UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
☑ | Filed by the Registrant | ☐ | Filed by a |
CHECK THE APPROPRIATE BOX: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, | |
☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material |
BorgWarner Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
PAYMENT OF FILING FEE (CHECK | ||
☑ | No fee | |
☐ | Fee paid previously with preliminary materials | |
☐ | Fee computed on table |
2023
Notice of Annual Meeting of
Stockholders and Proxy Statement
BorgWarner’s 2022
Year in Review
BorgWarner Inc. (“BorgWarner” or the “Company”) has continued to deliver value to our stockholders even in a tough economic environment. The ongoing global shortage of semi-conductors and other supply chain and logistical constraints coupled with global inflation have negatively impacted the global economy, as well as our revenue and overall profitability.
Despite these challenges, BorgWarner achieved:
$15.8 | 8.70% | $1,564 | ||||
billion in sales | operating margin | million in operating cash flow | ||||
6.5% | 10.26%* | $860 | ||||
year-over-year increase in sales | adjusted operating margin | million* in free cash flow | ||||
Sales increased 6.5% year-over-year and relative revenue growth (“Relative Revenue Growth”) compared favorably to BorgWarner’s weighted average market with a relative outperformance of approximately 11.0%*. | Adjusted operating margin (“Adjusted Operating Margin” or “AOM”) of 10.26% was slightly below the target set under the Company’s Management Incentive Plan (“MIP”) for 2022, resulting in a payout of 96% on the AOM portion of the 2022 MIP award. | For purposes of MIP, free cash flow (“Free Cash Flow” or “FCF”) of $860 million exceeded the target set under the MIP for 2022, resulting in a payout of 200% on the FCF portion of the 2022 MIP award. |
* | |||
Our vision of a clean, energy-efficient world is more relevant today than it has ever been. Charging Forward, our accelerated electrification strategy, is a product of that vision and a plan for the next decade-plus of profitable and sustainable growth. Our Charging Forward strategy is based on achieving three key pillars: (1) profitably scaling organic growth in electric vehicles (“EVs”); (2) executing mergers and acquisitions (“M&A”) that expand our EV products; and (3) optimizing our combustion portfolio through planned dispositions of $3 billion to $4 billion in annual revenue.
As illustrated below, we are executing on our Charging Forward strategy and estimate that we are on track to exceed our 2025 organic EV sales target as we believe we have already booked $3.0 billion of EV program revenue for 2025 against our target of $2.5 billion. We believe we are also on track to meet our goal of $2.0 billion in M&A activity by 2025. In December 2022, we announced our intention to execute a tax-free spin-off of our Fuel Systems and Aftermarket segments into a separate, publicly traded company, PHINIA Inc. (“PHINIA”). Upon successful completion of that transaction, we expect to achieve our third pillar – optimizing our combustion portfolio.
Creating Two Leading, Focused Public Companies
We believe having two industry-leading, focused companies, each pursuing their respective strategies, will maximize stockholder value. Following completion of the intended separation, BorgWarner would consist of its current e-Propulsion & Drivetrain and Air Management segments. We believe this transaction positions the Company to be a market leader in EV propulsion and allows us to focus resources on attractive organic and inorganic EV opportunities.
PHINIA would consist of BorgWarner’s current Fuel Systems and Aftermarket segments. We believe PHINIA is a product leader in conventional propulsion and will benefit from its focus on the global vehicle parc (which would be primarily combustion-based through 2040) and its embedded relationships with original equipment manufacturers.
Immediately following completion of the intended transaction, BorgWarner stockholders would own shares of both companies. We anticipate completing the intended transaction in late 2023, subject to, among other things, satisfaction of customary closing conditions. There can be no assurance regarding the ultimate timing of the intended separation or that it will be completed.
Commitment to Electrification
The intended spin-off is just the latest step in BorgWarner’s journey to electrification. As demonstrated in the timeline below, BorgWarner has acquired companies with compelling technology that align with our electrification strategy.
We take a disciplined approach to our M&A activity and pursue opportunities that fit from a strategic and financial perspective. In 2022, we expanded our eMotor capabilities with our acquisition of Santroll, expanded our power electronics competencies with our acquisition of Drivetek AG (“Drivetek”), and increased our global charging footprint with our acquisition of Rhombus and our announced acquisition of SSE (which closed on March 1, 2023).
|
VALUE DELIVERED TO OUR STOCKHOLDERS
FINANCIAL HIGHLIGHTSNotice of Annual Meeting
of Stockholders
|
Auburn Hills, MichiganMarch 16, 2018
Dear Fellow Stockholder:
On behalf of the Board of Directors (our “Board”) and the management of BorgWarner, Inc. we invite you to attend the 20182023 Annual Meeting of Stockholders (the “Annual Meeting”) at itsour world headquarters located at 3850 Hamlin Road, Auburn Hills, Michigan, 48326 on Wednesday, April 25, 2018,26, 2023, at 9:00 a.m., local time, for the following purposes:
Board Recommendation | Page | |||||
PROPOSAL 1 | Elect | vote FOR the Board’s nominees | Page 11 | |||
PROPOSAL 2 | ||||||
Approve, on an advisory basis, the | vote FOR | Page 26 | ||||
PROPOSAL 3 | Approve, on an advisory basis, the frequency of voting on named executive officer compensation | vote FOR annual frequency | Page 67 | |||
PROPOSAL 4 | Ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for | vote FOR | Page 68 | |||
PROPOSAL 5 | ||||||
| vote FOR | Page 71 | ||||
PROPOSAL 6 | ||||||
| ||||||
| ||||||
Vote on a stockholder proposal to | vote AGAINST | Page 82 | ||||
PROPOSAL 7 | Vote on a stockholder proposal to request the | vote AGAINST | Page 84 | |||
Transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
Only stockholders of record at the close of business on March 1, 20182023, are entitled to vote at the meetingAnnual Meeting or any adjournment or postponement thereof.
Date and Time:Wednesday, April 25, 20189:00 a.m., local time
| ||
| ||
| ||
|
Please read the attached proxy statement carefully as it describes in greater detail the matters to be acted upon and your voting rights with respect to those matters. The enclosed proxy card is solicited by the Board of Directors of the Company.Board.
Along with the attached proxy statement, we are providing you with a copy of our Annual Report on Form 10-K for our fiscal year ended December 31, 2017. 2022.
Stockholders are not to regard our Annual Report on Form 10-K, which includes our audited financial statements, as proxy solicitation material.
By Order of the Board, of Directors
Tonit M. Calaway
Executive Vice President, Chief Administrative Officer,
General Counsel and Secretary
Auburn Hills, Michigan
March 17, 2023
Date and Time: Wednesday, April 26, 2023 9:00 a.m., local time | ||
Your Vote is Important! | ||
You can submit your vote by: | ||
Telephone Call us free of charge at 1-800-690-6903 and follow the instructions. | ||
Internet Access the internet, go to www.proxyvote.com and follow the instructions. | ||
Mail You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. See page 86 for instructions on how to receive a paper copy of our proxy materials. | ||
In Person If you attend the meeting, you may vote in person if you wish to do so, even if you have previously submitted your proxy. |
Proxy Summary
This summary of ballot items provides information that you should consider before voting on the proposals presented at this year’s Annual Meeting. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. Director David S. Haffner will not stand for re-election at the Annual Meeting.
Proposal 1 To Elect Eight Directors to the Board of Directors | Our Board recommendsthat you vote “FOR” the Board’s nominees. |
Key Audit Committee Compensation Committee Corporate Governance Committee Executive Committee Independent *Committee Chair | |||||||||
Sara A. Greenstein IND | Michael S. Hanley IND | Frédéric B. Lissalde | Shaun E. McAlmont IND | ||||||
President and Chief Executive Officer, Axel Johnson Inc. | Retired Global Automotive Leader, Ernst & Young LLP | President and Chief Executive Officer, BorgWarner Inc. | President and Chief Executive Officer, Ninjio, LLC | ||||||
Age: 48 Director since: 2021 Committees: CC, CGC | Age: 67 Director since: 2016 Committees: AC*, EC | Age: 55 Director since: 2018 Other current directorships: Autoliv, Inc. Committees: EC | Age: 57 Director since: 2020 Other current directorships: Lee Enterprises, Incorporated Committees: CC, CGC | ||||||
Deborah D. McWhinney IND | Alexis P. Michas IND | Sailaja K. Shankar IND | Hau N. Thai-Tang IND | ||||||
Retired Chief Executive Officer of Global Enterprise Payments, Citigroup Inc. | Non-Executive Chair of the Board, BorgWarner Inc.; Managing Partner, Juniper Investment Company, LLC | Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. | Former Chief Industrial Platform Officer, Ford Motor Company | ||||||
Age: 67 Director since: 2018 Other current directorships: Franklin Templeton ETF Trust, S&P Global Inc. Committees: AC, CC* | Age: 65 Director since: 1993 Other current directorships: AstroNova, Inc., PerkinElmer, Inc. Committees: CGC*, EC* | Age: 56 Director since: 2022 Committees: AC, CC | Age: 56 Director since: 2023 Committees: AC | ||||||
2023 Proxy Statement | 1
Proxy Summary
Director Demographics
Director Nominee Tenure | Director Nominee Gender and Racial/ Ethnic Diversity | |
Director Nominee Independence | Director Nominee Age | |
Corporate Governance Highlights
Independent Board Chair Annual election of directors Majority voting standard for election of directors Robust stockholder engagement Use of a skills matrix to align Board selection with business strategy Limit on number of public company directorships Board members may hold (4) Director retirement policy (age 72) Clawback and recoupment policies | Share ownership policies Prohibition of speculative and hedging transactions by all employees and directors Corporate Sustainability Report Stockholder right to call a special meeting (20%) Stockholder right to act by written consent (10%) No supermajority voting provisions for common stockholders Proxy access stockholder right No stockholder rights plan |
2 | | |
Proxy Summary
Proxy Stockholder Engagement
As part of BorgWarner’s annual engagement program and in preparation for the 2023 proxy season, management and our Board conducted extensive outreach with our stockholders during the fourth quarter of 2022.
We contacted our | Representing approximately |
Top 38 Stockholders | 69% of our outstanding shares (as of September 15, 2022) |
We held virtual meetings or calls with | Representing holders of approximately |
14 Stockholders | 28% of our outstanding shares (as of September 15, 2022) |
Our proxy-related stockholder engagement consists of three activities: off-season direct stockholder engagement prior to the filing of the proxy statement; engagement leading up to the Annual Meeting; and post-Annual Meeting assessment.
Off-Season Engagement ● We reached out to our top 38 stockholders to discuss corporate governance, corporate responsibility, and executive compensation matters and solicit feedback ● Our Board is provided with our stockholders’ feedback for consideration ● The Board and management discussed feedback and whether action should be taken ● Disclosure enhancements are considered | Engagement Leading up to the Annual Meeting of Stockholders ● In the lead up to the Annual Meeting, we conduct engagement meetings with stockholders who have questions or concerns regarding ballot items ● At the Annual Meeting, our stockholders vote on the election of directors, executive compensation, ratification of our auditors, and other management and stockholder proposals | Post-Annual Meeting Assessment ● Our Board and management review the vote results from our Annual Meeting ● The Board and management discuss vote results and whether action should be taken ● Preparation begins for off-season engagement meetings |
We shared and discussed with the full Board the stockholder feedback that we received in 2022. Topics that we discussed with stockholders included, among other things, our Charging Forward strategy, environmental, social, and governance (“ESG”) initiatives, human capital management, executive compensation, Board composition and refreshment, and general business strategy. Engagement with our stockholders is a valuable source of input for our Board and management team and has helped to inform decisions on topics we have discussed.
2023 Proxy Statement | 3
Proxy Summary
Proposal 2 Approve, on an Advisory Basis, the Compensation of Our Named Executive Officers | Our Board recommends that you vote “FOR” this proposal. |
Why Should You Vote in Favor of Our 2023 Say-on-Pay Proposal?
A strong link between pay and performance
Despite the significant production volatility and inflationary headwinds we faced in 2022, the Company performed well. As a result of strong sales and solid margin performance, we delivered close to the target level of guidance for AOM and exceeded the maximum level of guidance for FCF we disclosed in February 2022. We achieved AOM of 10.26% and a record level of FCF at $860 million for MIP purposes. As a result of this performance, the AOM portion of the MIP award resulted in a payout of 96%. The FCF portion of the MIP award resulted in a 200% payout. With a 50% weighting for each of the metrics, the result was a combined payout of 148% under the 2022 MIP prior to application of the performance modifier (discussed further below).
Adjusted Operating Margin | Free Cash Flow | |
Adjusted Operating Margin and Free Cash Flow are Non-GAAP measures and exclude the impact of the Santroll, Rhombus, and SSE acquisitions. Reconciliations to comparable GAAP measures for Adjusted Operating Margin and Free Cash Flow can be found in Appendix A. |
The fundamental principles of the Company’s compensation philosophy are:
● Aligning pay and performance
● Driving strong business results
● Focusing on long-term stockholder return
● Attracting and retaining high-quality talent
Executive Compensation Objectives
The objectives of our executive compensation program are to:
● Attract and retain the best global talent
● Motivate our executives to perform in support of the Company’s business strategies and goals (including growth and the creation of long-term stockholder value) using calculated risks
● Link executives’ and stockholders’ interests through equity-based incentive plans
● Provide an equitable compensation package that rewards individual performance in line with overall business results
4 | | |
Proxy Summary
2022 CEO Target Direct Compensation
■ Base Salary ● Comprises 10% of total compensation ● Remaining 90% of compensation is at-risk ■ Annual Incentive ● Drives achievement of key business results ● Incentivizes delivery of key short-term business objectives ● Based on achievement of AOM% and FCF, demonstrating strength of business | ■ Long-Term Incentive ● Aligns management interests with our stockholders’ ● Supports talent retention ● Significant portion performance based ● Two Thirds of Long-Term Incentive ● One Third of Long-Term Incentive |
We continue to refine our executive compensation program to ensure it is consistent with our short-term and long-term strategies and provides a strong link between pay and performance. Because sustainability is fundamental to our long-term and short-term strategies, we have included two “E” metrics in our Long-Term Incentive (“LTI”) Plan. In 2021, we introduced the eProducts revenue mix metric (the “eProducts Revenue Mix Metric”) in our 2021-2023 LTI Plan. In 2022, we included the eProducts revenue (the “eProducts Revenue Metric”) in our 2022-2024 LTI Plan. The products underlying these metrics include all products utilized on EVs plus those products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in EVs (the “eProducts”).
Under the 2022-2024 LTI Plan, the performance shares metrics are as follows:
● 25% based on eProducts Revenue Mix Metric;
● 25% based on eProducts Revenue Metric;
● 25% based on the Cumulative FCF Metric; and
● 25% based on a relative total stockholder return (“Relative TSR”) Metric.
The compensation of our named executive officers (“NEOs”) is largely performance based, with approximately 82%-90% of their target direct compensation (salary and target annual and long-term incentives) at risk and based on Company performance. We regularly meet with our investors to discuss our compensation practices, seek their feedback, and respond to any feedback shared with us. In 2022, the Company’s executive compensation program received substantial stockholder support and was approved, on an advisory basis, by 93.9% of stockholders voting on the proposal at the 2022 Annual Meeting of Stockholders.
To further align performance, strategy, and compensation, the Board’s Compensation Committee (the “Compensation Committee”) approved a performance modifier (the “Performance Modifier”) under our MIP. The Performance Modifier, which is based on achieving Company-wide strategic goals, allows the Compensation Committee to apply a performance modifier of up to 10% of the target MIP award to modify the MIP payout that would otherwise result (upward or downward). Payout under the MIP remains capped at 200% of target, and the Performance Modifier cannot increase the award beyond that amount.
When determining the Performance Modifier for a particular year, the Compensation Committee considers the actions taken by management in driving progress and demonstrating commitment in the following areas:
● ESG initiatives including diversity, equity, and inclusion (“DE&I”)
● Acquisitions and dispositions, including integration
● Succession planning and talent development
● Leadership during unusual and challenging circumstances
● Strategic change management
As a result of the Compensation Committee applying the full Performance Modifier for 2022 performance, the overall payout under the 2022 MIP plan was 158%.
2023 Proxy Statement | 5
Proxy Summary
Proposal 3 Approve, on an Advisory Basis, the Frequency ofVoting on Named Executive Officer Compensation | Our Board recommends that you vote “FOR” one year frequency. | |
Proposal 4 Ratification of Selection of Independent Registered Public Accounting Firm | Our Board recommends that you vote “FOR” this proposal. | |
Proposal 5 Approval of the BorgWarner Inc. 2023 Stock Incentive Plan | Our Board recommends that you vote “FOR” this proposal. | |
Proposal 6 Vote on a Stockholder Proposal to Change Share Ownership Threshold to Call a Special Meeting of the Stockholders | Our Board recommends that you vote “AGAINST” this proposal. | |
Proposal 7 Vote on a Stockholder Proposal to Request the Board of Directors to Publish a Just Transition Report | Our Board recommends that you vote “AGAINST” this proposal. |
We will also act upon any other business that may properly come before the Annual Meeting and any adjournments or postponements of that meeting.
Our Board or proxy holders will use their discretion on other matters that may arise at the Annual Meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR OUR ANNUAL MEETING TO BE HELD ON WEDNESDAY, APRIL 25, 201826, 2023
We have elected to furnish materials for the Annual Meeting via the internet. Beginning on or about March 16, 2018,17, 2023, we will mail a notice of internet availability to most of our stockholders containing instructions on how to access the proxy materials and vote online. All of our other stockholders will be sent a copy of our proxy materials by mail or e-mail on or about March 16, 2018.17, 2023. See your proxy card or page 1186 for more information on how you can elect to receive your proxy materials over the internet or by e-mail if you received them by mail this year.
6 | | |
Sustainability
Our Approach and Commitments
Our Company understands that sustainability is fundamental to our long-term continued success. To us, sustainability means driving ESG initiatives to deliver value to all stakeholders for today and tomorrow. We are guided by our BorgWarner Beliefs and our vision of a clean, energy-efficient world.
We use our materiality assessment process and stakeholder engagement to benchmark our sustainability focus against what is most important to our stakeholders and our business. This information is then translated into our ongoing sustainability strategy, reporting, and commitments.
Our sustainability objectives align with Charging Forward and our strategy to generate financial results. Central to those objectives is our commitment to our people practices, which foster and cultivate creativity, quick pivots, long-term planning, and operational excellence.
Sustainability Goals
* | from a 2021 baseline |
2023 Proxy Statement | 7
Sustainability
Sustainability Governance
Our Board has ultimate oversight of our sustainability strategy, with each Board committee having clearly defined responsibilities for specific ESG activities, risks, and opportunities as follows:
Our Board’s oversight responsibilities, among other things, require ongoing, in-depth consideration of economic, social, and environmental risks and opportunities. |
This summary of voting items provides information that you should consider before voting on the items presented at this year’s Annual Meeting of Stockholders. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
Audit | Compensation | Corporate Governance |
● The Audit Committee provides oversight of the quality and integrity of the accounting, auditing, financial reporting, and risk management practices of the Company, including assessing the Company’s compliance with ESG-related disclosure requirements. | ● The Compensation Committee oversees human capital management, including DE&I, and assesses whether ESG goals and milestones, if appropriate, are effectively reflected in executive compensation. | ● The Corporate Governance Committee reviews sustainability strategy, policies, and procedures, including corporate responsibility matters, and receives, reviews, and considers stakeholder feedback on ESG topics. The Corporate Governance Committee also ensures that there is appropriate ESG expertise on the Board and awareness of ESG risks and opportunities by the Board and executive management team. |
| ||
DIRECTOR NOMINEE
Empowering Our Diverse Teams
We believe our strength is in our differences. We strive to nurture an environment where diversity of background, experience, and skill is welcomed and embraced. We know an inclusive environment supports a sense of belonging which enables our team members to be authentic and innovative. As of December 31, 2022, we had approximately 52,700 employees*.
Understanding we are only able to achieve results because of our people, we support our employees in evolving their skills as we implement Charging Forward, while simultaneously building the talent pipeline we need to succeed. We also provide individual and team career growth opportunities that inspire our employees and set up the Company to thrive. To promote a positive work environment, we consistently review our policies, programs, and processes to align them with our DE&I strategy. In addition to the 2026 DE&I goals illustrated on page 7, the Company has continued its rollout of Unconscious Bias Awareness training and promoted the development of Employee Belonging Groups.
BorgWarner’s commitment to attracting and developing talent with diverse backgrounds, perspectives, and skills starts at the highest levels of our organization. As of March 1, 2023:
|
| ||||||
|
| ||||||
5 of 9 members |
| ||||||
are women and/or racial/ethnic minorities | are women and/or racial/ethnic minorities |
* | “employees” refers to total workforce, including contract and temporary workers |
** | The Strategy Board is comprised of our executive management team |
8 |
Sustainability
To attract and retain the highest caliber of talent, we aim to cultivate a culture where employees are treated with dignity and their differences are celebrated. As of December 31, 2022:
Leadership* | Salaried Workforce | Hourly | New Hires** | Overall*** | |||
|
|
| |||||
Ethnic Minorities (U.S.) |
|
|
* | Leadership is defined as employees who participate in MIP | |||||
|
|
|
| |||||
|
|
| |||||
*** | ||
CORPORATE GOVERNANCE HIGHLIGHTSAdditional Information
To ensure transparency for all stakeholders, our reporting regarding sustainability matters is aligned with SASB, TCFD, and GRI frameworks. For more information, please refer to the Company’s Sustainability Report available on the Company’s website at www.borgwarner.com/company/sustainability. In this Proxy Statement, we refer to additional materials or information available on or through our website. We do that for informational purposes only. In each case, we are not incorporating the content of our website in this Proxy Statement. 2023 Proxy Statement | 9 | ||||
| ||||
|
|
|
A STRONG LINK BETWEEN PAY AND PERFORMANCE
2017 PERFORMANCE
2017 was a year of record revenues and operating profits for the Company. The Company exceeded the top end of its guidance range for several critical financial metrics.
During 2017, the Company’s stock price increased by 29.5%. This price appreciation along with annual dividend payouts provided over $2.5 billion in stockholder value.
As a result of this outstanding operating performance the Company’s economic value for the year was $293.0M resulting in a maximum payout under the Management Incentive Plan for 2017. Details of this calculation are provided on page 40.
The revenue growth experienced in 2017 helped drive an annualized growth rate of 8.1% for the two-year period ended December 31, 2017. This growth exceeded the growth in the vehicle market by 5.2% resulting in payout at 160% of target for the 2016-2017 relative revenue growth performance shares.
WHAT CHANGED IN 2017
In order to improve the clarity in the Company’s approach to executive compensation, the Compensation Committee selected a single peer group for purposes of determining relative total stockholder return performance under its performance share program and for establishing market compensation levels. The new peer group includes companies of similar size, industry and global presence and with which the Company competes for talent. The new peer group can be found on page 43. This group was used in establishing market compensation levels for 2018 and will be used in determining relative total stockholder return performance under our performance shares program beginning with 2018 grants.
In 2017, to better align executive compensation to stockholder interest, economic value performance targets under the annual incentive plan were established in line with the financial performance guidance communicated to investors. A target payout under the annual incentive plan would only be achieved if the Company’s sales growth, operating margins and cash flow generation were at the midpoint of the guidance established. A maximum payout would only occur if the Company performed in excess of the top of the range of guidance provided for those same measures. This change was made to provide stockholders additional clarity regarding the process for establishing economic value target performance levels under the annual incentive plan. The actual economic value calculation for 2017 is set forth in the Compensation Discussion & Analysis on page 40.
|
The Compensation Committee made some additional changes to our compensation program in 2017 to better align the Company with market practice. A revised stock ownership policy was approved that establishes ownership targets as a percentage of base salary in line with market practice and adds a holding requirement for executives who have not yet met their ownership target. The new policy is described on page 47.
STOCKHOLDER ENGAGEMENT
In 2016 we engaged with our stockholders and based on their input made a number of changes to our compensation program that were highlighted and resulted in a “FOR” vote on our 2017 say-on-pay proposal. Management and the Board continue to conduct extensive outreach with our stockholders. Outreach meetings were conducted in April 2017 and follow-up meetings were held in October through December 2017. In total, we reached out to stockholders representing 52% of our outstanding shares and held in person meetings or calls with holders of 31% in April and 27% in October (in many instances we met with a stockholder more than once). Two of our directors, including the independent Chair of our Board, participated in many of these meetings, and feedback was shared and discussed with the full Board. Topics discussed with investors included executive compensation, action by written consent, board composition and refreshment, business strategy and sustainability.
Our objective is to maintain executive compensation programs that:
| |
| |
| |
|
|
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
We will also take action upon any other business as may properly come before the 2018 Annual Meeting and any adjournments or postponements of that meeting.
The Board of Directors or proxy holders will use their discretion on other matters that may arise at the 2018 Annual Meeting.
|
|
10 |
|
This proxy statement is furnished in connection with the solicitation of proxies by the Board PROPOSAL 1
Election of Directors of BorgWarner Inc. (“BorgWarner” or the “Company”) for the Company’s 2018 Annual Meeting of Stockholders to be held at its headquarters located at 3850 Hamlin Road, Auburn Hills, Michigan 48326 on Wednesday, April 25, 2018 at 9:00 a.m., local time, or at any adjournment or postponement thereof.
Internet Availability of Proxy Materials
As permitted by rules adopted by the Securities & Exchange Commission (“SEC”), we are providing our proxy statement, the form of proxy and our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 to stockholders electronically via the internet. (Our Annual Report on Form 10-K for our fiscal year ended December 31, 2017, which includes our audited financial statements, is not to be regarded as proxy solicitation material.)Our proxy statement and our 2017 annual report to stockholders are available athttp://www.proxyvote.com.
On or about March 16, 2018, we will initiate delivery of proxy materials to our stockholders of record as of the close of business on March 1, 2018 via (1) a notice containing instructions on how to access materials online, (2) a paper copy mailing or (3) e-mail distribution. If you received a notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the notice we sent provides instructions on how to access and review all of the important information contained in the proxy materials. The notice also provides instructions on how you can submit your proxy over the internet or by telephone. If you received a notice by mail and would like to receive a printed copy of our proxy materials or elect to receive the materials via e-mail in the future, please follow the instructions included in the notice. If you received a printed copy of proxy materials by mail and would like to register to receive a notice of internet availability of proxy materials in the future, you can do so by any of the methods that follow:
|
Only stockholders of record at the close of business on March 1, 2018 are entitled to vote at the meeting. As of such date, there were 210,750,746 outstanding shares of common stock. A list of all record holders of our stock will be available for examination by stockholders during normal business hours at 3850 HamlinRoad, Auburn Hills, Michigan 48326 at least ten days prior to the Annual Meeting and will also be available for examination at the Annual Meeting. On each matter considered at our Annual Meeting, you are entitled to one vote for each of your shares of common stock.
You have a choice of voting over the internet, by telephone or by using a traditional proxy card.
| |
| |
|
The deadline for voting by telephone or internet is 11:59 p.m. Eastern Time on April 24, 2018.
If you properly sign and return your signed proxy card or vote by telephone or by the internet before the Annual Meeting, we will vote your shares as you direct. Any proxy returnedwithout specification as to any matter will be voted as to each proposal in accordance with the recommendation of the Board of Directors.
If you hold your stock in “street name”, you may change or revoke your voting instructions by following the specific directions provided to you by your bank or broker. If you are a stockholder of record, you may change or revoke your vote at any time before the vote is taken by delivering a written notice of revocation to the Secretary of the Company or by submitting another vote on or before April 24, 2018 (including a vote in person at the Annual Meeting). For all methods of voting, your last vote cast will supersede all of your previous votes.
The election inspectors will tabulate the votes cast prior to the meeting and at the meeting to determine whether a quorum is present. The presence in person or by proxy of the holders of a majority of common stock will constitute a quorum. A quorum is necessary to transact business at the Annual Meeting. Shares of common stock represented by proxies that reflect abstentions or “broker non-votes” (i.e., shares held by a broker or nominee that are represented at the Annual Meeting, but with respect to which such broker or nominee is not empowered to vote on a particular proposal) will be counted as present and entitled to vote for purposes of determining the presence of a quorum.
With respect to Proposal 1, our Amended and Restated By-laws (“By-laws”) require that a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election in an uncontested election (that is, the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Each of our director nominees is currently serving on the board. If a nominee who is currently serving as a director is not re-elected, Delaware law provides that the director would continue to serve on the board as a “holdover director.” Under our By-laws and Corporate Governance Guidelines, each director submits an advance, contingent, irrevocable resignation that the board may accept if stockholders do not re-elect the director. In that situation, our Corporate Governance Committee would make a recommendation to the board about whether to accept or reject the resignation, or whether to take other action. The board would act on the Corporate Governance Committee’s recommendation, and publicly disclose its decision and the rationale behind it within 90 days from the date that the election results were certified.
|
If you hold your stock in street name, your brokerage firm or other nominee may not vote your shares with respect to the election of directors without specific instructions from you as to how to vote with respect to the election of each of the nine nominees for director. These are called broker non-votes. Abstentions and broker non-votes represented by submitted proxies will not be taken into account in determining the outcome of the election of directors.
Each of Proposal 2 (the advisory vote on executive compensation), Proposal 3 (stockholder ratification of the selection of our auditors), Proposal 4 (approval of the BorgWarner Inc. 2018 Stock Incentive Plan), and Proposal 7 (the advisory vote on a stockholder proposal) requires the affirmative vote of a majority of the votes cast to be approved. Accordingly, an abstention or a broker non-vote will have no effect on the outcome of any of those proposals.
Proposals 5 and 6 (amendments to the Restated Certificate of Incorporation) require the affirmative vote of a majority of the shares of outstanding voting stock. Accordingly, abstentions, broker non-votes and other shares that are not voted on those proposals in person or by proxy will have the same effect as voting against the proposal.
Proposals 2 and 7 are advisory votes. Even though your vote with respect to Proposal 2 is advisory and therefore will not be binding on the Company, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation. At the Annual Meeting of Stockholders held in 2017, stockholders selected annual frequency for stockholder consideration of executive compensation on an advisory basis. Stockholders must reconsider the desired frequency of such consideration in 2023.
We expect that only Proposal 3 will be considered “routine” under NYSE rules. Therefore, your brokerage firm or other nominee may not vote your shares with respect to Proposals 1, 2, 4, 5, 6 or 7 without specific instructions from you as to how to vote.
We have adopted a procedure called “householding,” which has been approved by the SEC. Under this procedure, a single copy of our annual report to stockholders, our proxy statement or our Notice of Internet Availability of Proxy Materials, as applicable, will be sent to any household at which two or more stockholders reside, unless one of the stockholders at that address notifies us that they wish to receive individual copies. This procedure reduces our printing costs and fees. Stockholders who participate in householding will continue to receive separate proxy cards.Householding will not affect dividend check mailings, if any, in any way.
We will deliver promptly upon written or oral request a separate copy of our annual report to stockholders, our proxy statement or our Notice of Internet Availability of Proxy Materials, as applicable, to any stockholder at a shared address to which a single copy of those documents was delivered. If you share an address with another stockholder and you wish to receive a separate copy of any of those documents, you may inform us of your wish by contacting Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326 (tel: +1-248-754-9200). Similarly, if you share an address with another stockholder that is receiving multiple copies and wish to request that the number of copies of those documents being delivered to that address be reduced to a single copy, you may inform us of your wish by contacting Investor Relations at the above address and telephone number.
|
At this meeting, stockholders will elect nineeight directors to serve a one-year term that will expire at our 20192024 Annual Meeting and until their respective successors have been duly elected and qualified. After 12 yearsThe Board currently consists of service, Richard Schaumnine members. Director David S. Haffner will complete his service on the Boardnot stand for re-election at the April Annual Meeting. The Company thanks himDirector Haffner for his guidance and years of service. TheAfter a search and qualification process in which a search firm assisted, our Board expectswas pleased to appointwelcome Sailaja K. Shankar as a current member of the Board to succeed Mr. Schaumnew director in 2022 and Hau N. Thai-Tang as chair of the Corporate Governance Committee.a new director in 2023.
Our Board takes a thoughtful approach to its composition and refreshment, with a focus on creating a balanced boardBoard that, as a whole, has the expertise, knowledge, and qualifications needed to guide the Company in the execution of its business strategy. The Corporate Governance Committee seeks to establish and maintain a boardBoard that is strong in its collective knowledge and that possesses a diversityrelevant skills and attributes including: notable auto industry experience; experience as Chair/CEO of skills, backgroundmulti-national businesses; backgrounds that contribute to desired diversity; legal/governance experience; international backgrounds; product or clean technology/electronics expertise; non-automotive technology expertise; manufacturing experience; environmental/sustainability experience; cybersecurity/risk management expertise; and experience with respect to vision, strategy and executive leadership, business judgment and knowledge, corporate governance, accounting and finance global markets, clean technology, government experience and automotive industry knowledge.expertise. The Corporate Governance Committee understands the value of cognitive diversity in decision making and has sought and will continue to seek qualified women and members of minority groups as boardBoard candidates. Under this framework and in line with our director nominee requirements, the Board is actively seeking a candidate to replace Mr. Schaum’s experience and technological expertise.
The current slate of director nominees blends fresh perspectives of newer directors with the continuity and institutional knowledge of longer tenuredlonger-tenured directors for an average tenure of less than eightapproximately 6.3 years.
See page 2416 for information on our process for director nominations and candidate requirements.
Recommendation |
FollowingOur Board recommends a vote “FOR” the election of directors at this Annual Meeting, your Board will have nine members and no vacancies. Eacheach of the nominees for election has agreed to serve if elected. All of the nominees are presently directors of the Company. In the event that any nominee should become unavailabledirector: Sara A. Greenstein; Michael S. Hanley; Frédéric B. Lissalde; Shaun E. McAlmont; Deborah D. McWhinney; Alexis P. Michas; Sailaja K. Shankar; and Hau N. Thai-Tang.
Information on Nominees for election, the Board may designate a substitute nominee, in which event the shares represented by proxies at the meeting will be voted for such substitute nominee unless an instruction to the contrary is indicated on the proxy card.Directors
| |
| |
The following pages set forth as of March 1, 2018,2023, with respect to each of the Company’s current directors continuing to serve,director nominees, his or her name, the year in which he or she first became a director of the Company, age, principal occupation, and his or her current directorships in other entities; a narrative description of the directors’ experience, qualifications, attributes, and skills; all directorships at public companies and registered investment companies held since March 1, 2013;2018; and a description of any relevant legal proceedings in which the director was involved since March 1, 2008.2013.
Each of the nominees for election has agreed to serve, if elected. All of the nominees are currently directors of the Company. If any nominee should become unavailable for election, our Board may designate a substitute nominee, in which event the shares represented by proxies at the meeting will be voted for such substitute nominee unless an instruction to the contrary is indicated on the proxy card.
2023 Proxy Statement | 11
Election of Directors
Directors and Nominees
Director Since Other Current BorgWarner |
|
DIRECTORS AND NOMINEES
| ||||
Principal Occupation and Ms. Greenstein has served as the President and Chief Executive Officer of Ms. Greenstein holds a
Key Attributes, Skills, and | ||||
Director Since Other Current BorgWarner |
| ||||
Retired Global Automotive Leader, Ernst & Young LLP Principal Occupation and Directorships
| ||||
|
| ||||
Mr. Mr. Hanley brings to the Board his extensive knowledge of accounting and his financial expertise in the automotive industry Key Attributes, Skills, and Experience |
Skills and Experience
Notable Auto Industry Experience | Experience as Chair/CEO of | Background Contributes to Desired Diversity | Legal/Governance Experience | |||||||
Non-U.S. Origin | Product or Clean Technology/ Electronics Expertise | Non-Automotive Technology Expertise | Manufacturing Experience | |||||||
Meets SEC Definition of “Audit Committee Financial Expert” | Environmental/Sustainability Experience | Cybersecurity/Risk Management Expertise |
12 |
Election of Directors
Director Since Other Current BorgWarner |
| |||
President and Chief Executive Officer, BorgWarner Inc. Principal Occupation and Directorships Mr. Mr. Lissalde holds a Masters of Engineering from ENSAM - Ecole Nationale Supérieure des Arts et Métiers - Paris, and an MBA from HEC Paris. He is also a graduate of executive courses at INSEAD - Institut Européen d’Administration des Affaires, Harvard, and MIT. Mr. Lissalde has served on the board of directors of Autoliv, Inc. (NYSE: ALV) since December 2020. Previously, he served on the board of directors of CLEPA (European Automotive Suppliers’ Association), based in Brussels, Belgium. Mr. Lissalde brings to the Board his experience and expertise in setting and executing strategic direction; driving business performance, growth, and culture; and integrating purchased companies around the world. In addition, he brings an intimate knowledge of the Company’s operations, its business, and industry. Key Attributes, Skills, and Experience | ||||
Director Since Other Current BorgWarner | Shaun E. McAlmont, 57 President and Chief Executive Officer, Ninjio, LLC Principal Occupation and Directorships Dr. McAlmont has served as President and Chief Executive Officer of Ninjio, LLC (“Ninjio”), a cybersecurity training company which provides enterprise level awareness training, since January 2022. Prior to Ninjio, he served as the President of Dr. McAlmont holds a
Dr. McAlmont brings to the Board his executive leadership experience, including proficiency as a Key Attributes, Skills, and Experience |
Skills and Experience
Notable Auto Industry Experience | Experience as Chair/CEO of Multi-National Business | Background Contributes to Desired Diversity | Legal/Governance Experience | |||||||
Non-U.S. Origin | Product or Clean Technology/ Electronics Expertise | Non-Automotive Technology Expertise | Manufacturing Experience | |||||||
Meets SEC Definition of “Audit Committee Financial Expert” | Environmental/Sustainability Experience | Cybersecurity/Risk Management Expertise |
2023 Proxy Statement | 13
Election of Directors
Director Since Other Current BorgWarner |
|
| ||||
Principal Occupation and Directorships Ms. McWhinney retired from Citigroup Inc. (NYSE: C), one of the Ms. McWhinney holds a Bachelor of Arts in Communications from Ms. McWhinney brings to the Board her executive leadership skills in developing and implementing global technology services for some of the world’s largest corporations and governments, including her financial expertise, knowledge of cybersecurity matters, and broad understanding of corporate governance matters. Key Attributes, Skills, and Experience | ||||
Director Since Other Current BorgWarner | Alexis P. Michas, 65 Non-Executive Chair of the Board,
| |||
| ||||
Principal Occupation and Directorships Mr. Michas is the founder and has been Managing Partner of Juniper Investment Company, LLC, Mr. Michas Mr. Michas brings to Key Attributes, Skills, and Experience |
Skills and Experience
Notable Auto Industry Experience | Experience as Chair/CEO of Multi-National Business | Background Contributes to Desired Diversity | Legal/Governance Experience | |||||||
Non-U.S. Origin | Product or Clean Technology/ Electronics Expertise | Non-Automotive Technology Expertise | Manufacturing Experience | |||||||
Meets SEC Definition of “Audit Committee Financial Expert” | Environmental/Sustainability Experience | Cybersecurity/Risk Management Expertise |
|
14 |
Election of Directors
Director Since Other Current BorgWarner | Sailaja K. Shankar, 56 Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. Principal Occupation and Directorships Ms. Shankar has served as the Senior Vice President, Engineering of the Security Business Group (SBG) of Cisco Systems, Inc. (NASDAQ: CSCO), a leading global manufacturer of networking hardware, software, telecommunications equipment, and other high-technology services and products, since January 2023, where she is responsible for engineering – including strategy execution and architecture. From September 2021 to January 2023, Ms. Shankar was the Senior Vice President and General Manager of SBG. From June 2021 to September 2021, Ms. Shankar was the Senior Vice President and General Manager of the Cloud and Network Security business unit within SBG. Prior to joining Cisco, Ms. Shankar served as Senior Vice President of Engineering, Enterprise of McAfee Corp. (NASDAQ: MCFE), a computer security software company, where she was responsible for its security and threat defense solutions across endpoint, extended detection and response, data center security, and cloud native application processes, from February 2019 to June 2021 and General Manager of Mobile and ISP Solutions Business Unit from February 2016 to February 2019. Ms. Shankar holds a Bachelor of Science in Chemistry from Maris Stella College, and a Bachelor and Master of Arts from Andhra University in Mass Communications/Journalism and English Literature, respectively. In 2022, Ms. Shankar received accolades for her executive leadership within the IT industry and beyond and was named among 10 Women Making a Difference in Cybersecurity by CRN, a top technology news and information source for solution providers, IT channel partners, and value-added resellers. Ms. Shankar brings to the Board her deep experience innovating technological solutions, driving strategic change in global enterprises, and portfolio building experience, including cybersecurity expertise. Ms. Shankar also prides herself on being a champion of diversity, mentoring the next generation of technical women, and is a global advisor with “How Women Lead.” Key Attributes, Skills, and Experience | |
Director Since Other Current BorgWarner |
Former Chief Industrial Platform Officer, Ford Motor Company Principal Occupation and Directorships Mr. Thai-Tang retired from Ford Motor Company (NYSE: F), a global automotive manufacturer, in 2022 as Chief Industrial Platform Officer. In this position, Mr. Thai-Tang led global research and advanced engineering, product development, design, manufacturing engineering, purchasing, and supply chain teams to deliver an industry leading product portfolio of digitally connected ICE and BEV vehicles. Mr. Thai-Tang joined Ford in 1988 and held positions of increasingly significant responsibility. Previous positions included Chief Product Platform and Operations Officer from October 2020 to October 2021; Chief Product Development and Purchasing Officer from July 2017 to October 2020; and Group Vice President of Global Purchasing from August 2013 to July 2017. Mr. Thai-Tang holds a Bachelor of Science in Mechanical Engineering from Carnegie Mellon University and a Master of Business Administration from the University of Michigan Stephen M. Ross School of Business. Mr. Thai-Tang brings to the Board extensive automotive industry experience, including his 34-year career at Ford and excellent forward-looking perspective on the industry, particularly the transformation around electrification. In addition to his engineering, product planning, portfolio, cybersecurity, and technology expertise. Mr. Thai-Tang has a strong operational background, including supply chain and procurement. Mr. Thai-Tang led Ford’s product development and purchasing organizations during its launches of the Mustang-E, F-150 Lightning, Bronco, Maverick, and Puma. Key Attributes, Skills, and Experience |
Skills and Experience
| Experience as Chair/CEO of Multi-National Business | Background Contributes to Desired Diversity | Legal/Governance Experience | |||||||
Non-U.S. Origin | Product or Clean Technology/ Electronics Expertise | Non-Automotive Technology Expertise | Manufacturing Experience | |||||||
Meets SEC Definition of “Audit Committee Financial Expert” | Environmental/Sustainability Experience | Cybersecurity/Risk Management Expertise |
2023 Proxy Statement | 15
Election of Directors
Director Nominee Requirements
The Corporate Governance Committee seeks to establish and maintain a board that is strong in its collective knowledge and that possesses a diversity of skills, background, and experience in areas identified as relevant to guide the Company in the execution of its business strategy, recognizing that these areas may change over time. In considering whether to recommend to the full Board any candidate for inclusion in our Board’s slate of recommended director nominees, the Corporate Governance Committee will consider, among other things, the extent to which candidates possess the following factors:
● | the highest personal and professional ethics, integrity, and values | |||
● |
| |||
● | ability to evaluate strategic options and risks, form independent opinions, and state those opinions in a constructive manner |
● | active, objective, and constructive participation at meetings of our Board and its committees |
● | flexibility in approaching problems |
● | open-mindedness on policy issues and areas of activity affecting overall interests of the Company and its stockholders |
● | stature to represent the Company before the public, stockholders, and various others who affect the Company |
● | involvement only in activities and interests that do not create a conflict with the director’s responsibilities to the Company and its stockholders |
● | willingness to objectively appraise management performance in the interest of the stockholders |
● | interest and availability of time to be involved with the Company and its employees over a sustained period |
● | ability to work well with others, with deep and wide perspective in dealing with people and situations, and respect for the views of others |
● | a reasoned and balanced commitment to the social responsibilities of the Company |
● | contribution to our Board’s desired diversity and balance |
● | willingness of independent directors to limit public company board service to four or fewer boards (any exceptions would require Corporate Governance Committee approval) |
● | willingness to tender, promptly following the annual meeting at which they are elected or re-elected as director, an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which they face re-election, and (ii) our Board’s acceptance of such resignation |
● | willingness to provide all information, including completion of a questionnaire, required by the Company’s Amended and Restated By-laws (“By-laws”) |
Nomination Process and Evaluation
The Corporate Governance Committee accepts candidate recommendations and referrals from a variety of sources, including stockholders, directors, management, search firms, and other sources. An overview of the process undertaken by the Corporate Governance Committee when evaluating candidates includes:
● | use of a skills matrix to identify specific attributes desired to be represented on our Board |
● | an assessment of the candidates’ freedom from conflicts of interest and independence |
● | consideration of the narrowed pool of candidates’ qualifications, expertise, and cognitive diversity |
● | qualified candidates are discussed and interviewed by the Corporate Governance Committee, Non-Executive Chair, and CEO |
● | the Corporate Governance Committee recommends nominees to the full Board |
● | the full Board selects nominees |
● | stockholders vote on nominees at annual stockholders’ meetings |
● | the Corporate Governance Committee evaluates the full Board, its committees, and individual directors annually |
16 | ||||
| ||||
| ||||
|
| ||||
| ||||
|
TableElection of ContentsDirectors
INDEPENDENCE OF THE DIRECTORS
The boardBoard Refreshment
We routinely assess the Board’s composition to ensure we have the right mix of attributes, experiences, perspectives, qualifications, and skills to maximize our Board’s potential. We believe the Company, our employees, our stockholders, and our other stakeholders benefit from continuity of longer-tenured directors complemented by the fresh perspectives of newer directors. Over the last five years, our Board has undergone significant refreshment, resulting in a low average tenure and broad diversity of backgrounds.
2018 | 2020 | 2021 | 2022 | 2023 | ||||||
Director additions | + Frédéric B. Lissalde | + Nelda J. Connors + David S. Haffner + Shaun E. McAlmont | + Sara A. Greenstein | + Sailaja K. Shankar | + Hau N. Thai-Tang |
Corporate Governance Principles and Board Matters
Independence of the Directors
Our Board has determined that all boardBoard members meet the independence requirements of the New York Stock Exchange (“NYSE”), with the exception ofexcept for Mr. Verrier,Lissalde, our President and CEO. Under the Company’s Corporate Governance Guidelines (available at www.borgwarner.com/investors/corporate-governance), a director will not be considered independent unless the boardour Board determines that such director has no direct or indirect material relationship with the Company. In addition, the Company’s Corporate Governance Guidelines provide, among other things, that:
a director who is an employee, or whose immediate family member is an executive officer, of the Company is not “independent” until three years after the end of such employment relationship | |
● | a director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not “independent” until three years after he or she |
● | a director who is affiliated with or employed by, or whose immediate family member is a current partner of, the internal or external auditor of the Company,is a current employee of such a firm and personally works on the Company’s audit or was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit at that time, is not “independent” until three years after the end of the affiliation or the employment or auditing relationship |
● | a director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Company’s present executives serve on that company’s compensation committee, is not “independent” until three years after the end of such service or the employment relationship |
● | a director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, the Company for property or services in an amount that, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold |
● | a director who is not considered independent by relevant statute or regulation is not “independent” |
BOARD LEADERSHIP STRUCTURENo director nominee, director, or executive officer is related to any other director nominee, director, or executive officer (or to any director or executive officer of any of the Company’s subsidiaries) by blood, marriage, or adoption. There are no arrangements or understandings between any nominee or any of our directors or executive officers or any other person pursuant to which that nominee or director or executive officer was nominated or elected as a director of the Company or any of its subsidiaries. No director or executive officer of the Company is party to, or has any material interests in, any material legal proceedings that are adverse to the Company or its subsidiaries.
2023 Proxy Statement | 17
Election of Directors
Board Leadership Structure
Our Board of Directors currently separates the roleroles of ChairmanChair and CEO.Chief Executive Officer. Mr. Michas, an independent director, is Non-Executive ChairmanChair and Mr. VerrierLissalde is President and CEO. The boardOur Board believes that separating the ChairmanChair and CEO positions provides the most appropriate leadership structure for the Company at this time. SeparatingSeparation of the ChairmanChair and CEO positions takes best synergetic advantage of the talents of two leaders and allows Mr. VerrierLissalde to devote his full attention to focusing on his responsibilities as CEO without the additional responsibilities of Chairman.Chair. Either the independent directors select a non-employee director to serve as Non-Executive Chair or the independent directors select a Lead Director from among them. The Non-Executive ChairmanChair, or, when applicable, the Lead Director, focuses on:
effectiveness and independence of | |
● | serving as the principal liaison between the Company’s management and the independent directors |
● | contributing to agenda planning and chairing the executive session of non-employee directors at each regularly scheduled |
● | facilitating discussion among the independent directors on key issues and concerns outside of Board meetings |
● | consulting with the CEO and independent directors regarding Board agenda items |
● | approving the scheduling of Board meetings and approving the agenda and materials for each Board meeting and executive session of our Board’s non-employee, independent directors |
● | presiding over all meetings of our Board |
● | communicating with stockholders when appropriate |
● | overseeing the CEO, full Board, and individual director evaluation processes with the Corporate Governance Committee |
● | other responsibilities that the independent directors as a whole might designate from time to time |
Director Michas, previously Lead Director, became Non-Executive ChairmanChair in April 2013 upon the retirement of the previous Executive Chairman.Chair.
TheOur Board of Directors recognizes that no single leadership model is right for all companies at all times. The boardOur Board has reserved for itself the discretion to determine the most appropriate leadership structure for the Company, and theour Board of Directors reviews the leadership structure from time to time.
| |
Election of Directors
Below please find our director nominees’ principal areas of expertise and attributes.
Board Nominee Skills and Attributes | ||||||||||||||||||
HANLEY | LISSALDE | MCALMONT | MCWHINNEY | MICHAS | SHANKAR | THAI-TANG | ||||||||||||
Notable Auto Industry Experience Has either long (measured in years) or high-level experience in the original equipment vehicle manufacture or vehicle systems or component supply business | ● | ● | ● | ● | ||||||||||||||
Experience as Chair/CEO of Multi-National Business Serves as or has served as Chairperson or Chief Executive Officer of a corporation that does or did business on more than one continent | ● | ● | ● | ● | ● | |||||||||||||
Background Contributes to Desired Diversity Cultural, ethnic, or geographic background increases the diversity of such backgrounds represented on the Board | ● | ● | ● | ● | ● | |||||||||||||
Legal/Governance Experience Current or former member of corporate governance committee of a public company or advised a public company on corporate governance matters | ● | ● | ● | |||||||||||||||
Non-U.S. Origin Was born outside of the United States | ● | ● | ● | ● | ||||||||||||||
Product or Clean Technology/Electronics Expertise Holds one or more degrees in engineering or has acquired specialized technical knowledge in industry-relevant product design and development, electronic controls, or ground propulsion technology | ● | ● | ||||||||||||||||
Non-Automotive Technology Expertise Has served as a leader in technology, strategy, or innovation in a mid-cap or larger multi-national company or currently does so. Experience in disruptive technology is also desired | ● | ● | ● | ● | ||||||||||||||
Manufacturing Experience Participated in or directly oversaw manufacturing operations during a significant portion of their career or currently does so | ● | ● | ● | |||||||||||||||
Meets SEC Definition of “Audit Committee Financial Expert” As determined by our Board, qualifies as an “Audit Committee Financial Expert” as defined in U.S. Securities and Exchange Commission (“SEC”) rules | ● | ● | ● | ● | ● | ● | ||||||||||||
Environmental/Sustainability Experience Has either long (measured in years) or high-level experience in assessing environmental compliance and overseeing responsible long-term value creation | ● | ● | ● | ● | ● | ● | ||||||||||||
Cybersecurity/Risk Management Expertise Has either long (measured in years) or high-level experience in providing effective oversight of risk management (including cybersecurity) procedures | ● | ● | ● | ● | ● | ● | ||||||||||||
BOARD COMMITTEES2023 Proxy Statement | 19
The BoardElection of Directors
Board Committees
Our Board held sixfour meetings during 2017.2022. Each of the directors attended at least 75% of the meetings of theour Board of Directors and each committee on which he or she served while members of them. The Company’sOur Corporate Governance Guidelines set forth the Company’sstate our policy that directors shouldare expected to use their best efforts to personally attend the Company’s Annual Meeting of Stockholders. If a director cannot attend meetings in person due to travel issues, schedule conflicts, or similar reasons, the director may attend by phone or via a virtual meeting platform. All directors serving at the time of the 20172022 Annual Meeting of Stockholders attended the meeting. Mr. Carlson attended via telephone.
TheOur Board of Directors has a standing CompensationAudit Committee, AuditCompensation Committee, Corporate Governance Committee, and Executive Committee. The charters for each of our principal board committeescommittee can be found on the Company’s website atwww.borgwarner.com. www.borgwarner. com/investors/corporate-governance. The responsibilities of our boardBoard committees are set forth in their charters, which are reviewed at least annually. The chart below details the Committees upon which our directors serve.
Age | Director Since | Independent | Audit | Compensation | Corporate Governance | Executive | ||
Sara A. Greenstein | 48 | 2021 | X | ● | ● | |||
David S. Haffner* | 70 | 2020 | X | |||||
Michael S. Hanley | 67 | 2016 | X | ● | ● | |||
Frédéric B. Lissalde | 55 | 2018 | ● | |||||
Shaun E. McAlmont | 57 | 2020 | X | ● | ● | |||
Deborah D. McWhinney | 67 | 2018 | X | ● | ● | |||
Alexis P. Michas | 65 | 1993 | X | ● | ● | |||
Sailaja K. Shankar | 56 | 2022 | X | ● | ● | |||
Hau N. Thai-Tang | 56 | 2023 | X | ● |
* |
|
|
| ||||
| | ||||
|
|
Election of Directors
The following profiles reflect the composition of each Board committee as of March 17, 2023.
Audit Committee
CHAIR: | MEMBERS*: | NUMBER OF MEETINGS IN 2022: | ||||||
5 * Director Greenstein served on the Audit Committee from February 9, 2022 until February 8, 2023 | ||||||||
Hanley | McWhinney | Shankar | Thai-Tang | |||||
AUDIT COMMITTEE PURPOSE:
The Audit Committee Charter provides that the Audit Committee will, among other things, assist the full Board in fulfilling our Board’s oversight responsibility relating to:
| overseeing the appointment, compensation, retention, and oversight of the independent |
● | monitoring the
|
● | providing pre-approval of |
| |
● | monitoring of the |
● | overseeing the quality and integrity of the accounting, auditing, financial reporting and risk management practices of the Company, including as it relates to cybersecurity and assessing the Company’s compliance with ESG-related disclosure requirements |
In October 2022, the Audit Committee reviewed the Audit Committee Charter and recommended to our Board that it was not necessary to make changes to it. Stockholders can find the current charter on the Company’s website at www.borgwarner.com/investors/corporate-governance.
Each member of the Audit Committee meets the independence requirements set by the NYSE, Section 10A(m) (3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the SEC. The Audit Committee has four members who are qualified as an audit committee financial expert as defined by the rules and regulations of the SEC: Mr. Hanley (who serves as Chair), Ms. McWhinney, Ms. Shankar, and Mr. Thai-Tang. None of the Audit Committee members simultaneously serve on the audit committees of more than two other public companies.
2023 Proxy Statement | 21
Election of Directors
Compensation Committee
CHAIR: | MEMBERS: | NUMBER OF MEETINGS IN 2022: | ||||||
7 | ||||||||
McWhinney | Greenstein | McAlmont | Shankar | |||||
COMPENSATION COMMITTEE PURPOSE:
The Compensation Committee Charter provides that the Compensation Committee will, among other things, assist our Board in fulfilling its oversight responsibility relating to:
● | reviewing and approving the Company’s stated executive compensation philosophy and strategy to ensure that members of management are rewarded appropriately for their contributions to corporate growth and value creation and that the executive compensation strategy supports corporate objectives and stockholder interests |
● | reviewing and approving |
● | ensuring that the compensation of |
● | overseeing human capital management, including DE&I, and assesses whether ESG goals and milestones, if appropriate, are effectively reflected in executive compensation |
The Compensation Committee may form and delegate authority to subcommittees as it deems appropriate.
In April 20172022, the Compensation Committee reviewed the Compensation Committee Charter and recommended to theour Board that it was not necessary to make changes to it. Stockholders can find itthe current charter on ourthe Company’s website located athttps://www.borgwarner.com/en/investors/corporate-governance.corporate-governance.
|
|
In October 2017 the Audit Committee reviewed the Audit Committee Charter and recommended to the Board that it was not necessary to make changes to it. Stockholders can find it on our website athttps://www.borgwarner.com/en/investors/corporate-governance.
Election of Directors
Corporate Governance Committee
CHAIR: | MEMBERS*: |
Each member of the Audit Committee meets the independence requirements set by the NYSE, Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC. The Audit Committee has three members who are qualified as audit committee financial experts as defined by the rules and regulations of the SEC. They are Messrs. Hanley (who serves as Chair), Krone and Stallkamp. None of the members of the Audit Committee simultaneously serve on the audit committees of more than two other public companies.
|
* Director Haffner, who is not standing for re-election to the Board at the Annual Meeting, served on the Corporate Governance Committee | ||||
Michas | Greenstein | McAlmont | |||
CORPORATE GOVERNANCE COMMITTEE PURPOSE:
The Corporate Governance Committee Charter provides that the Corporate Governance Committee will assist our Board in fulfilling its oversight responsibility by:
● | recommending Board |
● | developing and recommending appropriate corporate governance principles, including the nature, duties, and powers of |
● | recommending the term of office for directors and committee members |
● | reviewing and recommending qualified persons to be nominated for election or re-election as directors, including stockholders’ suggestions for |
● | recommending the emergency successor to the CEO |
● | considering any requests for waivers of application of the Company’s Code of Ethical Conduct |
● | analyzing and approving any related person transactions |
● | overseeing the Company’s sustainability strategy, policies, and procedures,
|
● | receiving, reviewing, and
|
● | ensuring that there is ESG expertise on the Board and awareness of |
opportunities |
In July 2017 the Corporate Governance Committee reviewed the Corporate Governance Committee Charter and recommended to the Board that the Committee’s charter should formally reflect the Committee’s responsibility to review and make recommendations concerning the Company’s sustainability strategy, policies and procedures and to encourage long-term sustainable performance. The charter was revised accordingly. Stockholders can find it on our website located athttps://www.borgwarner.com/en/investors/corporate-governance.
|
DIRECTOR NOMINEE REQUIREMENTS
The Corporate Governance Committee seeks to establishalso establishes criteria for Board and maintain a board that is strong in its collective knowledge and that possesses a diversity of skills, background and experience in areas identified as relevant to guide thecommittee membership, evaluates Company in execution of its business strategy, recognizing that these areas may change over time. In considering whether to recommendpolicies relating to the full board any candidate for inclusionrecruitment of directors, and oversees the evaluation of our Board, its committees, and management. The Corporate Governance Committee, subject to Board approval, also determines directors’ fees and reimbursable expenses and makes appropriate recommendations to the Board in the board’s slatelight of recommended director nominees, thecorporate governance developments.
The Corporate Governance Committee will consider among other things, the extent to which candidates possess the following factors:
NOMINATION PROCESS AND EVALUATION
The Committee accepts candidate recommendations and referralsnominees for our Board from a variety of sources, including stockholders,current directors, management, retained third-party search firms, and other sources. An overview of the process undertaken by the Committee when evaluating candidates includes:
PROCESS FOR NOMINATION BY STOCKHOLDERSstockholders.
Stockholders who wish to recommend candidates must do so in accordance with the procedures required in our By-laws.Stockholders submitting such nominations must provide the information and background material to the “BorgWarner Inc. Corporate Governance Committee” c/o BorgWarner Inc. Corporate Secretary, 3850 Hamlin Road, Auburn Hills, Michigan 48326 not less than 90 nor more than 120 days prior to the first anniversary of the preceding year’s Annual Meeting. Accordingly, any stockholder who wishes to have a nomination considered at the 2019 Annual Meeting must deliver the required materials between December 26, 2018 and January 25, 2019.
The Company’s By-laws require, among other things, that the nominating stockholder disclose all material monetary agreements between the nominating stockholder and the nominees; that director nominees (including the board’s nominees) complete a questionnaire regarding the nominee’s background, qualifications and conflicts of interest; and that stockholders proposing business disclose economic interests, including interest in the Company as a result of derivative instruments.
|
PROXY ACCESS
In addition, we have a proxy access right that permits a stockholder, or a group of up to 25 stockholders, owning continuously for at least three years shares of our company representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees constituting up to 20% of our board, provided that the stockholder(s) and the nominee(s) satisfy the requirements of our By-laws. Notice of proxy access director nominees must be received by our Corporate Secretary at the address above no earlier than October 17, 2018 and no later than the close of business on November 15, 2018.
Stockholder-recommended candidates and stockholder nominees whose nominations comply with the required procedures and who meet the criteria referred to aboveherein will be evaluated by the Corporate Governance Committee in the same manner as the Corporate Governance Committee’s nominees.candidates.
In July 2022, the Corporate Governance Committee reviewed the Corporate Governance Committee Charter and recommended to our Board that it was not necessary to make changes to it. Stockholders can find the current charter on the Company’s website at www.borgwarner.com/investors/corporate-governance.
Executive Committee
CHAIR: | MEMBERS: | THE EXECUTIVE COMMITTEE DID NOT MEET DURING 2022 | |||
Michas | Hanley | Lissalde | |||
The Executive Committee is empowered to act for the full Board during intervals between Board meetings when telephonic or virtual meetings cannot reasonably be arranged, with the exception of certain matters that by law may not be delegated.
2023 Proxy Statement | 23
Election of Directors
Risk Oversight
Oversight of risk is an evolving process in which management, through the Company’s internal enterprise risk management committee (the “ERM Committee”), assesses the degree to which risk management is integrated into business processes throughout the organization. While our Board has ultimate responsibility for oversight of the Company’s risk management practices, the Audit, Compensation, and Corporate Governance Committees of our Board contribute to the risk management oversight function.
Board of Regularly and continually receives information, including risk assessment and management reports from the internal ERM Committee, intended to | ||||
Audit
● | Focuses on financial and compliance risk, including internal controls and cybersecurity risk management practices, and receives risk assessment and management reports from the Company’s information technology and internal audit functions. | |||
● | Receives, reviews, and discusses regular reports concerning risk identification and assessment, risk management policies and practices, and mitigation initiatives, to assure that the risk management processes designed and implemented by the Company are adapted to the Company’s strategy and are functioning as expected. |
Compensation
● | |||
Corporate Governance
● | Oversees risk management practices in its domain, including director candidate selection, governance, sustainability, and succession matters. |
Management
● | Assesses the degree to which risk management is integrated into business processes and continually seeks opportunities to further engrain enterprise risk management into business processes throughout the organization. |
The members of the ERM Committee are the Company’s Vice President, Controller; Vice President, Treasurer; Vice President, Internal Audit; Vice President, Chief Compliance Officer; Vice President, Chief Information Officer; Director, External Reporting; and Director, Risk Management. Given their roles with the Company, the members are well positioned to provide the ERM Committee with the information necessary to properly identify, manage, and monitor material risks associated with our business processes.
Our Board actively encourages management to continue to drive this evolution. In 2022, our Board endorsed the Company’s continued enhancement of its enterprise risk management governance infrastructure, processes, integration, communications, and sustainability policies and practices. The members of the ERM Committee have direct access to the Audit, Compensation, and Corporate Governance Committees and our Board.
24 | | |
EXECUTIVE SESSIONSTable of Contents
Election of Directors
Executive Sessions
The non-employee directors meet in executive sessions without the presence of any corporate officer or member of management in conjunction with regular meetings of the board.our Board. Non-Executive ChairmanChair Michas is the current presiding director. In addition, allExcept for our Executive Committee, the committees of the Committees of theour Board also meet in executive sessionsessions without the presence of any corporate officer or members of management in conjunction with regular meetings of the Committee.committees. Interested parties can make concerns known directly to the non-management directors on-line at compliancehotline.borgwarner.com or by toll-free call to 1-800-461-9330.
CERTAIN TRANSACTIONSStockholder Communication with the Board
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEStockholders interested in communicating with the Non-Executive Chair or with non-management directors may do so by writing to such director, in care of our Secretary, 3850 Hamlin Road, Auburn Hills, Michigan, 48326. The Investors section on our website located at www.borgwarner.com/investors/corporate-governance lists the current members of our Board. We open and forward mail to the director or directors specified in the communication.
Certain Relationships and Related Person Transactions
The Company has adopted a written policy concerning Related Party Transactionsrelated person transactions under which the Corporate Governance Committee is responsible for review and disapproval or approval or ratification of any Related Party Transactionsrelated party transactions in which a director, nominee for director or Executive Officerexecutive officer, or Immediate Family Memberimmediate family member of any of them has a material interest.
2023 Proxy Statement | 25 |
Proposal 2
RISK OVERSIGHT
Our Board of Directors regularly and continually receives information intended to apprise the Board of the strategic, operational, commercial, financial, legal, and compliance risks the Company faces. Oversight of risk is
Approve, on an evolving process in which management assesses the degree to which risk management is integrated and continually seeks opportunities to further engrain enterprise risk management into business processes throughout the organization. The Board actively encourages management to continue to drive this evolution. In 2017, the Board endorsed the Company’s continued enhancement of its enterprise risk management governance infrastructure, processes, integration, communications and sustainability.
While the Board has responsibility for oversight of the Company’s risk management practices, the Audit, Compensation and Corporate Governance Committees of the Board contribute to the risk management oversight function. In particular, the Audit Committee focuses on financial and compliance risk, including internal controls and receives risk assessment and management reports from the Company’s internal Enterprise Risk Management Committee and from the Company’s internal audit function. The members of the Enterprise Risk Management Committee (the Company’s Controller, Treasurer, Vice President of Internal Audit, Vice President of Strategic Risk Management, Director of Strategic Risk Management, Vice President and Chief Compliance Officer, Vice President and Chief Information Officer and business operations leaders) have direct access to the Audit, Compensation and Corporate Governance Committees and the Board. The Audit Committee receives, reviews and discusses regular reports from them concerning risk identification and assessment, risk management policies and practices and mitigation initiatives, to assure that the risk management processes designed and implemented by the Company are adapted to the Company’s strategy and are functioning as expected. In addition, as part of its compensation philosophy,Advisory Basis, the Compensation Committee strives to adopt compensation incentives that encourage appropriate risk-taking behavior that is consistent with the Company’s long term business strategy and objectives. The Corporate Governance Committee oversees risk management practices in its domain, including director candidate selection, governance and succession matters.
Table of ContentsOur Named Executive Officers
|
Our stockholders may approve, onBorgWarner seeks a non-binding advisory basis,vote from its stockholders to approve the compensation of our named executive officersits NEOs as described and disclosed in the Compensation Discussion and Analysis section beginning on page 29 and the Executive Compensation Tables section beginning on page 52 in accordance with the executive compensation disclosure rules contained in Item 402 of the SEC’s Regulation S-K. Accordingly, we are seeking input from stockholdersConsistent with this advisory vote on the compensationrequirements of our named executive officers. TheSection 14A of the Exchange Act, the vote on this proposal is not intended to address any specific element of compensation;compensation but, rather, the overall compensation of our NEOs and the philosophy, policies, and practices described in this proxy statement.Proxy Statement.
While this vote is advisory, and not binding on our Company, it provides valuable information to our Compensation Committee. TheOur Board of Directors and the Compensation Committee value the opinions of our stockholders.
In 2017 theThe Compensation Committee redesigned thebelieves that their 2022 compensation decisions and our executive compensation program align the interests of stockholders and executives by emphasizing variable, at-risk compensation largely tied to address key concerns raised by stockholders during our extensive outreachmeasurable performance goals utilizing an appropriate balance of short-term and to better align with the Company’s evolving strategy (those changes are described throughout this proxy statement and in detail in our 2017 Proxy statement). The redesigned program has worked – effectively motivating our employees to deliver organic growth and take actions that resulted in an improvement in our stockholder returns in its first year of operation.
The success of 2017 follows a period when the Board and management were redefining Company strategy to become a propulsion leader focused on growth. Those years experienced an underperforming stock price as certain quarters did not meet market expectations due to softening in customer demand and strengthening of the dollar. It took time for the stock price to respond to the new strategy.
Our results over these last three years demonstrate the strong pay-for-performance alignment of our program,long-term objectives, while 2017 performance improvements show the effectiveness of the changes implemented:
We understand that many of our investors assess pay-for-performance alignment over a three-year period. While we are pleased with our 2017 results, it’s important to consider that a three-year lookback for BorgWarner will be impacted by our underperformance in 2015 and 2016. We believe that the changes made to our compensation program, which were implemented to address the underperformance in 2015 and 2016 and in response to stockholder feedback, will appropriately incent our employees to deliver growth and stockholder return as we move forward in 2018.
|
Pay for Performance
The Company’s operating performance in 2017 was outstanding. It was a year of record revenues and operating profits for the Company. The Company exceeded the top end of its guidance range provided to the investment community for several critical financial metrics.
During 2017, the Company’s stock price increased by 29.5%. This price appreciation along with annual dividend payouts provided over $2.5 billion in stockholder value.
In 2017, with input from our stockholders, Company annual incentive goals were determined in line with the Company guidance provided to the investment community. Target annual incentive compensation was set at the middle of the Company guidance. Maximum annual incentive compensation is ONLY achieved if the Company outperforms the guidance provided to our stockholders.
|
HIGHLIGHTS OF THE 2018 EXECUTIVE COMPENSATION PROGRAM
same time avoiding unnecessary or excessive risk taking. We maintain the highest level of oversight of our executive pay programs.compensation program. Our Board, of Directors, our Chairman,Non-Executive Chair, CEO, and our Executive Vice President and Chief Human Resources Officer engage in a rigorous talent review process annually to address succession and executive development for our CEO and other key executives. We closely monitor the compensation programsprogram and pay levels of executives from other companies that we believe to be similar to the CompanyBorgWarner in business characteristics and economics.
Recommendation |
Our Board recommends a vote “FOR” the approval, by advisory vote, of the compensation of our NEOs.
26 |
Approve, on an Advisory Basis, the Compensation of Our Named Executive Officers
Highlights of the 2022 Executive Compensation Program
Salary | ||||
• Base pay is the initial salary paid, excluding benefits, bonuses, and pay increases | • Reviewed annually, adjusted as appropriate to align with median-market levels (50th percentile of the Company’s peer group discussed on page 39) with actual salaries reasonably below or above the median considering scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual and business performance | |||
Annual Cash Incentive • The Management Incentive Plan (“MIP”) is our cash-based, annual incentive plan for executives • Reviewed annually, adjusted as appropriate to align with median-market levels (50th percentile of the Company’s peer group) with annual cash incentive targets, expressed as a percentage of base salary, reasonably below or above the median considering scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual and business performance • Variable pay component focused on short-term annual objectives that demonstrate the strength of the business over the long term | • 50% based on Adjusted Operating Margin, which measures the Company’s profitability relative to the sales it generates. For 2022, there is no payout for AOM below 9.8%, a 100% payout for AOM of 10.3%, and maximum payout for AOM that equals or exceeds 10.8% • 50% based on Free Cash Flow, which is an important measure of how much cash the Company generates after expenditures that allows the Company to pursue opportunities that enhance stockholder value. For 2022, there is no payout for FCF below $650 million, a 100% payout for FCF of $750 million, and maximum payout for FCF that equals or exceeds $850 million • Targets reflective of the current economic conditions of the industry • Performance Modifier allows the Compensation Committee to modify annual payout upwards or downwards up to 10% of MIP Target awards. Annual payout remains capped at 200% of target | |||
Long-Term Equity Incentive • Reviewed annually, adjusted as appropriate to align with median-market levels (50th percentile of the Company’s peer group) with target long-term equity incentives reasonably below or above the median considering scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual and business performance • One third in Restricted Shares • 50% vesting after two years and the remainder vesting after three years • Two thirds in Performance Shares • 25% based on eProducts Revenue Mix (as defined on page 45) measured at the end of a 3-year performance period • 25% based on eProducts Revenue (as defined on page 45) measured at the end of a 3-year performance period • 25% based on Cumulative Free Cash Flow (as defined on page 45) measured over a 3-year performance period • 25% based on Relative TSR (as defined on page 45) measured over a 3-year performance period | • For 2022-2024 performance period: • There is no payout for an eProducts Revenue Mix below 12.0%, a 100% payout for an eProducts Revenue Mix of 16.0%, and maximum payout for an eProducts Revenue Mix that equals or exceeds 24.0% • There is no payout for eProducts Revenue below $2.0 billion, a 100% payout for eProducts Revenue of $3.0 billion, and maximum payout for eProducts Revenue that equals or exceeds $4.0 billion • There is no payout for Cumulative Free Cash Flow below $1.4 billion, 100% payout for Cumulative Free Cash Flow of $1.7 billion, and maximum payout for Cumulative Free Cash Flow that equals or exceeds $2.0 billion • There is no payout for Relative TSR performance below the 25th percentile, 100% payout for Relative TSR Performance at median, and maximum payout for Relative TSR performance at or above the 75th percentile |
2023 Proxy Statement | 27
Approve, on an Advisory Basis, the Compensation of Our Named Executive Officers
2022 CEO Target Direct Compensation
The graphic below represents the 2022 target direct compensation of Frédéric B. Lissalde, our President and Chief Executive Officer. Approximately 90% of his target direct compensation was tied to performance, with the majority linked to long-term growth and stockholder returns. A significant portion of the target direct compensation of all the NEOs is at-risk and dependent upon the achievement of rigorous and objective performance requirements. In 2022, between 82-90% of the NEOs’ target direct compensation was at-risk.
Refer to page 34 for 2022 Key Compensation Decisions.
Accordingly, for the reasons we discuss above and in the “Compensation Discussion and Analysis” section, our Board recommends that stockholders vote in favor of the compensation of our named executive officersNEOs as disclosedpursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion.
The votes cast “for” this proposal must exceed the votes cast “against” this proposal for approval of the compensation of our named executive officers,NEOs, assuming that a quorum is present. For purposes of determining the advisory vote regarding this proposal, abstentions and broker non-votes do not constitute a vote “for” or “against” the proposal and will be disregarded in the calculation of “votes cast.” Proxies solicited by the boardour Board will be voted “FOR”“for” approval of the compensation unless a stockholder specifies otherwise.
We currently hold advisory votes on the compensation of NEOs on an annual basis and intend to hold the next such vote at the 2024 Annual Meeting of Stockholders. 28 | | |
| |
|
Compensation Discussion and Analysis
Table of Contents
2023 Proxy Statement | 29
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis, or CD&A, explains the executive compensation program for the Company’s named executive officers, or NEOs, listed below. This CD&A also describes the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to 2022 compensation for the NEOs.
Our Named Executive Officers
Frédéric B. Lissalde, 55President and Chief Executive Officer | ||||
Employee Since: 1999 |
|
2017 was a year of record revenues and operating profits for the Company.Biography
This outstanding performance was led by our employees and management team. A subset of the management team are our named executive officers listed below:
|
OUR NAMED EXECUTIVE OFFICERS
| ||||
| ||||
Mr.
| ||||
| ||||
| ||||
| ||||
|
| ||||
| ||||
Mr. Lissalde holds a Masters of Engineering | ||||
2022 Target Direct |
Kevin A. Nowlan, 51Executive Vice President and Chief Financial Officer | ||||
Employee Since: 2019 | Biography Mr. Nowlan has been Executive Vice President and Chief Financial Officer since April 2019. Prior to joining BorgWarner, he was Senior Vice President and President, Trailer, Components and Chief Financial Officer of Meritor, Inc., a commercial truck and industrial supplier, from March 2018 to March 2019. Mr. Nowlan joined Meritor in 2007 and served in a variety of finance roles before becoming Senior Vice President and Chief Financial Officer in May 2013. Prior to Meritor, Inc., Mr. Nowlan worked for GMAC Inc. and The General Motors Company’s Treasurer’s Office for 12 years in a variety of roles. Mr. Nowlan holds a Bachelor of Arts in economics, political science, and history and earned an MBA from the University of Michigan Stephen M. Ross School of Business. Mr. Nowlan has served on the board of directors of the Federal Reserve Bank of Chicago Detroit Branch since January 2022. | 2022 Target Direct
|
30 |
Compensation Discussion and Analysis
Joseph F. Fadool, 57 | Vice President, BorgWarner Inc. and President and General Manager, BorgWarner Emissions, Thermal and Turbo Systems |
Employee Since: 2010 | Biography Mr. Fadool has been Vice President of the Company and President and General Manager of BorgWarner Emissions Systems LLC, BorgWarner Thermal Systems Inc. and Turbo Systems LLC since October 2019. He was Vice President of the Company and President and General Manager of Turbo Systems LLC from May 2019 to October 2019. He was Vice President of the Company and President and General Manager of BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc. from January 2017 to May 2019. He was Vice President of the Company and President and General Manager of BorgWarner Ithaca LLC (d/b/a BorgWarner Morse Systems) from July 2015 until December 2016. From May 2012 to July 2015, he was the Vice President of the Company and President and General Manager of BorgWarner Morse TEC Inc. Prior to joining BorgWarner, Mr. Fadool worked at Continental Automotive Systems as Vice President for North American Electronic Operations. He previously held various positions with increasing responsibility at Continental and Siemens VDO Automotive since 1996 including general management, operations, sales, and program management. Prior to joining Continental, he spent seven years with Ford Motor Co., where he was involved in project management, product development, and the launches of several major vehicles, including the Mustang and Taurus programs. Mr. Fadool holds a Bachelor of Science in electrical engineering from Lawrence Technological University and earned a Master of Science in computer and electronic controls from Wayne State University. | 2022 Target Direct | ||
Stefan Demmerle, 58 | Vice President, BorgWarner Inc. and President and General Manager, BorgWarner PowerDrive Systems |
Employee Since: 2012 | Biography Dr. Demmerle has been Vice President of the Company and President and General Manager of BorgWarner PDS (USA) Inc. (formerly known as BorgWarner TorqTransfer Systems Inc.) since September 2012 and President and General Manager of BorgWarner PDS (Indiana) Inc. (formerly known as Remy International, Inc.) since December 2015. Prior to joining BorgWarner, Dr. Demmerle served as Vice President of the powertrain electronics business at Continental from 2010 to 2012 after leading Continental Diesel Systems (formerly known as Siemens Diesel Systems Technology) as President and CEO from 2006 to 2010. He previously held positions of increasing responsibility within Siemens VDO Automotive in the transmission and engine electronics businesses both in France and worldwide. Dr. Demmerle began his career in France with assignments in sales and program management for automotive engine components. Dr. Demmerle holds a Master of Science in Mechanical Engineering from the Technical University of Munich, Germany, as well as a Ph.D. in Mechanical Engineering from the Institut Polytechnique de Grenoble, France. |
| |||
| |||||
2023 Proxy Statement | 31
Compensation Discussion and Analysis
Tonit M. Calaway, 55 | Executive Vice President, Chief Administrative Officer, General Counsel and Secretary |
Employee Since: 2016 | Biography Ms. Calaway has been Executive Vice President, Chief Administrative Officer, General Counsel and Secretary since October 2020 and oversees the Legal, Government Affairs, Real Estate, Facilities, Security, and Aviation Departments. Prior to that, she served as Executive Vice President, Chief Legal Officer and Secretary of BorgWarner Inc. from August 2018 until October 2020 and was
Ms. Calaway | ||
2022 Target Direct
|
32 |
Compensation Discussion and Analysis
Executive Summary
2022 Performance Highlights Versus Our February 2022 Guidance
At BorgWarner, we strongly believe that pay should be linked to Company performance – even in tough times. Despite significant production volatility and inflationary headwinds in 2022, the Company performed well. As a result of strong sales and solid margin performance, we delivered close to the target guidance for Adjusted Operating Margin, or AOM, and exceeded the maximum level of guidance for Free Cash Flow, or FCF, that we disclosed in February 2022. We delivered AOM of 10.26% and a record level of FCF at $860 million for purposes of our cash-based, annual incentive plan for executives, the Management Incentive Plan, or MIP. As a result of this performance, the AOM portion of the MIP award resulted in a payout of 96%. The FCF portion of the MIP award resulted in a 200% payout. With a 50% weighting for each of the metrics, the result was a combined payout of 148% under the 2022 MIP prior to application of the Performance Modifier.
Adjusted Operating Margin | Free Cash Flow |
|
2023 Proxy Statement | 33
Compensation Discussion and Analysis
2022 Key Compensation Decisions
Below is a summary of the key compensation decisions that the Compensation Committee made for fiscal 2022:
Salary: As part of the annual strategic review of base salaries, the Compensation Committee determined the compensation of our executive management team, the Strategy Board, including the NEOs, and increased base salaries effective April 1, 2022. For compensation decisions relating to executive officers other than our CEO, our Compensation Committee considered the recommendations from our CEO. We provide details on page 40. | ||
● | Annual Incentives: From a financial performance perspective, the Company delivered AOM of 10.26%, which was close to the target that we set under our MIP for 2022. This resulted in a payout of 96% for the AOM portion of the MIP award. For purposes of the MIP calculation, which excludes the impact of the Santroll and Rhombus acquisitions, the Company also generated $860 million of Free Cash Flow. As a result of this performance, there was a 200% payout for the FCF portion of the award. With a 50% weighting for each of the designated metrics, the combined payout was 148% under the 2022 MIP. We provide details on pages 40 and 41. | |
After careful review of the actions taken by management and the commitment demonstrated to the Company-wide strategic goals detailed on page 42, the Compensation Committee utilized the performance modifier that the Committee had approved to modify the MIP payout that would otherwise have resulted by adding 10% of the MIP target award for all MIP-eligible participants. | ||
● | Long-Term Equity Incentives: Long-term equity incentives that were granted in 2022 consisted of performance shares (two thirds of the award) and restricted stock (one third of the award). For the 2022-2024 performance cycle, the mix of performance metrics consisted of the following: |
Performance Metric | Weighting |
eProducts Revenue Mix | 25% | ||
eProducts Revenue | 25% | ||
Cumulative Free Cash Flow | 25% | ||
Relative Total Stockholder Return (“Relative TSR”) | 25% |
The Compensation Committee believes this mix: (i) places more emphasis on delivering organic and inorganic growth (ii) drives higher eProducts revenue and (iii) generates more Free Cash Flow in our core business to help fund investments in eProducts, while maintaining a balanced focus on long-term growth and stockholder value creation. We provide details about these performance metrics on page 45.
For the 2020-2022 performance cycle, participants could earn performance shares based on the achievement of three equally weighted measures: Relative TSR, Relative Revenue Growth (“RRG”), and Adjusted Earnings Per Share (“Adjusted EPS”). Results for the 2020-2022 performance cycle were as follows:
● | Relative TSR Payout for 2020-2022: The Company’s Relative TSR was at the 50th percentile of the performance peer group, which was at the target level for a payout resulting in a 100% payout of TSR performance shares. | |
● | RRG Payout for 2020-2022: The Company’s annualized revenue growth, excluding the impact of changes in currency values and merger, acquisition, and disposition activity (in the year in which the merger, acquisition, or disposition activity occurred), was 5.6%, while the weighted average vehicle production decreased by 3.4%. The resulting 9.0% outperformance relative to the market resulted in a 2020-2022 RRG performance share payout at 200% of target. | |
● | Adjusted EPS for 2020-2022: The Company’s Adjusted EPS, excluding the impact of changes in currency values and merger, acquisition, and disposition activity (in the year in which the merger, acquisition, or disposition activity occurred), was $5.10 which was between the threshold level of $4.50 and the target of $5.20 and resulted in a 2020-2022 Adjusted EPS performance share payout at 93% of target. |
We also entered into an employment agreement with our CEO, as described on page 49 under “Employment Agreement with CEO”.
34 |
|
Compensation Discussion and Analysis
Stockholder Engagement
Each year, we carefully consider the results of our stockholder say-on-pay vote from the preceding year. We also consider the feedback we receive from our major stockholders during our ongoing, Board-driven, outreach and engagement efforts, which we describe in detail on page 3.
Our say-on-pay proposal at our 2022 Annual Meeting received support from 93.9% of the votes cast. Overall, our stockholders strongly supported our executive compensation program and its direction, including our continuous improvement efforts to tie performance metrics more closely to our business strategy that we describe in our disclosure. We will continue to keep an open dialogue with our stockholders to help ensure that we have a regular pulse on investor perspectives.
Leading Compensation Governance Practices
The following features of our executive compensation program demonstrate sound compensation governance and we have designed them in the best interests of our stockholders and executives:
| ||||
Stockholder engagement informs compensation program Significant portion of executive pay is performance based and at-risk Rigorous goal setting process Annual compensation assessment Annual risk assessment Stock ownership guidelines for executives Clawback policy for recoupment of incentive compensation under certain conditions Double trigger change in control provisions for restricted stock and performance shares | No short sales of Company stock No pledging of Company stock No hedging of Company stock No loans No gross-ups on excise tax or excessive perquisites | |||
| ||||
2023 Proxy Statement | 35
Compensation Discussion and Analysis
What Guides Our Program
Compensation Philosophy and Objectives
Attracting, developing, and retaining a highly talented workforce – at all levels within our organization – is a top priority. We are committed to providing competitive compensation opportunities designed to deliver equal pay for equal work regardless of race, color, age, religion, sex, sexual orientation, gender, identity/expression, national origin, disability, veteran status, or any other characteristic protected by applicable law.
As part of our regular compensation review process, our Board and senior management team regularly seek input from external experts and independent compensation consultants. Informed in large part by the results of comprehensive analyses, we ensure that our compensation program continues to support our business strategy, pay-for-performance philosophy, and competitive pay practices. Through this work, we make data-driven decisions about each employee’s compensation in the context of their role at the Company, experience, geography, and performance. When necessary, we adjust to better align pay with external market practices or internal comparable positions.
We also strive to ensure pay equity among comparable jobs across the Company. To this end, we examine pay among similarly situated employees who perform comparable work to identify pay disparities or other inequities (if any).
Where appropriate, we take corrective action consistent with our commitment to a diverse and inclusive culture where all our employees are paid equitably and have equal opportunities for success.
Management regularly reports to our Board on each of these efforts.
In addition to the above priorities, our executive compensation program follows a pay-for-performance approach wherein pay levels are strongly linked with our short-term operational performance and long-term market performance. The Compensation Committee has identifiedaims to achieve the following objectives for the compensation program:objectives:
● | Align the interests of our executives with the long-term interests of the business, our stockholders, and employees | |
● | Motivate exceptional performance through | |
● | Attract, develop, motivate, and retain top global talent | |
● | Pay competitively across salary grades in all regions of the world | |
| ||
Mitigate excessive risk taking | ||
● | Reflect the input of our stockholders |
| |
Compensation Discussion and Analysis Principal Elements of Compensation The principal elements of compensation that we list below support our compensation philosophy and objectives. We review each element annually and adjust them when appropriate to align with median market levels (50th percentile of the Company’s compensation peer group). Total target direct compensation may be reasonably below or above the median considering a person’s scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual business performance.
2023 Proxy Statement | 37 Compensation Discussion and Analysis
The Role of the
The Compensation Committee
Our Compensation Committee The Role of Management The The Role of the Independent Compensation Consultant Our Compensation Committee retained Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant. The Compensation Committee annually reviews its relationship with Pearl Meyer to ensure continued independence. The review process includes consideration of the factors impacting independence set forth in New York Stock Exchange rules. Pearl Meyer reports directly to the Compensation Committee and provides benchmarking data to the Corporate Governance Committee with respect to Board compensation. Pearl Meyer regularly participates in Compensation Committee meetings and, in collaboration with the Compensation Committee, aids in determining the appropriate compensation program, design, levels, and peer groups for the Company.
Compensation Discussion and Analysis The Role of Peer Groups Compensation Peer Group: The Compensation Committee regularly assesses the market competitiveness of the Company’s executive compensation program The Compensation Committee did not make any changes to the compensation peer group in 2022. The following companies comprise the 2022 compensation peer group:
Performance Peer Group: For performance share grants in 2022, the Compensation Committee adopted the Automotive Parts & Supplier index performance peer group for purposes of measuring relative TSR. This performance peer group is more specific to the Company’s current industry. The Compensation Committee added Lear Corporation and Magna International to the performance peer group for 2022. The following companies comprise the 2022 performance peer group:
2023 Proxy Statement | 39 Compensation Discussion and Analysis 2022 Executive Compensation Program in Detail Base Salary We establish executives’ base salaries by considering the scope of the executive’s responsibilities, time in position, individual experience, internal equity, individual performance, and business performance. When considering market competitive base salaries, we target the median level among our peer group companies, which we determine annually. We review base salaries annually and adjust as appropriate to align with market levels after taking into account changes in individual responsibilities, individual and business performance, and experience. The Compensation Committee increased the base salary
The increases in the base salary effective April 1, 2022 for our CEO. Mr. Lissalde, as well as the other NEO’s were based on market data for our peer companies as well as individual and business performance and experience. Prior to the increases effective April 1, 2022, base salaries were last increased on October 1, 2020 after reflecting the increased size and revised compensation peer group following the Delphi Technologies acquisition. Management Incentive Plan
The MIP is our cash-based, annual incentive plan for 2022 MIP Target Award Opportunities We express target bonus opportunities as a percentage of base salary and establish them based on the NEO’s level of responsibility and ability to impact the Company’s overall results. The Compensation Committee also considers market data in setting target award amounts. The 2022 target bonus opportunity for our NEOs ranged from 120% to 160% of base salary in accordance with market median total cash compensation. NEOs receive 50% of the target opportunity for achieving threshold performance and 200% of the target opportunity for achieving maximum performance or above, with results in between these levels and target linearly interpolated. 2022 MIP Performance Goals and Results Each year, the Compensation Committee establishes threshold, target, and maximum performance goals for the Company and
40 | Compensation Discussion and Analysis The Compensation Committee
The Compensation Committee selected AOM because it:
The Compensation Committee selected FCF because it places emphasis on driving strong cash flow performance, which supports the Company’s ability to
The Compensation Committee set the 2022 target performance The 2022 AOM and FCF performance targets and actual results were as follows:
For 2022, we delivered AOM of 10.26%, which was close to target, and strong levels of Free Cash Flow at $860 million, which was above maximum. As a result of this performance, the AOM portion of the award A schedule reconciling Adjusted AOM to 2023 Proxy Statement | 41 Compensation Discussion and Analysis 2022 MIP Performance Modifier The Compensation Committee carefully considers each element of our executive compensation program to ensure that those elements promote execution of our business strategy. To further BorgWarner’s mission to execute on our accelerated electrification strategy and continue to deliver innovative and sustainable mobility solutions for the vehicle market, the Compensation Committee The Compensation Committee applies the modifier based on quantitative or qualitative targets
The achievements the Compensation Committee considered for 2022 included those set out in the table below: Environmental, Social, and Governance (“ESG”) initiatives including Diversity, Equity, and Inclusion
Acquisitions and dispositions, including integration
Succession planning and talent development
42 | Compensation Discussion and Analysis Leadership during unusual and challenging circumstances
Strategic change management
The table above demonstrates that the management team made significant achievements in 2022 in multiple areas of the business in addition to delivering strong financial performance. After careful review of the actions and the commitment that management demonstrated to these Company-wide strategic goals detailed above, the Compensation Committee, on a subjective basis, approved applying a performance modifier of 10% of the MIP target award to increase the payout that would otherwise result for all MIP eligible participants, including the NEOs. 2022 MIP Payouts For our President and CEO, Frédéric Lissalde, this performance provided the following bonus payout.
2023 Proxy Statement | 43 Compensation Discussion and Analysis Long-Term Equity Incentives We believe that long-term performance is driven through an ownership culture that rewards our executives for maximizing long-term stockholder value. Our long-term incentive plans provide participants with appropriate incentives to acquire equity interests in our Company and align their interests with the interests of our stockholders.
We detail below the
44 | Compensation Discussion and Analysis 2022-2024 Performance Share Awards The For the 2022-2024 performance
2023 Proxy Statement | 45 Compensation Discussion and Analysis The Compensation Committee
Compensation Discussion and Analysis Restricted Stock Restricted stock awards Treatment of Equity in the Event of a Change of Control In response to stockholder feedback, the Company revised the terms of its equity plans starting in 2018 to subject all restricted stock If the successor or purchaser in the Change of Control transaction does not assume the awards or issue replacement awards, then upon the date of the Change of Control, restricted stock will become fully vested and 2023 Proxy Statement | 47 Compensation Discussion and Analysis Other Executive Compensation Practices, Policies, and Guidelines Stock Ownership Guidelines To promote equity ownership and to align the interests of management and our stockholders, we have established stock ownership guidelines that outline our expectations for our executives to hold a significant and sustained long-term personal financial interest in the Company. The guidelines are as follows:
We expect executives to meet the guidelines within five years after appointment as an officer. Shares counted to meet the ownership guidelines include shares held outright in brokerage or other investment accounts, non-vested restricted shares, and shares held by the executive under the Retirement Savings Plan and the Retirement Savings Excess Benefit Plan. Officers who do not meet their ownership guideline must hold at least 50% of any performance share awards or restricted shares that become vested until their ownership guideline is met. Our Compensation Committee reviews the ownership level for our CEO and all other persons covered under this guideline each year. As of January 1, 2023, each of our NEOs had met the level of ownership required or had more time to meet the guidelines. Clawback Policy Our Board adopted a policy to recover payment if an executive engages in any fraud or intentional illegal conduct that materially contributed to the need for a restatement of the Company’s publicly filed financial results. Performance-based compensation received by the executive during the three-year period preceding the restatement will be subject to
Short Sales, Pledging, and Hedging Generally, our Insider Trading and Confidentiality Policy (the “Policy”) prohibits our directors and employees from engaging in Executive Benefits and
NEOs are eligible to participate in employee benefit plans on the same basis as other employees (such as medical, dental, and vision care plans; health care flexible spending accounts; life, accidental death and dismemberment, and disability insurance; employee assistance programs; and a defined contribution retirement plan, including a 401(k) feature). Our U.S.-based executives who exceed the limits under the qualified BorgWarner Inc. Retirement Savings Plan participate in the BorgWarner Inc. Retirement Savings Excess Benefit Plan,
Compensation Discussion and Executive perquisites for the U.S.-based NEOs are limited to a taxable annual perquisite
As previously disclosed, on September 9, 2022, we entered into an employment agreement (“Employment Agreement”) with Mr. Lissalde. Under the terms of the Employment Agreement, Mr. Lissalde will remain employed by us until his retirement on August 30, 2025 (the “Term”), unless we and Mr. Lissalde each agree to extend the Term for one or more one-year periods. If Mr. Lissalde remains employed until the end of the Term, he will retire at such time (such date, the “Retirement Date”). Mr. Lissalde will remain in his role as President and CEO until our Board appoints a successor President and CEO. If the Board appoints a successor President and CEO before the end of the Term, then Mr. Lissalde will serve as a consultant to the Board and support the transition of his duties, as reasonably requested by the successor President and CEO or by the Board from time to time, to ensure an orderly transition of such duties through the effective date of the successor’s appointment (the “Transition Date”) and through the end of the Term (the “Transition Period”). Before the Transition Date, (1) the Compensation Committee will determine, from time to time, Mr. Lissalde’s base salary, (2) he will be eligible to participate in our MIP at a level commensurate with his position as President and CEO, and (3) he will be eligible to receive awards under the Company’s 2018 Stock Incentive Plan or any applicable successor plan as determined by the Compensation Committee at a level commensurate with the position of CEO and a base salary rate equal to his then current salary rate as CEO. During the Transition Period, Mr. Lissalde’s annual base salary will be reduced to sixty-seven percent (67%) of his annual base salary as in effect immediately prior to the Transition Date, and he will not be entitled to participate in the MIP for any performance periods beginning on or after the Transition Date. He will be eligible for a pro-rata MIP payment, if otherwise earned, for the performance period in which the Transition Date occurs based on the length of time he served as President and CEO during such performance period. During the Transition Period, Mr. Lissalde will remain eligible to receive awards under the 2018 Stock Incentive Plan (or successor plan) as determined by the Compensation Committee at a level commensurate with the position of CEO and a base salary rate equal to his most recent base salary rate as CEO. The Employment Agreement also provides that, during the Term, Mr. Lissalde will receive reimbursement for reasonable expenses incurred for international financial planning and advice and international tax preparation services and remain eligible to participate in the Company’s benefit plans and receive other benefits that are provided to him as of the date he entered into the Employment Agreement. Following the Retirement Date, Mr. Lissalde will continue to receive health care and other benefits as set forth in the Company’s welfare benefit plans. Mr. Lissalde’s employment may be terminated prior to the end of the Term by the Company for cause, by Mr. Lissalde for any or no reason upon providing ninety (90) days’ advance notice to the Company, or by mutual agreement of the Company and Mr. Lissalde. Mr. Lissalde’s employment will automatically terminate upon his death or disability. In the event of any such termination, Mr. Lissalde will be entitled to any accrued but unpaid salary and vacation, as well as reimbursement of reasonable business expenses incurred prior to the date of termination. If Mr. Lissalde remains employed until his Retirement Date, has satisfied his obligations under the Employment Agreement, and executes a release of claims in favor of the Company and its affiliates, then we will treat such termination as being by reason of “Retirement” within the meaning of the 2018 Stock Incentive Plan (or successor plan) and Mr. Lissalde will: (1) vest in his restricted stock granted within 12 months prior to the Retirement Date on a pro-rata basis, determined by dividing the number of months Mr. Lissalde was employed from January 1 of the year in which the grant date occurred through the Retirement Date by 12, (2) vest in his restricted stock granted more than 2023 Proxy Statement | 49 Compensation Discussion and Analysis 12 months prior to the Retirement Date on a pro-rata basis, determined by dividing the number of months Mr. Lissalde was employed from the grant of such restricted stock through the Retirement Date and the denominator of which is the number of months in the applicable restriction period, (3) vest in his performance shares granted within 12 months of the Retirement Date, upon completion of the performance period, in the amount earned based on achievement of the applicable performance goals, but then pro-rated, determined by dividing the number of months Mr. Lissalde was employed from January 1 of the year in which the grant date occurred through the Retirement Date by 12, and (4) vest in his performance shares granted more the 12 months prior to the Retirement Date, upon completion of the performance period, in the full number of performance shares earned, based on achievement of the applicable performance goals. The Company will also pay any pro-rated MIP bonus to which Mr. Lissalde is entitled that has not yet been paid and will provide Mr. Lissalde with its standard repatriation benefits for senior executive officers in connection with his relocation to France. If a “Change of Control” as defined in the Change of Control In exchange for the benefits provided by the Employment Agreement, Mr. Lissalde has agreed to certain non-competition and non-solicitation restrictions that extend for two years following the end of the Term or earlier termination of the Employment Agreement, as well as confidentiality and non-disparagement covenants. Change of Control Agreements and Transitional Income Plan We have entered into COC Agreements with each of our NEOs and certain other executives. In establishing the COC Agreements, our Board determined that it is in the best interests of the Company and its stockholders COC Each of our
Compensation
Each year, the Compensation Committee oversees a risk assessment of the Company’s executive compensation program. Based on its most recent review, the Compensation Committee concluded that our compensation program and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. Our executive compensation program includes
Internal Revenue Code In determining our executive compensation for Compensation Committee Report The Compensation Committee
The Compensation Committee Report does not constitute soliciting material. It is not considered filed by us and shall not be incorporated by reference into any of our other filings under the Securities Act or the Exchange Act unless we state otherwise.
During our last completed fiscal year, the No executive officer of the Company served as a member of the
Executive Compensation Tables Executive Compensation Tables Fiscal Year 2022 Summary Compensation Table The following table sets forth information regarding compensation
52 |
The following table details, by category, the amounts reported above in the “All Other Compensation” column of the Summary Compensation Table for each of our NEOs.
Executive Compensation Tables Grants of Plan-Based Awards The following table summarizes the grants of equity and non-equity plan awards to our NEOs in
The equity awards reflected in the Grants of Plan-Based Awards table are granted under the 54 | Executive Compensation Tables Outstanding Equity Awards at Fiscal Year End The following table summarizes all equity awards to our NEOs that remain either unexercised and/or unvested as of December 31,
Regarding adjustments to shares in the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the stock, or other change in corporate structure affecting the stock, our Compensation Committee or our Board 2023 Proxy Statement | 55 Executive Compensation Tables Option Exercises and Stock Vested The following table summarizes all option exercises and stock vestings by our NEOs during
None of
Our
Executive Compensation Tables Non-Qualified Deferred Compensation The following table shows the non-qualified deferred compensation activity for our NEOs during
The Excess Plan is an unfunded, non-qualified retirement plan, which keeps certain highly compensated U.S. employees whole with regard to Company contributions that are otherwise limited under the RSP by IRC provisions. Participation is automatic once these limits are reached in a plan year. The contributions vest in the same manner as under the RSP. Distributions are made following a participant’s separation from service, with distributions attributable to amounts earned or vested before January 1, 2005 distributed within 30 days of participant’s separation from service and Excess Plan balances are invested in the same investment choices that are selected by the participants under the RSP. As these plans are unfunded, no money is actually invested. Rather, a notional account is maintained which mirrors the returns of these investments. 2023 Proxy Statement | 57
The following table shows the post-employment payments that would be paid to each of our NEOs
Change of Control Employment Agreements We have entered into COC Agreements Below is a general description of the material terms and conditions of our In the event that
The COC Agreements also provide that, in the event of a change of control, any outstanding equity awards that are assumed or replaced by the successor purchaser in the change of control will not become vested on an accelerated, or “single-trigger,” basis solely as a result of the change of control. Instead, the assumed or replaced awards will continue in accordance with their terms and will become vested on an accelerated basis only if the Company terminates the NEO’s employment without cause or the NEO terminates employment for good reason within two years after the change of control. This is referred to as “double trigger” vesting. Any awards that are not assumed or replaced in the change of control will generally become vested upon the change of control. Executives forego a portion of change of control payments that could otherwise trigger IRC Section 4999 excise taxes, as the tax will not be “grossed-up” under the COC Agreement, if such reduction in change in control payments would be beneficial to the executive. “Change of “Cause” generally means the willful and continued failure of the executive to perform substantially the executive’s duties or the willful engaging by the executive in illegal conduct or gross misconduct materially injurious to us. “Good
Executive Compensation Tables Terminations Not Related to a Change of Control In the event of an involuntary In the event of termination of employment by retirement not in connection with a CEO Pay Ratio For 2022, we estimate the ratio of our CEO’s total compensation to our median employee’s total compensation as 542 to 1. This estimated ratio is slightly lower than in 2021 when the ratio was 554 to 1. The The median employee’s 2022 total compensation was $32,960 and was calculated under the 60 | Pay Versus Performance Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the section “Compensation Discussion and Analysis”. The following table summarizes the Summary Compensation Table (“SCT”) total and Compensation Actually Paid (“CAP”) to the CEO and the average for the other NEOs:
2023 Proxy Statement | 61 Pay Versus Performance
Most Important Performance Measures In our assessment, the most important financial performance measures used to link CAP to Company performance are listed in the table below, not ranked in order of importance. The role of each of these performance measures in our executive compensation program is discussed in the “Compensation Discussion and Analysis”.
Pay Versus Performance Analysis of the Information Presented in the Pay versus Performance Table In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table. Compensation Actually Paid and TSR The chart below shows the comparison of Compensation Actually Paid to the CEO and NEOs and TSR for the Company and Peer Group. 2023 Proxy Statement | 63 Pay Versus Performance Compensation Actually Paid and Net Income The chart below shows the comparison of Compensation Actually Paid for the CEO and NEOs and Net Income. Compensation Actually Paid vs Adjusted Operating Margin The chart below shows the comparison of Compensation Actually Paid for the CEO and NEOs and Adjusted Operating Margin.
Director Compensation The following table details the compensation earned by each non-employee director who served on the Board in 2022. After review of
Annual compensation for our non-employee directors for In The Non-Executive Chair’s total compensation was
2023 Proxy Statement | 65 Security Ownership of Certain Beneficial Owners and Management The following table sets forth, as of December 31, 2022, certain information regarding beneficial ownership of common stock by those persons and entities that are known to the Company as beneficially owning more than five percent of the Company’s common stock.
The following table sets forth, as of March 1, 2023, certain information regarding the beneficial ownership of common stock by each director, each nominee for election as a director, each executive officer named in the Summary Compensation Table, and the directors and executive officers of the Company as a group. As of such date, there were 233,785,305 outstanding shares of common stock.
Code of Ethics The Company has long maintained a Code of Ethical Conduct, updated from time to time, which is applicable to all directors, officers, and employees of the Company. In addition, the Company has adopted a Code of Ethics for CEO and Senior Financial Officers which applies to the Company’s CEO, CFO, Treasurer, and Controller. Each of these codes is posted on the Company’s website at www.borgwarner.com/investors/corporate-governance. We intend to disclose any amendments to, or waivers from, a provision of our Code of Ethical Conduct or Code of Ethics for CEO and Senior Financial Officers on our website within four business days following the date of any amendment or waiver.
Approve, on an Advisory Basis, the Frequency of Voting on Named Executive Officer Compensation In accordance with the Section 14A of the Exchange Act and the related SEC rules, the Company seeks a non-binding advisory vote on the frequency of future stockholder advisory votes on the compensation of our named executive officers. In particular, we are asking whether the advisory vote should occur every three years, every two years or every year. Currently, the Company conducts non-binding advisory votes to approve the compensation of our named executive officers on an annual basis. Stockholders may cast their advisory vote to conduct advisory votes on executive compensation every “1 YEAR,” “2 YEARS,” or “3 YEARS,” or they may “ABSTAIN”. The frequency that receives the highest number of votes cast will be deemed to be the frequency selected by our stockholders. Stockholders are not voting to approve or disapprove the Board’s recommendation. As an advisory vote, this proposal is not binding on the Company, the Board, or the Compensation Committee. However, the Compensation Committee and the Board value the opinions expressed by our stockholders and will consider the outcome of the vote in determining the frequency of future advisory votes on the compensation of our named executive officers. It is expected that the next advisory vote on frequency will occur at the 2029 Annual Meeting of Stockholders. The Company asks that you support a frequency period of every one year (an annual vote) for future non-binding stockholder votes on the compensation of our named executive officers.
Our Board recommends a vote “FOR”, by advisory vote, the frequency of every one year for the advisory vote on the Company’s Executive Compensation Program. 2023 Proxy Statement | 67
Ratification of Selection of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP, its member firms, and their respective affiliates (collectively, “PwC”), an independent registered public accounting firm, performed an audit of our consolidated financial statements for the fiscal year ended December 31, If the stockholders do not ratify the engagement of PwC at the Annual Meeting, the adverse vote will be considered a direction to the Audit Committee to consider other To ratify the selection of PwC as our independent registered public accounting firm for the fiscal year ending December 31,
Our Board recommends a vote “FOR” the ratification of PwC as the Independent Registered Public Accounting Firm.
Ratification of Selection of Independent Registered Public Accounting Firm Fees Paid to PwC The aggregate fees billed to us for the years ended December 31,
The Audit Committee has adopted procedures for pre-approving all
Ratification of Selection of Independent Registered Public Accounting Firm
In the performance of its oversight function, the Audit Committee has reviewed and discussed with management and PwC the audited consolidated financial statements for the year ended December 31, The Audit Committee discussed with PwC the overall scope and plans for their audit. The Audit Committee met with PwC, with and without management present, to discuss the results of their audits, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. In addition, the Audit Committee provided guidance and oversight to the internal audit function, including the audit plan, and results of internal audit activity. The Vice President of Internal Audit has direct access to the Audit Committee to discuss any matters desired, and the Vice President of Internal Audit presented an update of internal audit activity at each regularly scheduled Audit Committee meeting. The members of the Audit Committee are not full-time employees of
Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee that are described above and in the Audit Committee’s charter, the Audit Committee recommended to
The Audit Committee Report does not constitute soliciting material. It is not considered filed by the Company and shall not be incorporated by reference into any of its other filings under the Securities Act or the Exchange Act unless we state otherwise.
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan We are seeking stockholder approval of our As of February 28, The favorable vote of a majority of the shares of common stock We believe that equity-based compensation is an effective means to promote the future growth and development of the Company because equity awards align the interests of our management team, non-employee directors, and other key employees with the interests of our stockholders while also allowing us to attract and retain talented individuals. If our stockholders do not approve the
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan Description of the 2023 Plan The following description of the key features and material terms of the Key Features of the 2023 Plan
Administration.The Compensation Committee of the Company’s Board of Directors, or another committee of members of the Board who are “non-employee directors” (within the meaning of Section 16 of the Securities Exchange Act of 1934 (“Exchange Act”)) and “independent directors” (within the meaning of the applicable NYSE rule) as appointed by the Board (“Committee”), will administer the In the case of awards granted to members of the Board who are not officers or employees of the Company, a subsidiary or an affiliate, the Under the
When references are made to the Committee in this description of the
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan Under the Term, Amendment and Termination. The Board may amend, alter, or discontinue the The Committee may amend the terms of any outstanding award, either prospectively or retroactively, but no such amendment may impair the rights of any award holder without the holder’s consent except to the extent required or permitted by the No amendment may be made to the Shares Subject to the Shares of our common stock subject to an award may be authorized but unissued shares, treasury stock, or shares of our common stock purchased on the open market. The aggregate number of shares of our common stock reserved will be depleted on the date of grant of an award by the maximum number of shares of our common stock, if any, that may be payable with respect to the Award, as determined at the time of grant. As of February 28, If an award lapses, expires, terminates, or is cancelled without the issuance of shares of our common stock under the award (whether due currently or on a deferred basis), it is determined during or at the conclusion of the term of an award that all or some portion of the shares of common stock with respect to which the award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, shares of common stock are forfeited under an award, an award that is denominated in shares of common stock (in whole or in part) is settled in cash or shares of common stock are issued under any award and the Company subsequently reacquires them pursuant to rights reserved upon the issuance of the shares of common stock, then those shares of common stock will be recredited to the
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan
Individual Limitations on Awards.Subject to adjustments as described below, no individual non-employee director may be granted, during any fiscal year of the Company, stock options, stock appreciation rights, restricted stock, stock units, or performance Adjustments.In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to our stock, other change in corporate structure affecting our stock or any other event that, which other event in the judgment of the Committee, necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the If any adjustment results in fractions of a share of common stock, such fractional shares will not be issued and will be canceled for no consideration. Notwithstanding the foregoing, no adjustment will be made to outstanding stock options if the adjustment would cause the stock options to provide for a deferral of compensation subject to Section 409A of the Code (and any applicable related regulations and guidance) or, in the case of ISOs, such adjustment would cause the If any of the transactions or events described in this section constitutes a Change in Control (as defined in the If any of the events described above occurs, the Committee may also (or in lieu of the adjustments described in this section) make provision for a cash payment to the holder of an outstanding award in exchange for the cancellation of all or a portion of the award (without the consent of the holder of the award) in an amount determined by the Committee effective at such time as the Committee specifies (which may be the time such transaction or event is effective), but if such transaction or event constitutes a Change in Control, then (i) such payment will be at least as favorable to the holder as the greatest amount the holder could have received in respect of such award under the
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan
Eligibility For Awards and Types of Awards.The Stock Options.Stock options grant the award holder the right to purchase our common stock at a specific price, referred to as the exercise price, at such times and upon such conditions as the Committee determines. Under the The Committee will determine the manner of payment of the exercise price and the procedures to be followed to exercise an option. The exercise price of a stock option must be paid in full at the time of exercise and is payable in cash, although the Committee may provide in the award agreement that the exercise price may also be paid: (i) in the form of unrestricted common stock already owned by the optionee having a fair market value on the date of exercise equal to the exercise price; (ii) by requesting that the Company withhold, from the number of shares of our common stock otherwise issuable upon exercise of the stock option, shares having an aggregate fair market value on the date of exercise equal to the exercise price, or (iii) a combination of (i) and (ii). Additionally, if permitted by the Committee and allowable by law, payment of the exercise price may be made through a broker-facilitated cashless exercise. Upon receipt of a notice of exercise of a stock option, the Committee may elect to cash out all or part of the shares of our common stock for which a stock option is being exercised by paying the optionee an amount, in cash or common stock, equal to the difference between the exercise price and the fair market value of shares of our common stock times the number of shares of common stock for which the option is being exercised on the effective date of the cash out. Stock Appreciation Rights.A stock appreciation right (“SAR”) entitles the holder to a payment in cash, shares of our common stock, or a combination of the two as determined by the Committee in its discretion, equal to the difference between the base price of the SAR and the fair market value of a share of our common stock on the date of exercise times the number of shares of common stock as to which the SAR was exercised. A SAR may be granted alone or in addition to other awards under the Restricted Stock and Stock Units.Restricted stock are shares of our common stock that are subject to forfeiture by the recipient if the conditions to vesting set forth in the related restricted stock agreement are not met. The Committee may condition the grant or vesting of restricted stock upon the attainment of specified performance measures of the participant or of the Company or subsidiary, division or department of the Company for or within which the participant is primarily employed or upon other factors or criteria. A stock unit is a right to receive a share of our common stock or the fair market value in cash of a share of common stock in the future, under terms and conditions established by the Committee. Upon a participant’s termination of employment for any reason prior to the date restricted stock or stock units vest, all unvested shares or unvested stock units will be forfeited, except to the extent otherwise provided by the Committee in the applicable award agreement or the Change in Control provisions of the 2023 Proxy Statement | 75 Approval of the BorgWarner Inc. 2023 Stock Incentive Plan Unless otherwise provided in the related award agreement, the grant of a restricted stock award will entitle the recipient to vote the shares of our common stock covered by the award and to receive the dividends paid on those shares except that cash
dividends will either, at the discretion of the Committee, (i) be automatically deferred and reinvested in additional restricted stock that will be subject to the same restrictions, terms and conditions, including the vesting period, as the original grant of restricted stock, or (ii) be paid out in cash at the time that the restricted stock vests. With respect to any grant of stock units, the participant who receives such grant will acquire no rights of a stockholder unless and until the participant becomes the holder of shares delivered to such participant with respect to such stock units. The Committee may in its discretion provide that a participant receiving stock units also will be entitled to receive dividend equivalents related to such units. These dividend equivalents may, as determined by the Committee at the time the Award is granted, be paid in cash at the time the stock unit to which it relates is settled, credited to the participant as additional stock units, which will vest and be settled at the same time as the stock unit to which it relates, or paid or credited (as appropriate) in any combination of cash and additional stock Performance The Committee may condition payment with respect to performance units or performance If a performance stock unit or performance unit recipient’s employment or service with the Company terminates during the performance period or before the performance goals are satisfied, the participant will forfeit all rights to receive cash or our common stock in payment of the performance units or performance The Committee may in its discretion provide that a participant shall be entitled to receive dividend equivalents on outstanding performance stock units. Such dividend equivalents may, as determined by the Committee at the time the award is granted, be: paid in cash at the time the performance stock units to which it relates are settled; credited to the participant as additional performance stock units, which shall vest and be earned and settled at the same time as the performance stock units to which they relate; or paid or credited (as appropriate) in any combination of cash and additional performance stock units; provided that in no event may dividend equivalents relating to performance stock units provide for payment prior to the time at which such performance stock units are earned and vested and, notwithstanding anything to the contrary in the 2023 Plan, dividend equivalents paid or credited with respect to performance stock units shall only be paid out to or earned by a participant to the extent that the vesting and performance conditions applicable to the underlying performance stock units are satisfied.
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan Cash Incentive Awards.The Committee will determine all terms and conditions of cash incentive awards, subject to the terms of the Minimum Vesting Period.All awards have a minimum vesting period of one year from the date of grant. For purposes of awards granted to non-employee directors, “one year” may mean the period of time from one annual meeting of stockholders to the next annual meeting of stockholders, provided that that period of time is not less than 50 weeks. Despite the foregoing, the Committee may grant awards with less than a one-year vesting requirement, as long as those Awards do not relate to more than 5% of the number of shares reserved for the Repricing and Backdating Prohibited.Except for the adjustments as described under the section entitled “Adjustments” above, neither the Committee nor any other person may (i) amend the terms of outstanding options or SARs to reduce the exercise or base price of such outstanding options or SARs; (ii) cancel outstanding options or SARs in exchange for options or SARs with an exercise or base price that is less than the exercise or base price of the original options or SARs; or (iii) cancel outstanding options or SARs with an exercise or base price above the current fair market value of a share of our common stock in exchange for cash or other securities, in each case, without prior approval of the Company’s stockholders. In addition, the Committee may not make a grant of an option or SAR with a grant date that is effective prior to the date the Committee takes action to approve such award.
Change in Control Provisions.The If the successor or purchaser in the Change in Control transaction does not assume the awards or issue replacement awards as provided in the If a participant has in effect an employment, retention, change in control, severance or similar agreement with the Company, a subsidiary or any affiliate that provides a more favorable result upon a Change in Control on the participant’s awards than as described above, then such agreement will control in respect of those awards. In addition, the Committee may provide in an award agreement a more favorable result upon a Change in Control than as described above. 2023 Proxy Statement | 77 Approval of the BorgWarner Inc. 2023 Stock Incentive Plan Rescission of Awards.Under the Disgorgement of Awards.Any awards granted pursuant to the Transferability.Participants are not permitted to sell, assign, transfer, pledge or otherwise encumber any award granted under the Subject to the terms of the
Code Section 409A.It is intended that stock options, SARs, and restricted stock awarded under the
The following is a brief and general summary of the federal income tax consequences of transactions under the Stock Options.Stock options granted under the
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan
Stock Appreciation Rights.No income will be recognized by a recipient in connection with the grant of a SAR. When a SAR is exercised, the recipient will generally be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any of our common stock received on the exercise. In the case of a recipient who is also an employee, any income recognized upon exercise of a SAR will constitute wages for which withholding will be required. The Company will be entitled to a tax deduction at the same time and in the same amount, except as described under the section entitled “Section 162(m) Limit” below. If the optionee receives common stock upon the exercise of a SAR, any gain or loss on the sale of the stock will be treated in the same manner as discussed above under “nonqualified stock
Restricted Stock.A recipient will not realize taxable income at the time of grant of a restricted stock award, assuming that the restrictions constitute a substantial risk of forfeiture for federal income tax purposes. Upon the vesting of shares of our common stock subject to an award, the recipient will realize ordinary income in an amount equal to the excess of the fair market value of the shares at that time over the amount paid by the recipient, if any. The Company will be entitled to a deduction equal to the amount of ordinary income realized by the recipient in the taxable year in which the amount is included in the recipient’s income, except as described under the section entitled “Section 162(m) Limit” below. Dividends paid to the recipient during the restriction period will be taxable as compensation income to the recipient at the time paid and will be deductible at that time by the Company, except as described under the section entitled “Section 162(m) Limit” below. The recipient of a restricted stock award may, by filing an election with the Internal Revenue Service within 30 days of the date of grant of the restricted stock award, elect to be taxed at the time of grant of the award on the excess of the then fair market value of the shares of our common stock over the amount paid by the recipient, if any, in which case (1) the Company will be entitled to a deduction equal to the amount of ordinary income recognized by the recipient in the taxable year in which the amount is included in the recipient’s income, except as described under the section entitled “Section 162(m) Limit” below, (2) dividends paid to the recipient during the restriction period will be taxable as dividends to the recipient and not deductible by the Company, and (3) there will be no further tax consequences to either the recipient or the Company when the restrictions lapse. In the case of a recipient who is also an employee, any amount included in income will constitute wages for which withholding will be required. Stock Units, Performance Units, and Performance 2023 Proxy Statement | 79 Approval of the BorgWarner Inc. 2023 Stock Incentive Plan transferred, determined as of the date of delivery or transfer. The Company will be entitled to a deduction equal in amount to the ordinary income realized by the recipient in the year paid, except as described under the section entitled “Section 162(m) Limit” below. In the case of a recipient who is an employee, any amount included in income will constitute wages for which withholding will be required. Section 162(m) Limit.Code Section 162(m) generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid for any fiscal year to “covered employees,” a term which generally includes Income Tax Withholding.Upon an employee’s realization of income from an award, the Company is generally obligated to withhold against the employee’s federal and state income and employment tax liability. Payment of the withholding obligation can be made from other amounts due from the Company to the award recipient or with shares of our common stock owned by the recipient. If the recipient elects to tender shares of our common stock or to reduce the number of shares the recipient is otherwise entitled to receive to satisfy the withholding obligation, then the shares tendered or reduced will be treated as having been sold to the Company. Capital Gains.Generally, net capital gain (net long-term capital gain minus net short-term capital loss) is generally taxed at a maximum rate of 15%, with a 20% rate applying to certain high-income individuals.
New Plan Benefits.
Except for Effective Date.If approved by the stockholders, the
Approval of the BorgWarner Inc. 2023 Stock Incentive Plan As of December 31,
Our Board recommends a vote “FOR” approval of the 2023 Stock Incentive Plan. 2023 Proxy Statement | 81
We have been advised that a stockholder, John Chevedden, intends to present the following stockholder proposal at our Annual Meeting. We will furnish the address and share ownership of the proponent promptly upon written or oral request. The proposal will be voted on at the Annual Meeting if the proponent or a qualified representative is present at the meeting and submits the proposal for a vote. The text of the proposal and the supporting statement appear below Proposal
Shareholders ask our Board to take the One of the main purposes of this proposal is to give all shareholders, including street name shareholders, the right to formally participate in calling for a special shareholder meeting regardless of their length of stock ownership to the fullest extent possible. Currently it takes a theoretical 20% of all shares outstanding to call for a special shareholder meeting. This theoretical 20% of all shares outstanding translates into 24% of the shares that vote at our annual meeting. It would be hopeless to expect that the shares that do not have time to vote at would have the time for the intricate procedural steps to call for a special shareholder meeting. Then it appears that all the shares that are held in street name are 100% disqualified from participating in the call of a And it does not stop here because all BorgWarner shares not owned for a full continuous year are 100% disqualified from calling for a special shareholder meeting. Thus if 25% of shares are held for less than a full continuous year then it would take 64% of the
Thus the theoretical 20% figure to call for special meeting translates into an almost impossible 64% figure which is like have no right at And to top it off the
Please vote
Our Recommendation and Response The Board of Directors unanimously recommends that stockholders vote against Proposal 6, which, among other things, seeks to reduce the ownership threshold for stockholders to call a special meeting of stockholders from 20% to 10% and to eliminate the requirement that stockholders must have held shares for one continuous year to participate in the call. In 2022, a majority of our stockholders did not support a substantially similar shareholder proposal. We engaged extensively with stockholders prior to the 2022 Annual Meeting, and most stockholders supported the Company’s existing special meeting threshold of 20%. At the 2022 Annual Meeting, more than 57% of votes cast by our stockholders were against the 2022 proposal. This vote affirms our belief that BorgWarner’s current threshold is appropriate and in line with or exceeds market practice. According to the data provider, FactSet, as of January 2023, 66% of S&P 500 companies allow shareholders to call special meetings. Fewer than 12% of S&P companies set that threshold at 10% or lower. Our stockholders already have a meaningful right to call a special meeting. In 2016, our stockholders approved our current special meeting provision, which allows stockholders who have held 20% of BorgWarner stock for one continuous year to call a special stockholders meeting. Conducting a special stockholders meeting is a significant undertaking that requires substantial expense and time. The Company must pay to prepare, print, and distribute disclosure documents to stockholders, solicit proxies, hold the meeting, and tabulate votes. Such time and expense are only in the best interest of stockholders if a reasonable percentage of our stockholders support holding a special meeting. We believe our current 20% threshold and holding requirement of one continuous year appropriately balance enhancing the rights of stockholders and protecting against imprudent use of Company resources and stockholder attention to address the special interests of a select group of stockholders. The proposal inaccurately states that shares that are held in “street name” are disqualified from participating in the call of a special shareholder meeting. To the contrary, our By-laws provide for a clear process by which qualifying beneficial holders may request a special meeting so long as their request for the meeting is also submitted by the record holder of their shares. BorgWarner believes this BorgWarner is committed to strong corporate governance practices. Our corporate governance practices allow our stockholders to voice their concerns and ensure Board accountability and responsiveness. These practices include: giving stockholders the right to call special meetings and to act by written consent, annual election of directors subject to a majority voting standard, a market-standard proxy access We have robust stockholder engagement and
management. In response to the passage of a 2021 stockholder proposal, the Company amended its Restated Certificate of Incorporation to allow 10% of our shares to request a record date to initiate stockholder written consent. OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
Our Board recommends a vote “AGAINST” the stockholder proposal to change the share ownership requirement to call a special meeting of stockholders. 2023 Proxy Statement | 83
Stockholder Proposal to Request the Board of Directors to Publish a Just Transition Report We have been advised that a stockholder, Domini Impact Investments LLC, intends to present the following stockholder proposal at our Annual Meeting. We will furnish the address and share ownership of the proponent promptly upon written or oral request. The proposal will be voted on Proposal 7 – Just Transition Report Whereas: The Paris Agreement underscored the “close links between climate action, sustainable development, and a just transition.” To support implementation of a just transition, the International Labor Organization (ILO) developed guidelines discussing the anticipated employment impacts, importance of skills development and decent work during the energy transition, and adaptation needed by companies and communities to avoid lost assets, livelihoods or involuntary migration.1 Investors increasingly acknowledge the importance of a just transition and providing greater market certainty in the transition to a low-carbon economy. Over 700 investors, managing $68 trillion, support Climate Action 100+, which requests just transition disclosures. The automotive industry is one of the heaviest contributors to global greenhouse gas emissions and must transition current business models from BorgWarner will play a meaningful role as a supplier to global auto manufacturers, many of which have electrification strategies. In its 10-K, BorgWarner says it is well positioned for the movement toward an electrified portfolio through investments and acquisitions, as well as dispossession of combustion assets. It plans to generate 45% of its revenue from products for electric vehicles by 2030, from less than 3% in 2021.3 Proponents believe this will cause disruption to current BorgWarner operations, which may result in significant changes to the number of workers, skills required, and manufacturing facility size and location, leading to impacts on While BorgWarner indicates it conducts training for salaried employees, its reporting lacks detail on the scale and reach of programs for the workforce affected by the electrification transition. It does not discuss the impact of its electrification strategy on communities and other stakeholders, or the locations where impacts are anticipated. It also does not report any strategies to support hourly employees, which comprise approximately two-thirds of its workforce. Resolved: Shareholders request that the Board Supporting Statement: Shareholders recommend the report include, at Board discretion:
Stockholder Proposal to Request the Board of Directors to Publish a Just Transition Report Management Recommendation and Response Our Recommendation and Response The Board of Directors unanimously recommends that stockholders vote against Proposal 7 requesting that the Board publish a Just Transition report. The Company already has a sustainability program that includes assessing and disclosing impacts on its workforce and communities in which it operates. We recognize that our electrification strategy will impact our workforce, our stakeholders, and the Through regular engagement with our stockholders, we have received feedback that our sustainability strategy and disclosure meet, and frequently exceed, expectations. This past fall, we spoke with stockholders representing The ILO’s Just Transition standards are nascent and still in “beta” form. We believe it is in the best interest of the
BorgWarner recognizes the important role that our people play in achieving our goals and has implemented strategies to develop our workforce to have the skills to meet the needs of our evolving business. As we implement Charging Forward, we are focused on maintaining and improving the Charging Forward is creating opportunities for stakeholders and the communities in which it operates. One of the goals of a We anticipate growth for much our combustion-related portfolio. Although the In summary, the
Our Board recommends a vote “ 2023 Proxy Statement | 85 Other Information Other Information Proxy Statement This Proxy Statement is
Internet Availability of Proxy Materials As permitted by rules adopted by the SEC, we are providing our Proxy Statement, the form of proxy, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 to stockholders electronically via the internet. (Our Annual Report on Form 10-K for our fiscal year ended December 31, 2022, which includes our audited financial statements, is not to be regarded as proxy solicitation material.) Our Proxy Statement and our 2022 Annual Report to stockholders are available at www.proxyvote.com. On or about March 17, 2023, we will initiate delivery of proxy materials to our stockholders of record as of the close of business on March 1, 2023 via: (1) a
Record Date and Shares Outstanding Only stockholders of record at the close of business on March 1, 2023 are entitled to vote at the meeting. As of such date, there were 233,785,305 outstanding shares of common stock. A list of all record holders of our stock will be available for examination by stockholders during normal business hours at 3850 Hamlin Road, Auburn Hills, Michigan 48326 at least 10 days prior to the Annual Meeting and will also be available for examination at the Annual Meeting. On each matter considered at our Annual Meeting, you are entitled to one vote for each of your shares of common stock.
Other Information Voting You have a choice of voting over the internet, by telephone, in person, or by using a traditional proxy card.
The If you properly sign and return your signed proxy card, or vote by telephone, or by the internet before If you hold your stock in “street name”, you may change or revoke your voting instructions by following the specific directions provided to you by your bank or broker. If you are a stockholder of record, you may change or revoke your vote at any time before the vote is taken by delivering a written notice of revocation to the Secretary of the The election inspectors will tabulate the votes cast prior to the meeting and at the meeting to determine whether a quorum is present. The presence in person or by proxy of the holders of a majority of common stock will constitute a quorum. A quorum is necessary to transact business at the Annual Meeting. Shares of common stock represented by proxies that reflect abstentions or “broker non-votes” (i.e., shares held by a broker or nominee that are represented at the Annual Meeting, but with respect to which such broker or nominee is not empowered to vote on a particular proposal) will be counted as present and entitled to vote for purposes of determining the presence of a quorum. Required Vote With respect to Proposal 1, our By-laws require that a director nominee will be elected in an uncontested election only if he or she receives a majority of the votes cast with respect to his or her election (that is, the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Each of our director nominees is currently serving on our Board. If a nominee who is currently serving as a director is not re-elected, Delaware law provides that the director would continue to serve on our Board as a “holdover director.” Under our By-laws and Corporate Governance Guidelines, each director submits an advance, contingent, and irrevocable resignation that our Board may accept if stockholders do not re-elect the director. In that situation, our Corporate Governance Committee would make a recommendation to our Board about whether to accept or reject the resignation or whether to take other action. Our Board would act on the Corporate Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date that the election results were certified. If you hold your stock in street name, your brokerage firm or other nominee may not vote your shares with respect to the election of directors without specific instructions from you as to how to vote with respect to the election of each of the eight nominees for director. These are called broker non-votes. Abstentions and broker non-votes represented by submitted proxies will not be taken into account in determining the outcome of the election of directors. Each of Proposal 2 (the advisory vote on executive compensation), Proposal 4 (stockholder ratification of the selection of our auditors), Proposal 5 (approval of the BorgWarner Inc. 2023 Stock Incentive Plan), Proposal 6 (a stockholder proposal to change the special meeting share ownership threshold), and Proposal 7 (a stockholder proposal regarding publication of a Just Transition Report) requires the affirmative vote of a majority of the votes cast to be approved. For 2023 Proxy Statement | 87 Other Information Proposal 3, the frequency receiving the greatest number of votes will be considered to be the frequency recommended by our stockholders. Accordingly, an abstention or a broker non-vote will have no effect on the outcome of any of those proposals. Proposals 2 and 3 are advisory votes. Even though your vote with respect to Proposals 2 and 3 are advisory and therefore will not be binding on the Company, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation and deciding on the frequency of voting on executive compensation, respectively. We expect that only Proposal 4 will be considered “routine” under the rules of the NYSE. Therefore, your brokerage firm or other nominee may not vote your shares with respect to Proposals 1, 2, 3, 5, 6, or 7 without specific instructions from you as to how to vote. As to Proposal 4, however, we expect that your brokerage firm or other nominee may vote your shares without specific instructions from you as to how to vote. Householding Information We have adopted a procedure called “householding,” which has been approved by the SEC. Under this procedure, a single copy of our annual report to stockholders, our Proxy Statement, or our Notice of Internet Availability of Proxy Materials, as applicable, will be sent to any household at which two or more stockholders reside, unless one of the stockholders at that address notifies us that they wish to receive individual copies. This procedure reduces our printing costs and fees. Stockholders who participate in householding will continue to receive separate proxy cards. Householding will not affect dividend check mailings, if any, in any way. We will deliver promptly upon written or oral request a separate copy of our annual report to stockholders, our Proxy Statement or our Notice of Internet Availability of Proxy Materials, as applicable, to any stockholder at a shared address to which a single copy of those documents was delivered. If you share an address with another stockholder and you wish to receive a separate copy of any of those documents, you may inform us of your wish by contacting Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326 (tel: 1-248-754-9200). Similarly, if you share an address with another stockholder that is receiving multiple copies and wish to request that the number of copies of those documents being delivered to that address be reduced to a single copy, you may inform us of your wish by contacting Investor Relations at the above address and telephone number. Expenses of Solicitation The cost of solicitation of proxies will be borne by the Company. In addition to solicitation of proxies through the internet and by use of the mails, proxies may be solicited by directors, officers, and regularly engaged employees of the Company. None of these directors, officers, or employees will receive any extra compensation or will enter into any contract or arrangement for doing Stockholder Proposals Stockholder proposals that are intended to be presented at the A stockholder who intends to present business, including the election of a director, at the
Other Information should
Proxy Access We have a proxy access right in our By-laws that permits a stockholder, or a group of up to 25 stockholders, owning continuously for at least three years shares of our Company representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees constituting up to 20% of our Board, provided that the stockholder(s) and the nominee(s) satisfy the requirements of our By-laws. For the 2024 Annual Meeting of Stockholders, notice of proxy access director nominees must be received by our Secretary at 3850 Hamlin Road, Auburn Hills, Michigan, 48326 no earlier than October 19, 2023 and no later than the close of business on November 18, 2023. Process for Nomination by Stockholders Stockholders who wish to nominate candidates other than pursuant to the proxy access right must do so in accordance with the procedures in our By-laws. Stockholders submitting such nominations must provide the information and background material to our Secretary, 3850 Hamlin Road, Auburn Hills, Michigan 48326 not less than 90 nor more than 120 days prior to the first anniversary of the preceding year’s Annual Meeting. Accordingly, any stockholder who wishes to have a nomination considered at the 2024 Annual Meeting must deliver the required materials between December 28, 2023 and January 27, 2024. The Company’s By-laws require, among other things, that the nominating stockholder disclose all material monetary agreements between the nominating stockholder and the nominees; that director nominees (including our Board’s nominees) complete a questionnaire regarding the nominee’s background, qualifications, and conflicts of interest; and that stockholders nominating candidates must disclose economic interests, including all direct and indirect compensation between or among such stockholder and such stockholder’s respective affiliates and associates, on the one hand, and each proposed nominee and his or her respective affiliates and associates, on the other hand. The Company’s Corporate Governance Committee Charter provides that the Corporate Governance Committee considers suggestions for Board membership submitted by stockholders in accordance with the notice provisions and procedures set forth in our By-laws. In addition, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must comply with the additional requirements of SEC Rule 14a-19(b). Available Information on Corporate Governance and SEC Filings Through its website(www.borgwarner.com), the Company makes available, free of charge, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings with the SEC, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The Company also makes the following documents available on its website: the Audit Committee Charter; the Compensation Committee Charter; the Corporate Governance Committee Charter; the Company’s Corporate Governance Guidelines; the No person is authorized to give any information, or make any representation, other than that contained in this 2023 Proxy Statement | 89 Other Information Other Matters The Company is not aware of any business to come before the Annual Meeting other than the matters described in this Proxy Statement. However, if any other matters should properly come before this meeting, votes pursuant to the proxy will be cast thereon in accordance with the discretion of the persons named in the accompanying proxy. Forward-Looking Statements This Proxy Statement contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,” “forecasts,” “goal,” “guidance,” “initiative,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Further, all statements, other than statements of historical fact contained or incorporated by reference in this Proxy Statement that we expect or anticipate will or may occur in the future regarding our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. All forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. Forward-looking statements are not guarantees of performance, and the Company’s actual results may differ materially from those expressed, projected or implied in or by the forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Proxy Statement. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and some being beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. We do not undertake any obligation to update or announce publicly any updates to or revisions to any of the forward-looking statements in this Proxy Statement to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements.
Appendices Appendix A — Non-GAAP Reconciliations Net Sales Reconciliation to Relative Revenue Growth The Company defines relative revenue growth as (a) the annual change in revenue, excluding the impact of changes in currency exchange rates and merger, acquisition, and disposition activity (in the year of the merger, acquisition, or disposition), less (b) the annual change in industry vehicle production, weighted to reflect the Company’s relative participation in the vehicle markets of the various regions of the world and the Company’s relative participation in the passenger car and commercial vehicle markets. The Company determines the change in industry vehicle production using data published by IHS Automotive, a leading global automotive research firm.
2023 Proxy Statement | 91 Appendices Earnings Per Share Reconciliation to Adjusted Earnings Per Share Adjusted earnings per diluted share (Adj. EPS) is defined as earnings per diluted share adjusted to eliminate the impact of restructuring expense; merger, acquisition, and divestiture expense; other net expenses, discontinued operations; other gains and losses not reflective of the Company’s ongoing operations; and any related tax effects, divided by diluted shares outstanding.
Appendices Operating Income and Margin Reconciliation to Adjusted Operating Income and Margin We determined the 2022 Adjusted Operating Margin, excluding Santroll and Rhombus, from the Company’s reported financial results, which were adjusted for non-comparable items as reported in the Company’s financial statements, including restructuring, and other non-comparable items.
Net Cash Provided by Operating Activities Reconciliation to Free Cash Flow We determined the 2022 FCF from the Company’s reported financial results.
2023 Proxy Statement | 93 Appendices Appendix B — BorgWarner Inc. 2023 Stock Incentive Plan BORGWARNER INC. SECTION 1.Purpose and Effective 1.1Purpose. The purpose of the Plan is to give the Company a significant advantage in attracting, retaining and motivating officers, employees and directors and to provide the Company, its subsidiaries and its Affiliates with the ability to provide incentives more directly linked to the profitability of the Company’s businesses and increases in stockholder value. 1.2Effective Date. The Plan will become effective, and Awards may be granted under the Plan, on and after the date the Company’s stockholders approve the Plan (the “Effective Date”). The Plan will terminate as provided in Section 16.1. Upon the Effective Date, the Prior Plan will terminate and no new awards will be granted under the Prior Plan, although awards previously granted under the Prior Plan and still outstanding will continue to be subject to all the terms and conditions of the Prior Plan. SECTION 2. For purposes of the Plan, the following terms are defined as set forth below: 2.1 “Affiliate” means a corporation or other entity controlled by the Company and designated by the Committee as such. 2.2 “Award” means a Stock Appreciation Right, Stock Option, Restricted Stock, Stock Unit, Performance Unit, Performance 2.3 “Award Agreement” means a written agreement or notice memorializing the terms and conditions of an Award. 2.4 “Board” means the Board of Directors of the Company. 2.5 “Breach of Conduct” means, for purposes of the Plan, any of the following: (a) actions by the participant resulting in the termination of the participant’s employment with the Company or any Affiliate for Cause, (b) the participant’s violation of the Company’s Code of Ethical Conduct where such business standards have been distributed or made available to the participant, (c) the participant’s unauthorized disclosure to a third party of confidential information, intellectual property, or proprietary business practices, processes, or methods of the Company; or willful failure to protect the Company’s confidential information, intellectual property, proprietary business practices, processes, or methods from unauthorized disclosure, or (d) the participant’s soliciting, inducing, or attempting to induce employees of the Company and its Affiliates to terminate their employment with the Company or an Affiliate. 2.6 “Cash Incentive Award” means the right granted under Section 12 to receive a cash payment to the extent Performance Goals are achieved (or other requirements are met). 2.7 “Cause” means: (a) the participant’s conviction of, or entering a guilty plea, no contest plea or nolo contendre plea to any felony or to any crime involving dishonesty or moral turpitude under Federal law or the law of the state in which such action occurred, (b) the participant’s commission of any material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Affiliates,
Appendices (c) dishonesty in the course of fulfilling the participant’s employment duties, (d) the participant’s misappropriation of material funds or assets of the Company for personal use or any act of theft or fraud as determined by the Company,
(f) the participant’s breach of material Company policy, (g) the participant’s refusal to perform lawful duties as directed in good faith by the Company, (h) willful and deliberate failure on the part of the participant to perform his employment duties in any material (i) the participant’s substantial or repeated neglect of duties (even if not willful and deliberate) after notice and an opportunity to cure, (j) the participant’s gross negligence or willful misconduct that results or is reasonably expected to result in substantial harm to the Company (either singly or on a consolidated basis), or (k) the participant’s breach of written obligations to the Company or any subsidiary in respect of confidentiality and/or the use or ownership of proprietary information. 2.8 “CEO” means the chief executive officer of the Company or any successor corporation. 2.9 “Change in Control” has the meaning set forth in Section 15.2.
2.10 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. Any reference to a section of the Code shall include all the rules and regulations promulgated thereunder. 2.11 “Commission” means the Securities and Exchange Commission or any successor agency. 2.12 “Committee” means the Committee referred to in Section 3.1. 2.13 “Company” means BorgWarner Inc., a Delaware corporation. 2.14 “Disability” means that the participant: (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident or health plan covering the Company’s employees, or (c) is determined to be permanently disabled by the Social Security Administration. “Disability” shall be determined by the plan administrator of the RSP under the disability claims procedures of the RSP but applying the foregoing definition of “Disability.” 2.15 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. Any reference to a section of the Exchange Act shall include all the rules and regulations promulgated thereunder. 2023 Proxy Statement | 95 Appendices 2.16 “Fair Market Value” means, per Share on a particular date, (i) if the Shares are listed on a national securities exchange, the last sales price on that date on the national securities exchange on which the Shares are then listed (including without limitation, the New York Stock Exchange or the NASDAQ Stock Market), as reported on the composite tape or other reporting system of such exchange, or if no sales of Shares occur on such exchange on such date, then on the last preceding date on which there was a sale on such exchange; or (ii) if the Shares are not listed on a national securities exchange, but are traded in an over-the-counter market, the last sales price (or, if there is no last sales 2.17 “Full-Value Award” means Restricted Stock, Stock Units, Performance Stock Units and any other Award under which the value of the Award is measured as the full value of a Share, rather than the increase in the value of a Share. 2.18 “Incentive Stock Option” means any Stock Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
(a) on or after the last day of the calendar month coincident with or immediately following the day on which the participant attains age 55 if the participant has been credited with at least 10 Years of Service, or (b) in the case of Section 8 (Restricted Stock), Section 9 (Stock Units), Section 10 (Performance Units), and Section 11 (Performance
2.32 “Share” means a share of Stock.
In addition, certain other terms used herein have definitions given to them in the first place in which they are used. SECTION 3. 3.1Compensation Committee Administration. Subject to Section 3.2, the Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board, composed of not less than three (3) members of the Board, each of whom shall be appointed by and serve at the pleasure of the Board and who shall also be: (a) “non-employee directors” within the meaning of Rule 16b-3, and (b) “independent directors” within the meaning of any applicable stock exchange rule. 3.2Awards Granted to the Board. With respect to Awards granted to members of the Board who are not officers or employees of the Company, a subsidiary, or an Affiliate, the Plan shall be administered by the Committee subject to the approval of a majority of all members of the Board (including members of the Committee) who are “non-employee directors” within the meaning of Rule 16b-3 and “independent directors” with the meaning of any applicable stock exchange rule. With respect to such Awards, all references to the “Committee” contained in the Plan shall be deemed and construed to mean the Committee, the decisions of which shall be subject to the approval of a majority of such members of the Board who are
both “non-employee directors” within the meaning of Rule 16b-3 and “independent directors” within the meaning of any applicable stock exchange rule. 2023 Proxy Statement | 97 Appendices 3.3Committee Authority. Among other things, the Committee shall have the authority, subject to the terms of the Plan: (a) to interpret the provisions of the Plan or any agreement covering an Award; (b) to select the officers, employees and directors to whom Awards may from time to time be granted; (c) to determine whether and to what extent Awards are to be granted hereunder and the type or types of Awards to be granted; (d) to determine the number of Shares to be covered by each Award granted hereunder; (e) to determine the terms and conditions of any Award granted hereunder (including, but not limited to, the exercise price (subject to Section 6.3(a)), any vesting restriction or limitation and any vesting acceleration or forfeiture waiver regarding any Award and the Shares relating thereto, based on such factors as the Committee shall determine); (f) to modify, amend or adjust the terms and conditions of any Award, at any time or from time to time to the extent required or permitted by the Plan or by applicable law, including but not limited to any clawback requirements or policy of the Company as may be in effect from time to time; (g) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan; (h) to determine to what extent and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred; and (i) to determine under what circumstances a Stock Option or a Stock Appreciation Right may be settled in cash or Stock under Section 6 or Section 7, respectively. 3.4Grants by the CEO. The Committee may authorize the CEO to grant Awards pursuant to the terms of the Plan with respect to (a) officers and employees of the Company and its subsidiaries and Affiliates who are not, at the time of grant, subject to Section 16 of the Exchange Act; and (b) any individual as an inducement to accept an offer of employment (including Awards to individuals who may become, upon accepting an offer of employment, officers of the Company and its subsidiaries and Affiliates who are subject to Section 16 of the Exchange Act). Any such authorization so made shall be consistent with recommendations made by the Board’s Compensation Committee to the Board regarding non-CEO compensation, incentive-compensation plans and equity-based plans. When such authorization is so made by the Committee, the CEO shall have the authority of the Committee described in Sections 3.3(a), 3.3(b), 3.3(c), and 3.3(d) with respect to the granting of such Awards; provided, however, that the Committee may limit or qualify such authorization in any manner it deems appropriate. 3.5Committee Actions. The Committee may act only by a majority of its members then in office, except that the members thereof may: (a) delegate all or a portion of the administration of the Plan to one or more officers of the Company, provided that no such delegation may be made that would cause Awards or other transactions under the Plan to cease to be exempt from Section 16(b) of the Exchange Act, and (b) authorize any one or more of its members or any officer of the Company to execute and deliver documents on behalf of the Committee. 3.6Determinations Final. Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to the Plan or any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan participants.
Appendices
3.7Indemnification. In addition to such other rights of indemnification from the Company as they may have, the members of the Committee shall be indemnified by the Company against reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except that such member is liable for negligence or misconduct in the performance of his duties; provided that within sixty days after institution of any such action, suit or proceeding, the member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. SECTION 4.Stock Subject To Plan; Individual 4.1Share Reserve. Subject to adjustment as provided herein, 4.2Replenishment of Shares. If (i) an Award lapses, expires, terminates or is cancelled without the issuance of Shares under the Award (whether due currently or on a deferred basis), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares with respect to which the Award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, (iii) Shares are forfeited under an Award, (iv) an Award that is denominated in Shares (in whole or in part) is settled in cash or (v) Shares are issued under any Award and the Company subsequently reacquires them pursuant to rights reserved upon the issuance of the Shares, then such Shares shall be recredited to the Plan’s reserve and may again be used for new Awards under the Plan, but Shares recredited to the Plan’s reserve pursuant to clause (v) may not be issued pursuant to Incentive Stock Options. Notwithstanding the foregoing, in no event shall the following Shares be recredited to the Plan’s reserve: (x) Shares purchased by the Company using proceeds from Option exercises; (y) Shares tendered or withheld in payment of 4.3Individual Award Limits. Subject to adjustment as provided in Section 4.4, during any fiscal year of the Company, no individual non-employee director may be granted: (a) Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units, or Performance (b) an Award or payment or payment right outside the Plan that is payable or settleable in cash (or property other than Shares) that could result in a maximum payment of more than 4.4Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the Stock, other change in corporate structure affecting the Stock or any other event, which other event the Committee determines necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, adjust any or all of the following: (a) the number and type of Shares reserved for issuance and future grant under the Plan and the individual award limits under the Plan; (b) the exercise, purchase or grant prices with respect to any Award; (c) the number and type of Shares subject to outstanding Awards;
(d) the maximum number of Shares that may be issued as ISOs set forth in Section 4.1; and (e) the Performance Goals of an Award, 2023 Proxy Statement | 99 Appendices and in all cases subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws and rules of the stock exchange on which the Shares are then traded. Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or stock split or combination of the Shares (including a reverse stock split), if no action is taken by the Committee, adjustments contemplated by this Section that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or stock split or combination of the Shares. However, if any adjustment results in fractions of a Share, such fractional shares shall not be issued and shall be canceled for no consideration. Notwithstanding the forgoing, no adjustment will be made to outstanding Stock Options if (i) the adjustment would cause the Stock Options to provide for a deferral of compensation subject to Section 409A of the Code (and any applicable related regulations and guidance) or (ii) in the case of Incentive Stock Options, such adjustment would cause the Plan to violate Section 422 of the Code. If any of the transactions or events described in this Section constitutes a Change in Control or occurs subsequent to any Change in Control occurring after the Effective Date, then, subject to participants’ rights under Section 15 and the cash payment provisions of the following sentence, and unless the Committee otherwise determines prior to the first Change in Control occurring after the Effective Date, proportionate adjustments of the type described in this Section shall be made automatically such that the full economic value of the Awards to participants that are outstanding at the time of the transaction or event shall be preserved and not diminished as a result of the transaction or event. If any of the events described in this Section occur, the Committee may also (or in lieu of the adjustments described in this Section) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of the Award) in an amount determined by the Committee effective at such time as the Committee specifies (which may be the time such transaction or event is effective), but if such transaction or event constitutes a Change in Control, then (i) such payment shall be at least as favorable to the holder as the greatest amount the holder could have received in respect of such Award under Section 15, (ii) if Section 15 applies to the Award, such payment shall be allowed only to the extent Section 15(b) would allow acceleration of exercisability, vesting, issuance of shares or other payment in respect of such Award in connection with the Change in Control and (iii) from and after the Change in Control, the Committee may make such a provision only if the Committee determines that doing so is necessary to substitute, for each Share subject to an Award, the number and kind of shares of stock, other securities, cash or other property to which holders of Shares are or will be entitled in respect of each Share pursuant to the transaction or event in accordance with the last sentence of this Section. Further, and without limitation, subject to a participant’s rights under Section 15, in the event of any such merger or similar transaction, stock dividend, stock split or combination of Shares, distribution or other event described above, whether or not constituting a Change in Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Shares are not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Committee shall substitute, on an equitable basis as the Committee determines, for each Share then subject to an Award, the number and kind of shares of stock, securities, cash or other property to which holders of Shares are or will be entitled with respect to each Share pursuant to the transaction. SECTION 5. The Committee may grant Awards under the Plan to any of the following individuals: (i) officers and other employees of the Company, its subsidiaries and Affiliates who are responsible for or contribute to the management, growth and profitability of the business of the Company, its subsidiaries and Affiliates, as determined by the Committee, (ii) any individual that the Company, a subsidiary or an Affiliate has engaged to become an officer or employee and (iii) directors of the Company. SECTION 6.Stock 6.1Types. Stock Options granted under the Plan may be of two types: Incentive Stock Options and Non-Qualified Stock Options, provided however, that Incentive Stock Options may be granted only to employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
Appendices 6.2Grant. The Committee shall have the authority to grant participants Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights). The grant of a Stock Option shall be evidenced by an Award Agreement, which shall be delivered to the optionee and indicate on its face whether it is intended to be an agreement for an Incentive Stock Option or a Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date the Committee by
resolution selects an individual to receive a grant of a Stock Option, determines the number of Shares to be subject to such Stock Option to be granted to such individual and specifies the terms and provisions of the Stock Option. 6.3Option Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions and any additional terms and conditions as the Committee shall deem desirable: (a)Exercise Price.The exercise price per Share purchasable under a Stock Option shall be determined by the Committee and set forth in the Award Agreement, provided that the exercise price shall never be less than the Fair Market Value of the Shares subject to the Stock Option on the date of grant. (b)Option Term.The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the date of grant. (c)Exercisability.Except as otherwise provided herein, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the Committee may at any time, in whole or in part, accelerate the exercisability of any Stock Option. 6.4Exercise. Stock Options may be exercised by following the procedures the Committee establishes from time to time. The exercise price shall be paid in full in cash (by certified or bank check or such other instrument as the Company may accept) at the time of exercise or, if and to the extent set forth in the Award Agreement, may also be paid by one or more of the following: (a) in the form of unrestricted Stock already owned by the optionee having a Fair Market Value on the date of exercise equal to the exercise price; provided, however, that, in the case of an Incentive Stock Option, the right to make a payment in the form of already owned Shares may be authorized only at the time the Stock Option is granted; (b) by requesting that the Company withhold from the number of Shares otherwise issuable upon exercise of the Stock Option that number of shares having an aggregate Fair Market Value on the date of exercise equal to the exercise price for all of the Shares subject to such exercise; or (c) by a combination thereof, in each case in the manner provided in the Award Agreement. In the discretion of the Committee and if not prohibited by law, payment for any Shares subject to a Stock Option may also be made by delivering a properly executed exercise notice to the Company or its agent, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. 6.5Rights as a 6.6Cash Out. On receipt of a notice of exercise of a Stock Option, the Committee may elect to cash out all or part of the portion of the Shares for which a Stock Option is being exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Shares over the exercise price times the number of Shares for which the Option is being exercised on the effective date of such cash out. 2023 Proxy Statement | 101 Appendices SECTION 7.Stock Appreciation 7.1Grant. Stock Appreciation Rights may be granted as Awards under the Plan and may be granted alone or in addition to other Awards under the Plan. Each grant of a Stock Appreciation Right shall be confirmed by, and be subject to the terms of, an Award Agreement. 7.2Stock Appreciation Rights Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Committee, including the following: (a) A Stock Appreciation Right shall be exercisable as determined by the Committee and specified in the Award Agreement, but in no event after ten years from the date of grant. A Stock Appreciation Right may be exercised by giving written notice of exercise to the Company or its designated agent specifying the number of Shares as to which Stock Appreciation Right is being exercised.
(b) The base price of a Stock Appreciation Right shall not be less than the Fair Market Value of a Share on date of grant. (c) Upon the exercise of a Stock Appreciation Right, a participant shall be entitled to receive an amount in cash, Shares, or a combination thereof, as determined by the Committee in its discretion, equal to the product of (i) the difference between the base price of the Stock Appreciation Right and the Fair Market Value of a Share on the date of exercise of the Stock Appreciation Right, and (ii) the number of Shares as to which such Stock Appreciation Right shall have been exercised. 7.3No Rights as a Stockholder. In the case of any Stock Appreciation Right providing for, or in which the Committee has determined to make, payment in whole or in part in Stock, the holder thereof shall have no rights of a stockholder of the Company prior to the proper exercise of such Stock Appreciation Right, and if requested, prior to providing the representation described in Section SECTION 8.Restricted 8.1Grant. The Committee shall determine the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any participant, the Restriction Period and any other terms and conditions of the Awards. Each grant of Restricted Stock shall be confirmed by, and be subject to the terms of, a Restricted Stock Agreement. The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance measures of the participant or of the Company or subsidiary, division or department of the Company for or within which the participant is primarily employed or upon such other factors or criteria as the Committee shall determine. Where the grant or vesting of Restricted Stock is subject to the attainment of one or more Performance Goals, such shares of Restricted Stock shall be released from such restrictions only after the attainment of such Performance Goals has been certified by the Committee, unless the Committee determines otherwise. The provisions of Restricted Stock Awards need not be the same with respect to each participant. 8.2
8.3Termination of Employment. Shares of Restricted Stock shall be subject to the following terms and conditions: (a) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and Sections 8.3(b) and 15.1(b)(2), upon a participant’s Termination of Employment for any reason during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant.
Appendices (b) Except to the extent otherwise provided in Section 15.1(b)(2), the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions with respect to any or all of a participant’s shares of Restricted Stock in the event that such participant’s employment is involuntarily terminated (other than for Cause), or in the event of the participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement. 8.4Rights as a Stockholder; Dividends. Except as provided in this Section 8 and the applicable Restricted Stock Agreement, the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any dividends, provided, however, that cash dividends will either, at the discretion of the Committee, (i) be automatically deferred and reinvested in additional Restricted Stock that shall be subject
to the same restrictions, terms and conditions, including the vesting period, as the original grant of Restricted Stock, or (ii) be paid out in cash at the time that the Restricted Stock vests. If dividends are credited to the participant as additional shares of Restricted Stock, then the number of additional shares of Restricted Stock that shall be credited to the participant shall not exceed the amount that is the result of multiplying the number of shares of Restricted Stock held by the participant on the dividend record date by the dividend paid on each Share, and then dividing the amount by the Fair Market Value of a Share on the dividend payment date. For the avoidance of doubt, in no event will dividends be distributed to a participant unless, until and to the same extent as the underlying Restricted Stock vests. SECTION 9.Stock 9.1Grant. The Committee shall determine the time or times at which grants of Stock Units will be awarded, the number of Stock Units to be awarded to any participant, the time or times within which such Awards may be subject to forfeiture, and any other terms and conditions of the Awards, in addition to those contained in Section 9.2. The provisions of Stock Units Awards need not be the same with respect to each participant. Each grant of Stock Units shall be confirmed by, and be subject to, the terms of an Award Agreement. 9.2Terms and Conditions. All grants of Stock Units shall be subject to the following terms and conditions. (a) Except to the extent otherwise provided in the applicable Award Agreement and Section 9.2(b) and Section 15.1(b)(3), upon a participant’s Termination of Employment for any reason prior to the date on which Stock Units awarded to the participant shall have vested, all rights to receive cash or Stock in payment of such Stock Units shall be forfeited by the participant. (b) The Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all of a participant’s Stock Units in the event that such participant’s employment is involuntarily terminated (other than for Cause), or in the event of the participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement. (c) In any case in which the Committee has waived, in whole or in part, any or all remaining payment limitations with respect to any or all of a participant’s Stock Units, payment of such participant’s Stock Units shall occur on the time(s) or event(s) otherwise specified pursuant to Section 9.2(e), in such participant’s Award Agreement. (d) With respect to any grant of Stock Units, the participant who receives such grant shall acquire no rights of a stockholder unless and until the participant becomes the holder of Shares delivered to such participant with respect to such Stock Units. (e) The Award Agreement for each award of Stock Units shall specify the time(s) or event(s) of payment of vested Stock Units, which time(s) or event(s) shall be limited to one or more of the following: (1) the date on which the Stock Units shall have vested, (2) the date of the participant’s Termination of Employment, or (3) a specified date. In the case of an Award of Stock Units providing for payment upon the vesting of the Stock Units, payment shall be made as soon as administratively practicable thereafter, but in no event later than March 15 of the year following the year in which the vesting of the Stock Units occurs. In the case of an Award of Stock Units providing for payment upon 2023 Proxy Statement | 103 Appendices Termination of Employment, payment shall be made on or after the Termination of Employment in the year in which the Termination of Employment occurs, except that in the case of a Specified Employee, payment shall be made on the first day of the seventh month following the month in which such Termination of Employment occurs or, if earlier, the date of the participant’s death. In the case of an Award of Stock Units providing for a specified date for payment, payment shall be made as soon as practicable on or after the specified date, but in no event no later than December 31 of the year in which the specified date occurs. (f) On the time(s) or event(s) specified in the applicable Award Agreement for the payment of cash or Stock with respect to vested Stock Units, the Company shall deliver to the participant either (1) a number of Shares equal to the number of vested Stock Units, or (2) cash equal to the Fair Market Value of such number of Shares. The form of payment shall be determined by the Committee in its discretion or as provided in the applicable Award Agreement.
9.3Dividend Equivalents. The Committee may in its discretion provide that a participant shall be entitled to receive dividend equivalents on outstanding Stock Units. Such dividend equivalents may, as determined by the Committee at the time the Award is granted, be: (a) paid in cash at the time the Stock Unit to which it relates is settled; (b) credited to the participant as additional Stock Units, which shall vest and be settled at the same time as the Stock Unit to which it relates; or (c) paid or credited (as appropriate) in any combination of cash and additional Stock If dividend equivalents are credited to the participant as additional Stock Units, then the number of additional Stock Units that shall be credited to the participant with respect to any dividend on Stock shall not exceed the amount that is the result of multiplying the number of Stock Units credited to the participant on the dividend record date by the dividend paid on each Share and then dividing this amount by the Fair Market Value of a Share on the dividend payment date. For the avoidance of doubt, in no event will dividends or dividend equivalents be distributed to a participant unless, until and to the same extent as the related shares of Stock or Stock Units have vested. SECTION 10.Performance 10.1Grant. The Committee shall determine the time or times at which Performance Units shall be awarded, the number of Performance Units to be awarded to any participant, the duration of the Performance Period and any other terms and conditions of the Award, in addition to those contained in Section 10.2. Each grant of Performance Units shall be confirmed by, and be subject to, the terms of an Award Agreement. 10.2Terms and Conditions. Performance Units shall be subject to the following terms and conditions. (a) The Committee may condition payment with respect to Performance Units on the attainment of Performance Goals. The Committee may also condition Performance Unit payments upon the continued service of the participant. The provisions of such Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each participant. (b) Except to the extent otherwise provided in the applicable Award Agreement, Section 10.2(c) and Section 15.1(b)(4), upon a participant’s Termination of Employment for any reason (c) The Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all of such participant’s Performance Units in the event that such participant’s employment is involuntarily terminated (other than for Cause), or in the event of the participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement.
Appendices (d) In any case in which the Committee has, prior to the expiration of the Performance Period, waived, in whole or in part, any or all payment limitations with respect to a participant’s Performance Units, such participant shall receive payment with respect to his or her Performance Units in the year following the year in which the Performance Period ends or would have ended, at the same time as the Committee has provided for payment to all other Award recipients. (e) At the expiration of the Performance Period, unless otherwise determined by the Committee, the Committee shall evaluate the extent to which the Performance Goals for the Award have been achieved and shall determine the number of Performance Units granted to the participant that have been earned, and the cash value thereof. The Company shall then deliver to the participant either a cash payment equal in amount to the cash value of the Performance Units or Shares equal in value to the cash value of the Performance Units, with the form of payment determined by the Committee in its discretion or as provided in the applicable Award Agreement. Payment shall occur as soon as administratively practicable thereafter, but in no event later than March 15 of the year following the year in which the Performance Period ends. SECTION 11.Performance 11.1Grant. The Committee shall determine the time or times at which Performance
attainment of Performance Goals and continued employment or service of the participant. The provisions of such Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient. 11.2Terms and Conditions. (a) Unless otherwise provided in Section 11.2(b) or Section 15.1(b)(4), upon a participant’s Termination of Employment during the Performance Period or before any applicable Performance Goals are satisfied, all rights to receive cash or Stock in payment of the Performance (b) Except to the extent otherwise provided in Section 15.1(b)(4), the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all such participant’s Performance (c) In any case in which the Committee has waived, in whole or in part, prior to the expiration of the Performance Period, any or all payment limitations with respect to a participant’s Performance (d) At the expiration of the Performance Period, unless otherwise determined by the Committee, the Committee shall evaluate the extent to which the Performance Goals for the Award have been achieved and shall determine the number of Performance 11.3 Dividend Equivalents. The Committee may in its discretion provide that a participant shall be entitled to receive dividend equivalents on outstanding Performance Stock Units. Such dividend equivalents may, as determined by the Committee at the time the Award is granted, be: (a) paid in cash at the time the Performance Stock Units to which it relates are settled; (b) credited to the participant as additional Performance Stock Units, which shall vest and be earned and settled at the same time as the Performance Stock Units to which they relate; or 2023 Proxy Statement | 105 Appendices (c) paid or credited (as appropriate) in any combination of cash and additional Performance Stock Units; provided that in no event may dividend equivalents relating to Performance Stock Units provide for payment prior to the time at which such Performance Stock Units are earned and vested and, notwithstanding anything to the contrary herein, dividend equivalents paid or credited with respect to Performance Stock Units shall only be paid out to or earned by a participant to the extent that the vesting and performance conditions applicable to the underlying Performance Stock Units are satisfied. If dividend equivalents are credited to the participant as additional Performance Stock Units, then the number of additional Performance Stock Units that shall be credited to the participant with respect to any dividend on Stock shall not exceed the amount that is the result of multiplying the number of Performance Stock Units credited to the participant on the dividend record date by the dividend paid on each Share and then dividing this amount by the Fair Market Value of a Share on the dividend payment date. For the avoidance of doubt, in no event will dividends or dividend equivalents be distributed to a participant unless, until and to the same extent as the related shares of Stock or Performance Stock Units have vested. SECTION 12.Cash Incentive Subject to the terms of the Plan, the Committee will determine all terms and conditions of Cash Incentive Awards, including but not limited to the Performance Goals, the Performance Period, the potential amount payable, and the timing of payment; provided that the Committee must require that payment of all or any portion of the amount subject to the Cash Incentive Award is contingent on the achievement or partial achievement of one or more Performance Goals during the period the Committee specifies, although the Committee may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a participant’s death, Disability, or Retirement or in the event that such participant’s employment is involuntarily terminated (other than for Cause). Notwithstanding the foregoing, nothing hereunder shall preclude or limit the Company or the Administrator from granting annual incentive awards that are solely payable in cash outside of the terms of the Plan. SECTION 13.Minimum Vesting All Awards shall have a minimum vesting period of one year from the date of grant. For purposes of Awards granted to non-employee directors, “one year” may mean the period of time from one annual meeting of stockholders to the next annual meeting of stockholders, provided that such period of time is not less than 50 weeks. Notwithstanding the foregoing, the Committee may grant Awards with less than a one-year vesting requirement, provided such Awards do not relate to more than 5% of the number of shares reserved under Section 4.1. SECTION 14.Repricing and Backdating Notwithstanding anything in the Plan to the contrary, and except for the adjustments provided for under the Plan, neither the Committee nor any other person may (i) amend the terms of outstanding Options or Stock Appreciation Rights to reduce the exercise or base price of such outstanding Options or Stock Appreciation Rights; (ii) cancel outstanding Options or Stock Appreciation Rights in exchange for Options or Stock Appreciation Rights with an exercise or base price that is less than the exercise or base price of the original Options or Stock Appreciation Rights; or (iii) cancel outstanding Options or Stock Appreciation Rights with an exercise or base price above the current Fair Market Value of a Share in exchange for cash or other securities, in each case, without prior approval of the Company’s stockholders. In addition, the Committee may not make a grant of an Option or SAR with a grant date that is effective prior to the date the Committee takes action to approve such Award.
Appendices
SECTION 15.Change in Control 15.1Impact of Event. If a participant has in effect an employment, retention, change in control, severance or similar agreement with the Company, a subsidiary or any Affiliate that provides a more favorable result upon a Change in Control on the participant’s Awards, then such agreement shall control in respect of such Awards. In all other cases, unless the Committee provides for a more favorable result in an Award Agreement (in which case such Award Agreement shall control over the provisions hereof), in the event of a Change in Control: (a) The successor or purchaser in the Change in Control transaction may assume an Award or provide a replacement award with terms and conditions at least as favorable as the terms and conditions in effect prior to the Change in Control, provided that any such assumed Award or replacement award shall: (1) have substantially equivalent economic value to the Award (as determined by the Committee as constituted immediately prior to the Change in Control); (2) relate to a class of equity that is (or will be within 5 business days following the Change in Control) listed to trade on a recognized securities market; (3) provide the participant with rights and entitlements substantially equivalent to or better than the rights and entitlements applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment (to the extent consistent with Section 409A of the Code, if applicable), including all provisions applicable in respect of such Award that provide for accelerated vesting; (4) with respect to Awards that vest upon the attainment of one or more Performance Goals, if the Change in Control occurs during the course of a Performance Period applicable to the Award, then (i) the Performance Goals shall be deemed to have been satisfied at the target level specified in the participant’s award agreement or, if greater, as otherwise specified by the Committee at or after grant, and (ii) any assumed or substituted award shall not include a performance objective,unless otherwise determined by the Committee as constituted immediately prior to the Change in Control; and (5) have terms and conditions providing that, if within two (2) years following a Change in Control either (i) the successor or purchaser in the Change in Control transaction (or any affiliate thereof) terminates the participant’s employment or service without Cause or (ii) if the participant is subject to any employment, retention, change in control, severance or similar agreement with the successor, purchaser, the Company or any affiliate thereof under which the participant has the right to certain benefits if the participant terminates his or her employment or service for “good reason” (as such term is defined in such agreement), such participant does, in fact, terminate his or her employment or service for “good reason”, then the following provisions shall apply to any assumed Awards or replacement awards described herein: (A) Effective upon the date of the participant’s termination of employment or service, all of such participant’s outstanding Awards or replacement awards automatically shall vest (assuming, for any Award the vesting of which is subject to Performance Goals for which the Performance Period had not been completed as of the date of such termination, that such goals had been met at the target level); and (B) If the assumed Award or replacement award relates to a class of equity that is not then listed to trade on a recognized securities market, then, at the election of a participant, at the time of exercise or settlement of such Awards or replacement awards, the participant may elect to receive, in lieu of the issuance of such equity, a cash payment equal to the fair market value of the equity otherwise issuable thereunder (such payment calculated using the definition of “Fair Market Value” under the Plan as applied to the equity otherwise issuable under the assumed Award or replacement award).
(b) If the successor or purchaser in the Change in Control transaction does not assume the Awards or issue replacement awards as provided in clause (a), then immediately prior to the date of the Change in Control: (1) Any Stock Options and Stock Appreciation Rights outstanding as of the date such Change in Control is determined to have occurred and not then exercisable and vested shall become fully exercisable and vested to the full extent of the original grant. (2) The restrictions applicable to any outstanding Restricted Stock shall lapse as of the date such Change in Control is determined to have occurred, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. 2023 Proxy Statement | 107 Appendices (3) The restrictions applicable to any outstanding Stock Units shall lapse as of the date such Change in Control is determined to have occurred, and such Stock Units shall become free of all restrictions and become fully vested. Payment for Stock Units that have vested as a result of this Section 15.1(b)(3) shall occur on the time(s) or event(s) otherwise specified in the Award recipient’s Award Agreement. (4) The restrictions applicable to any outstanding Performance Units and Performance (A) in the year following the year in which the Performance Period would have otherwise ended absent a Change in Control, or (B) if earlier, as soon as practicable in the year in which the Award recipient’s Termination of Employment occurs; provided, however, that in the case of a “Specified Employee” who becomes entitled to payment of Performance Units or Performance 15.2Definition of Change in Control. For purposes of the Plan, a “Change in Control” shall mean the happening of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange (1) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of Section 15.2(a), the following acquisitions shall not constitute a Change in Control:
(W) any acquisition directly from the Company, (X) any acquisition by the Company, (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (Z) any acquisition by any corporation pursuant to a transaction described in paragraphs (1), (2) and (3) of Section 15.2(c); or (b) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) and cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such
Appendices individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, statutory share exchange, merger or consolidation or similar transaction involving the Company or any of its Subsidiaries or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity by the Company or any of its Subsidiaries (each of the foregoing, a “Business Combination”), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then outstanding voting securities entitled to vote generally in the (2) no Person (excluding any corporation resulting from such Business Combination or any employee plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, if an Award is considered deferred compensation subject to the provisions of Section 409A of the Code, and if a payment under such Award is triggered upon a “Change in Control,” then the foregoing definition shall be deemed amended as necessary to comply with Section 409A of the Code.
SECTION 16.Term, Amendment and 16.1Term of Plan. Unless terminated sooner by the Board, the Plan will terminate 16.2Amendment by the Board. The Board may amend, alter, or discontinue the Plan at any time, but no amendment, alteration or discontinuation shall be made which would (a) impair the rights of a participant under an Award theretofore granted without the participant’s consent, except such an amendment made to cause the Plan to qualify for the exemption provided by Rule 16b-3, or (b) disqualify the Plan from the exemption provided by Rule 16b-3, except that the Board shall always have the authority to amend the Plan and the terms of any Award theretofore granted to take into account changes in law and tax and accounting rules. 2023 Proxy Statement | 109 Appendices 16.3Amendment by the (a) to the extent required or permitted by the Plan or by applicable law, including but not limited to any clawback requirements or policy of the Company as may be in effect from time to time, or (b) an amendment made to cause the Plan or Award to qualify for the exemption provided by Rule 16b-3. 16.4Approval by Stockholders. No amendment shall be made to the Plan without the approval of the Company’s stockholders to the extent such approval is required by law, rules of the stock exchange on which the Shares are then traded, or agreement. SECTION 17.Cancellation and Rescission of 17.1Reasons for Cancellation or (a) a participant has violated the terms of the Plan or the Award Agreement under which such Award has been made, or (b) the participant has committed a Breach of Conduct. In addition, for a period of one year following the exercise, payment or delivery of an Award, the Committee may rescind any such exercise, payment or delivery of an Award upon its determining that the participant committed a Breach of Conduct prior to the exercise, payment or delivery of the Award, or within six months thereafter subject to any clawback requirements or policy of the Company as may be in effect from time to time. 17.2Committee’s Determination Binding. In the case of an Award’s cancellation, forfeiture, or rescission due to a Breach of Conduct by reason of the participant’s conviction of, or entering a guilty plea, no contest plea or nolo contendre plea to any felony or to any crime involving dishonesty or moral turpitude, the Committee’s determination that a participant has committed a Breach of Conduct, and its decision to require rescission of an Award’s exercise, payment or delivery shall be conclusive, binding, and final on all parties. In all other cases, the Committee’s determination that a participant has violated the terms of the Plan or the Award, or has committed a Breach of Conduct, and the Committee’s decision to cancel, declare forfeited or rescind an Award or to require rescission of an Award’s exercise, payment or delivery shall be conclusive, binding, and final on all parties unless the participant makes a written request to the Committee to review such determination and decision within thirty days of the Committee’s written notice of such actions to the participant. In the event of such a written request, the members of the Board who are “independent directors” within the meaning of the applicable stock exchange rule (including members of the Committee) shall review the Committee’s determination no later than the next regularly scheduled meeting of the Board. If, following its review, such directors approve, by a majority vote, (a) the Committee’s determination that the participant violated the terms of the Plan or the Award or committed a Breach of Conduct, and (b) the Committee’s decision to cancel, declare forfeited, or rescind the Award, such determination and decision shall thereupon be conclusive, binding, and final on all parties.
17.3Rescinded Awards. In the event an Award is rescinded or recovered, the affected participant shall repay or return to the Company any cash amount, Stock, or other property received from the Company upon the exercise, payment or delivery of such Award (or, if the participant has disposed of the Stock or other property received and cannot return it, its cash value at the time of exercise, payment or delivery), and, in the case of Stock or other property delivered to the participant, any gain or profit realized by the participant in a subsequent sale or other disposition of such Stock or other property. Such repayment and (or) delivery shall be on such terms and conditions as the Committee shall prescribe. 17.4Disgorgement of Awards. Any Awards granted pursuant to the Plan, and any Stock issued or cash paid pursuant to an Award, shall be subject to any recoupment or clawback policy that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.
Appendices SECTION 18.General 18.1Prohibition on Certain Dividends and Dividend Equivalent Payments. Notwithstanding anything to the contrary in the Plan, in no event may dividends or dividend equivalents be awarded with respect to Options, Stock Appreciation Rights or any other Award that is not a Full-Value Award; and, for the avoidance of doubt, this Plan expressly prohibits the payment of dividends or dividend equivalents on unvested Awards for all equity Award types. 18.2 Unfunded Status. The Plan constitutes an “unfunded” plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.
(a) by will or by the laws of descent and distribution, or, in the Committee’s discretion, pursuant to a written beneficiary designation, (b) pursuant to a qualified domestic relations order (as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder), or (c) in the Committee’s discretion, pursuant to a gift to such optionee’s “immediate family” members directly, or indirectly by means of a trust, partnership, or limited liability company, provided that the participant may not receive consideration for such transfer of an Award, provided that an Incentive Stock Option may only be transferred according to subsection (a). Subject to the terms of the Plan and the relevant Award Agreement, all Stock Options shall be exercisable only by the optionee, guardian, legal representative or beneficiary of the optionee or permitted transferee, it being understood that the terms “holder” and “optionee” include any such guardian, legal representative or beneficiary or transferee. For purposes of this Section
All The Company shall have no obligation to issue, or make a book-entry transfer or deliver certificates for, Shares under the Plan prior to: (a) obtaining approval from any governmental agency which the Company determines is necessary or advisable, (b) admission of such shares to listing on the stock exchange on which the Stock may be listed, and (c) completion of any registration or other qualification of such shares under any state or federal law or ruling of any governmental body which the Company determines to be necessary or advisable.
2023 Proxy Statement | 111 Appendices
18.13 Severability. If any provision of the Plan is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be impaired or affected thereby. The invalid, illegal, or unenforceable provision shall be treated as amended to the minimum extent necessary to make the provision valid, legal, and enforceable and to accomplish the Company’s original objectives for establishing the Plan.
2023 Proxy Statement | 113
(This page intentionally left blank.) BorgWarner Inc. BORGWARNER INC. ATTN: FAVIOLA BOGEN 3850 HAMLIN RD. AUBURN HILLS, MI 48326
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report on Form 10-K is/are available at www.proxyvote.com You invested in BORGWARNER INC. and it’s time to vote! You have the right to vote on proposals being presented at the Annual Meeting. This is an important notice regarding the availability of proxy material for the shareholder meeting to be held on April 26, 2023. Get informed before you vote View the Notice & Proxy Statement, Annual Report on Form 10-K online OR you can receive a free paper or email copy of the material(s) by requesting prior to April 12, 2023. If you would like to request a copy of the material(s) for this and/or future shareholder meetings, you may (1) visit www.ProxyVote.com, (2) call 1-800-579-1639 or (3) send an email to sendmaterial@proxyvote.com. If sending an email, please include your control number (indicated below) in the subject line. Unless requested, you will not otherwise receive a paper or email copy. Smartphone users Point your camera here and Vote in Person at the Meeting* April 26, 2023 3850 Hamlin Road THIS IS NOT A VOTABLE BALLOT This is an overview of the proposals being presented at the upcoming shareholder meeting. Please follow the instructions on the reverse side to vote these important matters. You invested in BORGWARNER INC. and it’s time to vote! You have the right to vote on proposals being presented at the Annual Meeting. This is an important notice regarding the availability of proxy material for the shareholder meeting to be held on April 26, 2023. Get informed before you vote View the Notice & Proxy Statement, Annual Report on Form 10-K online OR you can receive a free paper or email copy of the material(s) by requesting prior to April 12, 2023. If you would like to request a copy of the material(s) for this and/or future shareholder meetings, you may (1) visit www.ProxyVote.com, (2) call 1-800-579-1639 or (3) send an email to sendmaterial@proxyvote.com. If sending an email, please include your control number (indicated below) in the subject line. Unless requested, you will not otherwise receive a paper or email copy. Smartphone users Point your camera Vote in person at the April 26, 2023 This is an overview of the proposals being presented at the upcoming shareholder meeting. Please follow the instructions on the reverse side to vote these important matters. Check this box if you plan to attend the meeting and vote your shares.To ensure entry, you should review the meeting attendance requirements in the proxy statement. ☐ BORGWARNER INC. You invested in BORGWARNER INC. and it’s time to vote! You have the right to vote on proposals being presented at the Annual Meeting. This is an important notice regarding the availability of proxy material for the stockholder meeting to be held on April 26, 2023. Get informed before you vote View the Notice & Proxy Statement, Annual Report on Form 10-K online OR you can receive a free paper or email copy of the material(s) by requesting prior to April 12, 2023. If you would like to request a copy of the material(s) for this and/or future stockholder meetings, you may (1) visit www.ProxyVote.com, (2) call 1-800-579-1639 or (3) send an email to sendmaterial@proxyvote.com. If sending an email, please include your control number (indicated below) in the subject line. Unless requested, you will not otherwise receive a paper or email copy. Smartphone users Point your camera here and Vote in Person at the Meeting* April 26, 2023 3850 Hamlin Road THIS IS NOT A VOTABLE BALLOT This is an overview of the proposals being presented at the upcoming stockholder meeting. Please follow the instructions on the reverse side to vote these important matters. You invested in BORGWARNER INC. and it’s time to vote! You have the right to vote on proposals being presented at the Annual Meeting. This is an important notice regarding the availability of proxy material for the stockholder meeting to be held on April 26, 2023. Get informed before you vote View the Notice & Proxy Statement, Annual Report on Form 10-K online OR you can receive a free paper or email copy of the material(s) by requesting prior to April 12, 2023. If you would like to request a copy of the material(s) for this and/or future stockholder meetings, you may (1) visit www.ProxyVote.com, (2) call 1-800-579-1639 or (3) send an email to sendmaterial@proxyvote.com. If sending an email, please include your control number (indicated below) in the subject line. Unless requested, you will not otherwise receive a paper or email copy. Smartphone users Point your camera Vote in person at the April 26, 2023 BORGWARNER INC. The stockholder(s) hereby appoint(s) Tonit M. Calaway and Miyuki P. Oshima, or either of them, as proxies, each with the power to appoint her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of BORGWARNER INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholder(s) to be held at 09:00 AM EDT on April 26, 2023, at BorgWarner Inc. located at 3850 Hamlin Road, Auburn Hills, Michigan, 48326, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 0000908255 bw:YearoverYearChangeInFairValueOfOutstandingAndUnvestedEquityAwardsMember ecd:PeoMember 2020-01-01 2020-12-31 0000908255 4 2022-01-01 2022-12-31 |