The Board is responsible for overseeing the management and operations of the Company, including overseeing its risk assessment and risk management functions. As discussed elsewhere in this Proxy Statement, the Board has delegated primary responsibility for reviewing and oversight of certain areas of the Company's policies with respectCompany to risk assessment and risk managementthe relevant Board committees that regularly report to the full Board. The Board has delegated to the Audit Committee. The Board has determined that this oversightCommittee primary responsibility can be most efficiently performed by the Audit Committee as part of its overall responsibility for providing independent, objective oversight with respect to Tempur Sealy International'sthe Company's accounting and financial reporting functions, internal and external audit functions and systems of internal controls over financial reporting and legal, ethical and regulatory compliance as well as data privacy and cybersecurity risks. The Compensation Committee has primary responsibility for oversight of risk related to compensation matters, as more fully described elsewhere in this Proxy Statement.matters. The Nominating and Corporate Governance Committee has primary responsibility for oversight of risk associated with the Company's leadership structure and corporate governance matters. Each of these committees regularly reports tomaters.
The Audit Committee is responsible for providing independent, objective oversight with respect to Tempur Sealy International's accounting and financial reporting functions, internal and external audit functions and systems of internal controls over financial reporting and legal, ethical and regulatory compliance.compliance as well as data privacy and cybersecurity risks. The Audit Committee met nineseven (7) times in 2018.2020. Some of the Audit Committee's responsibilities include:
The Audit Committee has established whistleblower procedures, which provide for (a) the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters; and (b) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Tempur Sealy International also has a confidential, anonymous reporting system via telephone and internet, both of which is web-based andare available to all employees. All reports are treated confidentially.
The Compensation Committee assists the Board in fulfilling its oversight responsibilities relating to compensation. The Compensation Committee met sixeight (8) times in 2018.2020. Some of the Compensation Committee's responsibilities include:
The Compensation Committee, in its role as administrator under the Company's previous Amended and Restated 2003 Equity Incentive Plan, as amended (the "2003 Equity Incentive Plan"), and under the Company's current Amended and Restated 2013 Equity Incentive Plan, as amended (the "2013 Equity Incentive Plan"), recommended, and the Board approved, the delegation of authority to the Company's President and CEO to grant equity awards under those plans within certain specified parameters.
The Compensation Committee engages an independent executive compensation consultant to advise the Compensation Committee on matters related to executive and director compensation. For a further description of the services the compensation consultant provided, see "Executive Compensation and Related Information - Compensation"Compensation Discussion and Analysis"Analysis - What Guides Our Program - The Decision Making Process - The Role of the Independent Consultant" in this Proxy Statement.
The Nominating and Corporate Governance Committee assists the Board in fulfilling some of its oversight responsibilities relating to director nominations and corporate governance matters. The Committee met sixfour (4) times in 2018.2020. Some of the Nominating and Corporate Governance Committee's responsibilities include:
The members of our Compensation Committee are Jon L. Luther (Chair), Richard W. Neu and Arik W. Ruchim. None of these members is a current or former officer or employee of Tempur Sealy International or, to our knowledge, has any interlocking relationships as set forth in applicable SEC rules that require disclosure as a Compensation Committee interlock.
Our Board has adopted a written Related Party Transactions Policy providing for the review and approval or ratification by the Nominating and Corporate Governance Committee of any transaction, arrangement or relationship, or series of such transactions, arrangements or relationships (including indebtedness or guarantees of indebtedness), in which the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year end and involving the Company and its Directors, executive officers, beneficial owners of more than 5% of the Company's common stock or any such party's respective immediate family members or affiliates. In reviewing a transaction, an arrangement or relationship, the Nominating and Corporate Governance Committee will take into account, among other factors it deems appropriate, whether it is on terms no more favorable than to an unaffiliated third party under similar circumstances, as well as the extent of the related party's interest in the transaction, arrangement or relationship.
The Nominating and Corporate Governance Committee evaluates and recommends candidates for membership on our Board consistent with the needs and goals of the Company's business. In performing this role, the Nominating and Corporate Governance Committee regularly assesses the size and composition of the Board. It conducts an annual review with the Board relating to the Board's composition and recommends, if necessary, measures to be taken so that the Board's membership reflects an appropriate balance of knowledge, experience, skills, expertise and diversity. The Nominating and Corporate Governance Committee also ensures that the Board contains at least the minimum number of independent directors required by applicable laws and regulations. The Nominating and Corporate Governance Committee is responsible for ensuring that the composition of the Board accurately reflects the needs of the Company's business and, in furtherance of this goal, periodically proposes the addition or removal of members in order to obtain the appropriate balance of members and skills.
The Nominating and Corporate Governance Committee also considers numerous other qualities, skills and characteristics when evaluating Director nominees, including whether the nominee has specific strengths that would augment the existing skills and experience of the Board, such as an understanding of and experience in international business, accounting, governance, finance or marketing and whether the nominee has leadership experience with public companies or other sophisticated and complex organizations. Further, consideration is given to having a diversity of background, experience, skill and perspective among the Directors, including perspectives that may result from diversity in ethnicity, race, gender, national origin or nationality, and that the Directors represent a range of differing professional positions, industry sectors, expertise and geographic representation. In addition, the Nominating and Corporate Governance Committee is responsible for considering the tenure of existing Directors and longer-term Board composition transition issues. The Board does not have a specific policy with respect to the diversity of its Directors, and diversity is only one consideration when selecting and nominating Directors.
Each nominee also brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence and experience in a wide variety of areas, including corporate governance and board service, executive management, investing, finance, manufacturing, consumer products, sales, marketing and international business. Set forth below are the conclusions reached by the Board with regard to its nominees.
Ms. Dilsaver brings significant accounting, auditing and financial skills, based on her training as an accountant and her senior positions at a number of financial services companies, including in the role of chief financial officer.
Ms. Gates brings a wealth of experience in auditing, accounting and financial reporting to the Board gained through her past service as an Assurance and Managing Partner of Ernst & Young LLP.
Mr. Heil has served in positions of president, chief executive officer or chief operating officer of a number of food and consumer products companies, and has significant manufacturing, marketing and managerial experience.
Mr. Luther brings a strong track record of profitably growing large global consumer branded businesses, with a keen understanding of the consumer, and notable brand development expertise. He has significant relevant experience as a CEO and as a director of other high-performance public companies.
Mr. Neu has extensive knowledge and experience handling complex financial and operational issues through his service as both a director and executive officer of a variety of public companies.
Mr. Thompson serves as our Chairman, President and Chief Executive Officer and brings more than two decades of executive leadership experience, and a history of strategic focus, enhancing high-performance teams and stockholder value creation.
Mr. Trussell, as former Chief Executive Officer and a principal founder of the Company, brings management and mattress industry experience and an historical perspective to the Board.
Process for Identifying and Evaluating Director Nominees
As discussed above under "Director Qualifications and Review of Director Nominees," the Nominating and Corporate Governance Committee reviews annually the size and composition of the Board and makes recommendations to the Board regarding any measures to be taken. In addition, the Nominating and Corporate Governance Committee has established a process for identifying potential candidates when appropriate and evaluating nominees for Director. Although the Nominating and Corporate Governance Committee will consider nominees recommended by stockholders in accordance with the By-Laws, the Nominating and Corporate Governance Committee believes that the process it uses to identify and evaluate nominees for Director is designed to produce nominees that possess the educational, professional, business and personal attributes that are best suited to further the Company's mission. If the Board has identified a need to either expand the Board with a new member possessing certain specific characteristics or to fill a vacancy on the Board, the Nominating and Corporate Governance Committee may identify nominees through the use of professional search firms that may utilize proprietary screening techniques to match candidates to the Nominating and Corporate Governance Committee's specified qualifications. The Nominating and Corporate Governance Committee may also receive recommendations from existing Directors, executive officers, stockholders, key business associates and trade or industry affiliations. The Nominating and Corporate Governance Committee will evaluate nominations at regular or special meetings, and in evaluating nominations, will seek to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth above under "Director Qualifications and Review of Director Nominees." The Board itself is ultimately responsible for recommending candidates for election to the stockholders or for appointing individuals to fulfill a vacancy.
In 2018,2020, the Company did not employ a search firm or pay fees to any third party to either search for or evaluate Board nominee candidates.
Procedures for Recommendation of Director Nominees by Stockholders
The Nominating and Corporate Governance Committee considers director candidates recommended by our stockholders in accordance with the Company's By-Laws. In evaluating candidates recommended by our stockholders, the Nominating and Corporate Governance Committee applies the same criteria set forth above under "Director Qualifications and Review of Director Nominees" and follows the same process set forth above under "Process for Identifying and Evaluating Director Nominees."
Stockholders may also nominate director candidates pursuant to a "proxy access" provision in the Company's By-Laws (see discussion of the amendment and restatement of the Company's By-laws under the heading "Amendment to By-Laws" above).By-Laws. Pursuant to the proxy access provision, a stockholder or group of stockholders meeting certain eligibility requirements may nominate directors (up to the greater of two (2) or twenty percent (20%) of the number of directors then in office) to serve on the Board and have those nominees included in the Company's proxy solicitation materials. The eligibility requirements include the requirement to continuously hold an aggregate of three percent (3%) or more of the voting power of the Company's outstanding common stock for at least three (3) years prior to submitting notice of a nomination, with up to twenty (20) stockholders being able to aggregate their holdings to meet this requirement. Any stockholder recommendations of Director nominees proposed for consideration by the Nominating and Governance Committee should include the information required by our By-laws and should be addressed in writing to the Nominating and Corporate Governance Committee, care of: Tempur Sealy International, Inc., 1000 Tempur Way, Lexington, Kentucky 40511, Attention: Corporate Secretary. The Company's By-Laws permit stockholders to nominate Directors for consideration at our 20202022 annual stockholder meeting in accordance with certain procedures described in this Proxy Statement under the heading "Stockholder Proposals for 20202022 Proxy Statement."
Board Diversity
The Company is committed to continuing our efforts to ensure that the Board is diverse in demographic, thought, and experience. Women represent 25% of our Board and minorities represent 13% of our Board. In line with the Company's strategic objectives, our Directors demonstrate attributes and experience that are conducive to representing the best interests of our stockholders, including a range of skill sets, perspectives, backgrounds, ethnicity, genders, and qualifications. Each Director's unique background gives the Board as a whole competence and experience in a wide variety of areas, including corporate governance and board service, executive management, investing, finance, manufacturing, consumer products, sales, marketing and international business.
Designation of, and Communication with, Tempur Sealy International's Board of Directors through its Lead Director
As described in more detail above, the Board has designated Mr. Neu as the Lead Director. Stockholders or other interested parties wishing to communicate with our Board may contact the Lead Director by email at presidingdirector@tempursealy.com or by going to Tempur Sealy International's investor website at http://investor.tempursealy.com/overview under the caption "Corporate Governance" and then "click here to email the Lead Director." Regardless of the method you use, the Lead Director will be able to view your unedited message subject to and in accordance with our internal review policies. The Lead Director, in consultation with management, will determine whether to relay your message to other members of the Board.
Executive Sessions
Executive sessions, or meetings of the outside (non-management) Directors without management present, are held regularly. In 2018,2020, the independent Directors met several times in executive session without members of management present. Executive sessions are led by the Lead Director.
Charitable Contributions
Tempur Sealy International has not made charitable contributions to any charitable organization for which a Director serves as an executive officer that exceeded the greater of $1.0 million or 2% of such organization's consolidated gross revenues for any single year within the preceding three years.
Board Member Attendance at Annual Meetings
In accordance with our Corporate Governance Guidelines, all continuing Directors are generally expected to attend the Annual Meeting of Stockholders. At our last Annual Meeting of Stockholders, which was held on May 10, 2018,7, 2020, all the members of the Board attended.
PROPOSAL ONENO. 1
ELECTION OF DIRECTORS
Board of Directors
The Board has set seven directors as the number to be elected at the 2021 Annual Meeting and has nominated the individuals named below. All nominees are currently directors of Tempur Sealy International'sInternational and have been previously elected by our stockholders. Arik W. Ruchim, a current director, will not stand for re-election when his term expires at the 2021 Annual Meeting. As a result of Mr. Ruchim's departure, the size of our Board currently consistswill decrease to seven members, which is consistent with the size range (7-8) of eight members, each serving a one-year term. the Board over the last 5-years.
The current Directors standing for re-election are: Evelyn S. Dilsaver, Cathy R. Gates, John A. Heil, Jon L. Luther, Richard W. Neu, Arik W. Ruchim, Scott L. Thompson and Robert B. Trussell, Jr. Each of the nominees for election to the Board is currently a Director of Tempur Sealy International. The nominees, if elected, will each serve a one-year term until Tempur Sealy International's Annual Meeting of Stockholders in 20202022 or until his or her respective successor is elected and qualified. Each of the nominees has consented to serve a one-year term. There are no family relationships among our executive officers and Directors.
VOTE REQUIRED
Vote Required to Elect Director Nominees
Each Director will be elected by the affirmative vote of a majority of the shares of common stock present or represented by proxy at the Annual Meeting. In the event that the number of votes "against" a Director exceeds the number of votes "for" that Director, that Director must tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board whether to accept the resignation. The Board of Directors will then consider the recommendation and publicly disclose itsmake a decision to accept or reject the resignation within 90 days after the certification of the election results.
Board of Directors' Recommendation on Proposal No. 1
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION TO THE BOARD OF DIRECTORS OF EACH OF THE FOLLOWING NOMINEES:
Nominees to Board of Directors
Evelyn S. Dilsaver, 63,65, has served as a member of Tempur Sealy International's Board of Directors since December 2009. Ms. Dilsaver was President and Chief Executive Officer of Charles Schwab Investment Management from July 2004 until September 2007. Prior to that, Ms. Dilsaver held various senior management positions with The Charles Schwab Corporation since December 1991, including Executive Vice President and Senior Vice President, Asset Management Products and Services, of Charles Schwab Investment Management and Chief Financial Officer for U.S. Trust Company. Ms. Dilsaver is also a member of the board of directors of HealthEquity, Inc. (HQY), a non-bank health savings trustee, Bailard Private Real Estate Fund, as well as Blue Shield of California, and otherseveral non-profit boards. She also serves as a member of the advisory board of Protiviti Inc., a global consulting company. During the past five years, Ms. Dilsaver also served as a director of HighMark Funds, an asset management firm and Aeropostale, Inc., a specialty retailer. Ms. Dilsaver is a certified public accountant and holds a B.S. degree in accounting from California State University-Hayward. Ms. Dilsaver brings to the Board a long professional career in finance, accounting and general management and considerable experience with consumer-oriented businesses as a senior executive of a large investment management firm and her many years of serving as a director of companies in a variety of businesses.
Cathy R. Gates, 60,62, was elected to serve as a member of Tempur Sealy International's Board of Directors on July 5, 2018. Prior to her retirement in June 2017, Ms. Gates served as an Assurance Partner at Ernst & Young LLP in Tulsa, Oklahoma. From 2008 until 2017, she served as the Managing Partner of that office. Ms. Gates began working at Ernst & Young LLP in 1986, and during her tenure there worked with both public and privately-held clients throughout the southwestern United States in the retail/commercialconsumer products, transportation, manufacturing and contract drilling industries. Ms. Gates' areas of expertise include working with internal audit departments, coordinating financial statement audits, accounting and financial reporting. She currently serves on the Tulsa Area United Way Board of DirectorsCommunity Investment Cabinet and the Walton College of Business Dean's Executive Advisory Board at the University of Arkansas. She previously served on the Tulsa Area United Way Board of Directors and the Tulsa Regional Chamber of Commerce Board of Directors. Ms. Gates holds a Masters of Science in Accounting from the University of Arkansas. Ms. Gates brings a wealth of experience in auditing, accounting and financial reporting to the Board gained through her past service as an Assurance and Managing Partner of Ernst & Young LLP.
John A. Heil, 66,68, has served as a member of Tempur Sealy International's Board of Directors since March 2008. From February 2005 until his retirement in April 2013, he served as President of United Pet Group, Inc., a global manufacturer and marketer of pet food and supplies and a subsidiary of Spectrum Brands, Inc. Spectrum Brands, Inc. filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in February 2009 and emerged from bankruptcy protection on August 28, 2009. From 2000 to February 2005, he served as United Pet Group's President and Chief Executive Officer. Mr. Heil was a member of the board of directors and the audit committee of VCA Inc. (formerly VCA Antech Inc.), an NYSEa Nasdaq listed company, from February 2002 untilto October 2017, and previously served as a director of that company from 1995 to 2000. Prior to joining United Pet Group, Mr. Heil spent twenty-five years with the H.J. Heinz Company in various executive and general management positions including President of Heinz Pet Products. Mr. Heil holds a B.A. degree in economics from Lycoming College. Mr. Heil's long career in management and the branded consumer products arena brings to the Board a remarkable depth of operational and strategic experience.
Jon L. Luther, 75,77, has served as a member of Tempur Sealy International's Board of Directors since May 2015. He served as Chief Executive Officer of Dunkin' Brands Group, Inc. from January 2003 to January 2009 and Chairman from March 2006 to January 2009. In January 2009, he assumed the role of Executive Chairman and became non-Executive Chairman from July 2010 until his retirement in May 2013. Prior to Dunkin' Brands, Mr. Luther was President of Popeyes, a division of AFC Enterprises, Inc., from February 1997 to December 2002. Prior to Popeyes, Mr. Luther served as President of CA One Services, a subsidiary of Delaware North Companies, Inc., a global food service and hospitality company, and served as President and CEO of Benchmark Services, Inc., a food services company he founded. Earlier in his career, Mr. Luther held various senior leadership positions at Marriott Corporation and ARAMARK. Mr. Luther iscurrently serves as a director of Inspire Brands, Inc., which includes Arby's, Buffalo Wild Wings, Rusty Taco, Sonic Drive-In's, and Jimmy John's, and as an advisory board member of Staple Street Capital Group, LLC. From May 2010 until May 2020, Mr. Luther served as member of the boardBoard of directorsDirectors of Six Flags Entertainment Corporation, and Inspire Brands,the world's largest regional theme park company. Additionally, from April 2011 until November 2016, Mr. Luther served as a director of Brinker International, Inc. and serves on the advisory board of Staple Street Capital Group, LLC. Mr. Luther holds a degree in hotel and restaurant management from Paul Smith's CollegeCollege. He is Chairman Emeritus of the Culinary Institute of America, as well as Honorary Doctorate degrees from four colleges and universities.past Chairman of the International Franchise Association. Mr. Luther brings to the Board a strong track record of profitably growing large global consumer-branded businesses, with a keen understanding of the consumer, and notable brand development expertise. He has significant relevant experience as a CEO and as a director of other high-performance public companies.
Richard W. Neu, 63,65, has served as a member of Tempur Sealy International's Board of Directors since October 2015. Mr. Neu's professional career has spanned over 3540 years. For the last 1215 years Mr. Neu has served in a variety of Board roles. Mr. Neu currently serves on the board of directors, as chair of the audit committee, as a member of the nominating and corporate governance committee and as a member of the executive committee of Huntington Bancshares Incorporated, andIncorporated. He also serves as a member of the board of directors of Oxford Square Capital Corp. Until the sale of the company in 2012, he was the lead director and a member of the audit committee and governance committee of Dollar Thrifty Automotive Group, Inc., having served as the chairman of the Dollar Thrifty board of directors from 2010 through 2011. Mr. Neu also served as a director of MCG Capital Corporation, a business development corporation, from 2007 until its sale in 2015, and during this period served as chairman of the board from 2009 to 2015 and as Chief Executive Officer from November 2011 to November 2012. Mr. Neu served from 1985 to 2004 as Chief Financial Officer of Charter One Financial, Inc., a major regional bank holding company, and a predecessor firm, and as a director of Charter One Financial, Inc. from 1992 to August 2004. Mr. Neu previously worked for KPMG as a senior audit manager. Mr. Neu received a B.B.A. from Eastern Michigan University with a major in accounting. Mr. Neu has extensive knowledge and experience handling complex financial and operational issues through his service as both a director and executive officer of a variety of public companies.
Arik W. Ruchim, 38, has served a member of Tempur Sealy International's Board since May 2018. Mr. Ruchim is a Partner at H Partners, an investment management firm and Tempur Sealy International's largest shareholder. Prior to joining H Partners in 2008, Mr. Ruchim was at Creative Artists Agency and Cruise/Wagner Productions. Mr. Ruchim previously served as a director of Remy International, Inc., a global manufacturer of automotive parts, and as a director of Dick Clark Productions, a television production company. Mr. Ruchim serves as a member of the University of Michigan's Tri-State Leadership Council, a group dedicated to enhancing educational opportunities for undergraduate and graduate students. Mr. Ruchim has a Bachelor of Business Administration with Distinction from the University of Michigan. Mr. Ruchim brings to the Board a strong business and financial background and extensive investment experience.
Scott L. Thompson, 60,62, has served as Chairman of Tempur Sealy International's Board of Directors and as its President and CEOChief Executive Officer since September 2015. He previously served as Chief Executive Officer and President of Dollar Thrifty Automotive Group, Inc. until it was purchased by Hertz Global Holdings, Inc. in 2012. Prior to serving as CEO and President, Mr. Thompson was a Senior Executive Vice President and Chief Financial Officer of Dollar Thrifty. Prior to joining Dollar Thrifty in 2008, Mr. Thompson was a consultant to private equity firms and was a founder of Group 1 Automotive, Inc., ana NYSE and Fortune 500 company, serving as its Senior Executive Vice President, Chief Financial Officer and Treasurer. Mr. Thompson served as Chairman of Dollar Thrifty from December 2011 to September 2012. He served as a member of the boardBoard of directors,Directors, and for part of that time as the Non-Executive Chairman, of Houston Wire & Cable Company, a publicly-traded provider of industrial products, from November 2007 tountil September 2015. Mr. Thompson also served as a member of the boardBoard of directorsDirectors of Conn's, Inc., a publicly-tradedpublicly traded retailer of consumer furniture, from June 2004 to September 2015 and of Asbury Automotive Group, Inc., a publicly-tradedpublicly traded automotive retailer, from January 2015 to February 2018. Mr. Thompson earned a Bachelor of Business Administration degree from Stephen F. Austin State University in Nacogdoches, Texas, and began his career with a national accounting firm. Mr. Thompson brings to the Board extensive financial, operational and entrepreneurial experience in his roles as an executive officer and director of publicly traded companies.
Robert B. Trussell, Jr., 67,69, has served as a member of Tempur Sealy International's Board of Directors or its predecessors since 2002. Mr. Trussell served as CEOChief Executive Officer of Tempur Sealy International or its predecessors from November 2002 until his retirement in May 2006. From 1994 to December 2004, Mr. Trussell served as President of the Company and its predecessors. Prior to joining the Company's predecessor in 1994, Mr. Trussell was general partnerinvolved internationally in the thoroughbred race horse industry including several startup businesses. He is currently director of Clean Media LLC, a brand safe digital advertising company and serves on the board of several racing limited partnerships that owned racehorses in England, France and the United States. He was also the owner of several start-up businesses in the equine lending and insurance business.Catholic non-profit organizations. Mr. Trussell received his B.S. degree from Marquette University. As former Chief Executive Officer and a principal founder of Tempur Sealy International, Mr. Trussell brings to the Board significant management and mattress industry experience and an historical perspective.
Executive Officers
Certain information as of March 11, 2021, about our executive officers is set forth in the following table and accompanying text:
|
| | | | | | | | | | | | | |
Name | | Age | | Position |
Scott L. Thompson | | 6062 | | Chairman of the Board, President and Chief Executive Officer |
Bhaskar Rao | | 5355 | | Executive Vice President and Chief Financial Officer |
Richard W. AndersonH. Clifford Buster, III | | 5951 | | Chief Executive Vice President and President,Officer, North America |
David Montgomery | | 5860 | | Executive Vice President, Global Business Strategy and Development |
Thomas A. Murray | | 52 | | Executive Vice President, Chief Marketing Officer, Marketing U.S. |
Steven H. Rusing | | 56 | | Executive Vice President, President, U.S. Sales |
Scott J. Vollet | | 5557 | | Executive Vice President, Global Operations |
H. Clifford Buster, III | | 49 | | Executive Vice President, Direct to Consumer, North America |
Bhaskar Rao was appointed to serve as Executive Vice President and Chief Financial Officer of Tempur Sealy International in October 2017. Mr. Rao joined Tempur Sealy International as Director of Financial Planning and Analysis in January 2004 and, from April 2011 until his appointment as Executive Vice President and Chief Financial Officer, served as Senior Vice President and Chief Accounting Officer. From January 2004 to April 2011, he held various roles of increasing responsibility in the Company's finance and accounting organization. From 2002 until December 2003, Mr. Rao was employed by Ernst & Young, as a Senior Manager in the assurance and business advisory group, and from 1994 until 2002, he was employed by Arthur Andersen. Mr. Rao earned B.A. degrees in Accounting and Economics from Bellarmine University. Mr. Rao is also a Certified Public Accountant.
Richard W. AndersonH. Clifford Buster, III was appointed to serve as Chief Executive Officer, North America effective January 1, 2021. Mr. Buster joined Tempur Sealy International in July 2006 and serves as Executive Vice President, Direct to Consumer, North America in September 2017, and then served as Executive Vice President, North America.President U.S. Direct To Consumer during 2020. From 1983February 2015 to 2006,August 2017, Mr. Anderson was employed by The Gillette Company, which became a part of The Procter & Gamble Company in 2005. Mr. Anderson most recentlyBuster served as the Chief Financial Officer of Berkshire Hathaway Automotive, Inc. From November 2013 to January 2015, Mr. Buster served as an Executive Vice President of Marketing for Oral-Bat Exeter Financial Corp. Mr. Buster has also held leadership positions at Dollar Thrifty Automotive Group, Inc., Helix Energy Solutions Group, Inc. and Braun in North America. Previously,Group 1 Automotive, Inc. Mr. Anderson was the Vice President of Global Business Management for Duracell. Mr. Anderson has held several management positions in marketing and sales as well as overseeing branding, product development and strategic planning. Mr. AndersonBuster earned a B.S. and an M.B.A.Bachelor of Accountancy from Virginia Tech.the University of Mississippi.
David Montgomery joined Tempur Sealy International in February 2003 and served as Executive Vice President and President of International Operations until 2019. He currently serves as Executive Vice President, Global Business Strategy and Development with responsibilities including marketingglobal business strategy, global business development and sales.global licensing. From 2001 to November 2002, Mr. Montgomery was employed by Rubbermaid, Inc., where he served as President of Rubbermaid Europe. From 1988 to 2001, Mr. Montgomery held various management positions at Black & Decker Corporation, most recentlyincluding as Vice President of Black & Decker Europe, Middle East and Africa. Mr. Montgomery receivedearned his B.A. degree, with honors, from L'Ecole Superieure de Commerce de Reims, France and Middlesex Polytechnic, London.
Thomas A. Murray was appointed to serve as Executive Vice President, Chief Marketing Officer, U.S. in January 2020. Mr. Murray joined Tempur Sealy International in May of 2018 as Senior Vice President, Marketing. From 1994 to 2007, Mr. Murray was employed by The Gillette Company, which became a part of The Procter & Gamble Company in 2005. Following his tenure with Procter & Gamble, Mr. Murray transitioned to Senior Vice President of Marketing positions within a number of industry-leading consumer technology companies, including TomTom, Inc. from 2007-2011 and again in 2012-2014, Carbonite, Inc. from 2011-2012 and ADT, Inc. from 2014-2017. Mr. Murray earned a B.A. from Fairfield University in 1990 and attended the University of Connecticut Graduate School of Business.
Steven H. Rusing was appointed to serve as Executive Vice President, President, U.S. Sales in January 2020 after serving as Senior Vice President, U.S. Sales for Tempur Sealy International beginning in March 2016. Mr. Rusing joined Sealy Corporation in June 1992 and held various account management roles with increasing responsibility. From June 1996 until October 2002 he served as District Sales Manager. In November 2002 he was appointed Vice President of Sales for the West Region until June 2006. From July 2006 to December 2007 he served as Vice President of National Accounts. In January 2008 he was appointed Senior Vice President of National Accounts and held the same role at Tempur Sealy International starting in June 2013. Mr. Rusing earned a B.A. degree in Management from Wayne State University.
Scott J. Vollet joined Tempur Sealy International in August 2009 and currently serves as Executive Vice President, Global Operations. From 1987 to 2009, Mr. Vollet was employed by Texas Instruments Incorporated, Gemini Management Consulting and Lexmark International, Inc. Mr. Vollet was previously Vice President of Tempur Sealy Global Supply Chain. He began leading the Global Operations team at Tempur Sealy International in 2013. Mr. Vollet earned a B.S. in Industrial Engineering from the University of Missouri and an M.B.A. from the University of Dallas.
H. Clifford Buster, III joined Tempur Sealy International as Executive Vice President, Direct to Consumer, North America in September 2017. From February 2015 to August 2017, Mr. Buster served as the Chief Financial Officer of Berkshire Hathaway Automotive, Inc. From November 2013 to January 2015, Mr. Buster served as an Executive Vice President at Exeter Financial Corp. Mr. Buster has also held leadership positions at Dollar Thrifty Automotive Group, Inc., Helix Energy Solutions Group, Inc. and Group 1 Automotive, Inc. Mr. Buster earned a Bachelor of Accountancy from the University of Mississippi.
PRINCIPAL SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 12, 2019,11, 2021, regarding the beneficial ownership of our outstanding equity securities by:
•each person known to beneficially own more than 5% of Tempur Sealy International's outstanding common stock;
•each of Tempur Sealy International's Directors and Named Executive Officers (as defined below in "Executive Compensation and Related Information"); and
•all of Tempur Sealy International's Directors and executive officers as a group.
Beneficial ownership of shares is determined under Rule 13d-3(d)(1) of the Exchange Act and generally includes any shares over which a person exercises sole or shared voting or investment power and the number of shares that can be acquired within sixty (60) days upon exercise of any option or the conversion of other types of securities. Common stock subject to these options, warrants and rights is deemed to be outstanding for the purpose of computing the ownership percentage of the person holding such options, but is not deemed to be outstanding for the purpose of computing the ownership percentage of any other person. As of the close of trading on March 12, 2019,11, 2021, there were 54,715,562201,767,857 shares of common stock outstanding, which is used to calculate the percentages in the table below.
Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to all shares of common stock held by them. Beneficial ownership of shares has been adjusted, if necessary, to reflect the 4-for-1 stock split effected by the Company on November 24, 2021.
|
| | | | | | | |
| Shares Beneficially Owned |
| Number of | Percentage |
Name of Beneficial Owner: | Number of Shares | Percentage of Class |
5% Stockholders: | | |
The Vanguard Group | 18,751,496(1) | 9.29 |
BlackRock, Inc. | 16,192,648(2) | 8.03 |
H Partners Management, LLC | 8,000,00011,800,000(1)(3)
|
| 14.725.85 |
Manulife Financial Corporation | 5,568,729(2)
|
| 10.22 |
Route One Investment Company, L.P. | 5,092,739(3)
|
| 9.30 |
The Vanguard Group | 4,175,885(4)
|
| 7.66 |
BlackRock, Inc. | 4,024,979(5)
|
| 7.40 |
Dynamo Internacional Gestão de Recursos Ltda. | 2,723,121(6)
|
| 5.00 |
| | |
Named Executive Officers and Directors: | |
| |
Scott L. Thompson | 897,1404,646,912(7)(8)(4)(5)
|
| 1.622.27 |
Bhaskar Rao | 48,297379,231(8)(5)
|
| * |
Richard W. AndersonH. Clifford Buster, III | 138,500353,896(8)(5)
|
| * |
David Montgomery | 455,9301,125,362(8)(5)
|
| * |
Scott J. Vollet | 50,208340,463(9)(5)
|
| * |
Evelyn S. Dilsaver | 39,651147,524(8)(5)
|
| * |
Cathy R. Gates | 2,108 |
26,689(5) | * |
John A. Heil | 36,400119,112(8)(5)
|
| * |
Jon L. Luther | 20,30490,636(8)(5)
|
| * |
Richard W. Neu | 44,872153,400(8)(5)
|
| * |
Arik W. Ruchim | see Note(1)(3) |
| see Note(1)(3) |
Robert B. Trussell, Jr. | 25,05090,644(8)(9)(5)(6)
|
| * |
All Executive Officers and Directors as a group (13(14 persons): | 1,790,5667,728,302(8)(5)
|
| 3.233.78 |
* Represents ownership of less than 1% of class.
| | | | | | | | | | | | | | |
(1) | | Amounts shown reflect the aggregate number of shares of common stock held by The Vanguard Group based on information set forth in an amendment to Schedule 13G filed with the SEC on February 10, 2021. The Vanguard Group reported sole voting power over 0 shares, shared voting power over 145,306 shares, sole dispositive power over 18,453,607 shares and shared dispositive power over 297,889 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
(2) | | Amounts shown reflect the aggregate number of shares of common stock held by BlackRock, Inc. based on information set forth in an amendment to Schedule 13G filed with the SEC on February 1, 2021. BlackRock, Inc. reported sole voting power over 15,567,794 shares and sole dispositive power over all 16,192,648 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. |
(3) | | Amounts shown reflect the aggregate number of shares of common stock held by H Partners Management, LLC and certain of its affiliates based on information set forth in an amendment to Schedule 13D filed with the SEC on May 12, 2020. The amounts have been adjusted to reflect the 4-for-1 stock split effected by the Company on November 24, 2020. H Partners Management, LLC reported shared voting power and shared dispositive power over all 11,800,000 shares. H Partners, LP and H Partners Capital, LLC reported shared voting power and shared dispositive power over 7,791,600 shares. Rehan Jaffer, as the managing member of H Partners Management, LLC and H Partners Capital, LLC, respectively, reported shared voting power and shared dispositive power over all 11,800,000 shares. The address of H Partners Management, LLC and its subsidiaries and affiliates described herein is 888 Seventh Avenue, 29th Floor, New York, NY 10019. Mr. Ruchim, a partner at H Partners, may be deemed to have voting and dispositive power with respect to certain of these shares. Mr. Ruchim disclaims beneficial ownership of these shares, except to the extent of his respective pecuniary interests. |
(4) | | Includes 454,364 shares of common stock which are the result of the vesting of restricted stock units; however, payout of the vested common shares is deferred until thirty days following termination of his employment. |
(5) | | Includes the following number of shares of common stock which a Director or executive officer has the right to acquire upon the exercise of stock options that were exercisable as of March 11, 2021, or that will become exercisable within 60 days after that date, or other equity instruments which are scheduled to vest and convert into common shares within 60 days after that date: |
| Named Executive Officer | Number of Shares | Director | Number of Shares |
| Scott L. Thompson | 2,974,140 | Evelyn S. Dilsaver | 26,220 |
| Bhaskar Rao | 196,960 | Cathy R. Gates | — |
| H. Clifford Buster, III | 56,436 | John A. Heil | — |
| David Montgomery | 232,196 | Jon L. Luther | 6,676 |
| Scott J. Vollet | 153,428 | Richard W. Neu | 2,700 |
| | | Arik W. Ruchim | — |
| | | Robert B. Trussell, Jr. | — |
| | | | |
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(1 | ) | Amounts shown reflect the aggregate number of shares of common stock held by H Partners Management, LLC and certain of its affiliates based on information set forth in an amendment to Schedule 13D filed with the SEC on May 9, 2018. H Partners Management, LLC reported shared voting power and shared dispositive power over all 8,000,000 shares. H Partners, LP and H Partners Capital, LLC reported shared voting power and shared dispositive power over 6,009,900 shares. Rehan Jaffer, as the managing member of H Partners Management, LLC and H Partners Capital, LLC, respectively, reported shared voting power and shared dispositive power over all 8,000,000 shares. The address of H Partners Management, LLC and its subsidiaries and affiliates described herein is 888 Seventh Avenue, 29th Floor, New York, NY 10019. Mr. Ruchim, a Partner at H Partners, may be deemed to have voting and dispositive power with respect to certain of these shares. Mr. Ruchim disclaims beneficial ownership of these shares, except to the extent of his respective pecuniary interests. |
(2 | ) | Amounts shown reflect the aggregate number of shares of common stock held by Manulife Financial Corporation through its indirect, wholly-owned subsidiaries based on information set forth in an amendment to Schedule 13G filed with the SEC on February 14, 2019. Manulife Asset Management (US) LLC reported sole voting power and sole dispositive power over 5,491,405 shares. Manulife Asset Management Limited reported sole voting power and sole dispositive power over 77,324 of the shares. The address of Manulife Financial Corporation is 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5. |
(3 | ) | Amounts shown reflect the aggregate number of shares of common stock held by Route One Investment Company, L.P. ("Route One") and certain of its affiliates based on information set forth in a Schedule 13G filed with the SEC on February 14, 2019. Route One, ROIC, LLC and Route One Investment Company, LLC ("General Partner") each reported shared voting power and shared dispositive power over 5,092,739 shares. Route One Offshore Master Fund, L.P. ("Master Fund") reported shared voting power and shared dispositive power over 2,765,965 shares. William F. Duhamel, Jr. and Jason E. Moment, as control persons of Route One and the General Partner, reported shared voting and shared dispositive power over 5,092,739 shares. The address of Route One and its affiliates other than the Master Fund is One Letterman Drive, Building D, Suite DM 200, San Francisco, CA 94129. The address of the Master Fund is c/o Citco Fund Services (Cayman Islands) Limited, 89 Nexus Way, Camana Bay, P.O. Box 31106SMB, Grand Cayman, Cayman Islands. |
(4 | ) | Amounts shown reflect the aggregate number of shares of common stock held by The Vanguard Group based on information set forth in an amendment to Schedule 13G filed with the SEC on February 13, 2019. The Vanguard Group reported sole voting power over 25,309 shares, shared voting power over 6,799 shares, sole dispositive power over 4,148,265 shares and shared dispositive power over 27,620 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
(5 | ) | Amounts shown reflect the aggregate number of shares of common stock held by BlackRock, Inc. based on information set forth in an amendment to Schedule 13G filed with the SEC on February 6, 2019. BlackRock, Inc. reported sole voting power over 3,839,084 shares and sole dispositive power over all 4,024,979 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. |
(6 | ) | Amounts shown reflect the aggregate number of shares of common stock held by Dynamo Internacional Gestão de Recursos Ltda. ("Dynamo") based on information set forth in an amendment to Schedule 13G filed with the SEC on February 14, 2019. Dynamo reported sole voting and sole dispositive power over 2,723,121 shares. The address of Dynamo is Av. Ataulfo de Paiva, 1235-6 Andar, Rio de Janeiro D5 22440-034, Brazil. |
(7 | ) | Includes 113,591 shares of common stock which are the result of the vesting of restricted stock units, however payout of the vested common shares is deferred until thirty days following termination of his employment. |
(8 | ) | Includes the following number of shares of common stock which a Director or executive officer has the right to acquire upon the exercise of stock options that were exercisable as of March 12, 2019, or that will become exercisable within 60 days after that date, or other equity instruments which are scheduled to vest and convert into common shares within 60 days after that date: |
| Name | Number of Shares | Name | Number of Shares |
| Scott L. Thompson | 521,365 | Evelyn S. Dilsaver | 20,825 |
| Bhaskar Rao | 31,031 | Cathy R. Gates | — |
| Richard W. Anderson | 67,986 | John A. Heil | 6,837 |
| David Montgomery | 97,281 | Jon L. Luther | 3,825 |
| H. Clifford Buster, III | 4,703 | Richard W. Neu | 3,411 |
| Scott Vollet | 30,483 | Arik W. Ruchim | — |
| | | Robert B. Trussell, Jr. | 9,390 |
| All Executive Officers and Directors as a Group (13 persons): | | 797,137 |
(9 | ) | Includes 25,000 shares of common stock owned by RBT Investments, LLC, Robert B. Trussell, Jr. and Martha O. Trussell as tenants in common. |
| | | | | | | | | | | | | | |
| All Executive Officers and Directors as a Group (14 persons): | 3,735,596 | |
(6) | | Includes 40,000 shares of common stock owned by RBT Investments, LLC, Robert B. Trussell, Jr. and Martha O. Trussell as tenants in common. |
Agreements with H Partners
2017 Agreement. On June 26, 2017, the Company entered into a Non-Disclosure and Standstill Agreement (the "2017 Agreement") with Usman Nabi, a Director of the Company at the time (referred to in the 2017 Agreement as the "Director"), and H Partners Management, LLC ("H Partners"); H Partners, LP; H Partners Capital, LLC; P H Partners LTD; H Offshore Fund LTD.;LTD; and Rehan Jaffer (together with H Partners, the "H Partners Group"), which collectively beneficially owned 8,000,00011,800,000 shares (2,950,000 pre-stock split) of the outstanding common stock of the Company, par value $0.01 per share (the "Common Stock") as of May 9, 2018.7, 2020.
The 2017 Agreement provides for (i) certain confidentiality obligations for the Director, (ii) the ability of the Director to disclose Confidential Information (as defined in the 2017 Agreement) to his legal counsel and to other parties within the H Partners Group for the purpose of assisting him in the performance of his duties as a Director of the Company, (iii) requiring compliance with the Company's Insider Trading Policy (as defined in the 2017 Agreement) and the Company's "trading window" and preclearance requirements, and (iv) customary "standstill" provisions that generally prohibit each H Partners Group Member (as defined in the 2017 Agreement) from taking specified action with respect to the Company and its securities, including, among others: (x) acquiring beneficial ownership of twenty percent (20%) or more of the Company's then outstanding Common Stock in the aggregate (among all of the H Partners Group Members and their Affiliates and Associates (as defined in the 2017 Agreement)) or (y) seeking or in any way assisting or facilitating any other person in seeking, among other things, to acquire control of the Company or to engage in certain other extraordinary transactions with respect to the Company or any of its subsidiaries or any material portion of its or their businesses, all as more fully described in the Agreement. The 2017 Agreement contains no restrictions on the ability of the H Partners Group to vote its shares of Common Stock, including in any proxy contest, or to transfer its Common Stock. In addition, the standstill provisions under the 2017 Agreement do not purport to prevent the Director or any other Director from exercising his or her rights to comply with his or her fiduciary duties as a Director of the Company or from participating in board room discussions or private discussions with other members of the Board.
Either the Company or the Director may terminate the right described above to share information at any time by written notice. The date these rights terminate, either in accordance with the terms of the 2017 Agreement or otherwise, is referred to as the "Information Termination Date." The standstill provisions described above terminate six months after the Information Termination Date. It is expected that the Information Termination Date will occur upon Mr. Ruchim's departure from the Board at the 2021 Annual Meeting.
The above summary of the terms of the 2017 Agreement does not purport to be complete and is qualified in its entirety by reference to the 2017 Agreement, a copy of which is filed as an exhibit to the Company's Current Report on Form 8-K filed on June 28, 2017.
2018 Amendment. In connection with the then-pending departure of Mr. Nabi from H Partners, the Company and H Partners entered into a letter agreement dated March 23, 2018, which amended the 2017 Agreement (the "2018 Amendment"). Pursuant to the terms of the 2018 Amendment (i) the Company agreed to nominate Mr. Ruchim to the Board at the 2018 Annual Meeting, (ii) the H Partners Group members agreed to vote at the 2018 Annual Meeting in favor of the Company's nominees for the Board, and (iii) Mr. Ruchim would be permitted to share information with H Partners and certain related parties as the "Director" pursuant to the 2017 Agreement and would be required to comply with the obligations of the Director in the 2017 Agreement.
The above summary of the terms of the 2018 Amendment does not purport to be complete and is qualified in its entirety by reference to the 2018 Amendment, a copy of which is filed as an exhibit to the Company's Current Report on Form 8-K filed on March 26, 2018.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS
2020 CD&A At-A-Glance
This year's Compensation Discussion and Analysis ("CD&A") is organized into eight sections:reviews the objectives and elements of Tempur Sealy's executive compensation program and discusses the 2020 compensation earned by our named executive officers ("NEOs"). It also explains the significant actions the Compensation Committee took based on its ongoing commitment to consider stockholder feedback and to ensure our senior leadership team continues to drive earnings growth while balancing the Company's social responsibilities. During 2020, we:
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•Conducted a stockholder outreach campaign, with a significant focus on executive compensation matters | Introduction■Reached out to 14 of our top stockholders, representing more than 45% of shares outstanding | 23■The Lead Director from the Board of Directors, along with members of senior management, participated in various meetings with 10 top stockholders, representing approximately 34% of shares outstanding |
•Engaged a new independent compensation consultant | | 23■Retained Pearl Meyer to gain further insight on pay practices and ensure that our program effectively balances competitive market practices, investor expectations, best-practice governance standards and our business strategy |
•Strengthened the link between pay and performance in our Long-Term Incentive Plan ("LTIP") | | 24■For 2021, implemented several changes to our PRSU awards in order to further align these awards with market best practices: |
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• | | 36■The changes will reduce the CEO's maximum payout opportunity for the 2021 PRSU grant from $30 million to $12 million■Did not adopt a new aspirational PRSU program or grant any special equity awards to any of the NEOs ─ it is not a regular practice |
INTRODUCTION
This CD&A provides information about the material components of our executive compensation programs for our Named Executive Officers ("NEOs"), whose compensationTempur Sealy is set forth in the 2018 Summary Compensation Table and other compensation tables contained in this Proxy Statement:
Scott L. Thompson, Chairman, President and Chief Executive Officer ("CEO");
Bhaskar Rao, Executive Vice President and Chief Financial Officer ("CFO");
Richard W. Anderson, Executive Vice President and President, North America;
David Montgomery, Executive Vice President, Global Business Strategy and Development; and
Scott J. Vollet, Executive Vice President, Global Operations
In responsecommitted to direct stockholder feedback during a proxy contest in connection with our 2015 Annual Meeting of Stockholders, our Board of Directors effected several management and compensation changes. These changes included: (i) the recruitment of a highly experienced CEO with a strong record of shareholder value creation, (ii) a strategy realignment to emphasize profit growth as contrasted with sales growth and (iii) a more focused compensation structure that included an aspirational long-term earnings target that would reward management for delivering exceptional outcomes for stockholders. In addition, in order to create a more focused, efficient management structure, since May 2015 we have streamlined our Board of Directors and refreshed the composition of our Board (with eight Directors leaving the Board and five new Directors joining the Board) and significantly reduced the size of our senior management team. Our executive compensation program resulting from these changes is designed to attract, motivate and retain the leaders of our business. Our compensation program is designed to create long-term value for our stockholders. The Aspirational PRSU grants described below were designed by the Compensation Committee based on engagement with our largest stockholder to tightly align the interest of management with the value creation objectives and long-term strategy of our stockholders. As discussed in more detail below, we have also engaged in significant discussions with holders of more than a majority of our outstanding shares in order to ensure that our management's compensation incentives are aligned with the best interests of our stockholders. This CD&A explains how the Compensation Committee of the Board of Directors made compensation decisions in 2018 for our NEOs.
BUSINESS SUMMARY
We develop, manufacture and market bedding products, which we sell globally. Our long-term strategy is to drive earnings growth while improving the sleep of more people, every night, all around the world. Our key initiatives for 2018 included developingWe are a global leader in the most innovativedesign, manufacture and distribution of bedding products and accept our global responsibility to serve all stakeholders, our community and environment. We have and are implementing programs consistent with our responsibilities including safety programs, product donations, and environmental and social initiatives supporting our long-term commitments. Our focus on innovative products, consumer-preferred brands, omni-channel distribution and driving increases in allprofit drove strong financial results for the markets we serve,Company.
Despite the unprecedented challenges throughout 2020, the Company delivered record sales, adjusted EBITDA(1), and free cash flow(1), while reducing net debt and investing over $100 million in our brandspeople, plants and optimizing our worldwide distribution.processes that resulted in the creation of over 1,500 jobs and deploying over $300 million to share repurchases. The Compensation Committee believes that the adjusted EBITDA(1) targets for 2020 were challenging, particularly because they were not reduced in response to the onset of the global pandemic. In fact, at the onset of the pandemic the Board of Directors waived their annual cash base board fees, and the CEO donated the remainder of his 2020 net base salary to the Tempur Sealy Foundation. The Company believes that a culture of relentless pursuit towards execution, an experienced management team, and a performance-based compensation program for its executive team are instrumental in helping the Company achieve its strong financial performance.
2020NEOs
| | | | | |
Name | Title |
Scott L. Thompson | Chairman, President and Chief Executive Officer ("CEO") |
Bhaskar Rao | Executive Vice President and Chief Financial Officer ("CFO") |
H. Clifford Buster, III | Executive Vice President, President U.S. Direct to Consumer(*) |
David Montgomery | Executive Vice President, Global Business Strategy and Development |
Scott J. Vollet | Executive Vice President, Global Operations |
(*) Effective January 1, 2021, Mr. Buster's title changed to Chief Executive Officer, North America to align with his internal promotion.
Results of 2020 Say on Pay / Board Responsiveness to Stockholder Feedback
In 2018,2020, our executive compensation program received the support of 54% of the total votes cast at our Annual Meeting of Stockholders. As a result of this decline in support from 2019, we beganincreased the largest Tempur rolloutfocus and intensity of our regular stockholder engagement activities.
Between October and December, we contacted stockholders representing more than 45% of our outstanding common stock and met with many of those stockholders, who collectively hold approximately 34% of our outstanding common stock. A key objective of these outreach efforts was to listen to stockholders to better understand their perspectives on our executive compensation program and the concerns contributing to our lower levels of support for say on pay proposals. We spoke with a combination of investors who voted both "For" and "Against" our say on pay proposal in 2020 to gain a balanced perspective of our history. Duringprogram. The Lead Director, the initial stage,Senior Vice President, Chief Human Resources Officer, the Executive Vice President, Chief Financial Officer and the Director of Investor Relations were all active participants in these discussions.
These meetings helped validate that our stockholders continue to be broadly supportive of the overall philosophy, objectives, and design of our program. They also provided us with important perspectives on how to improve and better explain our program as we launched entry-level Tempur mattressescontinue to move forward. Based on these learnings and past learnings, we made several significant modifications to our executive compensation program effective for fiscal years 2020 and 2021, as summarized below:
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What We Heard | What We Did |
Stockholders prefer a mix of performance shares and restricted stock for equity grants | For 2020 regular LTIP awards, granted 50% using PRSUs based on the achievement of adjusted EBITDA(1); and 50% using time-based RSUs. PRSUs comprise 50% of the LTIP awards in 2021 as well |
Stockholders would like to see maximum payout opportunities for the long-term incentive award targeted closer to market practices | For 2021, the LTIP maximum award opportunity was reduced to 300% of target from 600% of target |
Stockholders were concerned about the use of special, one-time equity awards | Did not adopt a new aspirational PRSU program or grant any special equity awards to any of our employees, including NEOs ─ it is not a regular practice |
Stockholders seek a more diversified use of performance metrics in the incentive plans, and more clarity around the performance metrics in the incentive plans | For 2021, added relative TSR and qualitative ESG performance metrics to the LTIP to balance the existing quantifiable absolute metric. Details about the performance metrics and their rationale are provided below |
Stockholders suggested the inclusion of ESG as a component of compensation going forward, aligning with increased stockholder interests | For 2021, included a qualitative ESG component to balance our global responsibilities to serve all stakeholders, our community and environment |
We value the views and insights of our stockholders, and we believe that constructive and meaningful dialogue with them builds relationships that promote transparency and accountability for the benefit of all. We will continue to maintain an open dialogue with our stockholders to help ensure that the Board and management have a regular pulse of investor perspectives.
Incentive Plans: 2021 Performance Metrics At-A-Glance
The focus of our annual and long-term incentive plans is achieving profitable growth while balancing investments in business initiatives and driving long-term stockholder value creation. For awards in 2021, we used a balanced mix of quantifiable absolute and relative financial metrics, as well as Sealy Hybrid mattresses, pillowsqualitative ESG metrics to measure performance and adjustable bases. Our profitability in North America was unfavorably impactedsupport the following key objectives:
•Motivate and reward an experienced management team with performance-based equity awards and long-term incentive compensation to encourage both retention and performance
•Foster a culture of relentless pursuit towards execution of delivering earnings growth and strong stockholder returns
•Drive our ESG initiatives
We implemented these changes to our PRSU awards to strengthen alignment with market best practices by launch costreducing the maximum payout opportunity for all NEOs from 600% of target to 300% and some consumers purchasing ouradding two new entry-level mattresses instead of our existing higher-end mattresses. We expect this trend to continue until our higher-end Tempur mattresses are fully floored with our retailers inperformance metrics: Relative TSR and ESG. The changes diversify the second quarter of 2019. In addition, during 2018 our growth rates as compared to 2017 were significantly impacted byLTIP metrics and will reduce the loss of Mattress Firm, Inc. ("Mattress Firm") our largest customer, at the end of the first quarter of 2017. Our gross margins were also unfavorably impacted by significant commodity cost inflation and cheap import mattresses. We remain focused on our omni channel approach, which includes developing our North American distribution network by opening more high end company-owned stores and expanding our online direct to consumer operations.
During the past year, the U.S. bedding industry experienced volatility as certain traditional bedding and department store retailers filed for bankruptcy and consumer demand shifted to a variety of other non-traditional channels. In addition, low-end bedding imports from China significantly increased and competed against our value priced Sealy products in the U.S. market. These imports may be sold below cost. In September 2018, we and other industry participants filed petitions with the U.S. International Trade Commission and the U.S. Department of Commerce, alleging that many of these Chinese imports are being dumped into the U.S. market at prices below cost.
During 2018, we also completed an evaluation of our international operations and identified certain Latin American subsidiaries with low profitability and difficult operating environments containing higher operational risk and volatility. As a result, we decided to divest the net assets of certain of these subsidiaries in the Latin American region and enter into licensee relationships in these markets.
As discussed above, our financial performanceCEO's maximum payout opportunity for the year reflects the impact of a generally challenging environment. Our total net sales for 2018 increased 0.1%2021 PRSU grant from $30 million to $2,702.9 million from $2,700.6 million in 2017, driven primarily by robust growth in International of 7.6%, offset by a 1.7% decrease in North America. The decline in North America, as compared to 2017, was primarily driven by the termination of our contracts with Mattress Firm on April 3, 2017. North America net sales, excluding Mattress Firm, increased 2.8%. Growth in International was driven primarily by growth across all regions and the change in classification of royalty income due to the adoption of new revenue recognition guidance. Net income was $100.5 million as compared to $151.4 million in 2017, driven primarily by increased operating expenses. North America gross margin declined 40 basis points in 2018 compared to 2017 due primarily to commodity cost inflation and unfavorable merchandising mix. International gross margin improved 10-basis points primarily driven by operational improvements and the adoption of the new revenue recognition standard. Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP financial measure, decreased approximately 4.7% from $445.6 million in 2017 to $424.7 million in 2018.
We continue to make strategic investments in order to drive long-term earnings growth, including: introducing new products; investing in increasing our global brand awareness; investing in research and development and productivity initiatives; and taking other actions to further strengthen our business. In 2019, we expect to drive earnings growth through sales growth of Tempur products in North America, pricing actions, improved merchandising mix and expansion of our Direct channel. We expect these factors may be offset by a slight decline in Sealy product sales in North America. We do not expect significant commodity inflation in 2019.
$12 million.
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Plan | Annual Incentive Plan ("AIP") Awards | LTIP |
PRSUs = 50% of the total LTIP award value | RSUs = 50% of total LTIP award value |
Performance Metrics | Company-Wide Adjusted EBITDA(1) | Company-Wide Adjusted EBITDA(1) | Relative TSR | ESG | Not Applicable |
Weightings | 100% | 80% of 50% | 10% of 50% | 10% of 50% | 50% |
Key Points | *Adjusted EBITDA(1) emphasizes growth while continuing strong accountability for returns *Using a Company-wide performance goal based on adjusted EBITDA(1) promotes collaboration and focuses the entire Company on a goal that strongly correlates with stockholder value creation *After performance metrics satisfied for PRSUs, 3-year time vesting enhances retention | *Relative TSR directly aligns management and investor interests through the creation of stockholder value *Adds a relative performance component *Creates balance with other performance metrics *After performance metrics satisfied, 3-year time vesting enhances retention | *Qualitative assessment of accomplishments aligned with Company ESG initiatives *Ensures focus on global responsibility to serve all stakeholders, community, and environment *After performance metrics satisfied, 3-year time vesting enhances retention | *4-year time vesting supports leadership retention objectives *Reinforces ownership mentality through enhanced equity stakes |
(1) We provide information regarding EBITDA, and adjusted EBITDA neitherand free cash flow, none of which is a recognized item under U.S. general accepted accounting principles ("GAAP")GAAP and do not purport to be alternatives to net income as a measure of operating performance. For more information about non-GAAP financial measures, including reconciliations to GAAP information, please refer to Appendix-AAppendix A to this Proxy Statement.
Compensation Governance and Best Practices
2018 SAY ON PAY VOTE RESULTS AND STOCKHOLDER OUTREACH
Our independent Compensation Committee of our Board structures and develops our executive compensation program was approved on an advisory basis by approximately 66% ofweighing various possible incentives and associated risks, assessing the votes present or representedcompetitive environment for executive talent, and entitled to vote at the 2018 Annual Meeting of Stockholders, compared to approximately 88% at the 2017 annual meeting and approximately 77% at the 2016 annual meeting. We valueunderstanding the views and insightsperspectives of various constituencies, including our stockholders. As noted above, the Compensation Committee considers stockholders' views through the broad feedback mechanism of our stockholders, and we believe that constructive and meaningful dialogue with them builds relationships that promote transparency and accountability to the benefit of all. To that end, members of our management and Board periodically conduct outreach, either in person or by telephone, with our stockholders to engage with them regarding, among other things, our business, governance practices andannual say-on-pay vote on executive compensation, programs. The Board and our executive team value such engagements and incorporatealso through direct conversations with investors that allow the opinions of our stockholders into decision-making processes where appropriate.
Prior to the 2019 Annual Meeting of Stockholders, our Lead Director; Chairman, President & CEO; and Senior Vice President of Human Resources reached out to our eight largest investors, representing over 62% of our outstanding share ownership. The engagement team was selected in order to ensure stockholder perspectives were considered thoroughly by our Board members, as well as by the individuals responsible for designing and implementing our executive compensation programs. The engagement team met with seven stockholders whose ownership represents over 47% of our outstanding shares, not including H Partners Management, LLC. Our largest stockholder, H Partners Management, LLC (“H Partners”), representing nearly 15% of our outstanding shares, is represented by Arik Ruchim on the Company's Board of Directors and Compensation Committee and therefore H Partners responded that further engagement beyond Mr. Ruchim's routine input as a Board andto gather additional insights. The Compensation Committee member was unnecessary at this time. H Partners, throughalso seeks input from its current and former Director, were integral in the design and implementation of our Company's executiveindependent compensation programs, and are in full support of them.
With respect to the next seven largest stockholders, the representatives of our Board and senior human resources management team met with each of them individually to discuss their views of our corporate governance practices generally, with a specific emphasis on our executive compensation programs. This engagement was directed at better understanding our stockholders' views and providing each of them with the opportunity to offer detailed feedback on our executive compensation programs in a private meeting.
What We Heard and What We Didconsultant.
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Compensation Element | Stockholder Feedback | Our Response |
Annual Base Salary | ● Pay for performance | ● Executives did not receive any increases in annual base salary for 2019. Our CEO has not received an increase in annual base salary since he was hired in 2015. |
Annual Incentive Plan (AIP) Awards | ● Use stock price or free cash flow as a metric instead of using financial metrics such adjusted EBITDA | ● We have more control over how we generate earnings than our stock price, so we believe earnings is a better metric, and our long-term incentive values are based on stock price.
● We believe that a focus on a single metric is the best motivational tool for our business.
● Focus on the generation of free cash flow is critical to our long term capital allocation and revenue growth strategies. We do not believe that it serves as an effective metric for our annual incentive plan as it could, at times, be in conflict with our long term business initiatives.
● We did not pay annual bonuses in 2018 because adjusted EBITDA was below our expectations.
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Annual Long Term Incentive Awards (Stock Options & RSUs) | ● Discuss the performance incentive and how decisions are made to allocate between stock options and RSUs | ● LTIP grants, particularly RSUs, provide significant long-term retention incentives. This mitigates turnover among the management team. A cohesive and stable management team is viewed by us as having substantial value to shareholders.
● We have a rigid employee performance evaluation policy, which is reflected in the significant reduction of overall corporate headcount and turnover of several key executive positions in the past four years.
● We first decide on the dollar value of issuance, and then decide on the allocation between RSUs and stock options based on expense, dilution and other circumstances.
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Special Long-Term Incentive Awards (Aspirational PRSUs) | ● Discuss the plan design | ● Over 165 employees participate in the plan
● Extraordinarily difficult performance metrics to achieve any payout
● Performance at minimum payout level would result in substantial shareholder value accretion
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OUR COMPENSATION PROGRAM
Compensation Best Practices
Our compensation program featuresincludes specific elements designed to alignthat link executive compensation with long-term stockholder interests. We also strive to reflect and implement compensation design and governance best practices in our program. These practices include:
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What We Do | | What We Don'tDon't Do |
● | •Emphasize incentive-based compensation to align pay with performance | | ● | Permit•No stock option repricing without stockholder approval |
● | •Place primary emphasis on equity-basedlong-term incentive compensation to alignlink executive and stockholder interests | | ● | Provide•No uncapped incentive award opportunities |
● | Tie performance-based incentives to metrics that drive the leadership team and other employees to accomplish our most important business goals | | ● | Permit stock hedging or stock pledging activities |
● | Subject executives to•Have significant stock ownership guidelines and holding requirements which were amended in 2016 | •No stock hedging or stock pledging activities |
•Use tally sheets and other analytical tools to increase the ownership requirement for the CEO and members of the Board of Directorsassess executive compensation | | ● | Provide for•No multi-year pay guarantees within employment agreements |
● | •Maintain a Clawback Policy allowing for the recovery of excess compensation resulting fromin the event of a material financial restatement andresulting from fraud, willful misconduct or gross negligence | | ● | Maintain•No single trigger vesting provisionsacceleration of equity awards in the event of a change of control for cash severanceunless these awards are not assumed, continued or equity award vesting accelerationsubstituted by the surviving corporation |
● | Use tally sheets and other analytical tools to assess executive compensation | | ● | Provide excessive perquisites or benefits to our NEOs |
● | •Engage an independent compensation consultant to advise the Compensation Committee | | | •No single trigger or modified trigger vesting for cash severance or equity award vesting in the event of a change of control |
●•Conduct annual risk assessment | Terminate non-performing officers•No excessive perquisites or benefits to our NEOs |
•Solicit stockholder feedback | | | •No tax gross-ups in the event of a change of control |
2020 Business Overview
2020 Financial Performance and Accomplishments
The Company's long-term strategies and investments position Tempur Sealy as a growth company with a fortified balance sheet, dominant competitive position, and a capital allocation plan that is designed to drive shareholder value. Despite the unprecedented challenges throughout 2020, the Company grew sales by 18% to $3.7 billion. The sales growth was broad-based across geographies and channels. The Company believes it has expanded its market share in the U.S. and, in fact, Sealy reclaimed the number one position on a list of top bedding producers(a). The Company also increased adjusted EBITDA(1) by 54% to $780 million, adjusted EPS(1) by 91% to $1.91, and generated record operating cash flows of $655 million, and reduced our ratio of consolidated indebtedness less netted cash to adjusted EBITDA per credit facility(1) by 40% at year end. The robust increase in profits and reduction in net debt resulted in a record low leverage ratio of 1.68 times. Additionally, the Company invested over $100 million in people, plants and processes and deployed over $300 million in capital towards share repurchases in 2020. Refer to Appendix A for a discussion of adjusted EBITDA and adjusted EPS.
The following table compares 2020 to 2019 results.
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(in millions, except percentages and per common share amounts) | | Year Ended | | % Reported Change | | % Constant Currency Change(1) |
December 31, 2020 | | December 31, 2019 | | |
Net sales | | $ | 3,676.9 | | | $ | 3,106.0 | | | 18.4 | % | | 18.3 | % |
Net income | | $ | 348.8 | | | $ | 189.5 | | | 84.1 | % | | 83.5 | % |
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Adjusted EBITDA per credit facility (1) | | $ | 779.9 | | | $ | 508.1 | | | 53.5 | % | | 53.2 | % |
EPS | | $ | 1.64 | | | $ | 0.86 | | | 90.7 | % | | 90.7 | % |
Adjusted EPS (1) | | $ | 1.91 | | | $ | 1.00 | | | 91.0 | % | | 91.0 | % |
(1) These are Non-GAAP financial measurements. Please refer to Appendix A for a discussion of these measures.
The following chart compares the Company's stock as compared to the S&P 500:
The year began with robust growth, both organically and with new distribution partners, until mid-March when COVID-19 began having a significant impact around the world. The Company's omni-channel and flexible operating model quickly adapted during this stressful period and was further bolstered by efforts from our committed, experienced workforce. Several measures were made during this period to mitigate health risks, as well as working with various government and healthcare organizations to provide products and services in the time of crisis. In April, Tempur Sealy Chairman, CEO Annualizedand President Scott Thompson pledged to contribute his remaining 2020 net base salary to the Tempur Sealy Foundation (the "Foundation"). Other executives also volunteered to contribute a portion of their base salaries to support the Foundation, which supports charities providing critical services to children in need and their families. Our Board of Directors also elected to forego their cash board fees, which the Company then chose to also donate to the Foundation.
Subsequently, the global markets improved, and the bedding markets began rapidly recovering and causing the industry to face supply chain constraints. The Company's competitive position, unique operating model, and experienced management team enabled it to weather these circumstances better than any other bedding company in the world. Regardless of these many challenges, the Company delivered record profit and free cash flow during 2020.
The Board of Directors and executive leadership team believe that Tempur Sealy's success as an organization is not limited to financial performance. The Company believes that commitment to communities and environment is our duty as a corporate citizen and a generator of long-term stockholder value. The Company delivered significant progress on its ESG initiatives in 2020. For 2021, the Company implemented additional challenging initiatives, including a long-term goal of achieving carbon neutrality by 2040. For additional information, please refer to the Company's 2021 Corporate Social Values Report, located on the Tempur Sealy Investor website at http://investor.tempursealy.com/overview.
The totality of 2020 was a year full of challenges and uncertainties. The Company is extremely proud of everything that the global organization accomplished including its industry-leading employee and customer safety programs, the progress on ESG initiatives, and the financial performance. 2020 was a record year of financial performance and accomplishments that has strongly positioned the Company for 2021 and beyond.
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(a) See Furniture Today's Top 20 U.S. Bedding Producers methodology that includes SEALY® and STEARNS & FOSTER® products in Sealy ranking.
What Guides Our Program
Executive Compensation ValuesObjectives and Pay-for-Performance AlignmentPhilosophy
Our CEO's financial interests are strongly aligned with thoseWe have a strong pay-for-performance culture. Each element of our stockholders in two ways. First,compensation program is designed to attract, motivate and retain our management talent and to appropriately reward management for strong Company performance and successful execution of key business plans and strategies. We believe that our compensation philosophy aligns management incentives with the long-term interests of our stockholders.
Principal Components of Compensation
The principal components of compensation that support our compensation philosophy and objectives include:
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Pay Element | Purpose | Description | Link to Performance |
Annual Base Salary | To attract and retain qualified key leadership talent and to provide a competitive base of compensation that recognizes the executive's skills, experience and responsibilities in the position. | Fixed, non-variable cash compensation.
Used to calculate other compensation elements. | Base salary levels represent a small portion of our executive officers' total target compensation, reflecting our goal to allocate more compensation to the performance-based elements of the total compensation package.
Individual base salary amounts reflect our Compensation Committee's judgment with respect to each executive officer's responsibilities, performance, and work experience as well as market data. |
Annual Incentive Plan ("AIP") Awards | To focus executives on achieving critical short-term financial and operating targets and/or strategic initiatives. | Variable annual cash incentive with payout based on Company performance over the fiscal year. | Annual incentive opportunity is targeted at a competitive level, generally near the market median for each executive. The actual incentive award payout is based on the achievement of the performance criteria. Using a Company-wide performance goal based on adjusted EBITDA(1) promotes collaboration and focuses the entire Company on a goal that strongly correlates with stockholder value creation. |
Long-Term Incentive Plan ("LTIP") Awards | To align a significant portion of executive compensation to the Company's long-term operational performance, as well as share price appreciation and total stockholder return. This component also supports our executive talent retention objectives. | Annual grants of PRSUs and/or RSUs. | PRSUs reward participants contingent upon the successful achievement of pre-determined performance objectives, using a currency (common stock) that is strongly aligned with stockholder interests.
RSUs enhance retention based on performance and reinforce an ownership mentality through enhanced equity stakes. |
(1) These are Non-GAAP financial measurements. Please refer to Appendix A for a large portiondiscussion of these measures.
Compensation Mix
As illustrated below, the majority of our CEO's payand NEOs' annual total direct compensation opportunity is conditioned onperformance-based, at-risk, and long-term. The graphs depict the Company meeting aspirational performance goals. Second, by agreement with the Company,mix of total target direct compensation set for our CEO has invested approximately $9 million of his own funds in the Company's common stock. These aspects of our program were first implemented as part of an extensive recruiting process in 2015 that enabled us to attract, retain, and motivate a highly experienced CEO with an exceptional record of shareholder value creation. That initial approach, as well as the subsequent 2017 Aspirational PRSU grants, reflected feedback from certain stockholders.NEOs during 2020.
As required by SEC rules, amounts reported for 2018 in the Summary Compensation Table do not reflect the full value of certain multi-year awards made in prior years, nor are they indicativeThe Decision-Making Process
The Role of the realizable pay opportunities considered by the Compensation Committee when evaluating pay for performance alignment. The compensation for Mr. Thompson as reported in the Summary Compensation Table is 80% higher than Mr. Thompson's total realizable compensation (that is, potential actual pay delivery) for 2018. The table below summarizes Mr. Thompson's annualized total compensation opportunity.
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Supplemental Table of Pro-Forma Annualized Target Total Direct Compensation Value and Realizable Pay Comparisons for Mr. Thompson |
Compensation Element | | FY 2018($) | | Annualized Total ($) | | 2018 Total Realizable Compensation ($) |
Base Salary | | 1,100,000 |
| | 1,100,000 |
| | 1,100,000 |
|
Annual Incentive | | — |
| | — |
| | — |
|
2015 Aspirational PRSU Grant (Special Grant)(1) | | — |
| | — |
| | — |
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2016 Performance-Based PRSU Matching Grant (Special Grant)(2) | | — |
| | 636,315 |
| | 425,343 |
|
2017 Stock Option Grant (Special Grant)(3) | | — |
| | 2,105,904 |
| | — |
|
2017 Performance-Based PRSU Grant (Special Grant)(4) | | — |
| | — |
| | — |
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2018 Restricted Stock Grant(5)
| | 7,000,021 |
| | 7,000,021 |
| | 4,640,526 |
|
2018 Stock Option Grant(6)
| | 3,000,001 |
| | 3,000,001 |
| | — |
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Total Direct Compensation | | 11,100,022 |
| | 13,842,241 |
| | 6,165,869 |
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(1) | This grant of PRSUs runs through 2018 with a reduced award opportunity and is tied to an aspirational performance goal of achieving more than $650 million in adjusted EBITDA for 2018, which was not met. Because the performance requirement for vesting was so challenging, at the time of grant these shares were not expected to vest; therefore, no value attributable to these PRSUs is included in the Annualized Target. The Company did not meet the performance target for 2017 or 2018 and accordingly this grant is not included as Realizable Compensation. |
(2) | For the annualized value, the grant date value is annualized over the 5-year vesting period. For the 2018 total realizable compensation, the value is calculated by multiplying one-fifth of the grant, or 10,274 shares, by $41.40, the closing price of the common stock on December 31, 2018. |
(3) | For the annualized value, the grant date value is annualized over the 4-year vesting period. For the 2018 total realizable compensation calculation, no value is shown because the exercise price of $69.50 exceeds the closing price of the common stock on December 31, 2018. |
(4) | Because the performance requirement for vesting is so challenging, at the time of grant these shares were not expected to vest; therefore, no value attributable to these PRSUs is included in Annualized Target or Realizable Compensation. |
(5) | In January 2018, the Company granted regular annual restricted stock units ("RSUs") for 112,090 shares, vesting over 4 years. For the 2018 total realizable compensation, the value is calculated by multiplying the 112,090 shares by $41.40, the closing price of the common stock on December 31, 2018.
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(6) | In January of 2018, the Company granted regular annual stock options to acquire 125,411 shares, vesting over four years, at an exercise price of $62.45. For the 2018 total realizable compensation calculation, no value is shown because the exercise price of $62.45 exceeds the closing price of the common stock on December 31, 2018. |
Further, we note that the 2018 annual total compensation of Mr. Thompson, as compared to our median employee, is 39% lower than the 2017 annual total compensation of Mr. Thompson, as compared to our median employee. Please see "2018 CEO Pay Ratio."
Aspects of Our Compensation Process
Roles of the Committee, Compensation Consultant and Management
Committee.The Compensation Committee is comprised solely of independent directors and is responsible for determiningoversees the compensation of our CEO and other NEOs. The Compensation Committee's composition has changed significantly since 2015 in connection with the significant change in the composition of the Board in 2015 and 2016 and the Company's transition to a smaller Board in 2016. The Compensation Committee is currently comprised of Messrs. Luther (Chair), Neu and Ruchim. Mr. Neu joined the Compensation Committee in February 2016, Mr. Luther joined the Compensation Committee (as Chair) in May 2016 and Mr. Ruchim joined the Compensation Committee in May 2018.
The Compensation Committee receives assistance during its evaluation process from: (1) Frederic W. Cook & Co., Inc. ("F.W. Cook"), the Compensation Committee's independent consultant; and (2) our CEO and internal compensation staff, led by our Senior Vice President, Human Resources. F.W. Cook has been retained by and reports directly to the Compensation Committee; it does not have any other consulting engagements with the Company. A representative from F.W. Cook generally attends meetings of the Compensation Committee at the invitation of the Compensation Committee Chair. The Compensation Committee Chair frequently interacts with F.W. Cook between meetings to define the nature of work to be conducted, to review materials to be presented at committee meetings and to obtain the consultant's opinion and perspective on proposals prepared by management. F.W. Cook, at the Compensation Committee's request, regularly provides independent advice on current trends in compensation design and provides executive compensation benchmark data and compensation program proposals to assist in evaluating and setting the overall structure of our executive compensation program and thehas overall responsibility for making final decisions about total compensation levels of our NEOs.
In accordance with the requirements of Item 407(e)(3)(iv) of Regulation S-K and the NYSE rules, the Compensation Committee has affirmatively determined that no conflicts of interest exist between the Company and F.W. Cook (or any individuals working on the Company's account on F.W. Cook's behalf). In reaching such determination, the Compensation Committee considered the following enumerated factors,for all of the NEOs. As part of its annual process, the Committee works closely with senior management (as appropriate) and its independent compensation consultant. This process ensures consistency from year to year and adherence to the responsibilities listed in the Committee's Charter, which were attested to or affirmed by F.W. Cook:is available on our website.
during 2018, F.W. Cook provided no services to and received no fees from the Company other than in connection with engagement by the Compensation Committee (the "Engagement");
the amount of fees paid or payable by the Company to F.W. Cook in respectThe Role of the Engagement represented (or are reasonably certain to represent) less than 1% of F.W. Cook's total revenue for the 12 month period ended December 31, 2018;
F.W. Cook has adopted and put in place adequate policies and procedures designed to prevent conflicts of interest, which policies and procedures were provided to the Company;
there are no business or personal relationships between F.W. Cook and any member of the Compensation Committee other than in respect of (i) the Engagement, or (ii) work performed by F.W. Cook for any other company, board of directors or compensation committee for whom such Committee member also serves as an independent director;
F.W. Cook owns no stock of the Company; and
there are no business or personal relationships between F.W. Cook and any executive officer of the Company other than in respect of the Engagement.
CEO.The Compensation Committee reviews and evaluates the CEO's performance and determines and approves the CEO's compensation. The Compensation Committee also reviews, with input from the CEO the performance of the executive vice presidents ("EVPs") and senior vice presidents ("SVPs") and determines and approves the compensation for EVPs and SVPs. Our CEO reviews the compensation of the other executive officers annually and makes recommendations to the Compensation Committee regarding base salary,the compensation of executive team members. The CEO does not provide recommendations concerning his own compensation, nor is he present when his compensation is discussed by the Committee. The Committee, with input from its independent compensation consultant, discusses the elements of the CEO's compensation in an executive session and makes a recommendation to all of the non-management members of the Board for discussion and final approval. At the Committee's request, a member of our management team may attend the executive session to answer questions from the Committee.
The Role of the Independent Consultant. The Compensation Committee has the authority to engage and retain an independent compensation consultant to provide independent counsel and advice. At least annually, the Committee formally conducts an evaluation as to the effectiveness of the independent compensation consultant and periodically runs a request for proposal process to ensure the independent compensation consultant is meeting its needs. For early 2020, the Committee continued its engagement with Fredrick W. Cook & Co. Inc. ("F.W. Cook") as the independent compensation consultant for matters related to executive compensation, including the determination of 2020 salaries and the making of 2020 annual incentive and long-term incentive grants. F.W. Cook was retained through February 2020, at which time the Committee retained the services of Pearl Meyer & Partners, LLC ("Pearl Meyer") as its independent compensation plans.consultant for the remainder of 2020. Pearl Meyer was engaged to support the Compensation Committee's efforts to conduct a comprehensive analysis of the current executive compensation program. Pearl Meyer was selected as the independent consultant after a review process conducted by the Committee, and provided the following services: executive and board of directors compensation benchmarking, support in the design of annual and long-term incentive plans, review and analysis of compensation programs from a risk perspective, review of the Company's clawback policy, and support for the Committee's stockholder outreach activities. Additionally, a representative of the independent consultant attends meetings of our Compensation Committee and communicates with our Compensation Committee chair and our Senior Vice President, Chief Human Resources Officer between meetings; however, our Compensation Committee makes all decisions regarding the compensation of our executive officers.
The Compensation Committee reviewed its engagements with F.W. Cook and Pearl Meyer, based on the factors set forth in the corporate governance standards of the New York Stock Exchange and the rules of the Securities and Exchange Commission, and determined that there are no conflicts of interest between these firms and the Compensation Committee.
The Role of the Peer Group
Our Compensation Committee examines competitive peer group and survey information, compiled by F.W. Cook,its independent compensation consultant, as one of many factors to assist in determining base salary, annual incentive compensation and stock-based long-term equity awards. In addition to market data, the Compensation Committee considers factors such as individual performance, internal equity among executives, promotion potential and retention risk in determining total compensation for our NEOs. The Compensation Committee periodically benchmarks our executive compensation against the compensation paid to executives at a peer group of publicly-traded companies of similar size and in similar industries to the Company (the "Peer Group") to obtain a general understanding of current compensation practices. The twentyeighteen companies currently comprising the Peer Group provide a useful comparison to the Company based, among other things, on their similarity in size, revenues, market capitalization, EBITDA, scope of operations and branded consumer product focus. The Compensation Committee periodically evaluates the appropriateness of the size and composition of the Peer Group, and makes changes to its membership in response to mergers and acquisitions and changes in organizational comparability. In 2018There were no changes to the Peer Group was changed to add HNI Corporation, which is a peer-of-peers and met the revenue, market capitalization and business comparability criteria used by the Compensation Committee. for 2020.
The Peer Group companies for 2020 are listed below:
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Brunswick Corporation (BC) | Hasbro, Inc. (HAS) | RH (RH) |
Carter's, Inc. (CRI) | Herman Miller, Inc. (MLHR) | Sleep Number Corporation (SNBR) |
Carter's, Inc. (CRI)Columbia Sportswear Company (COLM) | HNI Corporation (HNI) | Steelcase Inc. (SCS) |
Columbia Sportswear Company (COLM) | La-Z-Boy Incorporated (LZB) | Tupperware Brands Corporation (TUP) |
Deckers Outdoor Corporation (DECK) | Leggett & Platt,La-Z-Boy Incorporated (LEG)(LZB) | Under Armour, Inc. (UA) |
Gildan Activewear Inc. (GIL) | lululemon athletica inc. (LULU)Leggett & Platt, Incorporated (LEG) | Williams-Sonoma, Inc. (WSM) |
Hanesbrands Inc. (HBI) | Polaris Industries Inc. (PII) | Wolverine World Wide, Inc. (WWW) |
Hasbro, Inc. (HAS) | RH (RH) | |
Tally Sheets
In addition to considering compensation levels for the Peer Group, the Compensation Committee also considers information contained in total compensation tally sheets for each NEO. The Compensation Committee uses tally sheets to evaluate accumulated equity value and total compensation opportunities. The tally sheets summarize each component of compensation, including base salary, annual incentive plan payout, vested and unvested long-term incentive plan awards, 401(k) company contributions, health and welfare benefits, perquisites and potential payments in the event of termination of employment under various scenarios.
Compensation Objectives
Each element of our compensation program is designed to attract, motivate and retain our management talent and to reward management for strong Company performance and successful execution of key business plans and strategies. We believe that our compensation philosophy aligns management incentives with the long-term interests of our stockholders.
Compensation Components
The principal components of compensation for our NEOs include the following: |
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Pay Element | Purpose | Description | Link to Performance |
Annual Base Salary | To attract and retain leadership talent and to provide a competitive base of compensation that recognizes the executive’s skills, experience and responsibilities in the position. | Fixed, non-variable cash compensation. | Base salary levels are based on a number of factors including each executive's time and sustained performance in a role, internal equity considerations, and succession planning considerations among other factors. |
Annual Incentive Plan (AIP) Awards | To provide executives with a clear financial incentive to achieve critical short-term financial and operating targets or strategic initiatives. | Variable annual cash incentive with payout based on Company performance over the fiscal year. | Annual incentive opportunity is targeted at a competitive level, generally near the market median for each executive. The actual incentive award payout is based on the achievement of the performance criteria and can range from 0% to 200% of target payout. 100% of the FY 2018 AIP payout opportunity was based on the Company's adjusted EBITDA for 2018. Using a Company-wide performance goal based on adjusted EBITDA promotes collaboration and focuses the entire Company on a goal that strongly correlates with stockholder value creation. |
Annual Long-Term Incentive Awards | To align a significant portion of executive compensation to the Company's long-term operational performance as well as share price appreciation and total stockholder return. This component serves to motivate and retain executive talent. | Annual grants of stock options, PRSUs, and/or restricted stock units "RSUs". | The Company has granted annual Long-Term Incentive Plan ("LTIP") awards in the form of stock options, PRSUs and RSUs. Stock options have value only if and to the extent our share price increases from the date of grant to the time of exercise.
PRSUs are granted to reward participants for the successful achievement of annual or multi-year performance objectives, using a currency (common stock) that is strongly aligned with stockholder interests.
RSUs are granted primarily to enhance retention and reinforce an ownership mentality through enhanced equity stakes.
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Special Long-Term Incentive Awards | To provide executives with an above market incentive only if significant shareholder value is created or to motivate executives to make significant personal investments in the Company to further executive alignment with other shareholders. | Aspirational performance equity awards and matching awards. | Aspirational awards are earned only if there is significant, above-market improvement in performance over a defined period of time.
Matching awards are granted primarily to enhance retention and encourage significant ownership of the Company's common stock by the executive. Since inception of the matching awards, the Company's current executive officers have invested approximately $11.5 million in the Company's common stock.
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Overall, the Compensation Committee seeks to strike a balance among the three ongoing components of salary, annual cash bonus and annual equity awards. The Compensation Committee at times has made special equity grants to deal with unusual situations like our termination of our largest North American customer or long-term retention issues when our industry has been disrupted by outside influences. These special grants generally require management to make significant long-term cash investment in our common stock or have lengthy vesting periods, with an emphasis on ensuring that a majority of the total potential compensation for the Company's executive officers is significantly at risk and tied to overall Company performance.
2018 Target Compensation Mix
The charts below show that most of our NEOs' target pay mix (excluding special grants) is variable and at risk. For the CEO, 91% of the 2018 target annualized compensation was provided in the form of annual and long-term incentives (see "Our2020 Executive Compensation Program - CEO Annualized Compensation Values and Pay-for-Performance Alignment - Supplemental Table of Pro-Forma Annualized Target Total Direct Compensation Value and Realizable Pay Comparisons for Mr. Thompson" for a description of the elements included in Mr. Thompson's compensation). For the other NEOs, annual and long-term incentives made up 81% of the total target pay mix. The proportions of each pay component shown below may change in the future based on market or performance considerations.In Detail
Inclusion of special long-term incentive awards would attribute a greater portion of the mix towards variable and at risk pay, which is not reflective of the regular annual target compensation program. Therefore, special long-term incentive awards are excluded from the charts below:
2018 COMPENSATION ACTIONS
This section summarizes the actions taken by the Compensation Committee for 2018.
Rationale for Key Compensation Decisions in 2018
Our compensation program is designed to align the interests of our NEOs, including our CEO, with our stockholders. In order to create a more focused, efficient management structure, beginning in May 2015 we significantly reduced the size of our senior management team and set challenging performance goals in order to align pay with performance. By having a smaller senior management team, we believe that we are able to more efficiently respond to and capitalize on changes in the market. We also believe that this smaller team's total compensation is very cost effective compared to other organizations and our Company's historical leadership structure.
The Compensation Committee believes strongly in paying for performance. We have been faced with a challenging business environment over the past two years and, while we believe our NEOs have generally navigated this environment effectively, the realizable portions of their equity incentive grants have, by design, been reduced commensurate with the Company's financial performance. Also consistent with this approach, at his request our CEO did not receive a base salary increase in either 2017 or 2018 and the other NEOs did not receive a base salary increase in 2017 unless it corresponded with a change in position.
We have set our annual equity incentive compensation at a level higher than the median for our Peer Group, because we believe tying more of the overall compensation to equity incentives enhances alignment with the interests of our stockholders. Our equity incentive grants have included both annual regular grants and special grants, including "aspirational" PRSU grants that provide for extraordinary compensation to be paid only if extraordinary performance goals are achieved. Our original aspirational program was adopted in 2015 and subsequent aspirational grants were made in August 2017 based on the Compensation Committee's view that the program is highly motivating and promotes the behaviors and thinking among the participants that are consistent with the Company's growth objectives. In addition to our NEOs, these grants were made to our management team (over 160 individuals) in order to ensure that all received the same incentives. These grants each established hurdles requiring annual adjusted EBITDA to increase by more than 40% (relative to grant date levels) in order for any incentive to be earned and 53% from 2018's EBITDA level. The grants were designed to reward only exceptional absolute and relative performance. We believe that most companies in the bedding industry are experiencing negative EBITDA or declining EBITDA; highlighting the truly aspirational nature of the Plan. Additionally, we encouraged our senior management team to invest their own funds in the Company, and they have collectively invested over $11.5 million.
We recognize that some aspects of our approach to compensation and our decisions on 2017 and 2018 compensation may not conform entirely with generalized approaches that are not individually tailored to a particular company's circumstances, but we believe our approach and the decisions we have made were necessary and appropriate for our business and in the best interests of our stockholders. Specific elements of our compensation package and decisions made during 2018 are discussed below.
Base Salary
EachThe Compensation Committee determines base salaries for the NEOs each year accounting for multiple factors, including breadth, scope and complexity of the role, internal equity, succession planning and retention objectives, market positioning and budget. The Committee also considers the analyses provided by our NEOs' base salary is established pursuant to his employment agreement.independent compensation consultant. The CEO and Mr. Montgomery did not receive an increase in base pay for 2018.2020. Additionally, Mr. Thompson has not had an annual base pay raise since he joined the Company in September 2015. For other members of senior management,Messrs. Rao and Vollet, the Compensation Committee determined that an approximate 2% increase for Mr. Rao and an approximate 3% increase for Mr. Vollet in base pay was appropriate. This decision was based in part on market data provided by the Compensation Committee's independent compensation consultant, which indicated that base salaries for the average NEO, excluding the CEO, were below the 25th percentile for the Peer Group.
The Committee focuses on total direct compensation, whichtable set forth below lists the base salary issalaries for the NEOs for 2019 and 2020. The salaries were established at the beginning of January 2020 and were not adjusted as a component. The NEOs are targeted at between 50 and 75 percent of our Peer Group with the mixresult of the components varying. The table below summarizespandemic. We had several planned transitions in our senior leadership team in early 2020 and 2021. Richard W. Anderson stepped down as an officer of the annualized salary changes duringCompany and from the year:executive team effective January 1, 2020, and thus is not included in the table.Mr. Buster was promoted to CEO, North America effective January 1, 2021 and has been included in the table. Previously he served as Executive Vice President, President U.S. Direct to Consumer.
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Named Executive Officer | 2019 Annual Salary | 2020 Annual Salary | Increase (%) |
Scott L. Thompson(1) | $1,100,000 | $1,100,000 | — |
Bhaskar Rao | $ 443,000 | $ 450,000 | 2% |
H. Clifford Buster, III (2) | N/A | $ 450,000 | — |
David Montgomery | £ 307,534 | £ 307,534 | — |
Scott J. Vollet | $ 438,000 | $ 450,000 | 3% |
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(1) In April 2020, Scott Thompson, Chairman and CEO, pledged to contribute his remaining 2020 net base salary to the Tempur Sealy Foundation, which generally supports children and families in need.
(2) Clifford Buster was promoted to CEO, North America effective January 1, 2021 and previously served as Executive Vice President, President U.S. Direct to Consumer. He was not an NEO in 2019. |
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Named Executive Officer | 2017 Annual Salary | 2018 Annual Salary | Increase (%) |
Scott L. Thompson | $1,100,000 | $1,100,000 | — |
Bhaskar Rao(1) | $ 430,000 | $ 443,000 | 3.0% |
Richard W. Anderson | $ 441,000 | $ 454,000 | 3.0% |
David Montgomery | £ 298,576 | £ 307,534 | 3.0% |
Scott J. Vollet(2) | $ 324,450 | $ 438,000 | 35.0% |
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(1) | Mr. Rao was promoted to CFO during 2017. Amount shown for 2017 represents his annualized salary at the end of 2017. |
(2) | Mr. Vollet served as Senior Vice President, Global Operations during 2017 prior to being promoted to Executive Vice President, Global Operations in 2018. Amount shown for 2017 represents his salary for his prior role.
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20182020 Annual Incentive Program
Our annual incentive program ("AIP") ensures that a significant portion of each NEO's annual compensation is at risk and dependent on overall Company performance. The program providesis designed to focus the NEOs a clear financial incentive to achieveon achieving critical short-term financial and operating targets and/or strategic initiatives. The Compensation Committee is responsible for administering the AIP pursuant to the terms of our Second Amended and Restated Annual Incentive Bonus Plan for Senior Executives, which was approved by our stockholders in May 2015.
2020 Target Bonus Opportunities. On average, target bonus opportunities for our NEOs were targeted at the median of a 50/50 blend of publicly filed peer company proxy data and published market survey data. The purposefollowing table sets forth the targeted annual incentive levels for each NEO in 2020, shown as a percentage of his annual base salary at year-end, along with the maximum potential incentive opportunity:
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NEO | Target Award as a % of Salary | Target Award ($) | Maximum Award as a % of Salary |
Scott L. Thompson | 135% | $1,485,000 | 270% |
Bhaskar Rao | 75% | $ 337,500 | 150% |
H. Clifford Buster, III | 75% | $ 337,500 | 150% |
David Montgomery | 75% | £ 230,651 | 150% |
Scott J. Vollet | 75% | $ 337,500 | 150% |
2020 Performance Goals, Metrics and Results. The performance goals set for AIP isawards are intended to focus the NEOs on behaviors that support our overall performance and success and it is designed to achieve that end. The goals are set withbe at a reasonable level of difficulty that requires the Company and NEOs to perform at a high level in order to meet them. The attainment of these goals and objectives is not assured. Payouts in any year above 100% (target level) indicate significant accomplishment with performance above expectation.
On average, target bonus opportunities for our NEOs were targeted at the market median. The following table sets forth the targeted annual incentive levels for each NEO in 2018, shown as a percentage of his annual base salary at year-end, along with the maximum potential incentive opportunity:
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Named Executive Officer | Target Award as a % of Salary | Target Award ($) | Maximum Award as a % of Salary |
Scott L. Thompson | 125% | $1,375,000 | 250% |
Bhaskar Rao | 70% | $ 310,100 | 140% |
Richard W. Anderson | 70% | $ 317,800 | 140% |
David Montgomery | 70% | £ 215,274 | 140% |
Scott J. Vollet | 70% | $ 306,600 | 140% |
Messrs. Thompson, Rao, Anderson and Montgomery were assigned the same target bonus opportunity for 2018 as in 2017. Mr. Vollet's target bonus for 2018 was increased to reflect his promotion to Executive Vice President, Global Operations, effective January 2018.
Company-wide adjusted EBITDA(1) was selected as the soleprimary performance metric for the 2018 AIP, consistent with the change made by the Compensation Committee in 20162020 because it places a significant emphasis on growth, while continuing to simplify the program's design by (i) eliminating multiple goals and different goalsprovide strong accountability for different groups, (ii) eliminating subjective goals and (iii) promoting collaboration.returns. The Compensation Committee believes that using Company-wide adjusted EBITDA(1) promotes the critical collaboration needed for the entire Company to stay focused on the same end results. For 2020, Company-wide adjusted EBITDA strongly correlates with long-term stockholder value creation. Performanceperformance was required to be measured with no adjustment for currency fluctuations, consistent with the Company's financial statements, to further align executive and stockholder interests. This target is also consistent with non-NEOs 20182020 AIP and iswas designed to foster teamwork at all levels.
The target was $470 million inCompensation Committee believes that the adjusted EBITDA(1) targets for 2020 were challenging, particularly because they were not reduced in response to the onset of the global pandemic. The payouts were interpolated percentages on adjusted EBITDA(1); no payout if below $500 million; payout between 50% to 100% for $500 to $600 million, payout between 100% to 200% for $600 to $700 million, and a maximum payout of 200% for exceeding $700 million.
The chart below reflects the 2020 AIP performance goals and payment percentages as compared to the 2019 AIP and 2018 AIP performance goals and payment percentages. The goals are set each year at which payout for alla level intended to motivate Company employees and NEOs would be 100%to perform at a high level in order to meet them. This was exemplified in 2018 as the actual full year results were below the performance goals and therefore no annual bonuses were paid out. The AIP performance goals are reset each year based on then current information. In 2019, the Company performed well above expectations and in 2020 the Company delivered exceptional financial performance with an adjusted EBITDA(1) of $780 million. The Company's AIP performance goals were increased from 2019 to 2020 and the maximum goal increased almost 50%. The minimumCompany's 2020 financial performance exceeded the maximum AIP performance goals for both 2019 and maximum were $440 million and $500 million, respectively.2018 as shown in the chart below.
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AIP Performance Goals % Comparison (in millions) | | Actual Full Year Results (in millions) |
| 2020 | 2019 | 2018 | | | 2020 | 2019 | 2018 |
50% | $500 | $430 | $445 | | Adjusted EBITDA(1) | $780 | $508 | $425 |
100% | $600 | $445 | $470 | | | | | |
200% | $700 | $470 | $500 | | | | | |
2020 AIP Payouts. Based on these targets, nothe following payouts were made under 20182020 AIP to NEOs orand non-NEOs.
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NEO | 2020 Target | AIP Payment | 2020 Actual Payout |
Scott L. Thompson | $1,485,000 | 270% | $ 2,970,000 |
Bhaskar Rao | $ 337,500 | 150% | $ 675,000 |
H. Clifford Buster, III | $ 337,500 | 150% | $ 675,000 |
David Montgomery | £ 230,651 | 150% | £ 461,301 |
Scott J. Vollet | $ 337,500 | 150% | $ 675,000 |
(1) Adjusted EBITDA is a Non-GAAP financial measurement. Please refer to Appendix A for a discussion of this measure.
2020 Annual Long-Term Incentive Plan ("LTIP") Grants (Regular Annual Grants)
As noted above, the Compensation Committee considers stockholders' views through the broad feedback mechanism of our annual say-on-pay vote. Based on this feedback, the Compensation Committee determined that one-half of the 2020 LTIP grant would be in the form of PRSUs and the remaining one-half of the 2020 LTIP grant would be in the form of RSUs.
Company-wide 2020 adjusted EBITDA was selected as the performance metric for the 2020 LTIP PRSUs because the Compensation Committee believes that adjusted EBITDA strongly correlates with long-term stockholder value creation. Using a Company-wide performance goal based on adjusted EBITDA promotes collaboration and focuses the entire Company on a common goal. If the performance metric for the PRSUs is met, then the award will vest, subject to continued service, over three-years beginning on the second year anniversary of the grant date. The Compensation Committee also believes PRSUs and RSUs effectively retain and motivate the Company's executive officers and further reinforce the link between the interests of our executive officers and our stockholders.
For 2020, the Compensation Committee approved equity award grants to the NEOs as follows:
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Named Executive OfficerEquity Vehicle | 2018 TargetWeighting | Percentage of Overall Incentive Target | 2018 Actual PayoutDescription |
Scott L. ThompsonPerformance-based restricted stock units ("PRSUs") | $1,375,00050% | — | —The PRSU payout is determined based on adjusted EBITDA performance over a one-year period Once the payout is calculated, PRSUs vest in three equal annual installments, subject to continued service Threshold, target and maximum performance levels are defined: Threshold performance results in a payout at 50% of target Maximum performance results in a payout at 600% of target (the maximum performance payout was reduced to 300% for the PRSUs awarded in 2021) Payouts are interpolated between threshold and maximum |
Bhaskar RaoTime-based restricted stock units ("RSUs") | $ 310,10050% | — | — |
Richard W. Anderson | $ 317,800 | — | — |
David Montgomery | £ 215,274 | — | — |
Scott J. Vollet | $ 306,600 | — | —•Awards vest in four equal annual installments, subject to continued service |
2018 Annual Long-Term Incentive Grants (Regular Annual Grants)2020 LTIP Awards
MembersIn determining the size of senior management,each 2020 LTIP award granted, the Committee considered a variety of factors, including our NEOs, are eligible to receive equity compensation awards under our equitybenchmarking data on competitive long-term incentive plans. As previously discussed, we believe that providing equity awards as a component of compensation for senior managers alignsvalues, the interests of management with the interests of our stockholders and provides an additional method of compensation where the return is directly tied to stockholders' return on their investment. Our practice prior to 2016 had been to grant multiple formspercentage of long-term incentive awards, each intendedvalue to accomplish different objectives. In connection with a recalibrationbe allocated to PRSUs and time-based RSUs, and the NEO's position within the Company. The actual number of compensation incentives in 2016,target PRSUs and time-based RSUs granted was calculated by dividing the Compensation Committee chose to use RSUs as a balance todollar value of the outstanding performance-based special awards and to enhance retention and an ownership mentalityaward by enhancingthe closing price of the Company's stock on the equity stakes. Accordingly, as in 2016 and 2017, annual LTIP grants for 2018 were inaward grant date. The table below shows the formdollar value of RSUs vesting over four years. Additionally, the Compensation Committee granted stock options, which vest over four years, and also align the interests of management with the interests of stockholders. The Compensation Committee reserves the right to adjust the target award mix from year to year, as deemed appropriate.
The Compensation Committee approved targeted equity valuesPRSUs and time-based RSUs awarded for fiscal 2020 for each of our NEOs in early 2018. Similar to 2017,the NEOs:
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NEO | 2020 PRSUs | 2020 RSUs |
Scott L. Thompson | $5,000,000 | $5,000,000 |
Bhaskar Rao | $775,000 | $775,000 |
H. Clifford Buster, III | $775,000 | $775,000 |
David Montgomery | $775,000 | $775,000 |
Scott J. Vollet | $775,000 | $775,000 |
2020 PRSU Outcomes
Based on 2020 results, the Compensation Committee determined that 600% of the target equity valuePRSUs were earned for Mr. Thompson's 2018 annualthe one-year performance cycle, subject to continued time vesting. These PRSUs will vest equally over three years beginning on the second anniversary of the grant should be set at $7,000,000, consistent with prior years, and isdate. The performance metrics were based on the achievement of Company-wide adjusted EBITDA (as defined in in the top quartilefollowing section of this Proxy Statement). The chart below shows the performance goals set, as well as actual results.
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Payout Level | % of Target | Company-Wide Adjusted EBITDA | Adjusted EBITDA Growth % |
Maximum | 600% | $700 million | 38% |
Target | 100% | $525 million | 3% |
Threshold | 50% | $500 million | 0% |
Actual | $780 million | 53% |
Earned Amount | 600% of Target | |
Note: Payout is an interpolated percentage between 50% to 600% if adjusted EBITDA exceeded $500 million up to $700 million. Please refer to Appendix A for a discussion of Adjusted EBITDA, which is a Non-GAAP financial measure.
2017-2020 Aspirational GrantsResults
In August 2017, Aspirational Grants of PRSUs were made to the NEOs as well as approximately 160 other members of the market. For Messrs. Anderson, Montgomery and Rao, the target value of the 2018 annual equity grants remained at the same level as the 2017 annual equity grants. For Mr. Vollet, his target annual equity grant was increased for 2018 to $975,000 to reflect his promotion to Executive Vice President, Global Operations during 2018.
The following table summarizes the 2018 annual grants to the NEOs:
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Named Executive Officer | 2018 LTIP RSUs Grant Date Fair Value ($)(1) | # of RSUs | 2018 LTIP Options Grant Date Fair Value ($)(2) | # of Options |
Scott L. Thompson | 7,000,021 |
| 112,090 |
| 3,000,001 |
| 125,411 |
Bhaskar Rao | 974,969 |
| 15,612 |
| 450,008 |
| 18,812 |
Richard W. Anderson | 974,969 |
| 15,612 |
| 450,008 |
| 18,812 |
David Montgomery | 1,099,994 |
| 17,614 |
| 450,008 |
| 18,812 |
Scott J. Vollet | 974,969 |
| 15,612 |
| 450,008 |
| 18,812 |
|
| |
(1) | The RSU grant date fair value is based on $62.45, the closing price of the Company's common stock on January 5, 2018, the grant date. |
(2) | The Option grant date fair value is based on the Black Scholes value of the Company's stock as of January 5, 2018, the grant date. |
2015 Aspirational Grants
To encourage significant increases in profitable growth and stockholder value creation, in 2015 the Board of Directors established an aspirational objective formanagement team. These PRSUs required the Company to achieve more than $650 million in adjusted EBITDA for 2017. To achieve thisa defined aspirational objective, the Company would need to increase its adjusted EBITDA by nearly $200 million, or more than 40%, above the Company's 2015 adjusted EBITDA. To reinforce this objective and encourage "aspirational pay for aspirational performance," the Compensation Committee approved special aspirational PRSU grants (the "2015 Aspirational PRSUs") for a group of senior executives, including our NEOs.
The Company did not meet the adjusted EBITDA targets for the 2015 Aspirational PRSUs, and accordingly none of these awards were earned.
2017 Aspirational Grants
In August 2017, in light of the termination of our relationship with Mattress Firm and taking into account feedback from certain stockholders that the Company needed to implement new incentives in light of the Company's changed environment, the Company granted executive officers and certain members of management approximately 1.5 million new PRSUs that vest if the Company achieves a certain level of adjusted EBITDA during four consecutive fiscal quarters as described below (the "2017 Aspirational PRSUs" and, together with the 2015 Aspirational PRSUs, the "Aspirational PRSUs").
Summary of Vesting and Performance Targets. The 2017 Aspirational PRSUs vest in accordance with a formula related to the Company's adjusted EBITDA, as measured over any four consecutive fiscal quarters (each a "Four Quarter Period") during two separate measurement periods. The first measurement period consistsperiods consisting of the fiscal quarters ending March 31, 2018 through December 31, 2019 (the "First Designated Period"). The second measurement period consists of the fiscal quarters(First Period) and ending March 31, 2020 through December 31, 2020 (the "Second Designated Period")(Second Period). In order to earnThe performance threshold was not met for the full amountFirst Period and therefore, half (50%) of thesethe PRSUs were forfeited. However, as of September 30, 2020, the Company'sCompany achieved an adjusted EBITDA must increase by more than $200of $694.2 million as comparedfor the trailing twelve months ended September 30, 2020, exceeding the $650 million maximum payment threshold target for the four (4) consecutive fiscal quarters ending on September 30, 2020. As a result, the remainder of Aspirational Grants were fully earned. Given the achievement of the maximum payment threshold at the conclusion of the third quarter and the Compensation Committee's intention to reward management, in a timely manner, for the $445.6 million in adjusted EBITDA for 2017,achievement of aspirational performance under these PRSU awards, the year the 2017 Aspirational PRSUs were granted on the termsCompensation Committee acted to vest and conditions describedsettle such awards in the grant agreements.second half of December 2020
. As used in the context of the 2017 Aspirational PRSUs, adjusted EBITDA means the Company's "Consolidated EBITDA" as such term is defined in the Company's current2016 senior secured credit facility. Please refer to Appendix A for a discussion of Adjusted EBITDA, which is a Non-GAAP financial measure.
The 2017Company did not adopt a new Aspirational PRSUs may be converted into time-based vesting RSUs uponAward program in 2020, nor were any additional special equity grants made. The Company also did not adopt a change of control.
new Aspirational Award program in 2021. The Compensation Committee believes that the 2017 Aspirational PRSUs, by providing extraordinary compensation for extraordinary performance, will serve as a significant incentive tool over the next 2 years. The Compensation Committee does not currently expect that it will adopt a new aspirational PRSU program covering any period prior to December 31, 2020. During that period, the 2017 Aspirational PRSUs will serve as a significant component of the NEOs' at-risk performance-based compensation.
2019 COMPENSATION ACTIONS
Set forth below is a brief summaryproposed construct of the compensation decisions made by the Compensation Committee in late December 2018program enables aspirational pay for aspirational performance.
Other Compensation-Related Policies and early 2019 relating to compensation for 2019.Processes
2019 Base Salary
No NEOs received an increase to base salary for 2019.
2019 Annual Incentive Program (2019 AIP)
Company-wide adjusted EBITDA was selected as the sole performance metric for the 2019 AIP, consistent with the change made by the Compensation Committee in 2016 to simplify the program's design. The Compensation Committee believes that adjusted EBITDA strongly correlates with long-term stockholder value creation. The target bonus under the 2019 AIP allocable to the Company-wide adjusted EBITDA goal is 100% and the potential range of each NEO's bonus based on this Company goal is 50% to 200% of the target bonus.
Adjustments were also made to target annual incentive award opportunities for the NEOs for 2019 as follows:
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Named Executive Officer | Target Award as a % of Salary |
Scott L. Thompson | 135% |
Bhaskar Rao | 75% |
Richard W. Anderson | 75% |
David Montgomery | 75% |
Scott J. Vollet | 75% |
2019 Annual Long-Term Incentive Grants (Regular Annual Grants)
The Compensation Committee approved annual long-term incentive awards for each of our NEOs for 2019. The Compensation Committee determined that the entire 2019 LTIP grant would be in the form of RSUs to best motivate the Company's executive officers and to further reinforce the link between the interests of our executive officers and our shareholders. In choosing to provide the LTIP grants in the form of RSUs, the Compensation Committee noted that RSUs are more retentive during this transitional period of our business, less dilutive, in terms of overall share usage, than stock options, and there is a significant performance-based incentive from the outstanding 2017 aspirational grants.
OTHER COMPENSATION-RELATED POLICIES
Executive Stock Ownership Guidelines
Our Board of Directors has adopted minimum stock ownership guidelines for our executive officers and Directors. The principal objective of the guidelines is to enhance the linkage between the interests of stockholders and our executive officers and Directors by requiring a meaningful, minimum level of stock ownership. The current guidelines provide that, within five years of becoming subject to the stock ownership guidelines, our CEO should own shares valued at an amount equal to six times his base salary, and that all other executive officers should own shares valued at an amount equal to three times the executive's base salary. Our Directors also are required to own, within five years of becoming subject to the stock ownership guidelines, shares valued at an amount equal to five times the Director's annual cash retainer (excluding any cash retainers paid for any committee or as Chair or Lead Director). Compliance is determined yearly based on the value of holdings of shares of stock and all vested restricted shares, restricted stock units, deferred stock units, performance units and other vested equity awards ("vested awards"), excluding any unvested equity awards or vested stock options. The yearly value of holdings of stock and vested awards is based on the average closing price of the Company's common stock on the NYSE forduring the most recent period from February 15 through May 14. The number of shares underlying vested awards that may be included in the value of the holdings is calculated net of the number of shares necessary to cover estimated taxes with respect to such vested awards that have not yet become payable. Until the guidelines are met, executive officers and Directors are required to retain at least 50% of the "Net Profit Shares," as defined below, and will be deemed to be in compliance with the guidelines while they comply with this retention obligation. "Net Profit Shares" means all shares of common stock received on vesting or earn-out of vested awards and shares received on exercise of stock options, in each case net of shares of common stock sold or withheld for payment of the exercise price or to pay any taxes related to the equity awards.
If an executive officer or Director achieves compliance with these guidelines and then falls out of compliance as of the end of the next measuring period due to changes in the market price of the common stock or an increase in base salary or cash retainer, that person will not be required to purchase shares in order to regain compliance, but will be deemed to be in compliance if going forward he or she retains at least 50% of his or her Net Profit Shares. In addition, if the person falls out of compliance for any other reason that person will be deemed to have remained in compliance if he or she retained at least 50% of his or her Net Profit Shares. The compliance of any Director who is an employee of an institutional stockholder of the Company, and has waived any right to receive compensation as a Director, will be calculated based on the stock ownership of that institutional stockholder and the average annual cash retainer paid to other Directors as of the end of the measurement period. For 2018,2020, all of our executives and Directors were on track to maintain compliance with the minimum stock ownership guidelines.
Anti-Hedging and Anti-Pledging Policy
The Company's Policy on Insider Trading and Confidentiality Policy prohibits employees, executive officers and members of the Board of Directors from hedging or pledging Company securities.
Clawback Policy
In early 2015, we adopted a
Our Clawback Policy that provides that certain performance-based compensation is recoverable from an officer if we determine that an officer has engaged in fraud, willful misconduct or gross negligence that directly caused or otherwise directly contributed to the need for a material restatement of our financial results. Performance-based compensation includes all annual incentives and long-term incentives with performance features based on our financial performance, whether paid in cash or in equity, where the award or size of the award was contingent on such performance. If our Compensation Committee determines, in its reasonable discretion, that any such performance-based compensation would not have been paid or would have been at a lower amount had it been based on the restated financial results, it will report its conclusions to the Board. If the Board determines action is necessary or appropriate, the Board may within 12 months of such a restatement, to the extent permitted by applicable law, seek recoupment from such officer of the portion of such performance-based compensation that is greater than that which would have been awarded or earned had such compensation been calculated on the basis of the restated financial results.
Other Benefits / Perquisites
We offer a 401(k) plan to all of our eligible U.S. employees, including our senior management and our NEOs other than Mr. Montgomery, who is a citizen ofemployees. Except as stated in the United Kingdom. The 401(k) plan is designed to allow employees to save for retirement as well as defer current earnings and recognize them later in accordance with statutory regulations when their individual income tax rates may be more beneficial. In 2018,next sentence, in accordance with the terms of the plan, we matched 100% of the first three percent of each match-eligible participating employee's salary that is deferred and 50% of the fourth and fifth percent of salary deferred. WeAs part of our efforts to control costs during the early period of COVID-19, we temporarily suspended our matching program from June until mid-August. Otherwise, we made the matching contribution in 20182020 for all match-eligible participating employees, including the match-eligible participating NEOs. In addition, the 401(k) plan permits us to provide a discretionary contribution of up to 3% of eligible compensation to eligible participants. We did not provide a discretionary contribution to plan participants for the year ending December 31, 2018, and do not expect to for the year ending December 31, 2019. However, the decision to make the discretionary contribution is at our sole discretion.
We do not offer any other U.S. defined contribution or defined benefit pension plans in which executive officers, including the NEOs, are eligible to participate. There are no alternate plans in place for senior management except for Mr. Montgomery. For more information regarding Mr. Montgomery's pension benefits see "Potential Payments upon Termination or Change in Control" elsewhere in this Proxy Statement.
We provide reimbursement for financial planning expenses for NEOs of up to $10,000 per year. The program is intended to cover some, if not most, of the expense associated with having a financial advisor and to allow executives more time to focus on business and personal matters. We also provide a car allowance for Mr. Montgomery in the amount of £15,000 pursuant to the terms of his original employment agreement entered into when he joined us in 2003.
We provide the use of corporate aircraft to certain executives in limited circumstances, as discussed in Note 43 to the Summary Compensation Table. Our NEOs also receive certain other benefits that are discussed in Note 3 to the Summary Compensation Table.
In the aggregate, we believe the perquisites and other benefits we provide are comparable in scope to those who compete with us for executive talent.
We also offer various broad-based employee benefit plans. NEOs participate in these plans on the same terms as eligible, non-executive employees, subject to any legal limits on the amounts that may apply. Our NEOs also receive certain other benefits that are discussed in Note 4 to the Summary Compensation Table.
Employment Agreements
Each of our NEOs is a party to an employment agreement with the Company. These employment agreements provide for severance arrangements in the event of termination of employment in certain circumstances and also provide for non-competition, non-solicitation and confidentiality agreements. These severance arrangements are discussed in more detail below under "Potential Payments upon Termination or Change in Control." The employment agreements for our NEOs were put in place at the time they either joined the Company at the level of EVP or above or were promoted to EVP of the Company. We believe that these agreements, including the severance provisions, are necessary to allow us to be competitive in recruiting and retaining top talent for executive officer positions. The Compensation Committee believes that the employment agreements in place for its executive officers are appropriate for the Company's needs. However, as part of its analysis of the reasonableness of each individual element of compensation and each NEO's compensation package as a whole, the Compensation Committee periodically analyzes these arrangements for reasonableness and market competitiveness.
Tax and Accounting Implications
Deductibility of Compensation under Section 162(m) of the Code
Until 2017,
Section 162(m) of the Internal Revenue Code of 1986 (the "Code") limited the Company's annualgenerally disallows for public companies a tax deduction for certain compensationfederal income tax purposes of remuneration in excess of $1 million paid to certainthe chief executive officer, chief financial officer, and each of our executives, including the NEOs,three other most highly‑compensated executive officers in any taxable year. Prior to January 1, 2018, remuneration in excess of $1 million each year unless certain requirements were met. As a resultcould in general be deducted if it qualified as "qualified performance‑based compensation" within the meaning of the U.S.Code. The Tax Cuts and Jobs Act (the "TCJA") eliminated the "performance-based" exception, beginning January 1, 2018; however, the TCJA provides a transition rule with respect to remuneration that is provided pursuant to a written binding contract that was in effect on November 2, 2017 and that was not materially modified after that date. As a result, compensation paid to our covered executive officers in excess of $1 million in taxable years beginning after December 31, 2017 will not be deductible unless it qualifies for the transition relief described above.
In designing our executive compensation program and determining the compensation of our executive officers, including the named executive officers, the Compensation Committee considers a variety of factors, including the possible tax consequences to us and our executive officers, such as the potential impact of the Section 162(m) deduction limit. To maintain flexibility to compensate our executive officers in a manner designed to promote short-term and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible. The Compensation Committee believes that our stockholder interests are best served if its discretion and flexibility in structuring compensation programs to attract, motivate, and retain key executives is not restricted, even though such arrangements may result in non-deductible compensation expense. Thus, the Compensation Committee may approve compensation for the named executive officers that does not comply with an exemption from Section 162(m) for certain "qualified performance-based compensation" ceased to be generally available beginning in 2018. Despite this change, the Company'sdeduction limit when it believes that such compensation philosophy remainsis consistent with the principle underlyinggoals of our executive compensation program and is in the qualified performance-based compensation exemption: that a large portionbest interests of each NEO's compensation should be at risk based on performance.the Company and our stockholders.
Accounting for Stock-Based Compensation
We account for stock-based payments, including under the 2003 Equity Incentive Plan and the Amended and Restated 2013 Equity Incentive Plan, in accordance with FASB ASCFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, "Stock Compensation."
OVERALL COMPENSATION APPROACH AND RISK INCENTIVES
TheOverall Compensation Approach And Risk Incentives
It is our belief that a majority of an NEO's total compensation should be variable "at risk" compensation, meaning it is tied to the Company's financial performance. However, because performance-based incentives play a large role in our compensation program, we strive to ensure that incentives do not result in actions that may conflict with the long-term best interests of the Company and our stockholders. Therefore, the Committee considers,evaluated all of our plans and policies (applicable to executive officers and employees below the executive level) in establishing and reviewing compensation programs, whether the programs encourage unnecessary orOctober 2020 for attributes that could cause excessive risk taking and hasrisk-taking. We concluded that they do not. Base salaries are fixed in amountour programs and thuspolicies do not encourage risk taking. In 2018, employees were also eligibleexcessive risk-taking because: (a) the salary component of our program is a fixed amount; (b) the majority of the average compensation paid to receive a portion of their total compensationour executive officers is delivered in the form of "at risk" compensation opportunities, includingequity ownership, which aligns the interest of our executive officers with those of our stockholders; (c) NEOs are subject to our stock ownership guidelines; and (d) the annual incentive and for senior managers, the long-term incentive awards. The portion of "at risk" compensation increases as an employee's level of responsibility within the Company increases. While the annual incentive awards focus on achievement of annual goals, and annual goals may encourage the taking of short-term risks at the expense of long-term results, the Company's annual incentive program represents only a portion of eligible employees' total compensation opportunities. In addition, the AIP currently uses a single metricplans are designed with risk-mitigating characteristics (for example maximum award payouts based on adjusted EBITDA,the attainment of Company financial objectives, which isare calculated based on the Company's audited financial results and a set of pre-established objective adjustments. The Compensation Committee's practice is to have the calculations for these awardsadjustments and reviewed by the Company's independent public accountants when there are payouts. Thepayouts). In addition, our programs include risk-mitigating policies in place such as insider trading and hedging prohibitions, clawbacks, and review and approval of final awards by our Compensation Committee believes that(and the AIP appropriately balances risk and the desire to focus eligible employees on specific short-term goals important to the Company's success, and that it does not encourage unnecessary or excessive risk taking.
The majority of "at risk" compensation provided to senior managers is in the form of long-term equity awards that help further align senior managers' interests with thoseindependent members of the Company's stockholders. The granting of these awards is generally on an annual and therefore overlapping basis, and these grants are subject to multi-year vesting schedules. As described above, a significant portion of long-term equity awards are provided in the form of stock options, RSUs and PRSUs. In addition, the Company also made special grants of aspirational PRSU awards pursuant to an aspirational program implemented in 2015 and a follow-on program implemented in 2017. The ultimate value of the stock option and RSU awards is tied to the Company's long-term stock price performance, while the value of the PRSU awards is dependent both on the Company's operating results over a multi-year period and the price performance of our stock. As additional risk mitigating factors, the performance targets for the 2015 Aspirational PRSUs and 2017 Aspirational PRSUs are based on pre-established goals that are based on the Company's audited (or,full Board in the case of the 2017 Aspirational PRSUs, unaudited quarterly) financial results and a setCEO), which is composed entirely of objective adjustments. The Compensation Committee's practice isindependent directors who have discretion under our plans to have the calculations for these awards reviewed by the Company's independent public accountants when there are payouts. In addition, the 2017 Aspirational PRSUs are based on aspirational performance targets based on rolling four quarter periods ending between March 31, 2018 and December 31, 2020, and the new program has a performance target range ($600-$650 million) rather than a single target threshold ($650 million). Both of these changes may create less of an incentive to take short-term risks at the expense of long-term results. Based on this long-range focus and these other factors, the Compensation Committee believes that these awards do not encourage unnecessaryapprove, modify, or excessive risk-taking.eliminate any award earned.
As more fully described above, the Company maintains stock ownership guidelines applicable to executive officers and members of the Board of Directors intended to encourage long-term ownership of a significant amount of Tempur Sealy International stock in order to promote a long-term "owner's" view of our business. The Compensation Committee believes the Company's compensation programs encourage employees to strive to achieve both the short and long-term goals that are important to the Company's success without promoting unnecessary or excessive risk taking.
COMPENSATION COMMITTEE REPORT
The information contained in this report shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Tempur Sealy International specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended ("Securities Act"), or the Exchange Act.
The Compensation Committee is comprised entirely of independent directors. The Compensation Committee has reviewed the Compensation Discussion and Analysis section required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis section be included in this Proxy Statement and incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 2018.2020.
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| Submitted by, |
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| COMPENSATION COMMITTEE |
| Jon L. Luther (Chair) |
| Richard W. Neu |
| Arik W. Ruchim |
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and long-term compensation for services in all capacities to Tempur Sealy International for the year ended December 31, 2018,2020, of those persons who served as (i) our principal executive officer during the year ended December 31, 2018,2020, (ii) our principal financial officer during the year ended December 31, 2018,2020, and (iii) our other three most highly compensated Executive Officers for the year ended December 31, 2018.2020. In this section of the Proxy Statement we refer to these persons collectively as our "NEOs."
Summary Compensation Table
| | Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($) | All Other Compensation ($)(4) | Total ($) | Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) |
Scott L. Thompson Chairman, President and Chief Executive Officer | 2018 | 1,100,000 |
| — |
| 7,000,021 |
| 3,000,001 |
| — |
| — |
| 196,326 |
| 11,296,348 |
| Scott L. Thompson Chairman, President and Chief Executive Officer | 2020 | 1,100,000(4) | 10,000,082 | | — | | 2,970,000 | | 181,256 | | 14,251,338 | |
| 2017 | 1,100,000 |
| — |
| 7,000,000 |
| 8,423,616 |
| 1,375,000 |
| — |
| 122,780 |
| 18,021,396 |
| | 2019 | 1,100,000 | | 10,000,013 | | — | | 2,970,000 | | 207,844 | | 14,277,857 | |
| 2016 | 1,100,000 |
| — |
| 3,181,573 |
| — |
| 1,934,625 |
| — |
| 20,976 |
| 6,237,174 |
| | 2018 | 1,100,000 | | 7,000,021 | | 3,000,001 | | — | | 196,326 | | 11,296,348 | |
| | | |
Bhaskar Rao EVP and Chief Financial Officer | 2018 | 443,000 |
| — |
| 974,969 |
| 450,008 |
| — |
| — |
| 29,373 |
| 1,897,350 |
| Bhaskar Rao EVP and Chief Financial Officer | 2020 | 450,000 | | 1,550,005 | | — | | 675,000 | | 24,369 | | 2,699,374 | |
| 2017 | 430,000 |
| — |
| 975,000 |
| 601,680 |
| 192,281 |
| — |
| 23,735 |
| 2,222,696 |
| | 2019 | 443,000 | | 1,425,010 | | — | | 664,500 | | 24,150 | | 2,556,660 | |
| | | | 2018 | 443,000 | | 974,969 | | 450,008 | | — | | 29,373 | | 1,897,350 | |
Richard W. Anderson EVP and President, North America | 2018 | 454,000 |
| — |
| 974,969 |
| 450,008 |
| — |
| — |
| 31,406 |
| 1,910,383 |
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| H. Clifford Buster, III EVP, President U.S. Direct to Consumer | | H. Clifford Buster, III EVP, President U.S. Direct to Consumer | 2020 | 450,000 | | 1,550,005 | | — | | 675,000 | | 228,125 | | 2,903,130 | |
| 2017 | 441,000 |
| — |
| 975,000 |
| 1,173,285 |
| 308,700 |
| — |
| 20,504 |
| 2,918,489 |
| |
| 2016 | 441,000 |
| 500,000 |
| 2,076,402 |
| — |
| 434,341 |
| — |
| 23,960 |
| 3,475,703 |
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| | | |
David Montgomery(5) EVP, Global Business Strategy and Development | 2018 | 392,014 |
| — |
| 1,099,994 |
| 450,008 |
| — |
| — |
| 87,701 |
| 2,029,717 |
| David Montgomery(5) EVP, Global Business Strategy and Development | 2020 | 420,491 | | 1,550,005 | | — | | 630,736 | | 101,688 | | 2,702,920 | |
| 2017 | 367,248 |
| — |
| 1,100,000 |
| 1,323,705 |
| 257,074 |
| — |
| 76,705 |
| 3,124,732 |
| | 2019 | 407,852 | | 1,549,993 | | — | | 611,778 | | 92,490 | | 2,662,113 | |
| 2016 | 365,756 |
| 500,000 |
| 1,100,000 |
| — |
| 360,233 |
| — |
| 76,705 |
| 2,402,694 |
| | 2018 | 392,014 | | 1,099,994 | | 450,008 | | — | | 87,701 | | 2,029,717 | |
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Scott J. Vollet EVP, Global Operations | 2018 | 438,000 |
| — |
| 974,969 |
| 450,008 |
| — |
| — |
| 23,985 |
| 1,886,962 |
| Scott J. Vollet EVP, Global Operations | 2020 | 450,000 | | 1,550,005 | | — | | 675,000 | | 24,369 | | 2,699,374 | |
| 2017 | 324,500 |
| — |
| 500,000 |
| 601,680 |
| 162,225 |
| — |
| 19,598 |
| 1,608,003 |
| | 2019 | 438,000 | | 1,425,010 | | — | | 657,000 | | 24,137 | | 2,544,147 | |
| | | 2018 | 438,000 | | 974,969 | | 450,008 | | — | | 23,985 | | 1,886,962 | |