute Option or SAR shall not constitute a “modification” as defined in Code Section 424(h)(3) and the applicable Treasury regulations.
Article 5. Eligibility and Participation
5.1 Eligibility. All Eligible Persons, including Eligible Persons who are members of the Board, are eligible to participate in this Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the Committee will, from time to time, select those Eligible Persons to whom Awards will be granted, and will determine the nature and amount of each Award.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Eligible Persons in the number, and upon the terms, and at any time and from time to time, as determined by the Committee.
6.2 Award Agreement. Each Option grant will be evidenced by an Award Agreement that specifies the Exercise Price, the duration of the Option, the number of Shares to which the Option pertains, the manner, time and rate of exercise or vesting of the Option, and such other provisions as the Committee determines. The Award Agreement will also specify whether the Option is intended to be an ISO or an NQSO.
6.3 Exercise Price. The Exercise Price for each Share subject to an Option will be at least one hundred percent (100%) of the Fair Market Value on the date the Option is granted.
6.4 Duration of Options. Each Option will expire at the time determined by the Committee at the time of grant, but no later than the tenth (10th) anniversary of the date of its grant. Notwithstanding any contrary provision herein, if, on the date an outstanding Option would expire, the exercise of the Option, including by a “net exercise” or “cashless” exercise, would violate applicable securities laws or any insider trading policy maintained by the Company from time to time, the expiration date applicable to the Option will be extended,
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except to the extent such extension would violate Section 409A, to a date that is thirty (30) calendar days after the date the exercise of the Option would no longer violate applicable securities laws or any such insider trading policy.
6.5 No Dividend Equivalents. Subject to Section 4.3, the Committee may not grant payments in connection with Options that are equivalent to dividends declared and paid on the Shares underlying the Options.
6.6 Exercise of Options. Options will be exercisable at such times and be subject to such restrictions and conditions as the Committee in each instance approves, which need not be the same for each Award or for each Participant.
6.7 Payment. The holder of an Option may exercise the Option only by delivering a written notice of exercise to the Company setting forth the number of Shares as to which the Option is to be exercised, together with full payment at the Exercise Price for the Shares and any withholding tax relating to the exercise of the Option.
The Exercise Price and any related withholding taxes will be payable to the Company in full either: (a) in cash, or its equivalent, in United States dollars; (b) by tendering Shares owned by the Participant and duly endorsed for transfer to the Company, Shares issuable to the Participant upon exercise of the Option, or any combination of cash, certified or cashier’s check and Shares described in this clause (b); or (c) by any other means the Committee determines to be consistent with the Plan’s purposes and applicable law. Cashless exercise must meet the requirements of the Federal Reserve Board’s Regulation T and any applicable securities law restrictions. For this purpose, “cashless” exercise will mean that the Participant notifies the Company it will exercise, and the Company is instructed to deliver the Share issuable on exercise to a broker, who sells the Shares and holds back the Exercise Price (and, often, the federal and state withholdings). Notwithstanding anything herein to the contrary, the Committee may, in its sole discretion, permit a Participant to satisfy such Participant’s tax withholding obligation by tendering Shares having a Fair Market Value equal to the amount required to be withheld or other greater amount up to the maximum statutory rate under applicable law, as applicable to such Participant, if such other greater amount would not result in adverse financial accounting treatment, as determined by the Committee (including in connection with the effectiveness of FASB Accounting Standards Update 2016-09).
6.8 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired through exercise of an Option as it deems necessary or advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which the Shares are then listed or traded, and under any blue sky or state securities laws applicable to the Shares.
6.9 Termination of Employment. Each Option Award Agreement will set forth the extent to which the Participant has the right to exercise the Option after his or her termination of employment with the Company and all Affiliates. These terms will be determined by the Committee in its sole discretion, need not be uniform among all Options, and may reflect, among other things, distinctions based on the reasons for termination of employment.
6.10 Nontransferability of Options. Except as otherwise provided in a Participant’s Award Agreement, no Option granted under the Plan may be sold, transferred, pledged,
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assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Further, except as otherwise provided in a Participant’s Award Agreement, all Options will be exercisable during the Participant’s lifetime only by the Participant or his or her guardian or legal representative. The Committee may, in its discretion, require a Participant’s guardian or legal representative to supply it with the evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of the Participant.
6.11 Incentive Stock Options. The grant of ISOs hereunder shall be subject to all of the requirements of Code Section 422, including the following limitations:
| | (a) | If an ISO is granted to a Participant who (together with persons whose stock ownership is attributed to the Participant pursuant to Code Section 424(d)) owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its subsidiaries, (i) the Exercise Price for each Share subject to the ISO shall not be less than one-hundred and ten percent (110%) of the Fair Market Value of a Share on the date of grant, and (ii) the ISO will expire upon the earlier of the time specified by the Committee in the Award Agreement and the fifth (5th) anniversary of the date of grant.
| | (b) | ISOs may be granted only to persons who are, as of the date of grant, common-law Employees of the Company or a subsidiary (as such term is defined in Code Sections 424(e) and (f)).
| (c) | To the extent that the aggregate Fair Market Value of the Shares with respect to which ISOs are exercisable for the first time by any individual during any calendar year (under all plans of the Company) exceeds $100,000, such Options will be treated as NQSOs to the extent required by Code Section 422. For purposes of this Section 6.11(c), ISOs shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
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| (d) | No Option that is intended to be an ISO may be granted under the Plan unless the Company’s shareholders approve the Plan within twelve (12) months after the Committee’s adoption of the Plan.
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| (e) | In the event of a Participant’s change of status from Employee to Director, an ISO held by the Participant shall cease to be treated as an ISO and shall be treated for tax purposes as an NQSO three (3) months and one (1) day following such change of status.
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6.12 Automatic Exercise. Unless provided by the Committee in an Award Agreement or otherwise, or as otherwise directed by the Participant in writing to the Company, each vested and exercisable Option outstanding on the Automatic Exercise Date with an Exercise Price per Share that is less than the Fair Market Value per Share as of such date shall automatically and without further action by the Participant or the Company be exercised on the Automatic Exercise Date. In the sole discretion of the Committee, payment of the Exercise Price of any such Option shall be made pursuant to Section 6.7 and the Company or any Affiliate shall deduct or withhold an amount sufficient to satisfy all taxes associated with such
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exercise in accordance with Section 16.1. Unless otherwise determined by the Administrator, this Section 6.12 shall not apply to an Option if the Participant’s employment or service has terminated on or before the Automatic Exercise Date. For the avoidance of doubt, no Option with an Exercise Price per Share that is equal to or greater the Fair Market Value per Share on the Automatic Exercise Date shall be exercised pursuant to this Section 6.12.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time, as determined by the Committee.
Within the limits of Article 4, the Committee will have sole discretion to determine the number of SARs granted to each Participant and, consistent with the provisions of the Plan, to determine the terms and conditions pertaining to SARs.
The grant price of a SAR will equal the Fair Market Value on the date of grant of the SAR.
7.2 Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.
7.3 Award Agreement. Each SAR grant will be evidenced by an Award Agreement that specifies the grant price, the term of the SAR and such other provisions as the Committee determines.
7.4 Term of SARs. The term of an SAR will be determined by the Committee, in its sole discretion, but may not exceed ten (10) years. Notwithstanding any contrary provision herein, if, on the date an outstanding SAR would expire, the exercise of the SAR would violate applicable securities laws or any insider trading policy maintained by the Company from time to time, the expiration date applicable to the SAR will be extended, except to the extent such extension would violate Section 409A, to a date that is thirty (30) calendar days after the date the exercise of the SAR would no longer violate applicable securities laws or any such insider trading policy.
7.5 Payment of SAR Amount. Upon exercise of an SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
| (a) | the excess (or some portion of the excess as determined at the time of the grant by the Committee) if any, of the Fair Market Value on the date of exercise of the SAR over the grant price specified in the Award Agreement; by
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| (b) | the number of Shares as to which the SAR is exercised.
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The payment upon SAR exercise may be made in cash, in Shares of equivalent Fair Market Value or in some combination of the two, as specified in the Award Agreement.
7.6 Termination of Employment. Each SAR Award Agreement will set forth the extent to which the Participant has the right to exercise the SAR after his or her termination of employment with the Company and all Affiliates. These terms will be determined by the
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Committee in its sole discretion, need not be uniform among all SARs issued under the Plan, and may reflect, among other things, distinctions based on the reasons for termination of employment.
7.7 Nontransferability of SARs. Except as otherwise provided in a Participant’s Award Agreement, no SAR may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Further, except as otherwise provided in a Participant’s Award Agreement, all SARs will be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative. The Committee may, in its discretion, require a Participant’s guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of the Participant.
7.8 No Dividend Equivalents. Subject to Section 4.3, the Committee may not grant payments in connection with SARs that are equivalent to dividends declared and paid on the Shares underlying the SARs.
7.9 Automatic Exercise. Unless provided by the Committee in an Award Agreement or otherwise, or as otherwise directed by the Participant in writing to the Company, each vested and exercisable SAR outstanding on the Automatic Exercise Date with an Exercise Price per Share that is less than the Fair Market Value per Share as of such date shall automatically and without further action by the Participant or the Company be exercised on the Automatic Exercise Date. The Company or any Affiliate shall deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 16.1. Unless otherwise determined by the Administrator, this Section 7.9 shall not apply to a SAR if the Participant’s employment or service has terminated on or before the Automatic Exercise Date. For the avoidance of doubt, no SAR with an Exercise Price per Share that is equal to or greater the Fair Market Value per Share on the Automatic Exercise Date shall be exercised pursuant to this Section 7.9.
Article 8. Restricted Stock, Restricted Stock Units and Restricted Units
8.1 Grant of Restricted Stock, Restricted Stock Units or Restricted Units. Subject to the terms and provisions of the Plan, the Committee may, at any time and from time to time, grant Restricted Stock, Restricted Stock Units or Restricted Units to Participants in such amounts as it determines.
8.2 Award Agreement. Each grant of Restricted Stock, Restricted Units or Restricted Stock Units will be evidenced by an Award Agreement that specifies the Restriction Periods, the number of Shares or Share equivalent units granted, and such other provisions as the Committee determines.
8.3 Nontransferability. Restricted Stock, Restricted Units and Restricted Stock Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)), until the end of the applicable Restriction Period as specified in the Award Agreement, or upon earlier satisfaction of any
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other conditions specified by the Committee in its sole discretion and set forth in the Award Agreement. All rights with respect to Restricted Stock, Restricted Units and Restricted Stock Units will be available during the Participant’s lifetime only to the Participant or the Participant’s guardian or legal representative. The Committee may, in its discretion, require a Participant’s guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of the Participant.
8.4 Other Restrictions. The Committee may impose such other conditions or restrictions on any Restricted Stock, Restricted Units or Restricted Stock Units as it deems advisable including, without limitation, restrictions based upon the achievement of specific performance objectives (Company-wide, business unit, individual, or any combination of them), time-based restrictions on vesting following the attainment of the performance objectives, and restrictions under applicable federal or state securities laws. The Committee may provide that restrictions established under this Section 8.4 as to any given Award will lapse all at once or in installments.
The Company will retain the certificates representing Shares of Restricted Stock in its possession until all conditions and restrictions applicable to the Shares have been satisfied.
8.5 Payment of Awards. Except as otherwise provided in this Article 8, Shares covered by each Restricted Stock grant will become freely transferable by the Participant after the last day of the applicable Restriction Period, and Share equivalent units covered by a Restricted Unit or Restricted Stock Unit will be paid out in cash or Shares to the Participant following the last day of the applicable Restriction Period, or on a later date provided in the Award Agreement.
8.6 Voting Rights. During the Restriction Period, Participants holding Shares of Restricted Stock may exercise full voting rights with respect to those Shares.
8.7 Dividends and Other Distributions. During the Restriction Period, unless otherwise determined by the Committee and set forth in an Award Agreement, Participants awarded Shares of Restricted Stock, Restricted Units or Restricted Stock Units hereunder will be credited with regular cash dividends or dividend equivalents paid on those Shares or with respect to those Share equivalent units. The Committee may apply any restrictions it deems advisable to the crediting and payment of dividends and other distributions; provided, that no dividends or dividend equivalents will be paid on unvested Awards of Restricted Stock, Restricted Units or Restricted Stock Units during the Restriction Period, but to the extent that any such Awards contain the right to receive dividends or dividend equivalents during the Restriction Period, such dividends or dividend equivalents will be accumulated and paid once (and to the extent that) the underlying Awards vest.
8.8 Termination of Employment. Each Award Agreement will set forth the extent to which the Participant has the right to retain unvested Restricted Stock, Restricted Stock Units or Restricted Units after his or her termination of employment with the Company or an Affiliate. These terms will be determined by the Committee in its sole discretion, need not be uniform among all Awards of Restricted Stock, and may reflect, among other things, distinctions based on the reasons for termination of employment.
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Article 9. Performance Units, Performance Shares and Other Awards
9.1 Grant of Performance Units or Performance Shares. Subject to the terms of the Plan, Performance Units or Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as the Committee determines.
9.2 Value of Performance Units and Performance Shares. Each Performance Unit will have an initial value established by the Committee at the time of grant. Each Performance Share will have an initial value equal to the Fair Market Value on the date of grant. The Committee will set performance objectives and a Performance Period during which the performance objectives must be met in its discretion which, depending on the extent to which they are met, will determine the number or value (or both) of Performance Units or Performance Shares that will be paid out to the Participant.
9.3 Earning of Performance Units and Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units or Performance Shares will be entitled to receive payout on the number and value of Performance Units or Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives have been achieved.
9.4 Award Agreement. Each grant of Performance Units or Performance Shares will be evidenced by an Award Agreement specifying the material terms and conditions of the Award (including the form of payment of earned Performance Units or Performance Shares), and such other provisions as the Committee determines.
9.5 Dividend Equivalents. Unless otherwise determined by the Committee and set forth in an Award Agreement, dividend equivalents will be paid on Awards of Performance Shares. Dividend equivalents may be paid on Awards of Performance Units in the Committee’s sole discretion. The Committee may apply any restrictions it deems advisable to the crediting and payment of dividend equivalents with respect to Performance Shares and Performance Units; provided, that no dividend equivalents will be paid on unvested Performance Shares or Performance Units, but to the extent that any such Awards contain the right to receive dividend equivalents during the Performance Period, such dividend equivalents will be accumulated and paid once (and to the extent that) the underlying Awards vest.
9.6 Form and Timing of Payment of Performance Units and Performance Shares. Except as provided in Article 12, payment of earned Performance Units and Performance Shares will be made as soon as practicable after the close of the applicable Performance Period, in a manner determined by the Committee in its sole discretion. The Committee will pay earned Performance Units and Performance Shares in the form of cash, in Shares, or in a combination of cash and Shares, as specified in the Award Agreement. Performance Shares may be paid subject to any restrictions deemed appropriate by the Committee.
9.7 Termination of Employment Due to Death or Disability. Unless determined otherwise by the Committee and set forth in the Participant’s Award Agreement, if a Participant’s employment is terminated by reason of death or Disability during a Performance
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Period, the Participant will receive a prorated payout of the Performance Units or Performance Shares, as specified by the Committee in its discretion in the Award Agreement. Payment of earned Performance Units and Performance Shares will be made at a time specified by the Committee in its sole discretion and set forth in the Participant’s Award Agreement.
9.8 Termination of Employment for Other Reasons. If a Participant’s employment terminates during a Performance Period for any reason other than death or Disability, the Participant will forfeit all Performance Units and Performance Shares to the Company, unless the Participant’s Award Agreement provides otherwise.
9.9 Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Performance Units and Performance Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Further, except as otherwise provided in a Participant’s Award Agreement, a Participant’s rights under the Plan will be exercisable during the Participant’s lifetime only by the Participant or Participant’s guardian or legal representative. The Committee may, in its discretion, require a Participant’s guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of the Participant.
9.10 Other Awards. In addition to the Awards described in Articles 6 through 8 and Sections 9.1 through 9.9 above, and subject to the terms of the Plan, the Committee may grant other incentives payable in cash or Shares under the Plan as it determines to be in the best interests of the Company and subject to such other terms and conditions as it deems appropriate. Dividend equivalents may be paid on such other Awards in the Committee’s sole discretion. The Committee may apply any restrictions it deems advisable to the crediting and payment of dividend equivalents with respect to such other Awards; provided, that no dividend equivalents will be paid on any such unvested Awards, but to the extent that any such Awards contain the right to receive dividend equivalents prior to vesting, such dividend equivalents will be accumulated and paid once (and to the extent that) the underlying Awards vest.
Article 10. Performance Measures
The Committee may establish performance goals for performance-based Awards under the Plan, which may be based on any performance measures selected by the Committee. Such performance measures may include, but are not limited to, any of the following:
| (a) | Earnings (including, but not limited to, earnings before interest and taxes, earnings before taxes, and net earnings);
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| (b) | operating earnings or income;
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| (e) | net income (absolute or competitive growth rates comparative);
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| (f) | net income applicable to common stock;
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| (g) | cash flow, including operating cash flow, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital;
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| (i) | return on shareholders equity (absolute or peer-group comparative);
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| (j) | stock price (absolute or peer-group comparative);
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| (k) | absolute and/or relative return on common shareholders equity;
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| (l) | absolute and/or relative return on capital;
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| (m) | absolute and/or relative return on assets;
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| (n) | economic value added (income in excess of cost of capital);
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| (o) | customer satisfaction;
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| (q) | expense reduction; and
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| (r) | ratio of operating expenses to operating revenues.
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The Committee may specify any reasonable definition of the performance measures it uses, and the measures may be described in terms of Company-wide objectives, objectives that relate to the performance of an individual Participant, an Affiliate, or a division, region, department, function or segment within the Company or an Affiliate. Such definitions may provide for reasonable adjustments and may include or exclude items, including but not limited to: investment gains and losses; unusual or non-recurring items; gains or losses on the sale of assets; effects of changes in accounting principles or the application thereof; asset impairment charges; effects of currency fluctuations; acquisitions, divestitures, or financing activities; recapitalizations, including stock splits and dividends; expenses for restructuring or productivity initiatives; discontinued operations; changes in applicable law or the application thereof; and other non-operating items. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render performance goals to be unsuitable, the Committee may modify such performance goals in whole or in part, as the Committee deems appropriate. If a Participant is promoted, demoted or transferred to a different business unit or function during a Performance Period, the Committee may determine that the performance goals or Performance Period are no longer appropriate and may (i) adjust, change or eliminate the performance goals or the applicable Performance Period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (ii) make a cash payment to the Participant in an amount determined by the Committee.
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Article 11. Beneficiary Designation
Each Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case the Participant should die before receiving any or all of his or her Plan benefits. Each beneficiary designation will revoke all prior designations by the same Participant, must be in a form prescribed by the Committee, and must be made during the Participant’s lifetime. If the Participant’s designated beneficiary predeceases the Participant or no beneficiary has been designated, benefits remaining unpaid at the Participant’s death will be paid to (a) the beneficiary designated by the Participant for purposes of the tax-qualified defined benefit retirement plan or, if none, the tax-qualified defined contribution retirement plan of the Company or an Affiliate in which the Participant participates, (b) the Participant’s spouse, if living, or (c) the Participant’s estate or other entity described in the Participant’s Award Agreement.
Article 12. Deferrals
The Committee may, consistent with the requirements of Code Section 409A, permit a Participant to defer receipt of cash or Shares that would otherwise be due to him or her by virtue of an Option or SAR exercise, the lapse or waiver of restrictions on Restricted Stock, Restricted Stock Units, Restricted Units or other Awards, or the satisfaction of any requirements or objectives with respect to Performance Units, Performance Shares or other Awards. If any such deferral election is permitted, the Committee will, in its sole discretion, establish rules and procedures for such deferrals consistent with the requirements of Code Section 409A.
Article 13. Rights of Employees
13.1 Employment. Nothing in the Plan will interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment at any time, or confer upon any Participant any right to continue in the employ of the Company or any Affiliate.
13.2 Participation. No Eligible Person will have the right to receive an Award under this Plan, or, having received any Award, to receive a future Award.
Article 14. Change in Control
14.1 Treatment of Awards upon a Change in Control. Upon the occurrence of a Change in Control, the following provisions of this Section 14.1 shall apply to all Awards, unless the Committee shall determine otherwise at the time of grant with respect to a particular Award and unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges:
(i) Any outstanding Options and SARs, unless exchanged by the Company for a Replacement Award, will become immediately exercisable (and will deemed to be
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exercisable immediately prior to the Change in Control), and will remain exercisable throughout the remainder of their term (the “Vested Options and SARs”); provided, however, that, with respect to Vested Options and SARs that are not exercised upon the Change in Control, such Vested Options and SARs will be subject to the provisions of Section 14.1(d) below, as applicable. To the extent that this provision causes ISOs to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be NQSOs.
(ii) Any Option or SAR may be exchanged by the Company upon the Change in Control for a Replacement Award that satisfies the conditions of this Section 14.1(a)(ii). The Replacement Award shall have equivalent value and vest and become exercisable in accordance with the vesting schedule and term for exercisability, in each case that applied to the corresponding Option or SAR for which it is being exchanged, provided, however, that if within twenty-four (24) months of such Change in Control, the Participant’s employment with the Company is terminated by the Company without Cause or by the Participant for Good Reason, such Award, to the extent then outstanding, shall become fully vested and exercisable upon such termination of employment.
| (b) | Restricted Stock, Restricted Stock Units and Restricted Units.
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(i) Any Restriction Periods or other restrictions imposed on Restricted Stock, Restricted Stock Units and Restricted Units that are not exchanged by the Company for a Replacement Award will lapse, except that the degree of vesting associated with those Awards that is conditioned on the achievement of performance conditions will be determined as set forth in Section 14.1(c).
(ii) Any Restricted Stock, Restricted Stock Unit, or Restricted Unit may be exchanged by the Company upon the Change in Control for a Replacement Award that satisfies the conditions of this Section 14.1(b)(ii). The Replacement Award shall have equivalent value to the Award for which it is being exchanged and shall vest in accordance with the vesting schedule that applied to the corresponding Award for which it is being exchanged, provided, however, that if within twenty-four (24) months of such Change in Control, the Participant’s employment with the Company is terminated by the Company without Cause or by the Participant for Good Reason, such Award, to the extent then outstanding, shall become free of all contingencies, restrictions and limitations and become vested and transferable (or paid) upon such termination of employment.
| (c) | Performance Shares and Performance Units.
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(i) Except as otherwise provided in the Award Agreement, the vesting of all Performance Units and Performance Shares that are not exchanged by the Company for a Replacement Award will be accelerated as of the effective date of the Change in Control, and Participants will be paid, within thirty (30) days after the effective date of the Change in Control, an amount in cash based on an assumed achievement of all relevant performance objectives at target levels.
(ii) Any Performance Share or Performance Unit may be exchanged by the Company upon a Change in Control for a Replacement Award that satisfies the
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conditions of this Section 14.1(c)(ii). The Replacement Award shall not be subject to any performance condition referred to in Article 10 above or otherwise, but instead shall be subject solely to the restrictions, if any, of the Award for which it is being exchanged that are based on the passage of time through the expiration date of the Performance Period utilized in the Award for which it is being exchanged. The number or value of such Replacement Award shall be determined based on the assumed achievement of all of the relevant performance objectives of the Award for which it is being exchanged at their target levels. Notwithstanding the foregoing in this Section 14.1(c)(ii), if within twenty-four (24) months of such Change in Control, the Participant’s employment with the Company is terminated by the Company without Cause or by the Participant for Good Reason, such Replacement Award, to the extent then outstanding, shall become free of all contingencies, restrictions and limitations and become vested and transferable (or paid) upon such termination of employment.
(d)
(i) If the Company is a party to an agreement that is reasonably likely to result in a Change in Control, such agreement may provide for settlement of the Vested Options and SARs for the Change in Control Price (less, to the extent applicable, the per Share Exercise Price or grant price), or, if the per Share Exercise Price or grant price equals or exceeds the Change in Control Price, such Vested Options and SARs shall terminate and be canceled.
(ii) To the extent that Restricted Stock, Restricted Units and Restricted Stock Units settle in Shares in accordance with their terms upon a Change in Control, such Shares shall be entitled to receive as a result of the Change in Control transaction the same consideration as the Shares held by shareholders of the Company as a result of the Change in Control transaction.
14.2 Termination, Amendment and Modifications of Change in Control Provisions. Notwithstanding any other provision of this Plan or any provision in an Award Agreement, this Article 14 may not be terminated, amended or modified on or after the effective date of a Change in Control in a way that would adversely affect any Award in any material way theretofore granted to a Participant, unless the Participant gives his or her prior written consent to the termination, amendment or modification.
Article 15. Amendment, Modification and Termination
15.1 Amendment, Modification and Termination. Subject to Section 14.2, the Committee or Board may at any time and from time to time, alter, amend, modify or terminate the Plan in whole or in part. The Committee or Board will not, however, increase the number of Shares that may be issued or transferred to Participants under the Plan, as described in the first sentence of Section 4.1 (and subject to adjustment as provided in Sections 4.2 and 4.3).
Subject to the terms and conditions of the Plan, the Committee may modify, extend or renew outstanding Awards under the Plan, or accept the surrender of outstanding Awards (to the extent not already exercised) and grant new Awards in substitution of them (to the extent not already exercised). Except as provided in Sections 4.3 and 15.2, the Committee will not, however, modify any outstanding Option or SAR so as to specify a lower Exercise Price or
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grant price (and will not cancel an Option or SAR and substitute for it an Option or SAR with a lower Exercise Price or grant price), without the approval of the Company’s shareholders. In addition, except as provided in Sections 4.3 and 15.2, the Committee may not cancel an outstanding Option or SAR whose Exercise Price or grant price is equal to or greater than the current Fair Market Value of a Share and substitute for it another Award or cash payment without the prior approval of the Company’s shareholders.Notwithstanding the foregoing, no alteration, modification or termination of an Award will, without the prior written consent of the Participant, adversely alter or impair any rights or obligations under any Award already granted under the Plan.
15.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may, using reasonable care, make adjustments in the terms and conditions of, and the criteria included in, Awards in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan (a) in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3) affecting the Company or its financial statements, (b) in recognition of changes in applicable laws, regulations, or accounting principles, or (c) whenever the Committee determines that such adjustments are necessary, equitable and/or appropriate.
15.3 Awards Previously Granted. No termination, amendment or modification of the Plan will adversely affect in any material way any Award already granted, without the written consent of the Participant who holds the Award.
15.4 Compliance with Code Section 409A. The Plan and Awards, and all amounts payable with respect to Awards, are intended to comply with, or be exempt from, Code Section 409A and the interpretative guidance thereunder and shall be construed, interpreted and administered accordingly. If an unintentional operational failure occurs with respect to Code Section 409A, any affected Participant or beneficiary shall fully cooperate with the Company to correct the failure to the extent possible in accordance with any correction procedure established by the U.S. Department of the Treasury. If a Participant is a “specified employee” (as such term is defined for purposes of Code Section 409A) at the time of his or her termination of employment, no amount that is subject to Code Section 409A and that becomes payable by reason of such termination of employment shall be paid to the Participant before the earlier of (a) the expiration of the six (6) month period measured from the date of the Participant’s termination of employment, and (b) the date of the Participant’s death. A termination of employment shall be deemed to occur only if it is a “separation from service” within the meaning of Code Section 409A, and references in the Plan and any Award Agreement to “termination,” “termination of employment,” or like terms shall mean a “separation from service.” A separation from service shall be deemed to occur if it is anticipated that the level of services the Participant will perform after a certain date (whether as an employee or as an independent contractor) will permanently decrease to no more than twenty percent (20%) of the average level of services provided by the Participant in the immediately preceding thirty-six (36) months.
Article 16. Withholding
16.1 Tax Withholding. The Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
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federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising under this Plan. No Award Agreement will permit reload Options to be granted in connection with any Shares used to pay a tax withholding obligation.
16.2 Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, the Company may satisfy the withholding requirement for supplemental wages, in whole or in part, by withholding Shares having a Fair Market Value (determined on the date the Participant recognizes taxable income on the Award) equal to the amount required to be withheld or other greater amount up to the maximum statutory rate required to be collected on the transaction under applicable law, as applicable to the Participant, if such other greater amount would not result in adverse financial accounting treatment, as determined by the Committee (including in connection with the effectiveness of FASB Accounting Standards Update 2016-09). The Participant may elect, subject to the approval of the Committee, to deliver the necessary funds to satisfy the withholding obligation to the Company, in which case there will be no reduction in the Shares otherwise distributable to the Participant.
Article 17. Indemnification
Each person who is or has been a member of the Committee or the Board will be indemnified and held harmless by the Company from and against any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or as a result of any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken, or failure to act, under the Plan. Each such person will also be indemnified and held harmless by the Company from and against any and all amounts paid by him or her in a settlement approved by the Company, or paid by him or her in satisfaction of any judgment, of or in a claim, action, suit or proceeding against him or her and described in the previous sentence, so long as he or she gives the Company an opportunity, at its own expense, to handle and defend the claim, action, suit or proceeding before he or she undertakes to handle and defend it. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which a person who is or has been a member of the Committee or the Board may be entitled under the Company’s Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify him or her or hold him or her harmless.
Article 18. Successors
All obligations of the Company under the Plan or any Award Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business or assets of the Company or both, or a merger, consolidation, or otherwise.
Article 19. Legal Construction
19.1 Number. Except where otherwise indicated by the context, any plural term used in this Plan includes the singular and a singular term includes the plural.
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19.2 Severability. If any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provision had not been included.
19.3 Requirements of Law. The granting of Awards and the issuance of Share or cash payouts under the Plan will be subject to all applicable laws, rules, and regulations, and to any approvals by governmental agencies or national securities exchanges as may be required.
19.4 Securities Law Compliance. As to any individual who is, on the relevant date, an officer, director or ten percent (10%) beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act, or any successor rule. To the extent any provision of the Plan or action by the Committee fails to so comply, it will be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.
19.5 Awards to Foreign Nationals and Employees Outside the United States. To the extent the Committee deems it necessary, appropriate or desirable to comply with foreign law or practice and to further the purposes of this Plan, the Committee may, without amending the Plan, (i) establish a sub-plan hereunder and/or rules applicable to Awards granted to Participants who are foreign nationals, are employed outside the United States, or both, including rules that differ from those set forth in this Plan, and (ii) grant Awards to such Participants in accordance with those rules.
19.6 Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments or deliveries of Shares not yet made to a Participant by the Company, the Participant’s rights are no greater than those of a general creditor of the Company. The Committee may authorize the establishment of trusts or other arrangements to meet the obligations created under the Plan, so long as the arrangement does not cause the Plan to lose its legal status as an unfunded plan.
19.7 Governing Law. To the extent not preempted by federal law, the Plan and all agreements hereunder will be construed in accordance with and governed by the laws of the State of Michigan without giving effect to principles of conflicts of law.
19.8 Offsets. To the extent permitted by applicable law, the Company shall have the right to offset from any Award payable hereunder any amount that a Participant owes to the Company or any Affiliate without the consent of the Participant (or his or her beneficiary, in the event of the Participant’s death).
19.9 Plan Document Controls. The Plan and each Award Agreement constitute the entire agreement with respect to the subject matter hereof and thereof; provided, that in the event of any inconsistency between the Plan and an Award Agreement, the terms and conditions of the Plan shall control.
Article 20. Incentive Compensation Recoupment Policy
Notwithstanding any provision in the Plan or in any Award Agreement to the contrary, all Awards are subject to the Incentive Compensation Recoupment Policy established by the
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Company, as amended from time to time, and any other compensation recovery and/or recoupment policy adopted by the Company to comply with applicable law or any listing exchange requirement, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governance practices, as such policies may be amended from time to time.
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LEAR CORPORATION
ATTN: INVESTOR RELATIONS
21557 TELEGRAPH ROAD
SOUTHFIELD, MI 48033
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.comor scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 17, 2023. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/LEA2023
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 17, 2023. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
V05124-P87531 KEEP THIS PORTION FOR YOUR RECORDS
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| | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.91 | | DETACH AND RETURN THIS PORTION ONLY | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | LEAR CORPORATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | LEAR CORPORATION | | | | | The Board of Directors recommends you vote FOR the following:
| | | | | | | | | | | | | | | | | | | | | | | 1.
| | Election of Directors
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees: | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1a. Mei-Wei Cheng
| | | | ☐ | | ☐ | | ☐ | | | | The Board of Directors recommends you vote FOR proposals 2, 3 and 5, and ONE YEAR on proposal 4. | | | | | | For | | Against | | Abstain | | | | | | | | | 1b. Jonathan F. Foster
| | | | ☐ | | ☐ | | ☐ | | | | 2. Ratification of the retention of Ernst & Young LLP as Lear Corporation’s (the “Company”) independent registered public accounting firm for 2023.
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| | | | | | | | | | | 1c. Bradley M. Halverson
| | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1d. Mary Lou Jepsen
| | | | ☐ | | ☐ | | ☐ | | | | 3. Approve, in a non-binding advisory vote, the Company’s executive compensation.
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| | | | | | | | | | | 1e. Roger A. Krone
| | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | 1f. Patricia L. Lewis
| | | | ☐ | | ☐ | | ☐ | | | | | | | | One Year | | Two Years | | Three Years | | Abstain | | | | | | | | | 1g. Kathleen A. Ligocki
| | | | ☐ | | ☐ | | ☐ | | | | 4. Approve, in a non-binding advisory vote, the frequency of the advisory vote on the Company’s executive compensation.
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| | | | | | | | | | | | | | | | | | | | | | | | 1h. Conrad L. Mallett, Jr.
| | | | ☐ | | ☐ | | ☐ | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | 1i. Raymond E. Scott
| | | | ☐ | | ☐ | | ☐ | | | | 5. Approve the amendment and restatement of the Company’s 2019 Long-Term Stock Incentive Plan.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | 1j. Gregory C. Smith
| | | | ☐ | | ☐ | | ☐ | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
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| | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | Signature (Joint Owners) | | Date | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com.
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V05125-P87531
LEAR CORPORATION
This proxy is solicited on behalf of the Board of Directors of
Lear Corporation for the
Annual Meeting of Stockholders on
May 18, 2023, at 9:00 a.m. (Eastern Time)
This proxy is solicited on behalf of the Board of Directors of Lear Corporation (“Lear”) for the Annual Meeting of Stockholders on May 18, 2023 or any adjournment or postponement thereof (the “Meeting”) to be held through a virtual web conference at www.virtualshareholdermeeting.com/LEA2023. The undersigned appoints Raymond E. Scott and Harry A. Kemp, and each of them, with full power of substitution in each of them, the proxies of the undersigned, and authorizes them to vote for and on behalf of the undersigned all shares of Lear common stock which the undersigned may be entitled to vote on all matters properly coming before the Meeting, as set forth in the related Notice of Annual Meeting and Proxy Statement, both of which have been received by the undersigned.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is given, this proxy will be voted FOR all nominees for director and FOR proposals 2, 3 and 5, and ONE YEAR on proposal 4.
Continued and to be signed on reverse side
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