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. )
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| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material under §240.14a-12 |
SPIRIT AEROSYSTEMS HOLDINGS, INC.
(Name of Registrant as Specified Inin Its Charter)
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| 2022 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT |
| MESSAGE FROM OUR CHAIRMAN March 16, 2022 Dear Fellow Stockholders: I am pleased to invite you to our 2022 Annual Meeting of Stockholders on Wednesday, April 27, 2022, at 11:00 a.m. Central Time. The meeting will once again be held virtually to protect the health and safety of attendees and facilitate stockholder participation. Our People Drive Our Resilience We believe our people and our strategy enabled us to be resilient through these extraordinarily challenging times. Thanks to the contributions of everyone at Spirit, our business began to emerge from the dual crises of the | |
 
 
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aerospace industry. We remain focused on the values and behaviors that served us so well during the past two years: transparency, collaboration, and inspiration. On behalf of the entire Board of Directors, |
| NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS The 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of Spirit AeroSystems Holdings, Inc.
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3801 S. Oliver St.Wichita, KS 67210-2112
March 11, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITYTABLE OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 24, 2019
The Proxy Statement and Annual Report are available at http://www.proxyvote.com
The 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Spirit AeroSystems Holdings, Inc. (“Spirit” or the “Company”) will be held:
WEDNESDAY, APRIL 24, 2019
11:00 a.m. Eastern Time
Fairmont Hotel, Dumbarton Room
2401 M St. NW
Washington, DC 20037
Items of business include:
Election of nine nominees as directors;
Advisory vote to approve the compensation of the Company’s named executive officers;
Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019;
The stockholder proposal regarding enhancing proxy access described in this Proxy Statement, if properly presented at the meeting; and
The transaction of any other business that properly comes before the meeting.
Stockholders of record of our Class A Common Stock (the “Common Stock”) as of February 25, 2019, are entitled to receive notice of, and may vote at, the Annual Meeting. We are furnishing proxy materials to our stockholders primarily over the internet rather than mailing paper copies. On March 11, 2019, we commenced distributing to our stockholders a Notice Regarding the Availability of Proxy Materials (the “Notice”) or a paper copy of the proxy materials and our Annual Report, along with a proxy card or voting information form. The Notice contains instructions on how to access and review the proxy materials, including this Proxy Statement and our Annual Report, on the internet and instructions on how to vote. Stockholders may vote in person at the Annual Meeting or by internet pursuant to the instructions set forth in the Proxy Statement. In addition, if you received a paper copy of the proxy materials, you may vote by completing and returning a proxy card or voting information form, as applicable, pursuant to the instructions set forth in the Proxy Statement.
Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible.
By order of the Board of Directors.
Sincerely,CONTENTS
StacyCozad
SeniorVicePresident,GeneralCounsel,ChiefComplianceOfficer,andCorporateSecretary
| PROPOSAL 3 RATIFICATION OF |
This summary highlights certain information contained elsewhere in the accompanying Proxy Statement. This summary does not contain all the information you should consider before voting your shares. For more complete information regarding the proposals to be voted upon at the Annual Meeting and our 2018 performance, please review the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
We use the terms “Spirit,” the “Company,” “we,” “us,” and “our” in this Proxy Statement to refer to Spirit AeroSystems Holdings, Inc. and its consolidated subsidiaries.
Matters to Be Voted On at the Annual Meeting
Stockholders of record of our Common Stock as of February 25, 2019, may vote their shares using any of the following methods:
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SPIRIT AEROSYSTEMS - 2019 Proxy Statement 7
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Spirit is a leading tier-one global aerostructures provider. We manufacture large aerostructures, including fuselages, wing structures, engine nacelles, pylons, fan cowls, thrust reversers, and systems integration for the world’s premier aircraft. Spirit’s capabilities include metal manufacturing and assembly, precision assembly, and composites manufacturing.
Our engineering capabilities, combined with our capacity for high-volume production, have positioned Spirit as a leading aerostructures supplier to both Airbus and Boeing. For Boeing, we manufacture the 737 fuselage, the front section of the 787 fuselage, and otherwise manufacture parts for every Boeing commercial aircraft currently in production. Further, for Airbus, we supply fuselage and wing aerostructures content on the A350 XWB and wing aerostructures content on the A320, A330, and A380. Spirit also supplies aerostructures for various regional and business jet programs, including pylons on the A220 and in-development Mitsubishi Regional Jet, as well as nacelles for Rolls-Royce engines used on Gulfstream aircraft.
In addition to producing aerostructures for commercial aircraft, Spirit designs, engineers, and manufactures structural components for military programs. We have been awarded a significant amount of work for Boeing’s P-8, C-40, and KC-46 tanker, all of which are commercial aircraft modified for military use. We are also involved in the development and production of various parts for the Sikorsky CH-53K heavy-lift helicopter and Bell V-280 tiltrotor aircraft. In addition, Spirit is proud to be a member of the Northrop Grumman B-21 Raider industry team. Spirit has invested heavily in research and development labs that enable us to deliver innovation and value on defense programs.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 8
Spirit Values and Fundamental Behaviors
At Spirit, we believe that culture and values play a determining role in the success of corporate strategy. Values are demonstrated in the way we think, act, and ultimately achieve results.
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Spirit’s corporate values are demonstrated through commitments to key community initiatives, from volunteer activities to corporate- and employee-funded grants. Our values are demonstrated through the way we conduct our business and our commitments, which include the following:
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About Spirit’s Director Nominees and Governance Practices
Name | Age | Director Since |
| Principal Occupation | Independent | Committee Memberships |
Charles L. Chadwell | 78 | 2008 |
| Retired VP/GM of Commercial Engine Operations, GE Aircraft Engines | Yes | Governance (Chair) Compensation |
Irene M. Esteves | 60 | 2015 |
| Retired CFO, Time Warner Cable Inc. | Yes | Audit (Chair) Risk |
Paul E. Fulchino | 72 | 2006 |
| Retired Chairman, President and CEO, Aviall, Inc. | Yes | Compensation (Chair) Governance |
Thomas C. Gentile III | 54 | 2016 |
| President and CEO, Spirit AeroSystems Holdings, Inc. | No |
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Richard A. Gephardt | 78 | 2006 |
| President and CEO, Gephardt Consulting Group | No |
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Robert D. Johnson, Chairman | 71 | 2006 |
| Retired CEO, Dubai Aerospace Enterprise Ltd. | Yes | Compensation Governance |
Ronald T. Kadish | 70 | 2006 |
| Retired EVP, Booz Allen Hamilton | Yes | Risk (Chair) Governance |
John L. Plueger | 64 | 2014 |
| President and CEO, Air Lease Corporation | Yes | Audit Risk |
Laura H. Wright | 59 | 2018 |
| Retired SVP and CFO, Southwest Airlines | Yes | Audit Risk |
| Spirit AeroSystems 2022 Proxy Statement |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 11
Corporate Governance Highlights
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 Independent Chairman | Proxy access right | |
 7 out of 9 director nominees are independent | Right to call special meetings | |
| Overboarding policy | Right to act by written consent | |
| Ongoing director education program | Active stockholder engagement program | |
| Regular executive sessions of non-management directors | Annual say-on-pay vote | |
| Annual board and committee evaluations | Annual election of all directors | |
| Robust stock ownership requirements for directors | Majority voting standard in uncontested director elections | |
| Anti-hedging and pledging policy | No poison pill or similar plan | |
| Robust risk oversight process with Board and committee roles |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 12
About Spirit’s Executive Compensation Program and Practices
Overview of Spirit’s Executive Compensation Program
We provide highlights of our executive compensation program below. For a full understanding of the compensation paid to our named executive officers, please review our Compensation Discussion and Analysis and the related compensation tables in this Proxy Statement.
Our compensation objectives are to (i) attract, retain, and motivate highly qualified executive officers, (ii) pay for performance using short-term and long-term incentives, (iii) align interests of the Company’s executive officers with the Company’s stockholders by using compensation performance measures that are meaningful to our stockholders, and (iv) ensure compensation does not encourage inappropriate risk-taking by diversifying performance measures, using payment caps, and maintaining a clawback policy, among other things. The 2018 compensation structure (excluding perquisite or “other” compensation) for our CEO and the other named executive officers (“NEOs”) is below. As the charts below demonstrate, 87% of our CEO’s direct compensation was variable based on performance, while 77% of the other NEOs’ direct compensation was variable based on performance.
Compensation Practices Checklist
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| Align pay and performance — substantial portion of pay is delivered through variable, at-risk compensation |  No ongoing new defined-benefit Supplemental Executive Retirement Plan accruals |
| Clawback policy |  No share recycling (other than in the context of forfeited shares) |
| Robust stock ownership requirements | No tax gross-ups related to a change-in-control |
| Performance goals are relevant and tied to creation of stockholder value | No enhanced health and welfare benefit plans for executives |
| Double-trigger change-in-control provisions | No guaranteed payouts on performance-based compensation (except for upon death, disability, or retirement after the age of 62, beginning with equity awards granted in 2018) |
| Offer market-competitive benefits | No dividend payments on time-based restricted stock awards until they vest |
| Pay long-term incentives entirely in stock | No accumulation of dividends on unvested performance-based restricted stock awards |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 13
ELECTION OF DIRECTORS
The Board of Directors is elected each year at the Company’s annual meeting of stockholders. Spirit currently has nine directors. Each director elected at the Annual Meeting will serve until the 2020 annual meeting of stockholders and until the election and qualification of his or her respective successor, subject to such director’s earlier death or disability.
Based on the recommendations of the Company’s Corporate Governance and Nominating Committee (the “Governance Committee”), the Board has nominated each of the persons listed below for election as directors. All nominees have served as directors of the Company since the 2018 annual meeting of stockholders.
Each of the nominees has agreed to serve if elected and, as of the date of this Proxy Statement, the Company has no reason to believe that any nominee will be unavailable to serve. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders’ intention is to vote the proxies for such other person as may be designated by the present Board to fill such vacancy.
The following information with respect to the nine nominees is based on information furnished to the Company by each nominee and highlights the specific experience, qualifications, attributes, and skills of the individual nominees that have led the Board to conclude that each should continue to serve on the Board.
 | women). Charles L. Chadwell | |
and Richard A. Gephardt are not standing for election at the Annual Meeting. We would like to thank Messrs. Chadwell and Gephardt for their many years of dedication and service to Spirit. The following table sets forth the 2022 director nominees. The average tenure of our nominees is approximately seven years and the average age of our nominees is approximately 65 years old. Other Name Age Director Skills and Experience Independent Committee Public Since
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Pentagon’s first Under Secretary of Defense for Intelligence. 2019 69 Stephen A. Cambone 2 * Yes Ms. Esteves has an invaluable depth and breadth of experience in finance, risk management, and business strategy across multiple industries. Ms. Esteves has overseen a variety of business functions in senior executive roles, including as EVP and CFO for Time Warner Cable Inc. 2015 63 Irene M. Esteves 0 Yes Mr. Fitzgerald has years of technical and operational leadership experience, including in global supply chain and aerospace manufacturing and services. Mr. Fitzgerald served most recently as Vice President and General Manager of Commercial | ||
| Other Name Age Director Skills and Experience Independent Committee Public Since Memberships Boards Executive Compensation At-A-Glance We made no adjustments to our 2021 performance metrics due to the ongoing effects of the COVID-19 pandemic and the 737 MAX grounding (i.e., no “in-flight” adjustments were made). We made significant changes to our 2022 compensation programs based on stockholder feedback: We changed the weighting of our long-term incentives from 60% time-based and 40% performance-based to 50%/50% We removed the individual performance component of our annual cash incentive for our CEO and other NEOs going forward so that achievement is now based solely on Company performance Robert D. Johnson, Board Chairman 74 2006 Mr. Johnson has deep domestic and international executive experience in the aerospace industry, including risk management, financial oversight, operations, and strategy. Mr. Johnson’s global experience was acquired through a variety of roles, including as CEO of Dubai Aerospace Enterprise and as Chairman of Honeywell Aerospace. Yes 2 0 * Yes Mr. Kadish has extensive military and executive experience with unique defense, government, risk oversight, and operations expertise. Mr. Kadish served as EVP of the Defense Group for Booz Allen Hamilton, in a variety of roles for the Department of Defense, and as a Lieutenant General in the United States Air Force. 2006 73 Ronald T. Kadish 1 Yes Mr. Plueger has unique operational and aviation industry experience from over 28 years in the aviation industry, along with financial and accounting expertise as a Certified Public Accountant. Mr. Plueger currently serves as CEO and President of Air Lease Corporation. 2014 67 John L. Plueger 2 Yes Mr. Ray has expertise in supply chain, business transformation, strategy development and execution, innovation, technology, acquisitions, and global business integration acquired through years of leadership experience at Stanley Black & Decker. 2022 58 James R. Ray, Jr. 2 Yes Mr. Shanahan has policy, defense, cybersecurity, and operations experience, as well as a valuable customer perspective. Serving most recently as Acting Secretary of Defense and previously as the 33rd Deputy Secretary of Defense, he spearheaded modernization in cybersecurity and other critical areas. Mr. Shanahan spent over three decades in a variety of leadership roles with Boeing. 2021 59 Patrick M. Shanahan 3 Yes Ms. Wright has extensive experience in commercial aviation executive management, including corporate finance, accounting, operations, treasury, and risk management. Ms. Wright also provides unique commercial aircraft end-user insights from her 25-year career at Southwest Airlines, most recently as SVP and CFO. 2018 62 Laura H. Wright *(Chair) Corporate Governance and Nominating Committee (the “Governance Committee”) Compensation Committee Risk Committee Audit Committee Our Board of Directors recommends that stockholders vote “FOR” the advisory approval of the compensation of our named executive officers (“ |
| We returned to more traditional performance metrics of free cash flow, EBIT, revenue, and quality for our 2022 annual cash incentive and retained total stockholder return for our 2022 long-term performance incentive grants The following are the key metric results for our 2021 executive performance incentive programs. *See Appendix A for an explanation and reconciliation of non-GAAP measures. The Company’s incentive compensation payouts demonstrate the rigor of the performance targets set by the Compensation Committee. *Reflects a blended payout based on 120% achievement for the total stockholder return portion of this award and 200% achievement for the free cash flow portion of this award. Each portion was equally weighted. See Appendix A for an explanation and reconciliation of non-GAAP measures. ADJUSTED NET DEBT* -$2.594 billion TARGET: -$2.568 billion OPERATING COST $1.682 billion TARGET: $1.718 billion NEW REVENUE GROWTH $147 million TARGET: $218 million QUALITY INDEX SCORE 1.05 TARGET: 1.00% TOTAL STOCKHOLDER RETURN (2019-2021 performance) Below 25th percentile TARGET: 50th Percentile FREE CASH FLOW AS A PERCENTAGE OF REVENUE* -2.54% TARGET: 7.75% 2021 Average Payout For NEOs 80% of target 2020 Average Payout For NEOs 88% of target 2019 Average Payout For NEOs 100% of target ANNUAL CASH INCENTIVE 1-year performance period 2022 Vesting (2019-2021 performance) 0% vesting 2021 Vesting (2018-2020 performance) 0% vesting 2020 Vesting (2017-2019 performance) 160%* vesting LONG-TERM PERFORMANCE INCENTIVE 3-year performance period Our Board of Directors recommends that stockholders vote “FOR” ratification of the appointment of Ernst & Young LLP as the Company’s independent auditors for 2022. See “Proposal 3 — Ratification of Appointment of Independent Auditors” beginning on page 63 of this Proxy Statement. PROPOSAL 3 — Ratification of Appointment of Independent Auditors Our Board of Directors recommends that stockholders vote “AGAINST” the stockholder proposal titled “Shareholder Ratification of Termination Pay.” See “Proposal 4 — Stockholder Proposal” beginning on page 66 of this Proxy Statement. PROPOSAL 4 — Stockholder Proposal Spirit AeroSystems 2022 Proxy Statement 5 |
| PROPOSAL 1 ELECTION OF DIRECTORS The Board has nominated each of the persons listed below for election as a director. The Board has determined it is in the best interests of the Company and its stockholders for each of these director nominees to continue serving on the Board, subject to stockholder approval. All of our directors are elected each year at the Company’s annual meeting of stockholders. Each director elected at the Annual Meeting will serve until the 2023 annual meeting of stockholders and until the election and qualification of his or her respective successor, subject to the director’s earlier death or disability. Our Board may consist of three or more directors, as increased or decreased from time to time by the Board on the recommendation of the Governance Committee. Spirit currently has 13 directors; however, Messrs. Chadwell and Gephardt are not being nominated to the Board at the Annual Meeting. Each of the director nominees has agreed to serve if elected and, as of the date of this Proxy Statement, the Company has no reason to believe that any nominee will be unavailable to serve. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders’ intention is to vote the proxies for such other person as may be designated by the Board to fill such vacancy. The Board unanimously recommends a vote FOR each of the director nominees listed below. Voting Standard The Company’s bylaws provide for simple majority voting in an uncontested election of directors. In order for a director nominee to be elected, the votes that stockholders cast “FOR” the director nominee must exceed the votes that stockholders cast “AGAINST” the director nominee. In the event that an incumbent nominee does not receive the requisite majority of votes cast in this election, the Company will follow the procedure described under “General Information — What happens if an incumbent director nominee is not elected at the Annual Meeting?” Any shares not voted (whether by abstention, broker non-vote, or otherwise) will have no impact on the election of directors. Your broker may not vote your shares on this proposal unless you give voting instructions. PROFESSIONAL EXPERIENCE: Trustee, Rumsfeld Foundation (2012-present) Associate Vice Chancellor for Cyber Initiatives, Texas A&M University System (2017-2022) Founder, Adirondack Advisors, LLC (2012-2018) Senior positions at QinetiQ, Inc. (2007-2012), including Executive Vice President, |
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PROFESSIONAL EXPERIENCE: Executive Vice President and Chief Financial Officer, Time Warner Cable Inc. (2011-2013) Executive Vice President and Chief Financial Officer, Senior Vice President and Chief Financial Officer, Regions Financial Corporation (2008-2010) |
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FORMER PUBLIC COMPANY DIRECTORSHIPS HELD IN PAST FIVE YEARS: Aramark Holdings Corp. (2015-2022) RR Donnelley & Sons Co. (2017-2022) Level 3 Communications (2014-2017) | ||
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COMMITTEE ASSIGNMENTS: Audit (Chair) Risk | ||
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PROFESSIONAL EXPERIENCE: Chairman, AEI HorizonX Ventures (2021-present) Operating Partner, AE Industrial Partners (“AEI”) (2015-present) Senior Advisor, Chairman, President, and Chief Executive Officer, Aviall, Inc. (2000-2010) (Aviall became a 2006) President and Chief Operating Officer, B/E Aerospace, Inc. (1996-1999) President and Vice Chairman, Mercer Management Consulting (1990-1996) | CURRENT PUBLIC COMPANY DIRECTORSHIPS: Spirit AeroSystems Holdings, Inc. (2006-present) BigBear.ai (2021-present) FORMER PUBLIC COMPANY DIRECTORSHIPS HELD IN PAST FIVE YEARS: Wesco Aircraft Holdings, Inc. | |
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(2008-2020) COMMITTEE ASSIGNMENTS: Compensation (Chair) Governance | ||
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SPIRIT AEROSYSTEMS - 2019 Proxy Statement 15
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Paul E. Fulchino Independent Director | ||
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Age: 75 Director Since: 2006 PROFESSIONAL EXPERIENCE: President and Chief Executive Officer, Spirit AeroSystems Holdings, Inc. (2016-present) Executive Vice President and Chief Operating President and Chief Operating Officer, General Electric Capital Corporation (2014-2016) President and Chief Executive Officer, General Electric Healthcare Systems (2011-2014) President and Chief Executive Officer, General Electric Aviation Services (2008-2011) |
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SPIRIT AEROSYSTEMS - 2019 Proxy Statement 16
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PROFESSIONAL EXPERIENCE: Chief Executive Officer, Dubai Aerospace Chairman, Honeywell Aerospace President and Chief Executive Officer, Honeywell Aerospace | (known as Allied Signal Aerospace until 2000) (1999-2005) President and Chief Executive Officer, Electronic and Avionics Systems, Honeywell Aerospace (known as Allied Signal Aerospace at the time) (1997-1999) CURRENT PUBLIC COMPANY DIRECTORSHIPS: Spirit AeroSystems Holdings, Inc. (2006-present) Roper Technologies, Inc. (2005-present) | |
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COMMITTEE ASSIGNMENTS: Compensation Governance | ||
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Robert D. Johnson, Chairman Independent Director | ||
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Age: 74 Director Since: 2006 PROFESSIONAL EXPERIENCE: Consultant, Raytheon (2018-2019) Senior Executive Advisor, Booz Allen Hamilton (“ (2015-2019) Executive Vice President, Director, U.S. Missile Defense Agency, U.S. Department of Defense (2002-2004) Director, Ballistic Missile Defense Organization, U.S. Department of Defense (1999-2001) Commander, Electronic Systems Center, Hanscom Air Force Base (1996-1999) | CURRENT PUBLIC COMPANY DIRECTORSHIPS: Spirit AeroSystems Holdings, Inc. (2006-present) FORMER PUBLIC COMPANY DIRECTORSHIPS HELD IN PAST FIVE YEARS: Northrop Grumman Innovation Systems, Inc. (formerly known as Orbital ATK, | |
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Inc.) (2015-2019) COMMITTEE ASSIGNMENTS: Risk (Chair) Governance | ||
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PROFESSIONAL EXPERIENCE: Chief Executive Officer and President, President and Chief Operating Officer, ALC (2010-2016) President and Chief Executive Officer, International Lease President and Chief Operating Officer, ILFC (2002-2010) | CURRENT PUBLIC COMPANY DIRECTORSHIPS: Spirit AeroSystems Holdings, Inc. (2014-present) ALC (2010-present) | |
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COMMITTEE ASSIGNMENTS: Audit Risk | ||
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experience having served as the 33rd Deputy Secretary of Defense. Mr. Shanahan also offers a unique customer perspective from his extensive leadership career at Boeing. Mr. Shanahan’s experience includes commercial and defense operations, cybersecurity, risk management, compensation oversight, public policy, and international expertise. Patrick M. Shanahan Independent Director Age: 59 Director Since: 2021 PROFESSIONAL EXPERIENCE: Senior Vice President and Chief Financial Officer, Southwest Airlines Co. (“SWA”) (2004-2012) Vice President, Finance, and Treasurer, SWA (2001-2004) Treasurer, SWA (1998-2001) | CURRENT PUBLIC COMPANY DIRECTORSHIPS: Spirit AeroSystems Holdings, Inc. (2018-present) TE Connectivity Ltd. (2014-present) | |
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JOBY Aviation, Inc. (2021-present) FORMER PUBLIC COMPANY DIRECTORSHIPS HELD IN PAST FIVE YEARS: Pebblebrook Hotel Trust (2009-2019) | ||
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COMMITTEE ASSIGNMENTS: Compensation Risk | ||
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The Company’s bylaws provide for simple majority voting in an uncontested election of directors. In order for a director nominee to be elected, the votes that stockholders cast “FOR” the director nominee must exceed the votes that stockholders cast “AGAINST” the director nominee. In the event that an incumbent nominee does not receive the requisite majority of votes cast in this election, the Company will follow the procedure described under “General Information Regarding the Meeting — What Happens if an Incumbent Director Nominee is Not Elected at the Annual Meeting?” Any shares not voted (whether by abstention, broker non-vote, or otherwise) will have no impact on the election of directors. Your broker may not vote your shares on this proposal unless you give voting instructions.
The Board recommends that you vote FOR each of the director nominees.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 18
The Company is governed by its Board of Directors. Other than with respect to matters reserved to stockholders, the Board is the ultimate decision-making body of the Company. The Board is responsible for overseeing the Company’s strategy and performance, and protecting stockholder interests and value. Further, the Board is responsible for selecting and overseeing the Company’s executive officers, who set and execute the Company’s business strategy and handle the Company’s day-to-day operations.
In carrying out its responsibilities, the Board has created and delegated certain responsibilities to four standing committees: the Audit Committee, the Compensation Committee, the Governance Committee, and the Risk Committee. Additional information about these committees and their responsibilities is described under “Committees.”
Corporate Governance Guidelines
The Board is committed to maintaining corporate governance practices that maximize stockholder value. To further its commitment, the Board has adopted the Company’s Corporate Governance Guidelines (the “Governance Guidelines”) to ensure that the Board has the necessary authority and practices in place to effectively review and evaluate the Company’s strategy and operations, to make decisions that are independent of the Company’s management, to oversee management, and to monitor adherence to the Company’s standards and policies. The Governance Guidelines are available at http://investor.spiritaero.com/govdocs.
Pursuant to our bylaws, the Board of Directors is required to consist of three or more directors and may be increased or decreased at any time by the Board of Directors. Currently, the Board of Directors consists of nine directors. Pursuant to its charter, the Governance Committee is responsible for reviewing the size of the Board and recommending to the Board any changes it deems appropriate with respect to Board size.
The Company separates the roles of Chief Executive Officer (“CEO”) and Chairman of the Board in recognition of the differences between the two roles and the value of independent leadership oversight. The Board believes that separation of the roles maximizes the ability of the CEO to focus on Company strategy and operations without distraction, while benefiting from the Chairman’s perspective and insight. Because Mr. Johnson, the Chairman of the Board, is an independent director, the Board has not deemed it necessary to appoint a lead independent director.
While the CEO is responsible for setting the strategic direction of the Company and managing the day-to-day operations and performance of the Company, the Chairman of the Board performs the following duties:
Sets the agenda for Board meetings;
Presides over meetings of the full Board and executive sessions of independent directors;
Presides over stockholder meetings;
Serves as a liaison between the CEO and the independent directors;
Provides feedback to the CEO on behalf of the independent directors regarding business issues and Board management; and
Regularly speaks with the CEO between Board meetings to discuss Company performance and matters of significance.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 19
Selecting qualified individuals to serve as directors is key to the Board’s performance. The Governance Committee is responsible for evaluating qualified potential candidates to serve on the Board, and recommending to the Board for its selection nominees to stand for election as directors at the Company’s annual meeting of stockholders. This responsibility is further described in the Governance Committee’s charter, which is available at: http://investor.spiritaero.com/govdocs. In evaluating candidates, the Governance Committee and Board consider the qualifications and expertise of director candidates individually and in the broader context of the Board’s overall composition, taking into account any particular needs that the Company may have based on its strategic initiatives, risks, and opportunities. The Company has engaged a third-party international executive search firm to assist the Governance Committee in identifying and evaluating potential director candidates.
In evaluating individual candidates, the Governance Committee considers the personal ethics and values, experience, judgment, and diversity of the candidates, among other things. It is the policy of the Board that the Board reflect diversity of viewpoint, professional experience, education, skill, expertise, industry knowledge, and such other factors as the Governance Committee and Board believe would enhance the effectiveness of the Board. Nominees must have high standards of integrity and ethics, and convey a commitment to act in the best interest of the Company and its stockholders.
In addition, the Governance Committee considers the candidates’ employment and other commitments, and evaluates whether the candidates have sufficient time available to efficiently and effectively carry out the duties of directors. For example, the Governance Guidelines limit the number of boards that any director may serve on to five (including the Company’s Board), or three boards (including the Company’s Board) in the case of a director who is an active chief executive officer at another public company.
It is the Governance Committee’s policy to consider candidates nominated by stockholders in compliance with applicable laws, regulations, and the procedures described in the Company’s bylaws and Proxy Statement. If a stockholder desires to recommend a director candidate for nomination by the Governance Committee, the stockholder should follow the procedures described under “Stockholder Proposals and Director Nominations for the 2020 Annual Meeting.” Director candidates recommended by stockholders will be considered and evaluated in the same manner as candidates discovered through other sources.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 20
Director Tenure and Refreshment
While the Company has added four new directors to its Board in the past five years, five of the nominees have served on the Board for more than ten years. Through its annual evaluation process, the Board has determined that each of these five nominees provides diversity of experience and perspective, and plays an integral and necessary role in the boardroom. The Board has periodically evaluated age and term limits along with retirement policies, and has determined that such limits and policies may arbitrarily restrict valuable Board members from service and, thus, reduce stockholder value. Instead, the Board has determined to continue evaluating its members on their merits based on the contributions they make in the boardroom and their ability to enhance overall Board effectiveness. The Board is committed to routine Board and director refreshment as needed to enhance Board effectiveness, and primarily uses rigorous board and committee evaluations and composition discussions as its refreshment mechanisms.
Board and Committee Evaluations
Each year, the Governance Committee oversees an evaluation of the Board and each committee. The 2018 evaluation covered the following topics, among other things:
Composition of the Board and committees and whether the composition is appropriate in light of the Company’s strategic priorities;
Effectiveness of Board and committee leadership;
Strengths of the Board and committees and opportunities for improvement;
Quality of information provided to the Board;
Effectiveness of structures and practices;
Quality of the directors’ relationships with each other; and
Quality of the Board’s relationship with management.
A summary of the evaluation process is below:
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 21
Our director education program is multifaceted and includes site visits and tours, in-depth education seminars on topics of interest by senior management and external advisors, background material on the Company’s operations and strategy, and the regular provision of resources from various educational institutions to directors. Each new Board member receives onboarding programming that involves meetings with senior management, business overviews, and presentations on the Code of Business Conduct, insider trading, and various other policies and procedures. We encourage our directors to attend reputable director education programs sponsored by external advisors and educational institutions.
The Company’s Common Stock is listed on the New York Stock Exchange (the “NYSE”), and the Company uses the NYSE’s listing standards to determine director independence. Under the NYSE’s listing standards and the Governance Guidelines, the Board must consist of a majority of independent directors. For a director to qualify as independent, the Board must determine that the director has no material relationship with the Company (either directly, or as a partner, stockholder, or officer of an organization that has a relationship with the Company). The Board performs an independence assessment of each director annually and as circumstances may otherwise require.
In assessing the existence of a material relationship with the Company, the Board considers all relevant transactions, relationships, and arrangements required by the NYSE’s independence standards. The Board examined each director’s involvement through directorships, employment, consulting relationships, or otherwise, with entities the Company does business with. In particular, the Board evaluated the following:
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| nominees to stand for election at the Company’s annual meeting of stockholders. This responsibility is further described in the Governance Committee’s charter (available at: http://investor.spiritaero.com/corporate-governance/govdocs/ default.aspx). In evaluating candidates, the Governance Committee and Board consider the qualifications and expertise of director candidates individually and in the broader context of the Board’s overall composition, taking into account any particular needs that the Company may have based on its strategic initiatives, risks, and opportunities. The following table highlights key areas of experience among our director nominees. Cambone Esteves Fitzgerald Fulchino Gentile Johnson Kadish Plueger Ray Shanahan Wright Public Company CEO Public Company CFO Aviation Operations Management Public Company Board Executive Compensation Risk Management M&A Senior Government Cyber International Defense The Company utilizes a variety of methods to assist the Governance Committee in identifying and evaluating potential director candidates, including: A third-party international executive search firm, The New York Stock Exchange’s Board Advisory Council, and Sitting director recommendations and contacts. When evaluating individual candidates, the Governance Committee considers the personal ethics and values, experience, judgment, and diversity of the candidates, among other things. It is the Board’s policy that the Board should reflect diversity of viewpoint, professional experience, education, skill, expertise, industry knowledge, and such other factors as the Governance Committee and Board believe would enhance Board effectiveness. As stated in our Governance Guidelines, “Spirit is committed to considering candidates for the Board regardless of gender, race, ethnicity, and national origin. Any CORPORATE GOVERNANCE (continued) 14 Spirit AeroSystems 2022 Proxy Statement |
| search firm retained to assist the corporate governance and nominating committee in seeking candidates for the board will affirmatively be instructed to seek to present diverse candidates.” Nominees must have high standards of integrity and ethics and convey a commitment to act in the best interest of the Company and its stockholders. In addition, the Governance Committee considers the candidates’ employment and other commitments, and evaluates whether the candidates have sufficient time available to efficiently and effectively carry out director duties. For additional information, see “Overboarding Policy.” Director Selection Process Stockholder Candidates It is the Governance Committee’s policy to consider candidates nominated by stockholders in compliance with applicable laws, regulations, and the procedures described in the Company’s bylaws and Proxy Statement. If a stockholder desires to recommend a director candidate for nomination, the stockholder should follow the procedures described under “Stockholder Proposals and Director Nominations for the 2023 Annual Meeting.” Director candidates recommended by stockholders will be considered and evaluated in the same manner as candidates identified through other sources. Proxy Access The Company’s bylaws provide the stockholders with a market-standard proxy access right. Specifically, our bylaws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s Common Stock continuously for at least three years, to nominate and include in the Company’s proxy materials directors constituting up to the greater of two individuals or 20% of the Company’s Board of Directors, provided that the stockholder(s) and the nominee(s) satisfy the applicable requirements in the bylaws. The Board has periodically evaluated age and term limits, along with retirement policies, and has determined that such limits and policies may arbitrarily restrict valuable Board members from service. Instead, the Board has determined that it will continue evaluating its members on their merits based on the contributions they make in the boardroom and their ability to enhance overall Board effectiveness. CANDIDATE RECOMMENDATIONS GOVERNANCE COMMITTEE THE BOARD STOCKHOLDERS Candidates are recommended by directors, members of management, search firms, or stockholders. Considers the candidates’ professional qualifications, independence, conflicts, personal ethics and values, integrity, judgment, diversity, time commitments, and other involvements. If appropriate, will recommend the candidates to the Board. Evaluates candidates, confirms independence, and selects nominees (and elects nominees if between annual meetings of stockholders). Elect nominees at the Annual Meeting. Spirit AeroSystems 2022 Proxy Statement 15 CORPORATE GOVERNANCE (continued) |
| 16 Spirit AeroSystems 2022 Proxy Statement Annual Evaluations Each year, the Governance Committee oversees an evaluation of the Board and each committee. The 2021 annual evaluation covered the following topics, among other things: Composition of the Board and committees and whether the composition is appropriate in light of the Company’s strategic priorities; Effectiveness of Board and committee leadership; Strengths of the Board and committees; Opportunities for improvement; Effectiveness of structures and practices; and Quality of the Board’s relationship with management. A summary of the evaluation process is below: Director Education Our director education program includes occasional site visits and tours, education seminars on topics of interest conducted by senior management or external advisors, provision of background material on the Company’s operations and strategy, and provision of resources from various educational institutions (including the National Association of Corporate Directors). REVIEW OF PROCESS In October, the Governance Committee annually reviews and approves the method and process of evaluation and specific questions asked during the evaluation. CONDUCT EVALUATION From October to December, the Chair of the Governance Committee has a private conversation with each director and asks the director each of the specified questions; at the end of the question period, the director is offered an opportunity to express any other thoughts, comments, or feedback on Board and committee performance and effectiveness. EVALUATION SUMMARY A summary of the evaluations is completed and presented for discussion. ACTIONS TAKEN In January, the Board and committees together discuss the evaluation summary and decide on actions to be taken. ONGOING FEEDBACK Throughout the year, directors provide ongoing feedback to the Chairman, committee chairs, CEO, COO, or General Counsel, as appropriate, outside of the regular evaluation process. CORPORATE GOVERNANCE (continued) |
| Each new Board member receives onboarding training that involves meetings with senior management, business overviews, and presentations on the Code of Conduct, insider trading, and various other policies and procedures. We encourage our directors to attend reputable director education programs sponsored by external advisors and educational institutions. Director Independence Consistent with New York Stock Exchange (“NYSE”) rules, SEC rules, and the Company’s Governance Guidelines, our Board consists of a majority of independent directors, and our Audit, Governance, and Compensation Committees each consist solely of independent directors. Directors qualify as independent based on the Board’s determination that the director has no material relationship with the Company (either directly, or as a partner, stockholder, or officer of an organization that has a relationship with the Company). The Board performs an independence assessment of each director annually, with the assistance of the Governance Committee, and as circumstances may otherwise require. In assessing the existence of a material relationship with the Company, the Board considers all relevant transactions, relationships, and arrangements required by NYSE’s independence standards, the SEC, and the Company’s Governance Guidelines, each as applicable to non-employee directors generally and to each committee. The Board examines each director’s involvement through directorships, employment, consulting relationships, or otherwise, with entities with which the Company does business. When considering the independence of Mr. Fulchino, the Governance Committee and Board considered his role as an operating partner of In his role at AEI, Mr. Fulchino assists with the acquisition, development, and value creation of portfolio companies. Mr. Fulchino receives a retainer from AEI and does not own any equity in AEI. However, Mr. Fulchino | The Governance Committee and Board affirmatively determined, based on available facts and circumstances, that Mr. Fulchino was not an employee of AEI (for purposes of the independence determination). Further, with respect to the Company’s transactions with |
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| Risk Committee. The Board |
Based on this analysis, the Board has determined that all the director nominees are independent under the NYSE’s criteria, with the exclusion of Messrs. Gentile and Gephardt. All the committees of the Board are comprised solely of independent directors.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 22
The Board has four committees: the Audit Committee, Compensation Committee, Governance Committee, and Risk Committee. The Board has adopted written charters for each committee, which are available at http://investor.spiritaero.com/govdocs. Information on each committee is set forth in the table below.
| 18 Spirit AeroSystems 2022 Proxy Statement Information on each committee of the Board at the time of publication of this Proxy Statement is set forth in the table below. Following the Annual Meeting, Ms. Wright will replace Mr. Chadwell as Chair of the Governance Committee and come off of the Compensation Committee, and Mr. Plueger will move from the Risk Committee to the Compensation Committee. No. of Meetings Committee* Members | Primary Responsibilities |
2021, the Board created a Mergers and Acquisitions Committee (“M&A Committee”); however, the Board subsequently disbanded the M&A Committee prior to the close of the fiscal year. The M&A Committee held four meetings in
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| are “audit committee financial experts,” as such term is defined in Item 407(d)(5) of Regulation S-K. 6 (1) Oversee the quality and integrity of the Company’s financial reporting. (2) Oversee the Company’s compliance with legal and regulatory requirements. (3) Engage, compensate, and oversee performance and independence of the independent auditor. (4) Oversee performance of the Company’s internal audit function. (5) Review and discuss with management and the independent auditors the Company’s earnings releases and quarterly and annual reports on Forms 10-Q and 10-K, and the audit generally. (6) Consider the effectiveness of the Company’s internal controls over financial reporting and participate in the resolution of internal control issues, where identified. (7)
(10) Oversee the Company’s Code of |
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| Plueger Patrick M. Shanahan Audit Committee** 8 (1) Review and approve the compensation of the Company’s executive officers, with a focus on linking pay and performance. (2) Oversee the administration of the Company’s compensation plans, policies, and programs. (3) Prepare the Compensation Committee Report in this Proxy Statement. (4)
(5) Review and make recommendations to the Board with respect to non-employee director compensation. |
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| Paul E. Fulchino (Chair) Robert D. Johnson Charles L. Chadwell
| James R. Ray, Jr. Patrick M. Shanahan Laura H. Wright Compensation Committee 4 (1) Assist the Board in identifying qualified individuals to become Board members, with a focus on improving the Board’s diversity profile. (2) Determine the composition of the Board and its committees. (3) Lead the (4) Develop and implement the Governance Guidelines and recommend to the Board any changes thereto. (5) Review and approve, deny, or ratify transactions under the Company’s Related Person Transaction Policy. (6)
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| (7) Review the Company’s practices and reporting with respect to corporate responsibility, environmental, and social matters. Charles L. Chadwell (Chair) Robert D. Johnson Paul E. Fulchino Ronald T. Kadish
| William A. Fitzgerald Governance Committee 6 (1) Provide oversight of management’s guidelines, policies, and processes for assessing, monitoring, and mitigating the Company’s critical enterprise risks, including the major strategic, strategies. (2) Oversee the effectiveness of the Company’s cybersecurity programs and its practices for identifying, assessing, and mitigating cybersecurity risks. (3) Oversee management’s review and assessment of key risks that have the potential to significantly affect the Company’s ability to execute |
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| Management’s Role in Risk Oversight The Company’s management is responsible for the identification, assessment, mitigation, and management of risks relating to the Company’s strategy and operations. Apart from reporting to the Board, management engages in a robust enterprise risk management process that involves: (i) creating risk-assessment surveys and conducting interviews; (ii) reviewing, repositioning, and prioritizing identified risks by a risk council composed of executive leadership; (iii) assigning risks to risk owners based on responsibilities with respect to the Company’s strategic objectives; (iv) developing and reporting mitigation plans by the risk owners and risk management team to the risk council; and (v) receiving insights from the Company’s internal audit function. On a quarterly basis, the status of the top risks identified in management’s enterprise risk management process, along with their associated mitigation plans, is presented to the Risk Committee. Risks that the Company focused on in 2021 included matters relating to the ongoing effects of the 737 MAX grounding, COVID-19 pandemic, financial performance recovery, quality, safety, and cybersecurity, among other items. Cybersecurity The Risk Committee of the Board is charged with reviewing the Company’s cybersecurity matters. Management reports to the Risk Committee quarterly regarding cyber practices and procedures. The Company requires cybersecurity education and training at all levels of the organization. Spirit works to maintain the confidentiality, integrity, and availability of its information and digital resources through comprehensive and proactive compliance, privacy, incident response, cyber threat management, and enterprise risk programs developed from industry-accepted best practices. The framework for our programs is based on the U.S. Department of Defense Cybersecurity Maturity Model Certification (CMMC) and National Institute of Security and Technology (NIST) Frameworks, U.K. Cyber Defence and Risk (CyDr), Generally Accepted Privacy Program (GAPP) guiding principles, and ISO 27001/2 standards. These standards reflect well-defined processes and best-in-class technology. Succession Planning The Board is responsible for overseeing management succession planning. At least twice annually, the Board reviews candidates for succession with respect to the CEO role and other senior management roles. Succession plans have been developed for both ordinary course succession and contingency planning for an unforeseen event. The Board receives updates on the development of the succession candidates regularly. Directors engage with potential succession candidates during formal presentations at Board and committee meetings and at informal events. Stockholder Engagement Our Board recognizes the importance of remaining aligned with our stockholders. The Board places a high priority on stockholder engagement, which we believe contributes to transparency and accountability. Our stockholder outreach team includes representatives from various functions including Sustainability, Compensation, Human Resources, Investor Relations, and the Corporate Secretary’s office. This team engages proactively with our stockholders throughout the year. Stockholder feedback is communicated to the Board and is instrumental in developing our governance, compensation, and sustainability policies and practices, and in informing our business strategy. CORPORATE GOVERNANCE (continued) 20 Spirit AeroSystems 2022 Proxy Statement |
| Spirit AeroSystems 2022 Proxy Statement 21 CORPORATE GOVERNANCE (continued) How We Engaged We engaged with our stockholders year-round in 2021 in a variety of ways: In the fall, we reached out to our largest stockholders representing nearly 50% of outstanding shares to solicit feedback on a variety of topics. We held calls with stockholders and discussed compensation, governance priorities, diversity, and sustainability performance, among other topics. Our investor relations team regularly meets with our stockholders, prospective stockholders, and investment analysts. We received unsolicited outreach from stockholders and responded to engage on areas of importance to them. What We Heard Below is a summary of the feedback we received in 2021: Positive feedback on the Company’s navigation of the COVID-19 pandemic and 737 MAX grounding dual crises. Requests to highlight the connection between pay and performance in our compensation programs, and return to more traditional incentive compensation financial metrics. Desire for continued focus on Board refreshment and diversity. Interest in our sustainability reporting and goals, including applied standards. How We Responded The following is a summary of action taken in response to stockholder feedback: We modified the weighting and metrics for our 2022 performance incentives (see “Compensation Discussion and Analysis” below for details). The average tenure of 7.1 years for our 2022 nominees represents a substantial decrease from the prior year. Two of our six most recently appointed independent directors are women and two are ethnically diverse (including one of the women). We are currently preparing our second annual Sustainability Report that will include enhanced disclosure and updates to progress on our sustainability programs. Overboarding Policy Per our Governance Guidelines, directors are expected to ensure that other commitments, including outside board memberships, do not interfere with their duties and responsibilities as Board members. A director may not serve on the boards of more than four other public companies or, if the director is an active CEO or equivalent of another public company, on the boards of more than two other public companies. In addition, directors must notify the Governance Committee before accepting an invitation to serve on the board of any other for-profit entity. The director must not accept such service until being advised by the Governance Committee Chair that the committee has determined that service on such other board would not create regulatory issues or potential conflicts of interest and would not conflict with the Company’s policies. All directors are in compliance with the Company’s overboarding policy as of the date of this Proxy Statement. |
| Code of Conduct The Company is committed to the highest ethical standards and complying with all laws and regulations applicable to the Company’s business. To support and articulate its commitment and responsibility in this regard, the Company has adopted the Code of Conduct (the “Code”). The Code addresses a number of topics, including the Foreign Corrupt Practices Act, conflicts of interest, safeguarding assets, insider trading, and general adherence to laws and regulations. All directors and employees, including executive officers, must comply with the Code. The Code is available on the Company’s website at http://investor.spiritaero.com/corporate-governance/OD/default.aspx. Social Responsibility and Sustainability In 2021, Spirit launched its first annual Sustainability Report (the “Report”), highlighting the Company’s work to meet its sustainability goals and objectives. The Report describes Spirit’s efforts to support the United Nations’ Sustainable Development Goals (SDGs), and utilizes the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force for Climate-Related Financial Disclosures (TCFD) frameworks. The second annual Sustainability Report will be published in 2022, continuing to focus on transparency in our disclosures. Pursuant to its charter, the Governance Committee oversees Spirit’s practices and reporting with respect to corporate responsibility, environmental, and social factors that are of significance to the Company and its stakeholders. Climate Action Plan Spirit is committed to conducting and managing its business in a manner that protects the environment and supports the transition to a low-carbon economy. We are transitioning to renewable energy at many of our sites across the globe. Additionally, Spirit has set a goal to reduce our absolute Scope 1 and 2 greenhouse gas emissions by 30% below 2019 levels by 2030. Our strategies and programs consider climate, water, waste, and biodiversity. Diversity, Equity, and Inclusion At Spirit, we believe our success and the success of our employees depends on a commitment to fostering a diverse and inclusive culture that supports growth and development, along with the diverse skills needed to innovate. We have set a goal to increase representation of women in leadership (senior manager and above globally) to 30%, and minorities in leadership (senior manager and above in the U.S.) to 20%, by 2025. In 2021, Spirit launched “The Power of Choice” leadership development program for women and other underrepresented talent within our organization. Community Contributions We believe in the power of innovative solutions, partnerships, and programs that bring communities together. In 2021, Spirit and its employees continued to support local communities, and contributed over 8,000 volunteer hours and donated roughly $4 million through corporate grants, in-kind contributions, and employee donations. For more information, visit www.spiritaero.com/company/sustainability/overview/. Expiration of Stockholder Rights Plan The Company adopted a limited duration stockholder rights agreement (the “rights plan”) on April 22, 2020. The rights plan expired on April 22, 2021. As of the filing date of this Proxy Statement, the Company does not intend to renew the rights plan. 100% Wind Energy in Kansas As of 2022, Spirit’s entire 12 million square foot facility in Wichita is now fully powered by a nearby wind farm. The project is also designed to support local economic development. Water Recycling at Scale Spirit has one of the largest industrial water reuse systems in the United States – recycling more than 800 million gallons of process water at our Wichita location in 2021. CORPORATE GOVERNANCE (continued) 22 Spirit AeroSystems 2022 Proxy Statement |
| Spirit AeroSystems 2022 Proxy Statement 23 Related Person Transactions The Board has adopted a written Related Person Transaction Policy (the “RPT Policy”) that can be found on the Company’s website at http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx. The purpose of the RPT Policy is to ensure the proper evaluation, approval or ratification, and reporting of related person transactions. Such transactions are only appropriate if they are fair to, and in the best interests of, the Company. Under the RPT Policy, a related person transaction is any transaction in which the Company was, is, or will be a participant, where the amount involved exceeds $120,000, and in which a Related Person (as defined below) has, had, or will have a direct or indirect material interest. A Related Person is a director, director nominee, officer, or 5% stockholder, or any of their immediate family members. The existence of a direct or indirect material interest depends upon individual facts and circumstances and is determined by our General Counsel or the Governance Committee. The Governance Committee is responsible for reviewing these transactions and determining whether they are fair to, and in the best interests of, the Company. After review of the relevant facts and circumstances, if the Governance Committee concludes a related person transaction is fair to, and in the best interests of, the Company, it may approve or ratify the transaction. If the Governance Committee declines to approve or ratify any related person transaction, the Company’s General Counsel, in coordination with the affected business unit or corporate function, will review the transaction, determine whether it should be terminated or amended in a manner that |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 23
The Board’s Role in Risk Oversight
Management’s Role in Risk Management
The Company’s management is responsible for the identification, assessment, mitigation, and management of risks The Governance Committee reviewed potential transactions in accordance with the RPT Policy, including transactions relating to the Company’s strategy and operations. Apart from reporting to the Board, management engages in a robust enterprise risk management process that involves: (i) semi-annual risk-assessment surveys and interviews; (ii) reviewing, repositioning, and prioritizing identified risks by a risk council composed of executive leadership (the “Risk Council”); (iii) assigning risks to risk owners based on responsibilities with respect to the Company’s strategic objectives; (iv) developing and reporting mitigation plans by the risk owners and risk management team to the Risk Council; and (v) oversight by the Company’s internal audit function. On a quarterly basis, the status of the top risks identified in management’s enterprise risk management process, along with their associated mitigation plans, are presented to the Risk Committee.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 24
The Risk Committee of the Board is charged with oversight of the Company’s cybersecurity matters. The Company hired a Chief Information Security Officer (“CISO”) in early 2018 to oversee the Company’s cybersecurity practices and procedures. The CISO reports to the Risk Committee quarterly regarding such practices and procedures. The Company took several steps in 2018 to mitigate cybersecurity risks, such as upgrading operating and monitoring systems, hiring specialized personnel, and reviewing and improving applicable policies and procedures. The Company requires cybersecurity education at all levels of the organization.
Stockholders and other interested persons may communicate with the Board, the Chairman of the Board, individual members of the Board, members of any committee of the Board, or one or more non-employee directors through the following:
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Mr. Fulchino’s interest in AEI and determined such not to
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be related person transactions under the RPT Policy or under Item 404 of Regulation S-K. See “Director Independence” for more information. CORPORATE GOVERNANCE (continued) For More Information, Governance Documents Are Available on Our Website We maintain governance documents on our website at
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The Corporate Secretary will forward communications received to the appropriate party. Receipt of communications clearly not appropriate for consideration by members of the Board, such as unsolicited advertisements, inquiries concerning the Company’s products and services, and harassing communications, are not forwarded to members of the Board.
Commitment to Stockholder Engagement and Responsiveness
The Company’s management and subject-matter experts frequently meet with investors to discuss Company performance, governance practices, strategy, operations, and other matters of importance to our stockholders. In 2018, members of the Company’s management held more than 560 in-person and telephonic meetings with investors and analysts, and traveled through the continental U.S. and to the U.K. to attend the meetings. The Company is committed to maintaining a robust stockholder outreach program in addition to regular participation at investor and community events and meeting with analysts. The Company welcomes feedback from all stockholders. Stockholders can contact the Company’s Investor Relations team by calling 316-523-7040 or emailing investorrelations@spiritaero.com.
At the 2018 annual meeting, two proposals were put forth regarding the stockholders’ right to call special meetings. Proposal 4 was a proposal from the Company’s Board to reduce the threshold required to call a special meeting from a majority of stockholders to 25%. Proposal 5 was a stockholder proposal to reduce the threshold required to call a special meeting from a majority of stockholders to 10%. At the 2018 annual meeting, stockholders voted overwhelmingly in favor of Proposal 5. After the 2018 annual meeting, the Company’s management engaged with several stockholders on the matter and reported the conclusions from the engagement efforts to the Board. On July 23, 2018, after careful consideration of the matter, the Board amended the Company’s bylaws to lower the threshold required to call a special meeting from a majority of stockholders to 10%, consistent with Proposal 5. The Board also adopted a number of customary protections around the right to protect against misuse. The bylaws, as amended, are available on the Company’s website at http://investor.spiritaero.com/govdocs.
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2018 Board and Committee Meetings and Attendance
During 2018, there were four in-person meetings and seven telephonic meetings of the Board. All the Company’s directors attended 75% or more of the aggregate of all meetings of the Board and of committees on which they served in 2018. The Company’s Governance Guidelines provide that director attendance is expected at annual meetings of stockholders, and all the Company’s directors attended the 2018 annual meeting of stockholders.
In addition to scheduled Board meetings, the Board receives monthly reports from Mr. Gentile detailing financial results, operational highlights and challenges, and updates on strategic initiatives.
As part of each quarterly in-person Board meeting in 2018, the Company’s non-employee directors met without management present in an executive session. During executive sessions, the non-employee directors reviewed management’s performance, compensation, talent development and succession planning, strategic considerations, corporate governance matters, and other matters of importance.
The Company is committed to the highest ethical standards and to complying with all laws and regulations applicable to the Company’s business. To support and articulate its commitment and personal responsibility in this regard, the Company has adopted the Code of Business Conduct (the “Code”). The Code addresses a number of topics, including the Foreign Corrupt Practices Act, conflicts of interest, safeguarding assets, insider trading, and general adherence to laws and regulations. All directors and employees, including executive officers, must comply with the Code. The Code is available on the Company’s website at http://investor.spiritaero.com/govdocs.
The Board is responsible for overseeing management succession planning. At least annually, the Board reviews candidates for succession with respect to the CEO role and other senior management roles. Succession plans have been developed for both ordinary course succession and contingency planning due to an unforeseen event. The Board receives updates on the development of the succession candidates regularly. Directors engage with potential succession candidates during formal presentations at Board and committee meetings, and informal events with directors and candidates present.
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Compensation of Non-Employee Directors
Non-employee directors receive annual cash and equity compensation as described below. Equity compensation is granted under the Director Stock Program adopted under the 2014 Omnibus Incentive Plan, as amended (the “OIP”). The Compensation Committee reviews and approves non-employee director compensation amounts and practices annually. As part of their review, the Compensation Committee evaluates non-employee director compensation data from the companies in Spirit’s proxy peer group, including data regarding the size of equity awards. In addition, the Compensation Committee confers with its independent compensation consultant on the magnitude and type of non-employee director compensation, and reviews market data and benchmarking surveys provided by the consultant. Based upon that information, the Compensation Committee makes a recommendation to the Board. The Board approves the form and amount of compensation after considering the Compensation Committee’s recommendation.
In developing its recommendations, the Compensation Committee is guided by the following goals with respect to non-employee director compensation:
Compensation should be market-competitive in relation to comparably-situated companies, including the Company’s proxy peer group;
Compensation should align directors’ interests with the long-term interests of the Company’s stockholders; and
The compensation structure should be simple, transparent, and easy for stockholders to understand.
The following table describes the elements of the 2018 non-employee director compensation program:
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Overview Non-employee directors receive annual cash and equity compensation as described below. Equity compensation is granted under the Director Stock Program adopted under the 2014 Omnibus Incentive Plan, as amended (the “OIP”). The Compensation Committee reviews non-employee director compensation amounts and practices annually. As part of their review, the Compensation Committee evaluates non-employee director compensation data from the companies in Spirit’s proxy peer group, including data regarding the size of equity awards. In addition, the Compensation Committee confers with its independent compensation consultant on the magnitude and type of non-employee director compensation, and reviews market data and benchmarking surveys provided by the consultant. Based upon that information, the Compensation Committee makes a recommendation to the Board. The Board approves the form and amount of compensation after considering the Compensation Committee’s recommendation. In developing its recommendations, the Compensation Committee is guided by the following goals with respect to non- employee director compensation: Compensation should be market-competitive in relation to similarly-situated companies, including the Company’s proxy peer group; Compensation should align directors’ interests with the long-term interests of the Company’s stockholders; and The compensation structure should be simple, transparent, and easy for stockholders to understand. Compensation Elements The following table describes the elements of the 2021-2022 term non-employee director compensation program: 2021-2022 Amounts Element ($) Annual Board Cash Retainer |
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110,000 Annual Board Equity Retainer |
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135,000 Additional Retainer for Chairman of the Board |
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115,000 Additional Retainer for |
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26,000 Additional Retainer for |
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21,000 Additional Retainer for |
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Each Board member receives an annual cash retainer, which is paid quarterly. Further, the Chairman of the Board and each committee chairman receives an additional cash retainer. Directors may elect to have their retainers received in shares of restricted stock or restricted stock units (“RSUs”) in lieu of cash.
Each Board member receives an annual equity retainer, which may be paid annually in the form of restricted stock or RSUs. Both types of awards vest if the non-employee director remains continuously in service for the entire term to which the grant relates. If the non-employee director incurs a termination for any reason before the end of the term (before the annual meeting of stockholders following the grant), the awards are forfeited without any payment. The Board may, in its discretion, waive this one-year service condition (in whole or in part) if it deems it to be appropriate and in the best interests of the Company to do so. Upon vesting, shares of restricted stock are delivered to the directors; however, vested RSUs are not paid to the director until the date that the director leaves the Board. Restricted stock confers voting and dividend rights; dividends accrue during the restricted period and are paid out upon vesting. RSUs confer dividend equivalent rights; dividend equivalents accrue during the restricted period and thereafter, and are paid out upon settlement. If the awards are forfeited, dividends or dividend equivalents, as applicable, are also forfeited.
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Board and Committee Meeting Fees
Until April 25, 2018, Board and committee meeting fees of $1,000 per meeting were paid for attendance at formal meetings where notice was duly given, a quorum was present, a matter was presented for consideration, the Board or committee took action on the matter, and minutes were taken. Meeting fees were paid in cash in arrears at the end of the quarter for which the fees were earned. Directors could choose to receive fees in the form of cash, restricted stock, or RSUs. A director was required to attend a majority of his or her required Board and committee meetings to receive any meeting fees. On April 25, 2018, the Board of Directors terminated the practice of paying meeting fees and changed the annual board equity retainer from $105,000 to $125,000.
Directors are reimbursed for out-of-pocket expenses incurred in connection with their Board services. The Company does not provide perquisite allowances to non-employee directors.
Non-Employee Director Stock Ownership Requirements
Non-employee directors are required to own stock equal to five times the annual Board cash retainer, which currently amounts to $525,000. Non-employee directors have four years of Board service to meet the minimum stockholder requirements. RSUs held by directors are counted in determining whether the minimum stockholding requirements are satisfied. Information regarding the current stock ownership of the Company’s non-employee directors can be found below under “Stock Ownership — Beneficial Ownership of Directors and Executive Officers.”
As of February 25, 2019, all non-employee directors other than Ms. Wright were in compliance with the stock ownership requirements. Ms. Wright, who joined our Board on February 20, 2018, has until February 20, 2022, to meet the requirements.
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2018 Director Compensation Table
The following table sets forth non-employee director compensation for the fiscal year ended December 31, 2018.
Name | Fees Earned or Paid in Cash ($) | (1)
| Stock Awards ($) | (2)
| All Other Compensation ($) | (3)
| Total ($) |
Charles L. Chadwell | 125,000 |
| 125,039 |
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| 250,039 |
Irene M. Esteves |
|
| 271,099 | (4) |
|
| 271,099 |
Paul E. Fulchino |
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| 262,054 | (5) |
|
| 262,054 |
Richard A. Gephardt | 108,000 |
| 125,039 |
| 275,604 |
| 508,643 |
Robert D. Johnson | 205,000 |
| 125,039 |
|
|
| 330,039 |
Ronald T. Kadish | 124,000 |
| 125,039 |
|
|
| 249,039 |
John L. Plueger |
|
| 245,053 | (6) |
|
| 245,053 |
Francis Raborn(7) | 61,500 |
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|
|
|
| 61,500 |
Laura H. Wright | 72,148 |
| 168,205 | (8) |
|
| 240,353 |
(1) Includes cash retainer, additional Committee chairmen retainers, and meeting fees paid until April 25, 2018. Please refer to “Compensation of Non-Employee Directors — Compensation Elements — Board and Committee Meeting Fees.” (2) Except for Ms. Wright (see footnote (8) below): Represents the aggregate grant date fair value of the stock awards computed in accordance with authoritative guidance on stock-based compensation accounting issued by the Financial Accounting Standards Board (the “FASB”). On May 7, 2018, each non-employee director received an annual grant of 1,493 shares of restricted stock or RSUs with an aggregate value of $125,000 based on $83.75 per share, the average of the opening and closing prices of Common Stock on the grant date. As a result of rounding up fractional share amounts, the grants were valued at $125,039. In addition, certain directors elected to defer a portion or all of their annual cash retainer. Please see footnotes (4), (5), and (6), for more information. As of February 25, 2019, the balance of each non-employee director’s unvested restricted stock or unvested RSUs was as follows: Mr. Chadwell: 1,493 shares of restricted stock; Ms. Esteves: 3,237 RSUs (includes 1,744 RSUs for deferred retainer, committee chair, and meeting fees); Mr. Fulchino: 3,129 shares of restricted stock (includes 1,636 shares of restricted stock for deferred retainer, committee chair, and meeting fees); Mr. Gephardt: 1,493 shares of restricted stock; Mr. Johnson: 1,493 shares of restricted stock; Mr. Kadish: 1,493 shares of restricted stock; and Mr. Plueger: 2,926 shares of restricted stock (includes 1,493 shares of restricted stock for deferred retainer and meeting fees). (3) The amount of perquisites and other personal benefits has been excluded for all non-employee directors other than Mr. Gephardt, as the total value of each director’s perquisites and other personal benefits was less than $10,000. For Mr. Gephardt, this amount reflects consulting fees paid to the Gephardt Group for labor consulting services rendered in 2018, as further described under “Director Independence.” (4) Includes $105,000 in deferred cash retainer, $25,000 in deferred Committee chair cash retainer, and $16,000 in deferred meeting fees per Ms. Esteves’ election to receive her cash retainers and meeting fees in RSUs. (5) Includes $105,000 in deferred cash retainer, $18,000 in deferred Committee chair cash retainer, and $14,000 in deferred meeting fees per Mr. Fulchino’s election to receive his cash retainers and meeting fees in restricted stock. (6) Includes $105,000 in deferred cash retainer and $15,000 in deferred meeting fees per Mr. Plueger’s election to receive his cash retainer and meeting fees in restricted stock. (7) Mr. Raborn was a non-employee director of the Company until April 25, 2018, when he retired. Mr. Raborn’s fees were prorated to reflect his service in 2018. (8) Represents the aggregate grant date fair value of two stock awards computed in accordance with authoritative guidance on stock-based compensation accounting issued by the FASB: (a) The first stock award was issued on February 20, 2018, the date Ms. Wright joined the Board. On this date, Ms. Wright received a pro rata grant of 243 shares of restricted stock with an aggregate value of $22,094 based on $91.13, the average of the opening and closing prices of Common Stock on February 20, 2018. As a result of rounding up fractional share amounts, the grant was valued at $22,145. The amount of Ms. Wright’s stock award included $3,683 in deferred cash retainer. (b) The second stock award was issued on May 7, 2018, when the annual Board equity awards were granted. On this date, Ms. Wright received a grant of 1,493 shares of restricted stock with an aggregate value of $125,000 based on $83.75 per share, the average of the opening and closing prices of Common Stock on the grant date. As a result of rounding up fractional share amounts, the grant was valued at $125,039. Ms. Wright also elected to defer $21,000 representing an additional 251 shares of restricted stock per Ms. Wright’s election to receive a portion of her cash retainer in restricted stock. As of February 25, 2019, the balance of Ms. Wright’s unvested restricted stock is 1,744 shares of restricted stock (including 251 shares of restricted stock for deferred cash retainer). | |||||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 29
Related Person Transaction Policy and Process
The Board has adopted a written Related Person Transaction Policy (the “RPT Policy”) that can be found on the Company’s website at http://www.investor.spiritaero.com/govdocs. The purpose of the RPT Policy is to ensure the proper evaluation, approval or ratification, and reporting of related person transactions. Such transactions are only appropriate if they are fair to, and in the best interests of, the Company.
Under the RPT Policy, a related person transaction is any transaction in which the Company was, is, or will be a participant, where the amount involved exceeds $120,000, and in which a Related Person has, had, or will have a direct or indirect material interest. A Related Person is a director, director nominee, officer, or 5% stockholder, or any of their immediate family members. The existence of a direct or indirect material interest depends upon individual facts and circumstances and is determined by our General Counsel or Governance Committee.
The Governance Committee is responsible for reviewing these transactions and determining whether they are fair to, and in the best interests of, the Company. After review of the relevant facts and circumstances, if the Governance Committee concludes the related person transaction is fair to, and in the best interests of, the Company, it may approve or ratify the transaction.
If the Governance Committee declines to approve or ratify any related person transaction, the Company’s General Counsel will review the transaction, determine whether it should be terminated or amended in a manner that is acceptable to the Governance Committee, and advise the Governance Committee of their recommendation. The Governance Committee will then consider the recommendation at its next meeting. If the General Counsel does not ultimately recommend the transaction to the Governance Committee or if the Governance Committee does not approve the transaction, the proposed transaction will not be pursued; or, if the transaction has already been entered into, the Governance Committee will determine an appropriate course of action with respect to the transaction.
Certain Related Person Transactions
Below are the transactions that occurred between January 1, 2018, and February 25, 2019, and fall within the definition of related person transaction in the RPT Policy or under Item 404 of Regulation S-K. With respect to each transaction, the Governance Committee reviewed the transaction in accordance with the RPT Policy and approved it on the basis that it was fair to, and in the best interests of, the Company.
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| 2021 Director Compensation Table The following table sets forth non-employee director compensation for the fiscal year ended December 31, 2021. Fees Earned or Paid in Cash(1) Stock Awards(2) Total(3) Name ($) ($) ($) Stephen A. Cambone 103,091 135,026 238,117 Charles L. Chadwell 116,528 135,026 251,554 Irene M. Esteves 127,507(4) 135,026 262,533 William A. Fitzgerald 15,110(5) 15,110 Paul E. Fulchino 122,224(6) 135,026 257,250 Richard A. Gephardt 103,091 135,026 238,117 Robert D. Johnson 208,249 135,026 343,275 Ronald T. Kadish 116,528 135,026 251,554 John L. Plueger 103,091(7) 135,026 238,117 Patrick M. Shanahan 15,110 15,110 Laura H. Wright 111,186 135,026 246,213 (1)Includes annual cash retainer and committee chair retainers earned for 2021, including any such retainers that were paid in the form of restricted stock or RSUs in 2021 or 2022 by the director’s election in lieu of cash compensation for 2021. Ms. Esteves and Messrs. Fitzgerald, Fulchino and Plueger elected to defer all or a portion of their annual cash retainers for 2021 as set forth in footnotes (4) - (7). (2)Represents the aggregate grant date fair value of the stock awards computed in accordance with authoritative guidance on stock-based compensation accounting issued by the Financial Accounting Standards Board (the “FASB”). On May 10, 2021, each non-employee director, other than Messrs. Fitzgerald and Shanahan, received an annual grant of 3,016 shares of restricted stock or RSUs with an aggregate value of $135,000 based on $44.77 per share, the closing price of Common Stock on the grant date. As a result of rounding of fractional share amounts, the grants were valued at $135,026. Messrs. Fitzgerald and Shanahan joined the Board in November 2021 and thus did not receive stock awards in 2021. As of December 31, 2021, each non-employee director’s aggregate number of unvested restricted stock or RSUs was as follows: Dr. Cambone: 3,016 shares of restricted stock; Mr. Chadwell: 3,016 shares of restricted stock; Ms. Esteves: 6,055 RSUs (includes 3,039 RSUs received in lieu of 2021-2022 term annual cash and committee chair retainers); Mr. Fulchino: 5,944 shares of restricted stock (includes 2,928 shares of restricted stock received in lieu of 2021-2022 term annual cash and committee chair retainers); Mr. Gephardt: 3,016 shares of restricted stock; Mr. Johnson: 3,016 shares of restricted stock; Mr. Kadish: 3,016 shares of restricted stock; Mr. Plueger: 5,474 shares of restricted stock (includes 2,458 shares of restricted stock received in lieu of 2021-2022 term annual cash retainer); and Ms. Wright: 3,016 shares of restricted stock. As of December 31, 2021, Messrs. Fitzgerald and Shanahan held no unvested restricted stock or RSUs. Note that any RSUs or shares of restricted stock received in lieu of annual cash and committee chair retainers described in this footnote were granted in 2021 and relate to retainers earned over the director’s 2021-2022 annual term, which covers portions of two calendar years, and that upon any termination of services of the director during the outstanding term, the equity award will be canceled, and a cash payment will be made therein that is equal to the cash amounts earned by the director through the date of such termination of service. (3)No non-employee director received perquisites or other personal benefits during 2021. (4)Includes $127,507 in annual cash and committee chair retainers that were paid in the form of 3,860 shares of RSUs for Ms. Esteves pursuant to her election. The RSUs were granted to Ms. Esteves in part on May 10, 2021, and in part on May 11, 2020, and are included in this disclosure because the RSUs were granted in lieu of cash payments earned for service in 2021. (5)Includes $15,110 in annual cash retainer that was paid in the form of 306 shares of restricted stock for Mr. Fitzgerald pursuant to his election. The restricted stock was granted to Mr. Fitzgerald on February 7, 2022, but are included in this disclosure because the restricted stock was granted in lieu of cash payments earned for service in 2021. (6)Includes $122,224 in annual cash retainer and committee chair retainers that were paid in the form of 3,688 shares of restricted stock for Mr. Fulchino pursuant to his election. The restricted stock was granted to Mr. Fulchino in part on May 10, 2021, and in part on May 11, 2020, and is included in this disclosure because the restricted stock was granted in lieu of cash payments earned for service in 2021. (7)Includes $103,091 in annual cash retainer that was paid in the form of 3,121 shares of restricted stock for Mr. Plueger pursuant to his election. The restricted stock was granted to Mr. Plueger in part on May 10, 2021, and in part on May 11, 2020, and is included in this disclosure because the restricted stock was granted in lieu of cash payments earned for service in 2021. DIRECTOR COMPENSATION (continued) 26 Spirit AeroSystems 2022 Proxy Statement |
| Beneficial Ownership of Directors and Executive Officers The following table sets forth, as of March 1, 2022, the shares of Common Stock beneficially owned by each director and executive officer, individually and as a group. Our directors and executive officers beneficially own less than 1.0% of our Common Stock both individually and in the aggregate. For purposes of the table, shares are considered to be beneficially owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to the shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days after March 1, 2022. Time-Based and Common RSUs Vesting Performance- Total Common Total Common Stock Within Based Stock Stock Beneficially Beneficially 60 Days of Restricted Beneficially Unvested Owned Plus Name Owned Record Date Stock(1) Owned RSUs(2) Unvested RSUs DIRECTORS Stephen A. Cambone 5,458 1,356 3,016 9,830 9,830 Charles L. Chadwell 20,731 4,884 3,016 28,631 28,631 Irene M. Esteves 29,519 29,519 6,055 35,574 William A. Fitzgerald 2,263 2,263 Paul E. Fulchino 25,902 5,944 31,846 31,846 Richard A. Gephardt 9,634 5,790 3,016 18,440 18,440 Robert D. Johnson 16,125 3,016 19,141 19,141 Ronald T. Kadish 25,563 3,016 28,579 28,579 John L. Plueger 21,961 13,026 5,474 40,461 40,461 James R. Ray, Jr. Patrick M. Shanahan 1,247 1,247 1,247 Laura H. Wright 10,318 3,016 13,334 13,334 EXECUTIVE OFFICERS Thomas C. Gentile III 185,042 132,820 317,862 139,160 457,022 Mark J. Suchinski 29,162 16,255 45,417 24,359 69,776 Samantha J. Marnick 64,149 21,967 86,116 32,033 118,149 Duane F. Hawkins(3) 55,469 24,511 18,570 98,550 98,550 William E. Brown 33,078 14,843 47,921 15,551 63,472 Mary (“Mindy”) McPheeters 5,147 8,046 13,193 6,641 19,834 Terry J. George 13,722 9,252 22,974 12,028 35,002 Kevin Matthies 28,422 10,989 39,411 13,979 53,390 Scott M. McLarty 16,195 9,059 25,254 13,925 39,179 Justin Welner 15,592 13,780 29,372 9,343 38,715 Kailash Krishnaswamy 10,039 1,334 14,722 26,095 10,438 36,533 All directors and executive officers as a group (20 persons) 591,709 80,420 301,064 973,193 285,775 1,258,968 Spirit AeroSystems 2022 Proxy Statement 27 STOCK OWNERSHIP |
| (1)For directors: includes unvested time-based restricted stock awards but excludes RSUs. RSUs do not confer voting rights until they are settled upon the director’s departure, as described in footnote (2) below. For executive officers: includes unvested time-based and performance-based restricted stock awards that are forfeitable until the vesting date or performance certification date, as applicable. Performance-based restricted stock awards are included in the table at target amounts. This column does not include any time-based or performance-based restricted stock units as they do not confer voting rights. (2)For directors: RSUs vest after one year of service as a director. However, RSUs are not payable until the director’s termination of service. At such time, the RSUs will be settled, at the Board’s option, in cash or shares of Common Stock based on the market value of Common Stock upon termination of service. Because of this, all vested RSUs are included under |
| PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION We are seeking advisory approval of the compensation of our named executive officers (“NEOs”), as set forth in the following “Compensation Discussion and Analysis” section. This “say-on-pay” vote is intended to address the overall compensation of the Company’s NEOs and the objectives, policies, and practices described in this Proxy Statement. We conduct a say-on-pay vote annually. The Board believes that our executive compensation promotes stockholder interests by providing a strong link between pay and performance consistent with practices across the |
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SPIRIT AEROSYSTEMS - 2019 Proxy Statement 30
Beneficial Ownership of Directors and Executive Officers
The following table sets forth, as of February 25, 2019, the shares of Common Stock beneficially owned by each director and named executive officer, individually, and by all the Company’s directors and executive officers as a group. Individually and together, they own less than 1% of our Common Stock. The table also includes information about RSUs credited to the accounts of certain non-employee directors. For purposes of the table, shares are considered to be beneficially owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to the shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days after February 25, 2019.
Name | Common Stock Beneficially Owned |
| Shares Vesting in 60 Days of Record Date | Time-Based and Performance- Based Restricted Stock | (1) | Total Common Stock Beneficially Owned | RSUs | (2) | Total Common Stock Beneficially Owned Including RSUs |
DIRECTORS Charles L. Chadwell |
12,328 |
|
|
1,493 |
|
13,821 |
4,884 |
|
18,705 |
Irene M. Esteves |
|
|
|
|
|
| 15,465 |
| 15,465 |
Paul E. Fulchino | 9,105 |
|
| 3,129 |
| 12,234 |
|
| 12,234 |
Richard A. Gephardt | 1,251 |
|
| 1,493 |
| 2,744 | 5,790 |
| 8,534 |
Robert D. Johnson | 12,742 |
|
| 1,493 |
| 14,235 |
|
| 14,235 |
Ronald T. Kadish | 17,180 |
|
| 1,493 |
| 18,673 |
|
| 18,673 |
John L. Plueger | 6,358 |
|
| 2,926 |
| 9,284 | 13,026 |
| 22,310 |
Laura H. Wright | 1,443 |
|
| 1,744 |
| 3,187 |
|
| 3,187 |
EXECUTIVE OFFICERS Thomas C. Gentile III |
65,645 |
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|
182,921 |
|
248,566 |
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|
248,566 |
Sanjay Kapoor(3) | 87,488 |
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| 36,240 |
| 123,728 |
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| 123,728 |
Samantha J. Marnick | 43,739 |
|
| 31,122 |
| 74,861 |
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| 74,861 |
Duane F. Hawkins | 30,125 |
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| 35,536 |
| 65,661 |
|
| 65,661 |
John A. Pilla(4) | 80,950 |
|
| 31,126 |
| 112,076 |
|
| 112,076 |
All directors and executive officers as a group (18 persons) | 430,551 |
|
| 421,417 |
| 851,968 | 39,165 |
| 891,133 |
(1) With respect to executive officers, includes unvested time-based and performance-based restricted stock awards that are forfeitable until the vesting date or performance certification date, as applicable. Performance-based restricted stock awards are included in the table at target amounts. With respect to directors, includes unvested restricted stock awards that are forfeitable until the vesting date. Such awards are included herein as they confer voting rights and, therefore, are deemed to be beneficially owned under Rule 13d-3(a)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). (2) RSUs vest after one year of service as a director. However, RSUs are not payable until the director’s termination of service. At such time, the RSUs will be paid, at the Board’s option, in cash or shares of Common Stock based on the market value of Common Stock upon termination of service. All RSUs reflected are currently vested except for 3,237 RSUs held by Ms. Esteves. (3) Mr. Kapoor retired from the position of Executive Vice President and Chief Financial Officer on February 9, 2019. The values shown in the table assume no transactions have taken place since February 9, 2019, when Mr. Kapoor ceased to be an executive officer of the Company. (4) Excludes 16,023 phantom stock units Mr. Pilla is entitled to receive upon his retirement from the Company under the frozen Supplement Executive Retirement Plan. | |||||||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 31
Beneficial Ownership of Major Stockholders
The following table sets forth information with respect to beneficial owners of more than 5% of our outstanding securities as of February 25, 2019. The information set forth below is based on ownership statements filed with the SEC pursuant to Section 15(d) or 13(g) of the Exchange Act.
Name | Amount of Shares Beneficially Owned | Percentage of Common Stock | Sole Voting Shares | Shared Voting Shares | Sole Investment Shares | Shared Investment Shares |
5% STOCKHOLDERS The Vanguard Group(1) 100 Vanguard Blvd. Malvern, PA 19355 |
10,560,087 |
9.91% |
82,406 |
21,149 |
10,462,132 |
97,955 |
Blackrock, Inc.(2) 55 E. 52nd St. New York, NY 10005 | 7,376,265 | 7.0% | 6,606,277 |
| 7,376,265 |
|
Darsana Capital Partners LP(3) Darsana Capital Partners GP LLC Darsana Master Fund LP Darsana Capital GP LLC Anand Desai 40 West 57th Street, 15th Floor New York, NY 10019 | 6,750,104 | 6.4% |
| 6,750,104 |
| 6,750,104 |
(1) Information is based on an amended Schedule 13G filed with the SEC on February 11, 2019. (2) Information is based on an amended Schedule 13G filed with the SEC on February 6, 2019. (3) Information is based on an amended Schedule 13G filed with the SEC on February 14, 2019.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors, executive officers, and persons who own more than 10% of any registered class of a company’s equity securities to file beneficial ownership reports with the SEC. Such reports are filed on Form 3, Form 4, and Form 5 under the Exchange Act, as appropriate. To the Company’s knowledge, based solely on a review of these reports and the reporting persons’ written representations, the Company believes that all filings required to be made by reporting persons holding the Company’s stock were timely filed in accordance with Section 16(a) in 2018, except for one Form 4 for Mr. Johnson (the “Late Form”). The Late Form regarded a sale of 500 shares on March 1, 2018, and was filed on May 9, 2018. The Late Form was not filed on a timely basis because the appropriate staff of the Company did not receive information about the sale until several weeks after it occurred.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 32
ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS
Stockholders are being asked to approve, on an advisory basis, the compensation of the named executive officers, or NEOs, as set forth under the heading “Compensation Discussion and Analysis.” This vote, which is referred to as the “say-on-pay” vote, is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s NEOs and the objectives, policies, and practices described in this Proxy Statement. We conduct a say-on-pay vote annually. The Board believes that executive compensation, as disclosed in this Proxy Statement, aligns with the Company’s peer group pay practices and furthers the Company’s compensation objectives.
Accordingly, the Board asks the Company’s stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed by the Company pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table, and other related tables and disclosures.”
The Board will review the voting results of Proposal 2 and take them into consideration when making future decisions regarding executive compensation.
The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non-binding approval with respect to Proposal 2.
With respect to Proposal 2, a stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” Proposal 2. However, because abstentions and broker non-votes will be counted as present at the Annual Meeting, they will have the effect of votes “AGAINST” Proposal 2.
Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on executive compensation matters unless the beneficial owner of such shares has given voting instructions on the matter. This means that, if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 2 if you want your broker to vote your shares on the matter.
TheBoardrecommendsyouvoteFORtheresolutionapprovingthecompensationofournamedexecutiveofficers.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 33
COMPENSATION DISCUSSION AND ANALYSIS
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Our 2018 Named Executive Officers
The following Compensation Discussion and Analysis describes the 2018 compensation of our NEOs. Our 2018 NEOs were:
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Samantha J. Marnick Executive Vice President, |
President, Commercial Duane F. Hawkins Executive Vice President |
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& Space Kevin Matthies Senior Vice President, Chief Technology and Quality Officer For a full description of the compensation we pay to our NEOs, please review this section and the related compensation tables carefully. Say on Pay Vote and Stockholder Engagement on Compensation After years of overwhelming stockholder support exceeding 90%, our say on pay resolutions received only 74% and 61% support at our 2020 and 2021 Annual Meetings, respectively. This was due in part to the voting standard under our Bylaws (which treats broker non-votes and abstentions as “against” votes) and support was nearly 80% in each of these years when measured as a straight percentage of shares voted. Even so, we were not satisfied with these results and we expanded our stockholder engagement program with a focus on understanding concerns regarding compensation practices. In our 2021 outreach to stockholders representing nearly 50% of the Company’s outstanding shares, we 2021 Named Executive Officers . . . . . . . . . . . . . . . . . . . . . 30 Say on Pay Vote and Stockholder Engagement on Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 How Performance Determines Pay . . . . . . . . . . . . . . . . . . . . 32 Executive Compensation Plan Design . . . . . . . . . . . . . . . . . . 33 Peer Benchmarking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2021 Performance and Payouts . . . . . . . . . . . . . . . . . . . . . . 37 Compensation Governance . . . . . . . . . . . . . . . . . . . . . . . . . 44 Other Compensation Elements and Information . . . . . . . . . . . 48 Executive Compensation Tables . . . . . . . . . . . . . . . . . . . . . . 50 Employment and Separation Agreements . . . . . . . . . . . . . . . 58 Potential Payments Upon Termination or Change in Control . . . 58 2021 CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . 62 30 Spirit AeroSystems 2022 Proxy Statement |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 34
Our executive compensation program is designed to enable us to attract, retain, and incentivize executive officers who can deliver short-term performance results and longer-term stockholder value. The following highlights the key items the Compensation Committee considers in the development, review, and approval of the NEOs’ compensation.
The Company’s executive compensation program is designed to:
Attract,retain,andmotivatehighlyqualifiedexecutiveofficers. The Company aims to deliver compensation that is market-competitive and designed to retain qualified, experienced, and motivated executives in the competitive aerospace and defense industry.
Reward/pay-for-performance. A substantial portion of total compensation for executive officers should be variable and deliver rewards based on Company and individual performance. Variable compensation motivates executives to perform. Company performance is measured against established metrics. Individual performance is measured against pre-established objectives and contributions to Company successes.
AligninterestsofexecutiveofficerswiththoseoftheCompany’sstockholders. In order to align such interests, metrics for determining Company performance should be aligned to the Company’s financial results and the creation of stockholder value. Variable compensation should focus on the achievement of financial targets such as revenue, free cash flow, and total shareholder return.
Ensurecompensationdoesnotencourageinappropriaterisk-taking. We mitigate risk-taking by balancing short- and long-term incentives, placing caps on potential payments, incorporating challenging performance goals, diversifying the metrics we use to measure performance, enforcing our stock ownership requirements, and maintaining our clawback policy.
The Compensation Committee reviews and approves the target pay levels for our NEOs with respect to salary, our annual cash incentive, and our long-term incentives. In setting these levels, the Compensation Committee reviews peer group compensation levels and broad survey samples provided by the Compensation Committee’s independent compensation consultant. In addition, the Compensation Committee reviews the individual responsibilities, goals, and challenges with respect to the position in question, along with the experience, prior performance, and potential of the individual in question. The Company generally sets total annual direct compensation of the NEOs (consisting of base salary, the annual cash incentive, and long-term incentives) at a target level that is at or around the market median, subject to individual circumstances and exceptions. Additional information about the Company’s peer group and compensation-setting process can be found under “The Compensation Decision-Making Process,” and “Benchmarking” sections.
The Company’s success depends largely on the efforts and contributions of its executives and their teams to deliver strong business results and increase stockholder value. The Company uses a balance of short- and long-term incentives as well as cash and non-cash compensation to reward NEOs for their roles in meeting Company objectives. For either short- or long-term incentives, executive officers have the opportunity to earn in excess of market median levels when performance exceeds expectations. Conversely, if performance falls below expectations, the incentives pay below target levels, if at all.
In 2018, we linked pay with performance through the following variable pay:
AnnualCashIncentive(the“ACI”): a short-term incentive, which is paid in cash annually based on Company and individual performance. Company performance goals include revenue, earnings before interest and taxes, adjusted for certain items (“Adjusted EBIT”), and annual free cash flow, adjusted for certain items (“Adjusted FCF”), each over a one-year period.
Time-BasedRestrictedStock: a long-term incentive consisting of an award of restricted Common Stock vesting ratably over three years. While vesting is not tied to performance, the increase or decrease in value that the executive receives between the award’s grant date and vesting date is tied to stock performance.
Performance-BasedRestrictedStock: a long-term incentive consisting of an award of restricted Common Stock that will be earned at the end of a three-year performance period based on the Company’s total shareholder return relative to its peer group (“TSR”) and on free cash flow as a percentage of revenue (“FCF Percentage”) over such period.
Additional information on our incentives can be found under “2018 Compensation Program Elements.”
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 35
The table below explains the metrics we used to measure performance with respect to the Company’s compensation.
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| How Performance Determines Pay Pay-for-Performance Our compensation programs are designed to incentivize achievement of annual and long-term performance objectives. Our Compensation Committee is |
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| COMPENSATION DISCUSSION AND ANALYSIS (continued) Looking Forward: Changes for 2022 Incentives Going into 2022, we are focused on fundamental financial performance and strengthening the pay-for-performance link consistent with the feedback we received from our stockholders. The following are changes we made for our 2022 incentive programs. Annual Cash Incentive Long-Term Incentive Executive Compensation Plan Design The objectives of our executive compensation programs are to: attract, retain, and motivate highly qualified executives; promote absolute performance through the use of structured incentives; align pay with relative performance by developing and benchmarking against an appropriate peer group (see “Peer Benchmarking”); link the interests of our NEOs with those of our stockholders, including by using TSR as a compensation incentive metric; and manage appropriate risk-taking through the use of diversified performance measures, payment caps, clawback policies, and other tools. What We Do What We Don’t Do Adjusted the weighting for the performance component of our 2022 long-term incentives from 60% time-based and 40% performance- based to 50% time-based and 50% performance-based. Maintained a relative TSR metric for our long-term performance incentive grants to promote focus on stock-price performance and alignment with stockholder interests. This also provides an objective and visible measure of relative performance against our peers. Established a secondary peer group specific to relative-TSR to maximize effectiveness of this metric as an incentive tool. Removed the individual performance component of our annual cash incentive for our CEO and other NEOs so that achievement is now based 100% on Company performance against established targets. Returned to more traditional performance metrics for our annual cash incentive: Free Cash Flow (40%) EBIT (20%) Revenue (20%) Quality (20%) Updated our primary compensation benchmarking peer group to reflect market dynamics and the most currently appropriate peer companies. Ongoing Accruals. No ongoing accruals under defined-benefit Supplemental Executive Retirement Plan Pay-for-Performance. Over 42% of direct NEO pay is tied to performance results Share Recycling. No share recycling (other than in the context of forfeited shares) Peer Benchmarking. Compensation packages are benchmarked against peers through relative metrics Hedging, Pledging, and Shorts. No short selling, pledging, or hedging Company stock Limit Awards. Payout of annual cash incentive and performance- based restricted stock awards is capped at 200% Enhanced Benefit Plans. No enhanced health and welfare benefit plans for executives Performance Weighting. Long-term incentive grants are weighted 50% performance and 50% time-based starting in 2022 Spirit AeroSystems 2022 Proxy Statement 33 |
| What We Do What We Don’t Do Setting Target Pay The Compensation Committee reviews and approves the target pay levels for our NEOs with respect to salary, our annual cash incentive, and our long-term incentives. In setting these levels, the Compensation Committee works with management and external advisors, including our independent compensation consultant, Meridian Compensation Partners, and reviews the following: the Company’s compensation objectives; peer group compensation levels and broad survey data provided by the Compensation Committee’s independent compensation consultant, along with other market data; each individual position’s responsibilities, goals, and challenges; and the experience, prior performance, and potential of each executive. The Company generally sets total annual direct compensation (consisting of base salary, the annual cash incentive, and long-term incentives) of the NEOs at a target level that is at or around the market median, subject to individual circumstances and exceptions. Additional information about the Company’s peer group can be found under the “Peer Benchmarking” section. Aligning Pay with Performance The 2021 compensation structure (excluding perquisite, “other” compensation, and changes in pension value) for our Chief Executive Officer (“CEO”) and the other NEOs is described in the below charts. These charts show that a substantial portion of our CEO’s and NEOs’ direct compensation is delivered through performance-based pay: 44% for our CEO and 42% for our other NEOs. Guaranteed Payouts. No guaranteed payouts on performance- based equity compensation (except for upon death or disability) Equity Incentives. Long-term incentives are paid entirely in Common Stock Dividends on Unvested Shares. No dividend payments on time- or performance-based restricted stock awards until they vest Clawback Policy. The Company’s short- and long-term incentive awards are subject to clawback provisions Tax Gross-Ups. No tax gross-ups related to a change in control Stock Ownership Requirements. Our executives are required to maintain stock ownership measured as a multiple of base salary (5x for CEO, 3x for EVP/SVP, 1x for VP) Single-Trigger Change in Control. We maintain double trigger change in control provisions Annual Say-on-Pay. Stockholders cast an annual advisory say- on-pay vote Independent Consultant. The Compensation Committee uses an independent compensation consultant and assesses independence annually Rigorous Targets. Performance targets are rigorous and tied to key measures of profitability and performance COMPENSATION DISCUSSION AND ANALYSIS (continued) 34 Spirit AeroSystems 2022 Proxy Statement |
| Our Pay Metrics The table below explains the metrics we used to measure performance for determining 2021 compensation. We strive to design incentive plans that challenge our executives and drive achievement, but are also achievable at target performance, with less frequent achievement of maximum performance and below threshold performance. Percentage of Program Metric Component Scale Rationale for Metric *Please see Appendix A for an explanation and reconciliation of non-GAAP measures. CEO PAY MIX 87% At-Risk/ Variable 13% Salary 15% Annual Cash Incentive 29% Performance- Based Restricted Stock 43% Time-Based Restricted Stock OTHER NEO PAY MIX 74% At-Risk/ Variable 26% Salary 21% Annual Cash Incentive 21% Performance- Based Restricted Stock 32% Time-Based Restricted Stock Reducing net debt is a key objective and indicator to improve financial stability, return to investment grade, and reduce borrowing costs Threshold: ($2.618 billion) Target: ($2.568 billion) Maximum: ($2.518 billion) 40% Adjusted Net Debt* Controlling operating costs is key to demonstrating discipline and achieving continuous margin improvement Threshold: $1.793 billion Target: $1.718 billion Maximum: $1.643 billion 30% Operating Cost Drives the Company’s diversification priorities and overall growth targets Threshold: $151.5 million Target: $218 million Maximum: $271 million 15% New Revenue Growth Quality is how our customers measure compliance with specifications and has direct financial impact. Our quality index uses key customer metrics Threshold: 0.5 Target: 1.0 Maximum: 2.0 15% Quality Incentivizes personal performance and contributions to the Company’s financial and operating results Achievement of individual performance goals relevant to each NEO’s assignment 100% Individual Performance Goals Promotes absolute stock price performance and executive retention by requiring continuous employment 3 year vesting period 60% Stock Price (Time-Based RSUs) Promotes relative stock price performance by measuring the Company’s TSR percentile rank against its peers over a three-year performance period Threshold: 25th percentile Target: 50th percentile Maximum: 75th percentile 40% TSR (Performance- Based RSUs) Spirit AeroSystems 2022 Proxy Statement 35 COMPENSATION DISCUSSION AND ANALYSIS (continued) Annual Cash Incentive — Company Performance (80% of total for CEO and 75% for other NEOs) Annual Cash Incentive — Individual Performance (20% of total for CEO and 25% for other NEOs) Long-Term Incentive Program |
| Peer Benchmarking In order to effectively attract, motivate, and retain our executives, the Compensation Committee regularly examines market data for both pay levels and pay practices with the assistance of our independent compensation consultant. Benchmarking data provides valuable insights regarding market practices, and the Compensation Committee generally targets the median compensation range for our executives. However we do not use a formulaic approach to determining competitive pay levels and will deviate from that range to address business needs, individual performance, internal pay equity across the executive team, and succession planning. Given the unique nature of the Company’s business, and the lack of true direct competitors in the market, it is challenging to develop a single set of peer companies for purposes of compensation benchmarking. While certain companies conduct business in areas that overlap with ours, many are either much smaller or much larger in scope with limited direct overlap. In addition, the Company’s profile is evolving as we integrate acquisitions and make progress on our diversification efforts. To address these challenges, beginning in 2022 the Compensation Committee developed both a primary compensation peer group and a secondary peer group for benchmarking relative TSR performance. Specific factors considered in determining companies for inclusion in these peer groups include: Overall size Similarities in capital intensity Scope of operations Stock price movement correlation Aerospace and defense industry Industrial operations Overlapping market competitors Domestic and international revenue mix Executive talent competitors 2021 Peer Group For 2021 compensation decisions, the Company’s peer group is shown below. Borg Warner Huntington Ingalls Teledyne Technologies Curtiss-Wright Moog Inc. Terex Dana Oshkosh Corporation Textron Hexcel Corporation Parker Hannifin Trane Technologies Howmet Aerospace Parsons Corporation Triumph Group 2022 Peer Groups For 2022 compensation decisions, the Company’s peer groups are shown below. Primary Compensation Peer Group Relative TSR Peer Group AAR Corp. A.O. Smith Moog Inc. Arconic Corporation AAR Corp. Northrop Grumman Curtiss-Wright Arconic Corporation Oshkosh Corporation Hexcel Corporation Crane Co Owens Corning Howmet Aerospace Curtiss-Wright Parker Hannifin Huntington Ingalls Eaton Corporation Parsons Corporation L3 Harris Technologies General Dynamics Pentair plc Lennox International Inc. Hexcel Rockwell Automation Moog Inc. Howmet Aerospace Stanley Black & Decker Oshkosh Corporation Hubbell Incorporated Teledyne Technologies COMPENSATION DISCUSSION AND ANALYSIS (continued) 36 Spirit AeroSystems 2022 Proxy Statement |
| Primary Compensation Peer Group Relative TSR Peer Group Owens Corning Huntington Ingalls Textron Parker Hannifin IDEX Corporation The Timken Company Parsons Corporation Illinois Tool Works Trane Technologies Textron ITT Inc. TransDigm Group Incorporated TransDigm Group Incorporated L3 Harris Technologies Triumph Group Triumph Group Lennox International Xylem, Inc. 2021 Performance and Payouts There are three major components to the Company’s compensation program for NEOs: base salary, annual cash incentive, and long-term incentive. Each component is described below. Base Salary Base salary is a fixed cash amount designed to attract, retain, and motivate executive officers, taking into consideration the officer’s responsibilities, experience, breadth of role, and overall performance. The Company reviews each NEO’s base salary annually in January and makes appropriate adjustments to account for individual performance, market movement, and any change in responsibilities or circumstances. Base salary is paid in cash bi-weekly. On January 4, 2021, we restored the 20% salary reductions our executives had taken as a result of the COVID-19 pandemic and 737 MAX grounding. Annual Cash Incentive The Annual Cash Incentive (“ACI”) is an annual cash award, the target for which is equal to a percentage of a NEO’s base salary. For 2021, this target amount was equal to 145% of base salary for Mr. Gentile, and 100% of base salary for each of Mr. Suchinski and Mr. Hawkins. Ms. Marnick’s target award increased from 100% to 110% of base salary during 2021, and Mr. Matthies’ target award increased from 100% to 105% of base salary during 2021. The Compensation Committee set each NEO’s target taking into consideration peer group market data and the NEO’s responsibilities, experience, breadth of role, and overall performance. Payout of the ACI depends on the attainment of individual and Company performance goals. Depending on the level of performance achieved, payout can be between 0% and 200% of target. The objectives of the ACI are to support our pay-for-performance philosophy, align the awards with stockholder interests, and motivate executives to achieve the Company’s near-term priorities that drive the Company’s long-term performance. The performance weightings for the NEOs’ ACIs are as follows: CEO: 80% Company performance; 20% individual performance; and For all NEOs other than the CEO (“Other NEOs”): 75% Company performance; 25% individual performance. With respect to the measurement of the performance components, the Compensation Committee used a scoring scale of 0.0 to 2.0, with 0.0 for unacceptable performance and 2.0 for exceptional performance. Payout of the ACI is in cash and typically occurs in February of each year after the Compensation Committee certifies performance in January. 2021 Company Performance For the 2021 ACI, the Company performance component was based on Adjusted Net Debt (40%), Operating Cost (30%), New Revenue Growth (15%), and Quality (15%). The table below shows achieved results against each performance component’s performance goals, which yielded a score of 0.7955 out of a potential score of 2.00. Spirit AeroSystems 2022 Proxy Statement 37 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
| 2021 ACI Company Metrics Performance Weighted Measure Weighting Threshold Target Maximum Actual Result Assessment Score Adjusted Net Debt* 40% ($2,618 million) ($2,568 million) ($2,518 million) ($2,594 million) Between Threshold 0.1940 and Target Operating Cost 30% $1,793 million $1,718 million $1,643 million $1,682 million Between Target and 0.4440 Maximum New Revenue Growth 15% $151.5 million $218.0 million $271.0 million $147.2 million Below Threshold 0.0000 Quality 15% 0.5 1 2 1.05 Between Target and 0.1575 Maximum Total Company Score 0.7955 *Please see Appendix A for an explanation and reconciliation of non-GAAP measures. Individual Performance Beginning in 2022, the company will no longer utilize an individual performance component but will base executive performance solely on achievement of Company performance metrics. For 2021, the individual performance component of the ACI was intended to further align executive compensation with performance. This performance component was focused on relevant individual performance metrics that relate to each NEO’s role and responsibilities. The Compensation Committee scored this performance component based on a NEO’s achievement against the NEO’s individual performance goals. To determine the score for Mr. Gentile, the Compensation Committee reviewed his annual performance and personal contributions to the Company’s financial and operating results. With respect to the other NEOs, the Compensation Committee first considered Mr. Gentile’s report and recommendation with respect to each person’s performance and score. Subsequently, the Compensation Committee conducted a review of each NEO’s contributions to the Company during the fiscal year. With respect to 2021 performance, the NEOs received the individual performance scores set forth in the table below (under “2021 ACI Payouts”) out of a potential total score of 2.00. Descriptions of each NEOs’ 2021 individual performance contributions are set forth in “Individual NEO Performance and Compensation Changes." 2021 ACI Payouts The 2021 ACI payout for each of our NEOs is reflected in the table below. The actual award payout is calculated |
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* Please see AppendixA for an explanation and reconciliation of these non-GAAP metrics.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 36
The Company’s one- and three-year total shareholder return compared to its peer group, the Russell 3000 index, and S&P 500 index, is set forth below.
Note: TSR is calculated in the chart above using adjusted close prices. Peer TSR is market-cap weighted at the beginning of each period. Three-year TSR is cumulative. The chart above includes data from all members of the Company’s 2016–18 proxy peer group, excluding companies that were acquired during such period (Orbital ATK, B/E Aerospace, Rockwell Collins). For additional information on the companies within our peer group, see “2018 Proxy Peer Group.” Source: S&P’s Capital IQ.
CEO Target Pay Compared to Peers
The target pay of our CEO as compared to the target pay of other CEOs in our peer group is set forth below:
Note: Represents 2017 target CEO pay for companies within our peer group and 2018 target CEO pay for the Company.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 37
Significant Program-Wide Compensation Decisions in 2018
The Compensation Committee met in January 2018 to discuss and implement changes to the Company’s compensation program for the year. In large part, from a programmatic standpoint, the 2018 executive compensation program remained the same as the 2017 program except for the following:
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goals. On |
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Target Award) 25% 100% 200% 0% *
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2018 Compensation Program Elements
There are three major components to the Company’s compensation program for NEOs:
| Individual NEO Performance and Compensation Changes *After restoration on January 4, 2021, of 20% salary reductions taken as a result of the COVID-19 pandemic and 737 MAX grounding. **As of the date of this Proxy Statement. *After restoration on January 4, 2021, of 20% salary reductions taken as a result of the COVID-19 pandemic and 737 MAX grounding. **Mr. Suchinski began 2021 with a target of 175% of base salary. On January 26, 2021, Mr. Suchinski’s target was raised to 200% of his base salary based on his performance and a review of peer and broad-based compensation for similar positions, effective beginning with the awards granted in 2021. Mr. Suchinski assumed additional responsibilities for mergers and acquisitions in 2021, which was taken into account in determining his compensation. ***As of the date of this Proxy Statement. Changes For 2022** SALARY No change ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE No change to target Changes During 2021 SALARY* No change (remains at $1,300,000) ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE No change to target 2021 Compensation SALARY $1,297,863 ANNUAL CASH INCENTIVE 145% target Payout:$1,497,053 (~20% below target) LONG-TERM INCENTIVE 550% target Grant date value: $7,150,071 2021 Performance In determining Mr. Gentile’s compensation, our independent Compensation Committee took into account Mr. Gentile’s broad achievements during an especially challenging market environment. The continuing impacts of the COVID-19 pandemic and 737 MAX return to service have had dramatic impacts on air traffic and demand for our products. During this volatile period, Mr. Gentile positioned the Company for recovery of the commercial aircraft industry, made meaningful progress on the Company’s diversification and growth strategy, and successfully re-aligned our business operations into three segments: Commercial, Defense & Space, and Aftermarket. Thomas C. Gentile III, President and CEO 2021 Performance In evaluating Mr. Suchinski’s performance, our directors took into consideration his continued success in preserving and enhancing the Company’s liquidity, his efforts in driving cost reductions throughout the business, and his leadership in appropriately scaling the Company’s cost structure in response to production rate increases. During the year Mr. Suchinski drove down borrowing costs by refinancing and upsizing the Company’s senior secured term loan B credit facility at a lower rate and took on new responsibilities, including leading the Company’s mergers and acquisitions function. Mark J. Suchinski, SVP and CFO Changes For 2022*** SALARY Increased to $625,000 ANNUAL CASH INCENTIVE Increased to 110% target LONG-TERM INCENTIVE Increased to 230% target Changes During 2021 SALARY* Increased from $500,000 to $550,000 ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE Increased from 175%** to 220% 2021 Compensation SALARY $528,767 ANNUAL CASH INCENTIVE 100% target Payout: $427,839 (~20% below target) LONG-TERM INCENTIVE 200% target at time of grant Grant date value: $1,050,065 Spirit AeroSystems 2022 Proxy Statement 41 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
| *After restoration on January 4, 2021, of 20% salary reductions taken as a result of the COVID-19 pandemic and 737 MAX grounding. **As of the date of this Proxy Statement. *After restoration on January 4, 2021, of 20% salary reductions taken as a result of the COVID-19 pandemic and 737 MAX grounding. **As of the date of this Proxy Statement. Changes For 2022** SALARY No change ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE No change to target Changes During 2021 SALARY* Increased from $620,000 to $700,000 ANNUAL CASH INCENTIVE Increased from 100% to 110% LONG-TERM INCENTIVE Increased from 230% to 255% 2021 Compensation SALARY $659,529 ANNUAL CASH INCENTIVE 110% target Payout: $547,917 (~20% below target) LONG-TERM INCENTIVE 230% target at time of grant Grant date value: $1,495,040 2021 Performance Ms. Marnick was appointed President of Commercial in 2021, in addition to continuing to serve as the Company’s EVP and COO. In this role, Ms. Marnick led the successful integration of our recent acquisition of select Bombardier assets, which is substantially complete and has contributed meaningfully to our financial performance. Ms. Marnick’s focus on supply chain performance, operational efficiency, risk management, and cross-functional integration has strengthened the Company’s relationship with its customers and laid the foundation for our commercial segment to participate in the recovery of commercial air traffic. Samantha J. Marnick, EVP, COO, and President, Commercial 2021 Performance Mr. Hawkins was appointed EVP for the Company in 2021, in addition to continuing to serve as President of Defense & Space. In this role, Mr. Hawkins led strong progress on the Company’s diversification efforts, increasing defense revenues by nearly 20% year-over-year and driving growth to 24 separate defense programs with revenues in excess of $1 million. Mr. Hawkins continued to deepen relationships with key customers, including defense primes and governmental leadership, strategically positioning Spirit’s Defense & Space business for continued growth. Duane F. Hawkins, EVP and President, Defense & Space Changes For 2022** SALARY No change ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE No change to target Changes During 2021 SALARY* Increased from $535,000 to $575,000 ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE No change to target 2021 Compensation SALARY $544,203 ANNUAL CASH INCENTIVE 100% target Payout: $440,328 (~20% below target) LONG-TERM INCENTIVE 230% target at time of grant Grant date value: $1,230,518 COMPENSATION DISCUSSION AND ANALYSIS (continued) 42 Spirit AeroSystems 2022 Proxy Statement |
| *After restoration on January 4, 2021, of 20% salary reductions taken as a result of the COVID-19 pandemic and 737 MAX grounding. **As of the date of this Proxy Statement. Changes For 2022** SALARY No change ANNUAL CASH INCENTIVE No change to target LONG-TERM INCENTIVE No change to target Changes During 2021 SALARY* Increased from $500,000 to $525,000 ANNUAL CASH INCENTIVE Increased from 100% to 105% LONG-TERM INCENTIVE No change to target 2021 Compensation SALARY $505,479 ANNUAL CASH INCENTIVE 105% target Payout: $407,372 (~20% below target) LONG-TERM INCENTIVE 140% target at time of grant Grant date value: $700,058 2021 Performance As Chief Technology and Quality Officer, Mr. Matthies’ work has broad organizational impact. In 2021, Mr. Matthies’ efforts resulted in measurable improvements in quality performance, as seen by the Company’s outperformance of its Quality metric for the 2021 annual cash incentive. Mr. Matthies also led the development of new technologies and processes targeting continued improvements in efficiency, safety, and consistency. Mr. Matthies’ leadership in strengthening our culture of quality and safety will be instrumental as the Company continues scaling to meet recovering commercial air traffic demand. Kevin Matthies, Chief Technology and Quality Officer Spirit AeroSystems 2022 Proxy Statement 43 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
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| The chart below reflects the annual compensation-setting process, though certain items may shift during the year. In addition to the following, the CEO’s performance, along with all Company performance metrics used in the ACI or long- term incentives, are monitored and discussed quarterly. Independent Compensation Consultant The Compensation Committee’s charter allows the committee to engage an independent compensation consultant to advise on executive compensation matters. The Company engaged Willis Towers Watson (“Willis”) for the initial part of 2021 and engaged Meridian Compensation Partners (“Meridian”) for the latter part of the year. Willis and Meridian were engaged directly by the Compensation Committee for the purpose of providing analysis and advice with respect to executive officer compensation to the Compensation Committee. Each consultant’s engagement and fees related to work conducted for the Compensation Committee were reviewed and pre-approved by the Compensation Committee. Willis provided consulting services for the Compensation Committee in the amount of $191,571 in 2021. In addition, Willis provided other services to the Company during 2021 totaling $964,422. Of such amount, $39,500 was for due diligence support for acquisitions, $906,122 was for various scopes of integration work for the Company’s acquisition of select assets from Bombardier, and $18,800 was for compensation and market data. Meridian provided consulting services for the Compensation Committee in the amount of $58,523 in 2021. October Meeting: Discuss compensation design for upcoming year and anticipated changes; conduct risk analysis of compensation programs. April Meeting: Review ISS and Glass Lewis reports on executive compensation and discuss resulting action steps; review regulatory matters; review stock ownership requirements. February Meeting: Review and approve compensation discussion and analysis and compensation committee report in proxy statement. July Meeting: Conduct a mid-year performance review of executive officers; review talent strategy and proposed changes to executive officers; review peer group composition. January Meeting: Review market trends and benchmarking data; evaluate NEOs’ performance; review and approve NEO annual compensation including salary, short- and long-term incentives, and other similar arrangements; review compensation consultant independence. Spirit AeroSystems 2022 Proxy Statement 45 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
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the award, if the participant, without the consent of the Company, engages in a detrimental activity. Detrimental activities include breaches of restrictive covenants, such as confidentiality, non-solicitation, and non-compete covenants, and any activity contributing to a financial restatement or accounting irregularities that are appropriate to include in the 2017 Policy. 2017 Policy. The 2017 Policy applies to the ACI and Performance-Based Restricted Stock |
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SPIRIT AEROSYSTEMS - 2019 Proxy Statement 38
Base salary is a fixed cash amount designed to attract, retain, and motivate executive officers. In determining base salary, the Compensation Committee considers market data for comparable roles, experience, skill set, prior positions held, performance, and responsibility level. The Company reviews each NEO’s base salary annually in January (and as circumstances or changes in responsibilities may require) and makes appropriate adjustments to account for performance, additional responsibilities, and market movement. We set base salary amounts as set forth under “Setting Target Pay.”
The ACI is an annual cash award granted under the Company’s Short-Term Incentive Plan (the “STIP”) under the 2014 Omnibus Incentive Plan, as amended (the “OIP”). Each individual receives a total target ACI that is equal to a percentage of his or her total base salary. For 2018, this target amount was equal to 140% of our CEO’s base salary, and 100% of the other NEOs’ (the “Other NEOs”) base salaries. We set ACI target amounts as set forth under “Setting Target Pay.”
Payout of the ACI depends on the attainment of individual and Company performance goals. Depending on the level of performance achieved, payout can be between 0 — 200% of target. The objectives of the ACI are to support our pay-for-performance philosophy, align the awards with stockholder interests, and motivate executives to achieve the Company’s near-term focus on safety, quality, delivery, and customer focus that drives the Company’s long-term performance.
The performance weighting for the NEOs’ ACIs are as follows:
CEO: 80% Company performance; 20% individual performance
Other NEOs: 75% Company performance; 25% individual performance
With respect to the measurement of the performance components, the Compensation Committee used a scoring scale of 0.0 to 2.0, with 0.0 for unacceptable performance and 2.0 for exceptional performance. Individual scores are calibrated to the Company’s performance score as further described below.
The Company Performance component of each NEO’s 2018 ACI is scored based on the performance of the Company with respect to three quantitative metrics, each over a one-year period:
Revenue, representing 20% of total Company performance
Adjusted EBIT, representing 30% of total Company performance
Adjusted FCF, representing 50% of total Company performance
The manner in which Adjusted EBIT and Adjusted FCF are calculated is described in AppendixA.
In 2018, the Company exceeded its target performance goal with respect to revenue and Adjusted FCF, but did not reach its threshold goal with respect to Adjusted EBIT. As a result, the Compensation Committee determined a 0.89 score had been achieved with respect to Company performance, representing a weighted score of 0.712 for the CEO (representing 80% of his total ACI score), and 0.6675 for each of the Other NEOs (representing 75% of their total ACI scores). The following table summarizes the Company’s actual performance relative to the Company’s threshold, target, and maximum performance goals for 2018:
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* The manner in which Adjusted EBIT and Adjusted FCF are calculated is described in AppendixA.
The Individual Performance component of the ACI is intended to further align executive compensation with performance in the Company’s focus areas in any given year by establishing relevant individual performance metrics that relate to each NEO’s assignments. This component was scored based on the achievement of such individual performance goals. Individual scores were calibrated to reflect the Company’s score, which was under the established target of 1.0 for 2018. For example, Mr. Gentile met expectations; however, because the Company score was a 0.89, his individual score was also a 0.89.
To determine the score for the CEO, the Compensation Committee reviewed his annual performance and personal contributions to the Company’s financial and operational results. With respect to the Other NEOs, the Compensation Committee first considered the report and recommendation of the CEO with respect to each person’s performance and score and, subsequently, the Compensation Committee conducted a subjective review of each NEO’s
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 39
contributions to the Company during the fiscal year. With respect to 2018 performance, the NEOs received the following individual performance scores: Gentile: 0.89, Kapoor: 0.89, Marnick: 1.09, Hawkins: 0.75, and Pilla: 1.04.
For additional payout information, please see “2018 ACI Payouts.” Descriptions of the NEOs’ 2018 individual performance contributions are set forth in “2018 NEO Performance and Compensation Decisions.”
The formula for determining the 2018 ACIs and the resulting payouts are reflected in the table below:
NEO | Base Salary ($) | (1) | × | Target (Percentage of Base Salary) (%) | = | Target Award ($) | × | Company Performance (80% weighting for CEO; 75% weighting for Other NEOs) |
(2) | + | Individual Performance (20% weighting for CEO; 25% weighting for Other NEOs) | (3) | = | 2018 Total Payout ($) |
Mr. Gentile | 1,241,233 |
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| 0.7120 |
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Mr. Kapoor | 650,000 |
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| 650,000 |
| 0.6675 |
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Ms. Marnick | 522,877 |
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| 522,877 |
| 0.6675 |
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| 491,504 |
Mr. Hawkins | 533,685 |
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| 0.6675 |
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Mr. Pilla | 456,041 |
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| 456,041 |
| 0.6675 |
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(1) With respect to all NEOs other than Mr. Kapoor (his salary did not change in 2018), the ACI payout was calculated using a weighted-average base salary that takes into account their salary changes in 2018. (2) Reflects a Company score of 0.89 multiplied by the weighting percentage. (3) Reflects individual performance scores multiplied by the weighting percentage. | ||||||||||||||
Based on Company and individual performance results, the Compensation Committee believes the 2018 NEO ACIs were appropriate and achieved the objectives of the executive compensation program. While the ACIs were earned based on performance in 2018, they were paid out in January 2019. The ACIs are reported as 2018 compensation in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”
Long-term incentives are an important component of compensation, as they provide long-term, equity-based variable incentive compensation in keeping with the Company’s pay-for-performance philosophy for the entire executive group. Long-term incentives are delivered under the Company’s Long-Term Incentive Plan (the “LTIP”) under the OIP. Under the OIP, the Compensation Committee selects eligible persons to receive such awards and determines the nature and amount of each such award. For 2018, each NEO received an annual target LTIP award equal to the percentage of his or her total base salary, at the time of the award, as provided in the table below:
NEO | Base Salary ($) | x | Target (Percentage of Base Salary) (%) | = | Target Award ($) |
Mr. Gentile | 1,250,000 |
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| 6,250,000 |
Mr. Kapoor | 650,000 |
| 300 |
| 1,950,000 |
Ms. Marnick | 520,000 |
| 200 |
| 1,040,000 |
Mr. Hawkins | 535,000 |
| 230 |
| 1,230,500 |
Mr. Pilla | 455,000 |
| 190 |
| 864,500 |
The total annual target LTIP award consists of three components:
Time-Based Restricted Stock, representing 60% of the total target award amount;
Performance-Based Restricted Stock tied to relative TSR over a three-year performance period, representing 20% of the total target award amount; and
Performance-Based Restricted Stock tied to FCF Percentage over a three-year performance period, representing 20% of the total target award amount.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 40
In 2018, 60% of the target award amount was delivered in the form of a Time-Based Restricted Stock award vesting in three equal installments on each of the first, second, and third anniversaries of the grant date, subject to the recipient being employed by the Company on the vesting date. The Compensation Committee grants Time-Based Restricted Stock awards to assist in retaining NEOs and increase their stock ownership, which further aligns our NEOs’ interests with those of stockholders. Awards are approved by the Compensation Committee in January and granted in February of each year. The number of shares granted is determined based on the average of the opening and closing Common Stock prices on the third trading day after the Company’s earnings release immediately following the date the award is approved by the Compensation Committee.
Dividends on Time-Based Restricted Stock awards accrue from the grant date and are paid out on vesting. If the underlying award is forfeited, the accrued dividends are forfeited as well.
Performance-Based Restricted Stock Tied to Total Shareholder Return
In 2018, 20% of the target award amount was delivered in the form of a Performance-Based Restricted Stock award tied to TSR. Payout of the award is based on the ranking of the Company’s TSR, expressed as a percentile, relative to the TSR of a group of the Company’s peers over a three-year tracking period as compared to threshold, target, and maximum performance goals. Participants are initially granted a number of unvested shares equal to the number of vested shares to which the participant would be entitled upon achievement of the target performance goal. The table below sets forth these performance goals and vesting percentages:
|
| Threshold* | Target | Maximum |
Performance Goal | (Percentile Ranking in Peer Group) | 25th | 50th | 90th |
Vesting Percentage | (% of Target Award) | 25% | 100% | 200% |
* If performance is below threshold, payout is zero. | ||||
For grants made in 2018, the performance period runs from January 1, 2018, to December 31, 2020, and the vesting of the awards is dependent upon the Compensation Committee’s certification of the performance goal being achieved. An individual must be continuously performing services (or deemed to be continuously performing services) throughout the entire performance period, or none of the award will be earned.
For grants made in 2018, the TSR for the Company and each member of its peer group for the tracking period will be determined by calculating the percentage increase in the dividend-adjusted average closing share price for the 20 trading days ending December 31, 2017, and the 20 trading days ending December 31, 2020. If the Company’s TSR percentile ranking falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the award that a participant will receive is interpolated on a straight-line basis. If the Company’s TSR percentile ranking is below the threshold performance goal, the participant will not be entitled to any vested shares, and if the Company’s TSR percentile ranking is equal to or higher than the maximum performance goal, the participant will be entitled to a number of vested shares equal to 200% of the target award. The Compensation Committee may apply negative discretion to the award payout. Dividends on Performance-Based Restricted Stock awards tied to TSR do not accrue until the award vests.
Performance-Based Restricted Stock Tied to FCF Percentage
In 2018, 20% of the target award amount was delivered in the form of a Performance-Based Restricted Stock award tied to FCF Percentage. Payout of the award is based on the Company’s free cash flow as a percentage of revenue over a three-year tracking period as compared to threshold, target, and maximum performance goals. FCF Percentage is a measure of long-term cash generation driven by increasing revenue, reducing costs, improving productivity, and efficiently using capital. Participants are initially granted a number of unvested shares equal to the number of vested shares to which the participant would be entitled on achievement of the target performance goal. The table below sets forth these performance goals and vesting percentages:
|
| Threshold* | Target | Maximum |
Performance Goal | FCF Percentage | 7.0% | 7.75% | 9.0% |
Vesting Percentage | (% of Target Award) | 25% | 100% | 200% |
* If performance is below threshold, payout is zero. | ||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 41
For grants made in 2018, the performance period runs from January 1, 2018, to December 31, 2020, and the vesting of the awards is dependent on the Compensation Committee’s certification of the performance goal being achieved. An individual must be continuously performing services through the entire performance period, or none of the award will be earned.
FCF Percentage will be calculated on a cumulative basis over a three-year period (total free cash flow over three years divided by total revenue over three years). If the calculated percentage falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the award that a participant will receive is interpolated on a straight-line basis. If the Company’s percentage is below the threshold performance goal, the participant will not be entitled to any vested shares, and if the Company’s percentage is equal to or greater than the maximum performance goal, the participant will be entitled to a number of vested shares equal to 200% of the target award. The Compensation Committee may apply negative discretion to the award payout. Dividends on Performance-Based Restricted Stock awards tied to FCF Percentage do not accrue until the award vests.
For an explanation and reconciliation of FCF Percentage, please see AppendixA.
2018 NEO Performance and Compensation Decisions
Mr. Gentile, President and Chief Executive Officer
2018 Performance: Mr. Gentile’s 2018 individual performance met expectations. He led the Company to overcome multiple supply chain challenges and achieve financial and operational results that aligned with our original plans. He reduced Company risk and strengthened our partnership with Boeing by securing a long-term contract that extends into the next decade, executed a new growth strategy by securing newly contracted work content on several programs, and continued to drive significant improvement in supply chain costs.
2018 Compensation Decisions:
Salary: In January 2018, the Compensation Committee approved an increase from $1,150,000 to $1,250,000, effective February 2, 2018. The increase was based on an evaluation of Mr. Gentile’s performance and target compensation as compared to the Company’s peer group.
Annual Cash Incentive: No changes were made to Mr. Gentile’s target during 2018. Mr. Gentile’s target was 140% of salary. In January 2019, based on a review of Mr. Gentile’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $1,546,576.
Long-Term Incentives: The Compensation Committee approved an increase of Mr. Gentile’s target amount from 450% to 500% effective February 2, 2018. The increase was based on an evaluation of Mr. Gentile’s performance and target compensation as compared to the Company’s peer group. In February 2018, Mr. Gentile was granted awards with an aggregate grant date fair value of $6,250,140. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”
Mr. Kapoor, Executive Vice President and Chief Financial Officer
2018 Performance: Mr. Kapoor’s 2018 individual performance met expectations. Mr. Kapoor delivered significant improvements in working capital, refinanced our debt, and drove stockholder value by executing an accelerated share repurchase plan. Mr. Kapoor retired from the position of Executive Vice President and Chief Financial Officer on January 9, 2019.
2018 Compensation Decisions:
Salary: Mr. Kapoor’s salary remained at $650,000.
Annual Cash Incentive: No changes were made to Mr. Kapoor’s target during 2018. Mr. Kapoor’s target was 100% of salary. In January 2019, based on a review of Mr. Kapoor’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $578,500.
Long-Term Incentives: The Compensation Committee approved an increase of Mr. Kapoor’s target amount from 280% to 300% effective February 2, 2018. The increase was based on an evaluation of Mr. Kapoor’s performance and target compensation as compared to the Company’s peer group. In February 2018, Mr. Kapoor was granted awards with an aggregate grant date fair value of $1,950,174. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 42
Ms. Marnick, Executive Vice President and Chief Administration Officer
2018 Performance: Ms. Marnick’s 2018 individual performance exceeded expectations. She successfully executed the Company’s growth strategy and delivered substantial new business wins, realigned and developed senior talent, significantly improved fringe costs, secured critical government incentives for growth, executed significant union contract extensions, led Company culture change, and improved key stakeholder relationships.
2018 Compensation Decisions:
Salary: In January 2018, the Compensation Committee approved an increase from $490,000 to $520,000, effective February 2, 2018. The increase was based on an evaluation of Ms. Marnick’s performance, level of responsibility, and target compensation as compared to the Company’s peer group. In October 2018, the Compensation Committee approved an increase from $520,000 to $550,000, effective October 23, 2018. The increase was based on the addition of responsibilities to Ms. Marnick’s role, including strategy and business and regional jets.
Annual Cash Incentive: No changes were made to Ms. Marnick’s target during 2018. Ms. Marnick’s target was 100% of salary. In January 2019, based on a review of Ms. Marnick’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $491,504.
Long-Term Incentives: The Compensation Committee approved an increase of Ms. Marnick’s target amount from 190% to 200% effective February 2, 2018. The increase was based on an evaluation of Ms. Marnick’s performance, level of responsibility, and target compensation as compared to the Company’s peer group. In February 2018, Ms. Marnick was granted awards with an aggregate grant date fair value of $1,040,241. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.” In October 2018, the Compensation Committee approved an increase of Ms. Marnick’s target amount from 200% to 215% effective October 23, 2018 (to affect the long-term incentives to be granted in future years). The increase was based on the addition of responsibilities to Ms. Marnick’s role, including strategy and business and regional jets.
Mr. Hawkins, Senior Vice President; President, Defense and Fabrication Division
2018 Performance: Mr. Hawkins’ 2018 individual performance met expectations overall. Despite multiple challenges in the Boeing 737 production line in 2018, he helped the line recover and ended the year strong on deliveries. He successfully exceeded expectations on defense programs, resulting in growth to the Company’s defense business.
2018 Compensation Decisions:
Salary: In January 2018, the Compensation Committee approved an increase from $520,000 to $535,000, effective February 2, 2018. The increase was based on an evaluation of Mr. Hawkins’ performance, level of responsibility, and target compensation as compared to the Company’s peer group.
Annual Cash Incentive: No changes were made to Mr. Hawkins’ target during 2018. Mr. Hawkins’ target was 100% of salary. In January 2019, based on a review of Mr. Hawkins’ and the Company’s performance during 2018, the Compensation Committee approved an ACI of $456,301.
Long-Term Incentives: The Compensation Committee approved an increase of Mr. Hawkins’ target amount from 220% to 230% effective February 2, 2018. The increase was based on an evaluation of Mr. Hawkins’ performance, level of responsibility, and target compensation as compared to the Company’s peer group. In February 2018, Mr. Hawkins was granted awards with an aggregate grant date fair value of $1,230,603. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”
Mr. Pilla, Senior Vice President, Chief Technology and Quality Officer
2018 Performance: Mr. Pilla’s 2018 individual performance exceeded expectations. He established new research and technology strategies positioning Spirit to take on new commercial and defense packages. Mr. Pilla also led Spirit engineering and quality teams in factory automation efforts and initiatives that increased the factories’ ability to manage rate growth in the future.
2018 Compensation Decisions:
Salary: In January 2018, the Compensation Committee approved an increase from $425,000 to $455,000, effective February 2, 2018. The increase was based on an evaluation of Mr. Pilla’s performance, level of responsibility, and target compensation as compared to the Company’s peer group. In October 2018, the Compensation Committee approved an increase from $455,000 to $475,000, effective October 23, 2018. The increase was based on an evaluation of Mr. Pilla’s performance, additional level of responsibility, and target compensation as compared to the Company’s peer group.
Annual Cash Incentive: No changes were made to Mr. Pilla’s target during 2018. Mr. Pilla’s target was 100% of salary. In January 2019, based on a review of Mr. Pilla’s and the Company’s performance during 2018, the Compensation Committee approved an ACI of $422,978.
Long-Term Incentives: No changes were made to Mr. Pilla’s target during 2018. Mr. Pilla’s target amount was 190%. In February 2018, Mr. Pilla was granted awards with an aggregate grant date fair value of $864,680. In October 2018, Mr. Pilla was granted a Time-Based Restricted Stock award with an aggregate grant date fair value of $500,064. Aggregate grant date fair values were determined as set forth in footnote (6) to the “Summary Compensation Table.”
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 43
The Compensation Decision-Making Process
The Compensation Committee is responsible for establishing, implementing, and monitoring compliance with the Company’s compensation objectives. Further, the Compensation Committee is responsible for setting compensation for, and reviewing performance of, the Company’s executive officers. Pursuant to its charter, the Compensation Committee has the authority to delegate its responsibilities to such subcommittees as it deems appropriate, so long as the subcommittee is solely comprised of one or more members of the Compensation Committee. In setting executive officer compensation, the Compensation Committee takes into consideration the following:
The CEO’s self-assessment and performance review of the Other NEOs;
The Compensation Committee’s and Board’s views of the NEOs’ performance;
The counsel and recommendations of the Company’s CEO and Chief Administration Officer;
Recommendations of other members of the Compensation Committee;
Results from benchmarking against the Company’s peer group and survey data; and
The analysis and consulting advice of its independent compensation consultant.
Generally, the Compensation Committee strives for internal equity among the Company’s NEOs and accordingly, the types of compensation and benefits offered to the Company’s NEOs are consistent among the group. The Compensation Committee continues to examine existing and new compensation programs and practices to ensure that the Company’s compensation programs remain appropriate and consistent with the Company’s overall objectives and market practice.
The chart below reflects the annual compensation-setting process by regularly scheduled meeting of the Compensation Committee. In addition to the following, the CEO’s performance, along with all Company performance metrics used in the ACI or long-term incentives, are monitored and discussed quarterly.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 44
Each year, the Compensation Committee, with the assistance of management and the independent compensation consultant, reviews external market data in order to determine the competitiveness of our compensation packages, highlight trends and regulatory implications, and develop incentive plan design alternatives. The market data reviewed is from the Company’s peer group and nationally recognized published survey data.
The Company uses its peer group as a reference point for compensation design and award decisions. The Company’s peer group consists of companies similar to Spirit in size and operations (emphasizing aerospace and defense and auto-component manufacturers) and/or companies that compete with Spirit for executive talent. For 2018, the Company’s peer group was as follows (the companies are ranked by revenue and all ticker symbols are for the NYSE):
Company Name | 2017 Revenue ($ in billions) | Market Cap as of 12/31/2017 ($ in billions) |
Textron (TXT) | 14.2 | 14.9 |
Ingersoll-Rand (IR) | 14.2 | 22.3 |
Arconic (ARNC) | 13.0 | 13.1 |
Parker-Hannifin Corporation (PH) | 12.0 | 26.6 |
Borg Warner (BWA) | 9.8 | 10.8 |
L3 Technologies (LLL) | 9.6 | 15.5 |
Tenneco (TEN) | 9.3 | 3.0 |
Huntington Ingalls (HII) | 7.4 | 10.7 |
Spirit AeroSystems Holdings (SPR) | 7.0 | 10.1 |
Harris Corp (HRS) | 5.9 | 16.9 |
Terex (TEX) | 4.4 | 4.1 |
Triumph Group (TGI) | 3.5 | 1.4 |
Teledyne Technologies (TDY) | 2.6 | 6.4 |
Moog (MOG-A) | 2.5 | 3.1 |
Curtiss-Wright (CW) | 2.3 | 5.4 |
Esterline Technologies Corporation (ESL) | 2.0 | 2.2 |
Changes to Proxy Peer Group for 2019
In January 2019, the Compensation Committee evaluated the Company’s peer group and added Hexcel (HXL) to the peer group, effective with the Performance-Based Restricted Stock awards tied to TSR that were granted in February 2019.
In addition to benchmarking using the peer group, the Company also uses a broad survey sample from the independent compensation consultant’s executive compensation survey. The survey analysis considers companies in relevant industries (aerospace and defense, machinery, auto-component, and electrical equipment) as well as companies in other industries, when necessary, to complement data limitations. Survey data was size-adjusted to approximate the Company’s revenue either through regression or by limiting the survey sample to comparably sized companies. This information was used by the Compensation Committee in establishing the compensation packages and target goals for the NEOs.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 45
Independent Compensation Consultant
The Compensation Committee’s Charter allows the committee to engage an independent compensation consultant to advise on executive compensation matters. For 2018, the Compensation Committee engaged Willis Towers Watson directly for the purpose of providing analysis and advice with respect to compensation matters. The Compensation Committee has determined, after considering criteria from the SEC and NYSE, that Willis Towers Watson does not have any conflicts of interest that would prevent objectivity.
Consideration of Advisory Stockholder Vote on Executive Compensation
The Company believes it is appropriate to seek and reflect the views of its stockholders on the design and effectiveness of the Company’s executive compensation program. Accordingly, consistent with the Company’s most recent say-on-pay frequency vote in April 2017, the Company holds an annual say-on-pay vote. At the Company’s 2018 annual meeting of stockholders, approximately 90% of stockholders present in person or by proxy voted in favor of the Company’s executive compensation programs. The Compensation Committee takes the annual say-on-pay proposal voting results into consideration when making future decisions regarding executive compensation.
In October each year, and as otherwise deemed necessary, the Compensation Committee assesses risks presented by our compensation program and award structures. This assessment is used to determine whether any of our compensation components incentivize executives to take risks that are not in the Company’s or stockholders’ best interests. In 2018, our Compensation Committee reviewed the following risk factors relative to our current compensation programs:
Senior talent acquisition and the ability to recruit and retain talent at market-based compensation levels.
Senior talent loss due to misalignment of strategic decisions and incentives, including balancing long-term incentives with the investment requirement for long-term objectives.
Matching compensation to Company performance in relation to meeting stockholder expectations to balance short- and long-term incentives to achieve growth strategies.
Potential for material restatement of earnings to impact incentive plan calculations.
Clawback policy requirements aligned with market in regard to talent recruitment and retention.
Potential for unforeseen one-time events beyond management’s control that affect incentive plan calculations.
Potential for management decisions based on short-term objectives unbalanced with long-term Company performance.
Potential for unrealized talent investment due to underperforming individuals.
After reviewing our current compensation program and award structures, the Compensation Committee determined that our program does not incentivize executives to take such risks in light of the following features:
We diversify the compensation delivered to executives — the individual components and performance goals each incentivize different behaviors (short-term focus, long-term focus, etc.) in an attempt to balance our executives’ interests;
We have maximum payouts, or caps, on our performance-based compensation — the highest amount that can be paid with respect to our ACIs or performance-based long-term incentives is 200%;
The Compensation Committee reserves the right to exercise negative discretion over performance-based awards;
We deliver compensation using several vehicles, including cash, stock, and perquisites;
We maintain a clawback policy that allows us to recover compensation awarded based on certain improper conduct by executives;
Our NEOs and other executives must comply with stringent stock ownership requirements; and
We have engaged an independent compensation consultant to advise us on compensation practices.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 46
Other Compensation Elements and Information
In addition to the four basic compensation elements, we provide our NEOs with the additional benefits and perquisites described below. Benefits and perquisites received by NEOs are included in the “All Other Compensation” column of the “Summary Compensation Table.” These benefits are based on an assessment of benefits offered by our peers and competitors and are important for retaining the Company’s executive officers.
|
|
Information Benefits and Perquisites In addition to the compensation described above, we provide our NEOs with certain other benefits and perquisites. Benefits and perquisites received by NEOs are included in the “All Other Compensation” column of the “Summary Compensation Table.” These benefits are consistent with the benefits offered by our peers and competitors. Benefit/Perquisite Explanation The RSP is a tax-qualified defined contribution plan for certain eligible salaried employees. The Company makes both matching and non-matching contributions under the RSP. Matching: The Company matches 75% of the employee’s contributions up to a maximum of 6% of the employee’s base pay (provided the employee contributes 8%). The matching contributions are immediately 100% vested. Non-Matching: The Company makes
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This nonqualified plan allows eligible Spirit employees, including each of our NEOs, to defer receipt of a portion of their base salary or ACI. In addition, the DCP allows for matching and discretionary contributions by the Company into a separate account in the DCP. Deferred amounts and matching or discretionary Company contributions are credited with a rate of return equal to 120% of the applicable federal long-term rate for October of the prior fiscal year. For | |
| (the “DCP”) Under the Company’s Perquisite Allowance Plan (the “Perquisite Plan”), the CEO receives an annual allowance of $25,000, while the Other NEOs receive an annual allowance of $13,000. Participants may select the perquisite items to be funded from their allowances subject to certain limitations set forth in the Perquisite |
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| Perquisite Allowance Plan For security reasons, the Company’s CEO and |
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| NEOs in 2021. Relocation Benefits The Company has two programs for post-retirement medical coverage. Under the first program, benefits are available to employees who were previously Boeing employees and who retire from the Company between the ages of 62 and 65 (and who meet certain other requirements). Under the second program, benefits are available to (i) employees who retire from the Company at age 55 or later with |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 47
Discontinued and Frozen Benefit Plans and Arrangements
The Company pays certain benefits through discontinued and frozen benefit plans and arrangements, which include the Supplemental Executive Retirement Plan (the “SERP”) and the Pension Value Plan (the “PVP”). A significant portion of Spirit’s operations related to Boeing aerostructures was owned and controlled by Boeing until 2005. In connection with the acquisition of these assets from Boeing, the Company adopted the SERP in order to attract certain employees from Boeing. The SERP provides supplemental, nonqualified retirement benefits to executives who (1) had their benefits transferred from a Boeing nonqualified plan to the SERP, and (2) did not elect to convert their SERP benefit into phantom stock units as of June 17, 2005. Benefits under this plan were frozen as of the date of the Boeing acquisition. There are no SERP annuity benefits presently payable to any of the NEOs. Mr. Pilla elected to convert his SERP benefit as of June 17, 2005, into 16,023 phantom stock units.
Also in connection with the Boeing acquisition, the Company adopted the PVP for certain eligible employees of Boeing, and allowed for the transfer of pension values from Boeing pension plans. The PVP is a frozen plan and no additional employees are becoming participants in the PVP and no current participants are accruing any additional benefits (other than interest credits). The PVP is fully paid for by the Company, and the Company’s employees are vested after reaching five years of service. Other than Mr. Pilla, none of the NEOs received benefits under the PVP or SERP in 2018 or is eligible to participate in such plans. Mr. Pilla’s participation in the PVP is detailed under “Pension Benefits.” Mr. Pilla’s phantom stock units under the SERP are described under “Nonqualified Deferred Compensation.”
Post-Termination Payments and Change-in-Control Compensation
The Company believes competitive severance protection is an appropriate incentive in attracting and retaining executive talent. The Company has provided for post-termination severance compensation through certain individual employment agreements and has also agreed to individual severance arrangements at the time of termination of employment, taking into account the specific facts and circumstances of termination. Certain of our employment agreements provide benefits upon a change-in-control.
Further, certain of the Company’s benefit plans provide for compensation upon termination or in connection with a change-in-control. Beginning in 2018, the ACI, long-term incentives, and Perquisite Allowance Plan are subject to a double trigger change-in-control provision.
You can find additional information regarding the Company’s practices in providing compensation in connection with termination of employment under the heading “Potential Payments Upon Termination or Change-in-Control.”
The Company maintains stock ownership requirements for its NEOs and other senior executives to further promote alignment of management and stockholder interests. The ownership requirements (measured by the value of the Company’s stock required to be held) are based on a multiple of base salary tied to pay grade. The stock ownership requirements establish the following target levels for Company stock ownership:
| The Company believes competitive severance protection is an appropriate incentive in attracting and retaining executive talent. The Company has provided for post-termination severance compensation through certain individual employment agreements and has also agreed to individual severance arrangements at the time of termination of employment, taking into account the specific facts and circumstances of termination. Certain of our employment agreements provide benefits upon a change in control. Further, certain of the Company’s benefit plans provide for compensation upon termination or in connection with a change in control. The ACI, long-term incentives, and Perquisite Plan are subject to double trigger change-in-control provisions. Additional information regarding the Company’s practices in providing compensation in connection with termination of employment may be found under the heading “Potential Payments Upon Termination or Change in Control.” Accounting and Tax Treatment of Compensation When evaluating the Company’s compensation programs, the Company takes into account the various accounting, tax, and disclosure rules associated with such matters, including Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”) and Section 409A of the IRC. Section 162(m) generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to “covered employees” each year. While the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of the Company’s overall compensation philosophy and objectives. The Compensation Committee believes that maintaining the discretion to evaluate the performance of executive officers is an important part of the Company’s responsibilities and benefits public stockholders, and therefore, the Compensation Committee may award compensation to the named executive officers that is not fully deductible if it is determined that such compensation is consistent with the Company’s compensation philosophy and benefits stockholders. Section 409A of the Code requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments, and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income tax liabilities and penalty taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is the Company’s intention to design and administer its compensation and benefits plans and arrangements for all employees and other service providers, including the executive officers, so that they are either exempt from, or satisfy the requirements of, section 409A of the Code. Executive Stock Ownership Requirements The Company’s executive stock ownership requirements promote alignment of management and stockholder interests. The requirements are based on a multiple of base salary and are measured by the value of Common Stock required to be held. Target Level
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ChiefExecutiveOfficer | 5x |
ExecutiveVicePresidents/SeniorVicePresidents | 3x |
VicePresidents | 1x The stock ownership requirements must be met within the later of: (i) five years after adoption of the guidelines, or (ii) five years after being hired or promoted into the officer position. During the five-year accumulation period, all NEOs are Spirit AeroSystems 2022 Proxy Statement 49 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
The stock ownership requirements mandate that the CEO and other senior officers accumulate their required positions within the later of: (i) five years after the adoption of the guidelines, or (ii) five years after being hired or promoted into the officer position. The Company believes that five years provides a reasonable goal for executives to accumulate shares through earned incentive awards.
During the five-year accumulation period, all NEOs are expected to continuously accumulate qualifying equity until they meet the minimum stock ownership guideline.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 48
The Company reviews ownership positions on an annual basis. Based on the review conducted in 2018, the Company determined that the NEOs own appropriate amounts of Company stock in light of the minimum stock ownership requirements and the portions of their respective accumulation periods that have passed. The Company may restrict any officer from liquidating any of his or her then-current holdings in Company stock, except for those shares that are sold to meet Company tax-withholding requirements. The Company may modify or waive the requirements of the guidelines at its discretion if it determines that compliance would result in severe hardship for an officer. Note that the Company’s insider trading policy prohibits Company employees from engaging in short sales of the Company’s securities and entering into short-term trades involving the Company’s securities. Further, the Company’s insider trading policy also prohibits employees from pledging the Company’s securities as collateral for a loan.
Accounting and Tax Treatment of Compensation
When evaluating the Company’s compensation programs, the Company takes into account the various accounting, tax, and disclosure rules associated with such matters, including Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and Section 409A of the Code. Section 162(m) generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to “covered employees” each year. The Compensation Committee generally seeks to award compensation that would allow it to preserve tax deductions; however, the Compensation Committee reserves the right to set compensation at the levels and in the manner (tax-deductible or not) that it determines to be in the best interests of the Company and its stockholders.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 49
The following table summarizes the compensation of the NEOs for the last three fiscal years.
Name and Principal Position | Year | Salary ($) | (4) | Bonus ($) | (5) | Stock Awards ($) | (6) | Non-Equity Incentive Plan Compensation ($) | (7) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | (8) | All Other Compensation ($) | (9) | Total ($) |
Thomas C. Gentile III President and CEO(1) | 2018 | 1,241,233 |
|
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| 6,250,140 |
| 1,546,576 |
|
|
| 861,744 |
| 9,899,693 |
2017 | 1,144,223 |
|
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| 5,175,087 |
| 2,578,703 |
|
|
| 1,009,385 |
| 9,907,398 | |
2016 | 770,773 |
|
|
| 3,000,045 |
| 2,234,460 |
|
|
| 169,476 |
| 6,174,754 | |
Sanjay Kapoor EVP and CFO | 2018 | 650,000 |
|
|
| 1,950,174 |
| 578,500 |
|
|
| 81,541 |
| 3,260,215 |
2017 | 650,000 |
|
|
| 1,820,067 |
| 1,046,500 |
|
|
| 39,148 |
| 3,555,715 | |
2016 | 624,229 |
|
|
| 2,696,650 |
| 973,882 |
|
|
| 127,208 |
| 4,421,969 | |
Samantha J. Marnick EVP, CAO and Strategy | 2018 | 522,877 |
|
|
| 1,040,241 |
| 491,504 |
|
|
| 149,309 |
| 2,203,930 |
2017 | 490,006 |
|
|
| 931,048 |
| 788,410 |
|
|
| 141,475 |
| 2,350,939 | |
2016 | 460,465 |
|
|
| 1,405,583 |
| 719,204 |
|
|
| 213,332 |
| 2,798,584 | |
Duane F. Hawkins SVP; President, Defense and Fabrication Division(2) | 2018 | 533,685 |
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| 1,230,603 |
| 456,301 |
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| 45,630 |
| 2,266,218 |
2017 | 517,691 |
|
|
| 1,144,036 |
| 831,827 |
|
|
| 33,657 |
| 2,527,211 | |
2016 | 497,684 |
|
|
| 1,000,076 |
| 756,097 |
|
|
| 57,905 |
| 2,311,762 | |
John A. Pilla SVP, Chief Technology and Quality Officer(3) | 2018 | 456,041 |
|
|
| 1,364,744 |
| 422,978 |
|
|
| 61,064 |
| 2,304,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) Mr. Gentile was appointed Executive Vice President and Chief Operating Officer of the Company effective April 1, 2016. (2) Mr. Hawkins served as the Company’s SVP and GM, Boeing, Defense, Regional/Jet Programs, and Global Customer Support until October 1, 2018. Effective October 1, 2018, Mr. Hawkins was given responsibility for defense and fabrication operations. (3) Mr. Pilla was not an NEO in the fiscal years ended December 31, 2017 and 2016. Accordingly, no information is displayed for those years. (4) For NEOs who received salary increases during the fiscal year, these numbers reflect a weighted amount based on the portions of the years for which their new compensation arrangements applied. (5) Because the Annual Cash Incentive (“ACI”) has mandatory performance measures that must be achieved for any payout, the ACI is shown in the “Non-Equity Incentive Plan Compensation” column of the table. (6) Amounts shown represent the aggregate grant date fair value of awards granted to NEOs during the applicable year, as determined in accordance with FASB ASC Topic 718. These grant date fair values represent the accounting expense to be recorded for the award and are not reflective of the actual value that may be recognized by an NEO with respect to the award. In 2018, each NEO received a Time-Based Restricted Stock award (“RS”), a Performance-Based Restricted Stock award tied to TSR (“PB-TSR”), and a Performance-Based Restricted Stock award tied to FCF Percentage (“PB-FCF”). The assumptions made by the Company in calculating these amounts are incorporated herein by reference to Note 18 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for 2018. The grant date fair value of the RSs is equal to the number of shares granted multiplied by $89.32, the average of the opening and closing prices of Common Stock on February 7, 2018, the grant date. The grant date fair value of the PB-TSRs is equal to the number of shares granted at target multiplied by $112.55, which was determined using a Monte Carlo simulation model based on the probable ranking of the Company’s TSR relative to the TSR of a group of the Company’s peers. If it is assumed that the maximum level of performance is achieved with respect to the PB-TSRs (and thus the maximum number of shares are awarded to the NEOs), using the average of the opening and closing prices of Common Stock on the grant date, the value of the PB-TSRs would be as follows: Mr. Gentile: $1,984,154; Mr. Kapoor: $619,166; Ms. Marnick: $330,305; Mr. Hawkins: $390,686; and Mr. Pilla: $274,570. The grant date fair value of the PB-FCFs is equal to the number of shares granted at target multiplied by $89.18, the average of the opening and closing prices of Common Stock on the grant date, adjusted for dividends (as dividends do not accrue on PB-FCFs until vesting). If it is assumed that the maximum level of performance is achieved with respect to the PB-FCFs (and thus the maximum number of shares are awarded to the NEOs), using the average of the opening and closing prices of Common Stock on the grant date, the value of the PB-FCFs would be as follows: Mr. Gentile: $2,503,997; Mr. Kapoor: $781,371; Ms. Marnick: $416,767; Mr. Hawkins: $493,046; and Mr. Pilla: $346,383. For additional information on the awards, see “2018 Compensation Program Elements.” In addition, Mr. Pilla’s amount includes the grant date fair value of an RS of 6,135 shares of Common Stock received on October 23, 2018. The same assumptions set forth above apply. The grant date fair value of this RS is equal to the number of shares granted multiplied by $81.51, the average of the opening and closing prices of Common Stock on October 23, 2018, the grant date. | ||||||||||||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 50
| 50 Spirit AeroSystems 2022 Proxy Statement expected to continuously accumulate qualifying equity until they meet the applicable threshold. The five-year accumulation allows for accumulation of shares through earned incentive awards. Executive ownership positions are reviewed on an annual basis. For 2021, all NEOs complied with the ownership requirements or were within the five-year accumulation period. The Company may restrict any officer from liquidating any Company stock, except for shares that are sold to meet Company tax-withholding requirements. The Company may modify or waive the requirements of the guidelines at its discretion if it determines that compliance would result in severe hardship for an officer. Note that the Company’s insider trading policy prohibits Company employees from engaging in short sales of the Company’s securities, and hedging and pledging the Company’s securities. For additional information on this policy, see “Policy Prohibiting Short-Selling, Hedging, and Pledging.” Executive Compensation Tables Summary Compensation Table The following table summarizes the compensation of the NEOs for the last three fiscal years. Non-Equity Name and Stock Incentive Plan All Other Principal Salary(2) Awards(3) Compensation(4) Compensation(5) Total Position Year ($) ($) ($) ($) ($) Thomas C. Gentile III 2021 1,297,863 7,150,071 1,497,053 904,951 10,849,938 President and CEO 2020 1,108,552 7,150,082 1,410,494 785,222 10,454,350 2019 1,295,753 7,150,017 1,873,535 752,844 11,072,149 Mark J. Suchinski(1) 2021 528,767 1,050,065 427,839 44,696 2,051,367 SVP and CFO 2020 414,481 875,064 363,696 42,311 1,695,552 Samantha J. Marnick(1) 2021 659,529 1,495,040 547,917 246,436 2,948,922 EVP; President, Commercial; 2020 493,025 1,182,567 442,799 146,949 2,265,339 and COO 2019 550,000 1,182,704 561,000 151,808 2,445,512 Duane F. Hawkins(1) 2021 544,203 1,230,518 440,328 35,483 2,250,532 EVP; President, Defense & 2020 456,212 1,230,597 400,326 40,904 2,128,039 Space 2019 535,000 1,230,696 536,338 38,440 2,340,474 Kevin Matthies(1) 2021 505,479 700,058 407,372 60,688 1,673,597 SVP, Boeing Programs (1)Mr. Hawkins was appointed as EVP and President, Defense & Space, and Ms. Marnick was appointed as EVP and President, Commercial and COO on September 28, 2021, and adjustments were made to their compensation to correlate with these appointments. Mr. Suchinski was not an NEO in the fiscal year ended December 31, 2019, and Mr. Matthies was not an NEO in the fiscal years ended December 31, 2019 and December 31, 2020. Accordingly, information is not displayed for 2019, for Messrs. Suchniski and Matthies and 2020, for Mr. Matthies. (2)Reflects a weighted amount based on the portion of the year for which different base salaries applied. From April 2020 through January 4, 2021, salaries were subject to a 20% reduction in light of impacts from the COVID-19 pandemic and 737 MAX grounding. (3)Amounts shown represent the aggregate grant date fair value of awards granted to the NEOs during the applicable year, as determined in accordance with FASB ASC Topic 718. These grant date fair values represent the accounting expense to be recorded for the award and are not reflective of the actual value that may be recognized by an NEO with respect to the award. The assumptions made by the Company in calculating these amounts are incorporated herein by reference to Note 19 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In 2021, each NEO received a Time-Based Restricted Stock Unit award (“RSU”) and a Performance-Based Restricted Stock Unit award tied to TSR (“PB-TSR”). The grant date fair value of the RSU awards is equal to the number of shares granted, multiplied by $42.83, which is the closing price of the Common Stock on the grant date. The grant date fair value of the PB-TSRs is equal to the number of shares granted at target multiplied by $60.35, which was determined using a Monte Carlo simulation model based on the probable ranking of the Company’s TSR relative to the TSR of a group of the Company’s peers, using the closing price of the Common Stock on the grant date. If the maximum level of performance is achieved with respect to the PB-TSRs, the value of the PB-TSRs would be as follows: Mr. Gentile: $5,720,094; Mr. Suchinski: $840,072; Ms. Marnick: $1,196,016; Mr. Hawkins: $984,429; and Mr. Matthies: $560,048. For additional information on the awards, see “2021 Compensation Program Elements.” (4)Represents ACIs earned by the
February 2022. (5)The following table shows “All Other Compensation” amounts for our NEOs in |
Name | Life Insurance ($) | (a)
| Financial and Tax Services ($) | (b)
| Personal Aircraft Usage ($) | (c)
| Personal Travel Expenses ($) | (d)
| Personal Security ($) | (e)
| Relocation Expenses and Gross-Ups ($) | (f)
| Deferred Compensation Plan Contributions ($) | (g)
| Company Contributions Under Tax- Qualified Contribution Plan ($) | (h)
| Other(i) ($) |
| Total ($) |
Thomas C. Gentile III | 816 |
| 16,600 |
| 56,376 |
|
|
|
|
| 124,843 |
| 600,000 |
| 30,375 |
| 32,734 |
| 861,744 |
Sanjay Kapoor | 816 |
|
|
| 32,257 |
| 13,000 |
| 1,091 |
|
|
|
|
| 33,375 |
| 1,002 |
| 81,541 |
Samantha J. Marnick | 816 |
| 975 |
| 4,068 |
| 12,025 |
| 10,200 |
|
|
| 100,000 |
| 21,224 |
|
| 149,309 | |
Duane F. Hawkins | 816 |
| 13,000 |
| 4,068 |
|
|
| 1,091 |
|
|
|
|
| 26,654 |
|
|
| 45,630 |
John A. Pilla | 743 |
|
|
|
|
| 9,463 |
|
|
|
|
|
|
| 47,322 |
| 3,537 |
| 61,064 |
(a) Amounts shown reflect Company contributions toward group life insurance. (b) Amounts shown reflect financial, tax-preparation, and other related services paid for by the Company. (c) Amounts shown reflect the incremental cost to the Company of personal usage of its corporate aircraft. The incremental cost to the Company for personal aircraft usage is determined by dividing direct operating costs per aircraft by the total number of flight hours per aircraft, resulting in a cost per hour, and multiplying the cost per hour by the hours of personal usage. Direct operating costs include variable costs less revenue derived from charter flights. Variable costs include fuel, maintenance expenses, parts and supplies, landing fees, ground services, catering, and crew expenses associated with such use, including those associated with “deadhead” flights related to such use. Because corporate aircraft is used primarily for business travel, the methodology excludes fixed costs that do not change based on usage. Fixed costs include pilot salaries, the purchase or lease costs of the aircraft, and the cost of maintenance not related to personal travel. Executives, their families, and invited guests occasionally fly on the corporate aircraft as additional passengers on business flights. In those cases, the aggregate incremental cost to the Company is a de minimis amount, and as a result, no amount is reflected in the Summary Compensation Table. Executives, directors, their families, and invited guests also occasionally fly on the corporate aircraft as additional passengers on personal flights that are attributed to another executive, in which case the entire incremental cost is allocated to the executive who arranged for the personal flight. The Company does not grant bonuses to cover, reimburse, or “gross-up” any income tax owed for personal travel on corporate aircraft. (d) Amounts shown reflect the NEOs’ personal travel expenses (or travel expenses of their spouses) and personal commercial flights paid for by the Company. (e) Amounts shown reflect the incremental cost of personal or home security services for the NEOs that were deemed to be necessary and appropriate based on risk assessments performed by an independent security firm. (f) Amounts shown reflect relocation expenses reimbursed by the Company and associated tax gross-ups. (g) Amounts shown reflect Company contributions to the accounts of its eligible NEOs under the DCP. See “Other Compensation Elements and Information — Benefits and Perquisites.” (h) Amounts shown reflect matching and non-matching contributions made by the Company under the RSP. See “Other Compensation Elements and Information — Benefits and Perquisites.” (i) For Mr. Gentile, amounts shown reflect executive physical costs of $2,750, costs relating to personal use of country club memberships of $5,036, personal driving fees of $16,548, and $8,400 for the value of forfeited shares in connection with Mr. Gentile’s resignation from a private company’s board of directors (such value was claimed by Mr. Gentile through the Company’s Perquisite Allowance Plan). For Messrs. Kapoor and Pilla, amounts shown reflect costs relating to personal use of a country club membership. | |||||||||||||||||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 51
| Company Contributions Deferred Under Tax- Financial Personal Personal Compensation Qualified Life and Tax Aircraft Travel Plan Contribution Insurance(1) Services(2) Usage(3) Expenses(4) Contributions(5) Plan(6) Other(7) Total Name ($) ($) ($) ($) ($) ($) ($) ($) Thomas C. Gentile III 858 18,700 232,251 24,130 600,000 23,175 9,963 909,077 Mark J. Suchinski 858 7,663 23,175 13,000 44,696 Samantha J. Marnick 858 7,368 592 200,000 25,210 12,408 246,436 Duane F. Hawkins 858 13,000 20,625 1,000 35,483 Kevin Matthies 839 25,274 21,575 13,000 60,688 (1)Amounts shown reflect Company contributions toward group life insurance. (2)Amounts shown reflect financial, tax preparation, and other related services paid for by the Company. Amounts shown for Messrs. Gentile and Hawkins were reimbursed under the Perquisite Plan. (3)Amounts shown reflect the incremental cost to the Company of personal usage of its corporate aircraft. The incremental cost is determined by dividing direct operating costs per aircraft by the total number of flight hours per aircraft, resulting in a cost per hour, and multiplying the cost per hour by the hours of personal usage. Direct operating costs include variable costs such as fuel, maintenance expenses, parts and supplies, landing fees, ground services, catering, and crew expenses associated with such use, including those associated with “deadhead” flights related to such use. Because corporate aircraft is used primarily for business travel, the methodology excludes fixed costs that do not change based on usage. Fixed costs include pilot salaries, the purchase costs of the aircraft, and the cost of maintenance not related to personal travel. Executives, their families, and invited guests occasionally fly on the corporate aircraft as additional passengers on business flights. In those cases, the aggregate incremental cost to the Company is a de minimis amount, and as a result, no amount is reflected in “Summary Compensation Table.” Executives, directors, their families, and invited guests also occasionally fly on the corporate aircraft as additional passengers on personal flights that are attributed to another executive, in which case the entire incremental cost is allocated to the executive who arranged for the personal flight. The Company does not grant bonuses to cover, reimburse, or “gross-up” any income tax owed for personal travel on corporate aircraft. The Compensation Committee has authorized annual aircraft personal usage amounts of the following (such amounts do not include “deadhead” or ferry flights): Mr. Gentile — 70 hours and Ms. Marnick — 25 hours. In 2021, Mr. Gentile used 69.3 hours, Ms. Marnick used 2.5 hours and Mr. Suchinki used 2.6 hours. With ferry flights, the total hours reported for Mr. Gentile in the table above for 2021 was 78.8 hours. (4)For Mr. Gentile, amount reflects $24,130 in personal driving expenses. For Ms. Marnick, amount reflects personal and family travel expenses. (5)Amounts shown reflect Company contributions to the accounts of its eligible NEOs under the DCP. See “Other Compensation Elements and Information — Benefits and Perquisites.” (6) Amounts shown reflect contributions made by the Company under the RSP. See “Other Compensation Elements and Information — Benefits and Perquisites.” (7)For Mr. Gentile, amount reflects the sum of (i) $3,327 in country and golf club membership expenses and (ii) $6,636 in medical expenses for an annual physical examination. For Mr. Suchinski, amount reflects $13,000 in car payments. For Ms. Marnick, amount reflects the sum of (i) $2,738 in tuition payments, (ii) $5,745 in car car payments and rentals and (iii) $3,925 in medical expenses. For Mr. Hawkins, amount reflects $1,000 in membership fees. For Mr. Matthies, amount reflects the sum of (i) $1,244 in car payments, (ii) $8,184 in country and golf club membership fees and (ii) $3,572 in housing-related expenses. Certain of these expenses were reimbursed under the Perquisite Plan, subject to the annual allowances of $25,000 for Mr. Gentile and $13,000 for the other NEOs. Narrative to the Summary Compensation Table For a description of the material terms of Messrs. Gentile’s and Suchinski’s agreements, please see the section titled “Employment and Separation Agreements.” While Ms. Marnick, Mr. Hawkins, and Mr. Matthies have employment agreements with the Company, their roles and compensation have significantly changed since the employment agreements were entered into. Accordingly, the Company does not believe a description of the terms of such agreements is necessary to understand the information disclosed in the “Summary Compensation Table.” Spirit AeroSystems 2022 Proxy Statement 51 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Spirit has employment agreements with all of its NEOs except for Mr. Pilla. A brief description of certain material terms is below.
Mr. Gentile’s Employment Agreement
On February 13, 2016, we entered into an employment agreement, effective April 1, 2016, with Mr. Gentile with respect to his position as Executive Vice President and Chief Operating Officer. Pursuant to the employment agreement, Mr. Gentile received a base salary of $1,000,000 per year, which could be changed based on performance. In addition, Mr. Gentile was eligible for an ACI equal to 140% of his base salary and an annual target LTIP award equal to 300% of his base salary. Mr. Gentile was also entitled to participate in the executive relocation program and receive an annual DCP Company contribution of $600,000.
The Company granted Mr. Gentile a sign-on award of $3,000,000 in shares of restricted stock. Half of the award vested on April 1, 2017, and the other half vested on April 1, 2018.
Effective August 1, 2016 (in recognition of Mr. Gentile’s appointment as President and CEO), Mr. Gentile’s base salary was increased to $1,100,000 and his annual target LTIP award was increased to 400% of his annual base salary. Effective February 3, 2017, Mr. Gentile’s base salary was increased to $1,150,000, and his annual target LTIP award was increased to 450% of his base salary. In January 2018, Mr. Gentile’s salary was increased to $1,250,000, and his annual target LTIP award was increased to 500%. In January 2019, Mr. Gentile’s salary was increased to $1,300,000, his annual target ACI award was increased to 145% of his annual base salary, and his annual target LTIP award was increased to 550% of his annual base salary.
Potential payments and termination events under Mr. Gentile’s employment agreement are described under “Potential Payments Upon Termination or Change-in-Control — Employment Agreements.”
Mr. Kapoor’s Employment Agreement
On August 23, 2013, we entered into an employment agreement, effective September 23, 2013, with Mr. Kapoor with respect to his position as Senior Vice President and Chief Financial Officer. The agreement provided for a three-year initial term and would be automatically extended for successive one-year periods thereafter. Pursuant to the employment agreement, Mr. Kapoor was entitled to a base salary of $525,000, which could be changed based on performance. In addition, Mr. Kapoor was eligible for an ACI equal to 100% of his base salary, an annual target LTIP award of 200% of his base salary, and, from time to time, a target discretionary bonus in the form of cash or equity of 10% of earned base salary. Mr. Kapoor was also entitled to participate in the executive relocation program.
The Company granted Mr. Kapoor $2,000,000 in restricted stock as a sign-on award, which fully vested in 2017. In addition, Mr. Kapoor received a cash signing bonus of $150,000 to be paid within 30 days of the effective date, and an additional cash signing bonus of $100,000 to be paid on the first pay period following the first anniversary of the effective date.
Effective January 30, 2015, Mr. Kapoor’s base salary was increased to $565,000. Effective February 5, 2016, Mr. Kapoor’s base salary was increased to $600,000, and his annual target LTIP award was increased to 220% of his base salary. In May 2016, the Board increased Mr. Kapoor’s base salary to $650,000 and his annual target LTIP award to 280% of his base salary. On July 26, 2016, Mr. Kapoor’s title was changed to Executive Vice President and Chief Financial Officer. In January 2018, Mr. Kapoor’s annual target LTIP award was increased to 300% of his base salary.
Potential payments and termination events under Mr. Kapoor’s employment agreement are described under “Potential Payments Upon Termination or Change-in-Control — Employment Agreements.” Mr. Kapoor retired from the position of Executive Vice President and Chief Financial Officer on January 9, 2019.
Both Ms. Marnick and Mr. Hawkins have employment agreements with the Company. However, both of their roles have changed significantly since the employment agreements were entered into, and all termination benefits expressly provided by the agreements have expired. Accordingly, the Company does not believe a description of the terms of such agreements is necessary to understand the information disclosed in the “Summary Compensation Table.”
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 52
Grants of Plan-Based Awards in 2018
The following table presents information regarding grants of plan-based awards to the NEOs during the fiscal year ended December 31, 2018. For more information on the terms applicable to the awards reflected below, please see “2018 Compensation Program Elements.”
|
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
| Estimated Future Payouts Under Equity Incentive Plan Awards |
| All Other Stock Awards | |||||
Name | Grant Date | Date Award Approved by Board | Threshold ($) | Target ($) | Maximum ($) |
| Threshold (#) | Target (#) | Maximum (#) |
| Number of Shares of Stock (#) | Grant Date Fair Value of Stock Awards ($) |
Thomas C. Gentile III | ||||||||||||
ACI(1) |
|
| 434,432 | 1,737,726 | 3,475,452 |
|
|
|
|
|
|
|
RS(2) | 2/7/2018 | 1/23/2018 |
|
|
|
|
|
|
|
| 41,984 | 3,750,011 |
PB-TSR(3) | 2/7/2018 | 1/23/2018 |
|
|
|
| 2,777 | 11,107 | 22,214 |
|
| 1,250,093 |
PB-FCF(4) | 2/7/2018 | 1/23/2018 |
|
|
|
| 3,505 | 14,017 | 28,034 |
|
| 1,250,036 |
Sanjay Kapoor |
|
|
|
|
|
|
|
|
|
|
| |
ACI(1) |
|
| 162,500 | 650,000 | 1,300,000 |
|
|
|
|
|
|
|
RS(2) | 2/7/2018 | 1/23/2018 |
|
|
|
|
|
|
|
| 13,099 | 1,170,003 |
PB-TSR(3) | 2/7/2018 | 1/23/2018 |
|
|
|
| 867 | 3,466 | 6,932 |
|
| 390,098 |
PB-FCF(4) | 2/7/2018 | 1/23/2018 |
|
|
|
| 1,094 | 4,374 | 8,748 |
|
| 390,073 |
Samantha J. Marnick |
|
|
|
|
|
|
|
|
|
|
| |
ACI(1) |
|
| 130,719 | 522,877 | 1,045,753 |
|
|
|
|
|
|
|
RS(2) | 2/7/2018 | 1/23/2018 |
|
|
|
|
|
|
|
| 6,987 | 624,079 |
PB-TSR(3) | 2/7/2018 | 1/23/2018 |
|
|
|
| 463 | 1,849 | 3,698 |
|
| 208,105 |
PB-FCF(4) | 2/7/2018 | 1/23/2018 |
|
|
|
| 584 | 2,333 | 4,666 |
|
| 208,057 |
Duane F. Hawkins |
|
|
|
|
|
|
|
|
|
|
| |
ACI(1) |
|
| 133,421 | 533,685 | 1,067,370 |
|
|
|
|
|
|
|
RS(2) | 2/7/2018 | 1/23/2018 |
|
|
|
|
|
|
|
| 8,266 | 738,319 |
PB-TSR(3) | 2/7/2018 | 1/23/2018 |
|
|
|
| 547 | 2,187 | 4,374 |
|
| 246,147 |
PB-FCF(4) | 2/7/2018 | 1/23/2018 |
|
|
|
| 690 | 2,760 | 5,520 |
|
| 246,137 |
John A. Pilla |
|
|
|
|
|
|
|
|
|
|
| |
ACI(1) |
|
| 114,010 | 456,041 | 912,083 |
|
|
|
|
|
|
|
RS(2) | 2/7/2018 | 1/23/2018 |
|
|
|
|
|
|
|
| 5,808 | 518,771 |
PB-TSR(3) | 2/7/2018 | 1/23/2018 |
|
|
|
| 385 | 1,537 | 3,074 |
|
| 172,989 |
PB-FCF(4) | 2/7/2018 | 1/23/2018 |
|
|
|
| 485 | 1,939 | 3,878 |
|
| 172,920 |
RS(5) | 10/23/2018 | 10/23/2018 |
|
|
|
|
|
|
|
| 6,135 | 500,064 |
(1) Represents ACIs that were paid in February 2019 but granted and earned in 2018. The actual ACI amounts are reported in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.” The threshold, target, and maximum figures were calculated on a weighted-average basis, giving effect to any changes made to the applicable NEO’s base salary or ACI target during 2018. (2) Represents RSs that vest annually over three years, beginning February 7, 2019, if such NEO remains employed by the Company on each annual vesting date. The grant date fair value of the award, which is reported in the “Stock Awards” column of the “Summary Compensation Table,” is equal to the number of shares multiplied by $89.32, the average of the opening and closing prices of Common Stock on the grant date. (3) Represents PB-TSRs that vest at the end of the three-year performance period based on the ranking of the Company’s TSR relative to the TSR of each of the companies in the Company’s peer group. The grant date fair value of the award, which is reported in the “Stock Awards” column of the “Summary Compensation Table,” is equal to the number of shares granted at target multiplied by $112.55, which was determined using a Monte Carlo simulation based on the probable ranking of the Company’s TSR relative to a group of the Company’s peers. Actual payout may be zero or range from 25% to 200% of the target shares granted. (4) Represents PB-FCFs that vest at the end of the three-year performance period based upon the achievement of a certain percentage of free cash flow as a percentage of revenue on a cumulative basis over the period. The grant date fair value of the award, which is reported in the “Stock Awards” column of the “Summary Compensation Table,” is equal to the number of shares granted at target multiplied by $89.18, the average of the opening and closing prices of Common Stock on the grant date, adjusted for dividends. Actual payout may be zero or range from 25% to 200% of the target shares granted. (5) Represents a one-time RS that vests annually over three years, beginning October 23, 2019, if Mr. Pilla remains employed by the Company on each annual vesting date. The grant date fair value of the award, which is reported in the “Stock Awards” column of the “Summary Compensation Table,” is equal to the number of shares multiplied by $81.51, the average of the opening and closing prices of Common Stock on the grant date. | ||||||||||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 53
Outstanding Equity Awards at 2018 Fiscal Year End
The following table presents the outstanding equity awards held by the NEOs as of December 31, 2018. The Company has not granted any options or option-like awards. The market value of the awards is determined by multiplying the number of shares shown in the applicable columns below by $72.09, the closing price of Common Stock on December 31, 2018.
Name | Stock Awards | |||||
Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) | |
Thomas C. Gentile III |
|
|
|
|
|
|
RS(1) | 2/7/2018 | 41,984 | 3,026,627 |
|
|
|
PB-TSR(2) | 2/7/2018 |
|
|
| 22,214 | 1,601,407 |
PB-FCF(3) | 2/7/2018 |
|
|
| 3,505 | 252,675 |
RS(4) | 2/7/2017 | 36,915 | 2,661,202 |
|
|
|
PB-TSR(5) | 2/7/2017 |
|
|
| 37,264 | 2,686,362 |
PB-FCF(6) | 2/7/2017 |
|
|
| 4,709 | 339,472 |
Sanjay Kapoor |
|
|
|
|
|
|
RS(1) | 2/7/2018 | 13,099 | 944,307 |
|
|
|
PB-TSR(2) | 2/7/2018 |
|
|
| 6,932 | 499,728 |
PB-FCF(3) | 2/7/2018 |
|
|
| 1,094 | 78,866 |
RS(4) | 2/7/2017 | 12,982 | 935,872 |
|
| |
PB-TSR(5) | 2/7/2017 |
|
|
| 13,106 | 944,812 |
PB-FCF(6) | 2/7/2017 |
|
|
| 1,657 | 119,453 |
RS(7) | 2/9/2016 | 7,607 | 548,389 |
|
|
|
PB-TSR(8) | 2/9/2016 | 6,076 | 438,018 |
|
|
|
Samantha J. Marnick |
|
|
|
|
|
|
RS(1) | 2/7/2018 | 6,987 | 503,693 |
|
|
|
PB-TSR(2) | 2/7/2018 |
|
|
| 3,698 | 266,589 |
PB-FCF(3) | 2/7/2018 |
|
|
| 584 | 42,101 |
RS(4) | 2/7/2017 | 6,641 | 478,750 |
|
|
|
PB-TSR(5) | 2/7/2017 |
|
|
| 6,704 | 483,291 |
PB-FCF(6) | 2/7/2017 |
|
|
| 848 | 61,132 |
RS(7) | 2/9/2016 | 3,965 | 285,837 |
|
|
|
PB-TSR(8) | 2/9/2016 | 3,167 | 228,309 |
|
|
|
Duane F. Hawkins |
|
|
|
|
|
|
RS(1) | 2/7/2018 | 8,266 | 595,896 |
|
|
|
PB-TSR(2) | 2/7/2018 |
|
|
| 4,374 | 315,322 |
PB-FCF(3) | 2/7/2018 |
|
|
| 690 | 49,742 |
RS(4) | 2/7/2017 | 8,160 | 588,254 |
|
|
|
PB-TSR(5) | 2/7/2017 |
|
|
| 8,238 | 593,877 |
PB-FCF(6) | 2/7/2017 |
|
|
| 1,041 | 75,046 |
RS(7) | 2/9/2016 | 5,764 | 415,527 |
|
|
|
PB-TSR(8) | 2/9/2016 | 4,603 | 331,830 |
|
|
|
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 54
Name | Stock Awards | |||||
Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) | |
John A. Pilla |
|
|
|
|
|
|
RS(9) | 10/23/2018 | 6,135 | 442,272 |
|
|
|
RS(1) | 2/7/2018 | 5,808 | 418,699 |
|
|
|
PB-TSR(2) | 2/7/2018 |
|
|
| 3,074 | 221,607 |
PB-FCF(3) | 2/7/2018 |
|
|
| 485 | 34,964 |
RS(4) | 2/7/2017 | 5,489 | 395,702 |
|
| |
PB-TSR(5) | 2/7/2017 |
|
|
| 5,542 | 399,523 |
PB-FCF(6) | 2/7/2017 |
|
|
| 701 | 50,535 |
RS(7) | 2/9/2016 | 4,434 | 319,647 |
|
|
|
PB-TSR(8) | 2/9/2016 | 3,542 | 255,343 |
|
|
|
(1) Represents 2018 annual RSs. The first tranche of the award vested on February 7, 2019, and the second and third tranches will vest on February 7, 2020, and February 7, 2021, respectively, if the NEO continues to be employed by the Company on each vesting date. (2) Represents PB-TSRs granted in 2018 with a performance tracking period running from January 1, 2018, to December 31, 2020. PB-TSRs are earned and paid out in shares of Common Stock at the end of the three-year tracking period based upon the ranking of the Company’s TSR relative to the TSR of a group of the Company’s peers over such period. The number of shares and market value shown is based upon the achievement of a maximum performance goal based on the Company’s achievement of the target performance goal with respect to the PB-TSRs that were granted in 2016 and vested in 2019. The award vesting date is December 31, 2020, subject to performance certification by the Compensation Committee. (3) Represents PB-FCFs granted in 2018 with a performance tracking period running from January 1, 2018, to December 31, 2020. PB-FCFs are earned and paid out in shares of Common Stock at the end of the three-year tracking period based upon the achievement of the Company’s goals relating to free cash flow as a percentage of revenue. The number of shares and market value shown is based upon the achievement of a threshold performance goal. The award vesting date is December 31, 2020, subject to performance certification by the Compensation Committee. (4) Represents 2017 annual RSs. The first tranche of the award vested on February 7, 2018, the second tranche of the award vested on February 7, 2019, and the third tranche will vest on February 7, 2020, if the NEO continues to be employed by the Company on such vesting date. (5) Represents PB-TSRs granted in 2017 with a performance tracking period running from January 1, 2017, to December 31, 2019. PB-TSRs are earned and paid out in shares of Common Stock at the end of the three-year tracking period based upon the ranking of the Company’s TSR relative to the TSR of a group of the Company’s peers over such period. The number of shares and market value shown is based upon the achievement of a maximum performance goal based on the Company’s achievement of the target performance goal with respect to the PB-TSRs that were granted in 2016 and vested in 2019. The award vesting date is February 7, 2020. (6) Represents PB-FCFs granted in 2017 with a performance tracking period running from January 1, 2017, to December 31, 2019. PB-FCFs are earned and paid out in shares of Common Stock at the end of the three-year tracking period based upon the achievement of the Company’s goals relating to free cash flow as a percentage of revenue. The number of shares and market value shown is based upon the achievement of a threshold performance goal. The award vesting date is February 7, 2020. (7) Represents 2016 annual RSs. The first tranche of the award vested on February 9, 2017, the second tranche of the award vested on February 9, 2018, and the third tranche of the award vested on February 9, 2019. (8) Represents PB-TSRs granted in 2016 with a performance tracking period running from January 1, 2016, to December 31, 2018. PB-TSRs are earned and paid out in shares of Common Stock at the end of the three-year tracking period based upon the ranking of the Company’s TSR relative to the TSR of a group of the Company’s peers over such period. The number of shares and market value shown is based upon actual award performance through December 31, 2018, at 100% (percentile rank of 50th), as certified by the Compensation Committee on January 23, 2019. The award vested on February 9, 2019. (9) Represents a one-time RS that vests annually over three years, beginning October 23, 2019, if Mr. Pilla remains employed by the Company on each annual vesting date. | ||||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 55
Option Exercises and Stock Vested for Fiscal Year 2018
The following table presents information regarding NEO stock awards that vested in 2018. Values reflected below are gross amounts that do not include any reductions for tax withholding. The Company has not granted any options or option-like awards.
Name | Grant Date | Vesting Date | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Thomas C. Gentile III |
|
|
|
|
Sign-on(1) | 4/1/2016 | 4/1/2018 | 32,666 | 2,918,054 |
RS(2) | 2/7/2017 | 2/7/2018 | 18,458 | 1,657,344 |
TOTAL |
|
| 51,124 | 4,575,398 |
Sanjay Kapoor |
|
|
|
|
PB One-Time(3) | 6/4/2016 | 6/4/2018 | 14,137 | 1,227,798 |
PB-TSR(4) | 2/7/2015 | 2/7/2018 | 8,433 | 757,199 |
RS(2) | 2/7/2017 | 2/7/2018 | 6,492 | 582,917 |
RS(5) | 2/9/2016 | 2/9/2018 | 7,609 | 653,994 |
RS(6) | 2/7/2015 | 2/7/2018 | 5,790 | 519,884 |
TOTAL |
|
| 42,461 | 3,741,792 |
Samantha J. Marnick |
|
|
|
|
PB One-Time(3) | 6/4/2016 | 6/4/2018 | 7,369 | 639,998 |
PB-TSR(4) | 2/7/2015 | 2/7/2018 | 4,478 | 402,080 |
RS(2) | 2/7/2017 | 2/7/2018 | 3,321 | 298,193 |
RS(5) | 2/9/2016 | 2/9/2018 | 3,966 | 340,878 |
RS(6) | 2/7/2015 | 2/7/2018 | 3,074 | 276,014 |
TOTAL |
|
| 22,208 | 1,957,162 |
Duane F. Hawkins |
|
|
|
|
PB-TSR(4) | 2/7/2015 | 2/7/2018 | 4,703 | 422,282 |
RS(2) | 2/7/2017 | 2/7/2018 | 4,081 | 366,423 |
RS(5) | 2/9/2016 | 2/9/2018 | 5,764 | 495,416 |
RS(6) | 2/7/2015 | 2/7/2018 | 3,229 | 289,932 |
TOTAL |
|
| 17,777 | 1,574,063 |
John A. Pilla |
|
|
|
|
PB-TSR(4) | 2/7/2015 | 2/7/2018 | 5,531 | 496,628 |
RS(2) | 2/7/2017 | 2/7/2018 | 2,745 | 246,474 |
RS(5) | 2/9/2016 | 2/9/2018 | 4,436 | 381,274 |
RS(6) | 2/7/2015 | 2/7/2018 | 3,796 | 340,843 |
TOTAL |
|
| 16,508 | 1,465,219 |
(1) Represents shares received as a sign-on award under Mr. Gentile’s employment agreement. The value realized on vesting represents the number of shares multiplied by $83.99, the average of the high and low prices of Common Stock on March 29, 2018, the business day prior to the vesting date. (2) Represents shares vesting under the 2017 annual RS. The value realized on vesting represents the number of shares multiplied by $89.79, the average of the high and low prices of Common Stock on February 7, 2018, the vesting date. (3) Represents PB One-Time awards granted to each of Mr. Kapoor and Ms. Marnick in 2016. The value realized on vesting represents the number of shares multiplied by $86.85, the average of the high and low prices of Common Stock on June 4, 2018, the vesting date. (4) Represents shares under the 2015 PB-TSR with a performance tracking period from January 1, 2015, to December 31, 2017. Performance was certified by the Compensation Committee on January 23, 2018, at a percentile rank of 87th and a resulting payout of 192.5%. The value realized on vesting represents the number of shares multiplied by $89.79, the average of the high and low prices of Common Stock on February 7, 2018, the vesting date. (5) Represents shares vesting under the 2016 annual RS. The value realized on vesting represents the number of shares multiplied by $85.95, the average of the high and low prices of Common Stock on February 9, 2018, the vesting date. (6) Represents shares vesting under the 2015 annual RS. The value realized on vesting represents the number of shares multiplied by $89.79, the average of the high and low prices of Common Stock on February 7, 2018, the vesting date. | ||||
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 56
The following table presents information concerning benefits received under the Company’s Pension Value Plan (the “PVP”) by Mr. Pilla during the fiscal year ended December 31, 2018. No other NEOs received any benefits under the PVP.
Name | Plan Name | Number of Years of Credited Service | (1) | Present Value of Accumulated Benefit ($) | (2) |
John A. Pilla | PVP | 24.0875 |
| 703,267 |
|
(1) Please note credited service was frozen in the PVP as of June 16, 2005. There is no policy that provides for granting extra years of credited service. (2) Present value was calculated based on the assumption that Mr. Pilla’s benefit commences at age 60. Key assumptions reflected in present value include a 4.21% discount rate, a cash balance interest crediting rate of 5.25%, and the life annuity form of payment. In order to determine changes in the present value reported in the Summary Compensation Table, the value was also calculated as of December 31, 2017. For values as of December 31, 2017, the discount rate was 3.59%. The present value was calculated assuming Mr. Pilla retires and commences receipt of benefits at age 60. The mortality assumption for the fiscal year ending December 31, 2017, is Mercer’s MILES-2010 generational mortality table for the Auto, Industrial Goods, and Transportation group with MMP-2016 improvement scale, and the mortality assumption for fiscal year ending December 31, 2018, is Mercer’s MILES-2010 generational mortality table for the Auto, Industrial Goods, and Transportation group with MMP-2018 improvement scale. | |||||
A significant portion of Spirit’s operations related to Boeing aerostructures was owned and controlled by Boeing until 2005. Boeing’s pension assets and liabilities were spun-off from Boeing’s qualified plans (each, a “Prior Plan”) into Spirit qualified plans for certain eligible Boeing employees who joined the Company. Credited service and benefit amounts under the Prior Plans were frozen as of June 16, 2005. Effective December 31, 2005, all Prior Plans were merged together into the PVP. The PVP is a frozen plan, so no additional employees are becoming participants in the PVP, and no current participants are accruing any additional benefits (except for the interest credits described below). The PVP is fully paid for by the Company, and the Company’s employees are vested after reaching five years of service.
Mr. Pilla is the only NEO who participates in the PVP. Mr. Pilla is fully vested in his benefits. Benefits under the PVP for Mr. Pilla are based upon heritage benefits transferred into the Prior Plan and a cash balance benefit. Heritage benefits were indexed (increased) for base pay increases from the date the heritage benefit transferred to the Prior Plan until June 16, 2005. Under the cash balance benefit formula, employees received benefit credits based on their age at the end of each plan year through June 16, 2005. The annual benefit credit was a specified percentage of eligible pay, ranging from 3% at ages younger than 30 to 11% upon reaching age 50. Eligible pay included base pay and executive incentive pay, limited to Internal Revenue Code Section 401(a)(17) limits. The benefit credits ceased upon freezing the Prior Plan; however, employees continue to receive interest credits each year. Interest credits are calculated by applying simple interest to the Prior Plan balance at the beginning of the year and are accrued until the pension benefit begins. Interest credits are based on the 30-year Treasury Rate as of November of the prior year, with a minimum of 5.25% and a maximum of 10%.
The PVP benefits are payable as a life annuity (other annuity options are also available). To determine a participant’s pension benefit, the participant’s accumulated benefits are divided by 11 and further divided by a factor of 12 to produce a monthly benefit.
The normal retirement age under the PVP is age 65. Participants who have at least ten years of service and are at least age 55, or at least one year of service and are at least age 62, are eligible for early retirement. Mr. Pilla is currently 59 years of age and is eligible for early retirement. A portion of the Prior Plan benefit is reduced by 2% for each year that benefits commence prior to age 60. Projected annual benefits payable upon retirement at age 60 are $47,154 for Mr. Pilla. If he retires at age 65, the annual benefit amount is $51,633.
We also maintain the Supplemental Executive Retirement Plan (the “SERP”), which provides supplemental, nonqualified retirement benefits to executives who (1) had their benefits transferred from a Boeing nonqualified plan to the SERP, and (2) did not elect to convert their SERP benefit into phantom stock units as of June 17, 2005. Benefits under this plan were also frozen as of the date of the Boeing acquisition. There are no SERP annuity benefits presently payable to the NEOs. Mr. Pilla was a participant in the SERP, but elected to convert his SERP benefit as of June 17, 2005, into 16,023 phantom stock units.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 57
Nonqualified Deferred Compensation
The following table presents information concerning each of the Company’s defined contribution or other plans that provide for the deferral of compensation of the NEOs on a basis that is not tax-qualified. In addition, and as discussed above under “Pension Benefits,” Mr. Pilla was a participant in the SERP, but elected to convert his SERP benefit as of June 17, 2005, into 16,023 phantom stock units. Mr. Pilla’s vested and undelivered phantom stock units and accrued dividend equivalents are reflected below and may be settled in cash or shares on the earlier of his separation from service or a change-in-control.
Name | Plan | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | (1) | Aggregate Earnings in Last FY ($) | (2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) |
|
Thomas C. Gentile III | DCP |
| 600,000 |
| 27,143 |
|
| 1,234,122 | (3) |
Sanjay Kapoor | DCP |
|
|
|
|
|
|
|
|
Samantha J. Marnick | DCP |
| 100,000 |
| 7,653 |
|
| 313,122 | (4) |
Duane F. Hawkins | DCP |
|
|
|
|
|
|
|
|
John A. Pilla | DCP | 26,000 |
|
| 2,450 |
|
| 97,442 |
|
| SERP |
|
|
|
|
|
| 1,168,557 | (5) |
(1) These amounts represent Company contributions to the DCP and are included in the “All Other Compensation” column of the “Summary Compensation Table.” (2) Under the DCP, these amounts represent earnings on DCP balances from January 1 to December 31, 2018, and are not included in the “Summary Compensation Table.” For Mr. Pilla’s balance under the SERP, represents a decrease om value of $237,942, representing the change in market value of 16,023 phantom stock units and accrued dividend equivalents under the SERP from January 1 to December 31, 2018. The change in market value of the phantom stock units for Mr. Pilla was calculated using the closing prices of Common Stock on January 2, 2018, and December 31, 2018, respectively. (3) This amount includes $606,979 consisting of Company contributions and earnings on balances prior to 2018 (and as reported in our 2017 proxy statement). (4) This amount includes $205,469 consisting of Company contributions and earnings on balances prior to 2018 (and as reported in our 2017 proxy statement). (5) Represents the sum of (i) $1,155,098, which represents the 16,023 phantom stock units under the SERP multiplied by $72.09, the closing price of Common Stock on December 31, 2018, and (ii) $13,459 in accrued dividend equivalents on the phantom stock units under the SERP through December 31, 2018. | |||||||||
More information on the DCP and SERP can be found under “Other Compensation Elements and Information” and “Potential Payments Upon Termination or Change-in-Control.” There were no “above-market” earnings (defined by SEC rule as that portion of interest that exceeds 120% of the applicable federal long-term rate) under the DCP during fiscal year 2018, as the Company used 120% of the applicable federal long-term rate to determine the amounts to be contributed.
Potential Payments Upon Termination or Change-in-Control
The Company believes competitive severance protection is an appropriate incentive in attracting and retaining talent and, accordingly, has provided for certain termination compensation through individual employment agreements. In addition, when appropriate, the Company has also agreed to individual severance arrangements at the time of termination of employment, taking into account the specific facts and circumstances of termination. The Company does not maintain any change-in-control agreements or other similar plans or arrangements intended specifically to provide income protection for executive officers upon a change-in-control.
In addition, the Company maintains several programs — the STIP, LTIP, Perquisite Allowance Program, and DCP — that deliver benefits upon certain types of termination or a change-in-control.
Information about these severance benefits is contained below, followed by a table summarizing the monetary benefits upon triggering events.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 58
Only the employment agreements of Messrs. Gentile and Kapoor provide for any payments to be made, or benefits provided, beyond the date of termination as of December 31, 2018. These benefits are paid only in the circumstances described below. Receipt of these benefits is conditioned upon the execution of a release of claims against the Company and satisfaction of a covenant not to compete and a covenant not to solicit customers or employees of Spirit.
Termination Without Cause or For Good Reason
Upon a termination without cause or for good reason, Messrs. Gentile and Kapoor will be entitled to their base salary in effect prior to termination and the costs of providing COBRA medical and dental benefits coverage over a period of 12 months. In addition, if such a termination occurs before April 1, 2019, the following long-term incentives will vest:
66-2/3% of the RS granted to Mr. Gentile in 2017 (such vested shares to include any shares that have previously vested under such award), which, as of December 31, 2018, reflects an additional vesting amount of 18,457 shares of Common Stock (18,457 shares under such award already vested in February 2018); and
| 52 Spirit AeroSystems 2022 Proxy Statement Grants of Plan-Based Awards in 2021 The following table presents information regarding grants of plan-based awards to the NEOs during the fiscal year ended December 31, 2021. Note that, for all equity awards below, the date the award was approved by the Compensation Committee was January 26, 2021; however, the awards were not priced until the grant date of February 26, 2021. Estimated Future Payouts Estimated Future Payouts All Other Under Non-Equity Incentive Under Equity Incentive Stock Plan Awards Plan Awards Awards Number Grant Date Fair of Shares Value of Stock Threshold Target Maximum Threshold Target Maximum of Stock Awards Name Grant Date ($) ($) ($) (#) (#) (#) (#) ($) Thomas C. Gentile III ACI(1) 141,143 1,881,901 3,763,803 RSU(2) 2/26/2021 100,164 4,290,024 PB-TSR(3) 2/26/2021 11,848 47,391 94,782 2,860,047 Mark J. Suchinski ACI(1) 39,658 528,767 1,057,534 RSU(2) 2/26/2021 14,710 630,029 PB-TSR(3) 2/26/2021 1,740 6,960 13,920 420,036 Samantha J. Marnick ACI(1) 50,788 677,173 1,354,346 RSU(2) 2/26/2021 20,944 897,032 PB-TSR(3) 2/26/2021 2,477 9,909 19,818 598,008 Duane F. Hawkins ACI(1) 40,815 544,203 1,088,405 RSU(2) 2/26/2021 17,238 738,304 PB-TSR(3) 2/26/2021 2,039 8,156 16,312 492,215 Kevin Matthies ACI(1) 38,407 512,096 1,024,192 RSU(2) 2/26/2021 9,807 420,034 PB-TSR(3) 2/26/2021 1,160 4,640 9,280 280,024 (1)Represents ACI opportunities that were granted and earned in 2021. The actual ACI amounts are reported in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table,” and were paid in February 2022. For all participants, the threshold, target, and maximum figures were calculated on a weighted-average basis, giving effect to the changes made to base salaries during 2021 (including the salary reductions that applied in 2021). (2)Represents RSUs that vest annually over three years, beginning February 26, 2022, if such NEO remains employed by the Company on each annual vesting date. However, Mr. Hawkins became retirement eligible in 2020 and, accordingly, will become 100% vested in the RSUs when he departs the Company (except under certain circumstances described under “Potential Payments Upon Termination or Change in Control”). The grant date fair value of each award, which is reported in the “Stock Awards” column of the “Summary Compensation Table,” is equal to the number of shares multiplied by $42.83, the closing price of the Common Stock on the grant date. (3)Represents PB-TSRs that vest at the end of the three-year performance period based on the ranking of the Company’s TSR relative to the TSR of each of the companies in the Company’s peer group. The grant date fair value of each award, which is reported in the “Stock Awards” column of the “Summary Compensation Table,” is equal to the number of shares granted at target multiplied by $60.35, which was determined using a Monte Carlo simulation based on the probable ranking of the Company’s TSR relative to a group of the Company’s peers, using the closing price of the Common Stock on the grant date. Actual payout may be zero or range from 25% to 200% of the target shares granted. COMPENSATION DISCUSSION AND ANALYSIS (continued) |
33-1/3% of the RS granted to Mr. Gentile in 2018, which, as of December 31, 2018, reflects 13,994 shares of Common Stock.
Termination of Mr. Kapoor due to expiration of his employment agreement without renewal constitutes a termination without cause.
A termination for “good reason” is a voluntary termination of employment by the executive within 90 days after one of the following conditions:
For Mr. Gentile: If he is assigned to a diminished position prior to April 1, 2019.
| Outstanding Equity Awards at 2021 Fiscal Year End The following table presents the outstanding equity awards held by the NEOs as of December 31, 2021. The Company has not granted any options or option-like awards. The market value of the awards is determined by multiplying the number of shares shown in the applicable columns below by $43.09, the closing price of the Common Stock on December 31, 2021. Stock Awards Equity Incentive Plan Market Value Awards: Market or Number of of Equity Incentive Plan Payout Shares or Shares or Awards: Number of Value of Unearned Units of Units Unearned Shares, Shares, Stock of Stock That Units, Units, or Other Rights That Have Have Not or Other Rights That That Grant Not Vested Vested Have Not Vested Have Not Vested Name Date (#) ($) (#) ($) Thomas C. Gentile III RSU(1) 2/26/2021 100,164 4,316,067 PB-TSR(2) 2/26/2021 11,848 510,530 RS(3) 3/4/2020 56,178 2,420,710 PB-TSR(4) 3/4/2020 12,123 522,380 PB-FCF(5) 3/4/2020 7,038 303,267 RS(6) 2/6/2019 15,530 669,188 Mark J. Suchinski RSU(1) 2/26/2021 14,710 633,854 PB-TSR(2) 2/26/2021 1,740 74,977 RS(3) 3/4/2020 6,875 296,244 PB-TSR(4) 3/4/2020 1,484 63,946 PB-FCF(5) 3/4/2020 862 37,144 RS(6) 2/6/2019 941 40,548 Samantha J. Marnick RSU(1) 2/26/2021 20,944 902,477 PB-TSR(2) 2/26/2021 2,478 106,777 RS(3) 3/4/2020 9,291 400,349 PB-TSR(4) 3/4/2020 2,005 86,395 PB-FCF(5) 3/4/2020 1,164 50,157 RS(6) 2/6/2019 2,568 110,655 Spirit AeroSystems 2022 Proxy Statement 53 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
For Mr. Kapoor: Upon a change-in-control or within 12 months thereafter, the executive is not offered continued employment in a position other than a diminished position.
A position is a “diminished position” if it reflects: (1) a material diminution in base compensation; (2) a material diminution in authority, duties, or responsibilities; (3) a change in reporting requirements; (4) relocation of the executive’s principal office to a location greater than 50 miles from Wichita, Kansas; or (5) any action or inaction on Spirit’s part that constitutes a material breach by Spirit of the employment agreement.
For Mr. Kapoor, a “change-in-control” means (a) a transaction where any person acquires more than 50% of the Company’s total voting power, or (b) a transaction where the Company sells or transfers all or substantially all of its assets to a person, if all or substantially all the proceeds are distributed to the Company’s stockholders.
For context, a “for cause” termination is defined as a termination resulting from the following:
Commission of a material breach or acts involving moral turpitude, fraud, dishonesty, unauthorized disclosure of confidential information, the commission of a felony, or material violations of the Company’s policies;
| 54 Spirit AeroSystems 2022 Proxy Statement Stock Awards Equity Incentive Plan Market Value Awards: Market or Number of of Equity Incentive Plan Payout Shares or Shares or Awards: Number of Value of Unearned Units of Units Unearned Shares, Shares, Stock of Stock That Units, Units, or Other Rights That Have Have Not or Other Rights That That Grant Not Vested Vested Have Not Vested Have Not Vested Name Date (#) ($) (#) ($) Duane F. Hawkins RSU(1) 2/26/2021 16,683 718,870 PB-TSR(2) 2/26/2021 2,039 87,861 RS(3) 3/4/2020 5,379 231,781 PB-TSR(4) 3/4/2020 2,087 89,929 PB-FCF(5) 3/4/2020 1,212 52,225 RS(6) 2/6/2019 1,487 64,075 Kevin Matthies RSU(1) 2/26/2021 9,807 422,584 PB-TSR(2) 2/26/2021 1,160 49,984 RS(3) 3/4/2020 4,648 200,282 PB-TSR(4) 3/4/2020 1,003 43,219 PB-FCF(5) 3/4/2020 583 25,122 RS(6) 2/6/2019 1,082 46,623 (1)Represents 2021 annual RSUs. The first tranche of the award vested on February 26, 2022, and the second and third tranches will vest on February 26, 2023, and February 26, 2024, respectively, if the NEO continues to be employed by the Company on each vesting date. However, Mr. Hawkins became retirement eligible in 2020 and, accordingly, will become 100% vested in the RSUs when he departs the Company (except under certain circumstances described under “Potential Payments Upon Termination or Change in Control”). This retirement eligibility required the Company to withholding shares for certain tax purposes in 2021. For this reason, Mr. Hawkins’ amounts for the RSUs are shown as net shares, because shares were disposed of for tax purposes in accordance with IRC requirements in 2021. (2)Represents PB-TSRs granted in 2021, with a performance period running from January 1, 2021, to December 31, 2023. The number of shares and market value shown reflects the achievement of a threshold performance goal based on TSR performance for the fiscal year ended December 31, 2021. The award vesting date is December 31, 2023, subject to performance certification by the Compensation Committee. (3)Represents 2020 annual RSs. The first and second tranches of the award vested on March 4, 2021 and March 4, 2022, respectively, and the third tranche will vest on March 4, 2023, if the NEO continues to be employed by the Company on the vesting date. As Mr. Hawkins was retirement eligible in 2021, Mr. Hawkins’ amounts for the RS are shown as net shares because shares were disposed of for tax purposes on the date he became retirement eligible in 2020 in accordance with IRC requirements. (4)Represents PB-TSRs granted in 2020 with a performance period running from January 1, 2020, to December 31, 2022. The number of shares and market value shown reflects the achievement of a threshold performance goal based on TSR performance for the fiscal year ended December 31, 2021. The award vesting date is December 31, 2022, subject to performance certification by the Compensation Committee. (5)Represents PB-FCFs granted in 2020 with a performance period running from January 1, 2020, to December 31, 2022. The number of shares and market value shown reflects the achievement of a threshold performance goal based on FCF Percentage performance for the fiscal year ended December 31, 2021. The award vesting date is December 31, 2022, subject to performance certification by the Compensation Committee. (6)Represents 2019 annual RSs. The first, second and third tranches of the award vested on February 6, 2020, February 6, 2021 and February 6, 2022, respectively. As Mr. Hawkins was retirement eligible in 2021, Mr. Hawkins’ amounts for the RS are shown as net shares because shares were disposed of for tax purposes on the date he became retirement eligible in 2020 in accordance with IRC requirements. COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Direct and deliberate acts constituting a material breach of the duty of loyalty;
| Option Exercises and Stock Vested for Fiscal Year 2021 The following table presents information regarding NEO stock awards that vested in 2021. Values reflected below are gross amounts that do not include any reductions for tax withholding. The value realized on vesting represents the number of shares multiplied by the average of the high and low prices of the Common Stock on the vesting date. The Company has not granted any options or option-like awards. Number of Shares Acquired on Vesting Value Realized on Vesting Name Grant Date Vesting Date (#) ($) Thomas C. Gentile III RS(1) 2/7/2018 2/7/2021 13,994 546,955 RS(2) 2/6/2019 2/6/2021 15,530 606,990 RS(3) 3/4/2020 3/4/2021 28,089 1,316,672 TOTAL 57,613 2,470,617 Mark J. Suchinski RS(1) 2/7/2018 2/7/2021 776 30,330 Special RS(4) 11/26/2018 11/26/2021 1,674 64,365 RS(2) 2/6/2019 2/6/2021 941 36,779 RS(3) 3/4/2020 3/4/2021 3,438 161,156 TOTAL 6,829 292,630 Samantha J. Marnick RS(1) 2/7/2018 2/7/2021 2,329 91,029 RS(2) 2/6/2019 2/6/2021 2,569 100,409 RS(3) 3/4/2020 3/4/2021 4,646 217,781 TOTAL 9,544 409,219 Duane F. Hawkins RS(1) 2/7/2018 2/7/2021 1,532 59,886 RS(2) 2/6/2019 2/6/2021 1,487 58,127 RS(3) 3/4/2020 3/4/2021 2,690 126,107 RSUs(5) 2/26/2021 2/26/2021 555 23,771 TOTAL 6,264 267,891 Spirit AeroSystems 2022 Proxy Statement 55 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Refusal or material failure (other than by reason of disability) to perform job duties and responsibilities if not remedied within 30 days after receiving written notice thereof;
| 56 Spirit AeroSystems 2022 Proxy Statement Number of Shares Acquired on Vesting Value Realized on Vesting Name Grant Date Vesting Date (#) ($) Kevin Matthies RS(1) 2/7/2018 2/7/2021 965 37,722 RS(2) 2/6/2019 2/6/2021 1,082 42,295 RS(3) 3/4/2020 3/4/2021 2,324 108,949 TOTAL 10,850 188,966 (1)Represents shares vesting under the 2018 annual RS. (2)Represents shares vesting under the 2019 annual RS. (3)Represents shares vesting under the 2020 annual RS. (4)Represents shares vesting under a Special RS granted to the recipients in consideration of their performance or responsibilities, or for retention purposes. (5)Represents shares required to be withheld to satisfy tax obligations upon the grant date as Mr. Hawkins was retirement eligible. 2021 Nonqualified Deferred Compensation The following table presents information concerning each of the Company’s defined contribution or other plans that provide for the deferral of compensation of the NEOs on a basis that is not tax-qualified. Executive Registrant Aggregate Aggregate Aggregate Contributions Contributions Earnings Withdrawals/ Balance at in Last FY(1) in Last FY(2) in Last FY(3) Distributions Last FYE Name Plan ($) ($) ($) ($) ($) Thomas C. Gentile III DCP 600,000 38,014 3,175,897(4) Samantha J. Marnick DCP 200,000 8,528 745,282(5) Kevin Matthies DCP 15,000 25,574 3,395 283,923 (1)These amounts represent participant contributions to the DCP and are included in the “Salary” column of the “Summary Compensation Table.” (2)These amounts represent Company contributions to the DCP and are included in the “All Other Compensation” column of the “Summary Compensation Table.” (3)Under the DCP, these amounts represent earnings on DCP balances from January 1 to December 31, 2021, and are not included in the “Summary Compensation Table.” (4)This amount includes $2,400,000 consisting of aggregate Company contributions prior to 2021 (reported in the “Summary Compensation Table” of prior year’s proxy statements). (5)This amount includes $500,000 consisting of aggregate Company contributions prior to 2021 (reported in the “Summary Compensation Table” of prior year’s proxy statements). More information on the DCP can be found under “Other Compensation Elements and Information” and “Potential Payments Upon Termination or Change in Control.” There were no “above-market” earnings (defined by SEC rule as that portion of interest that exceeds 120% of the applicable federal long-term rate) under the DCP during fiscal year 2021, as the Company used 120% of the applicable federal long-term rate to determine the amounts to be contributed. Summary Table — Potential Payments Upon Termination or Change in Control The following table summarizes the value of compensation and benefits payable to each NEO upon termination that would exceed the compensation or benefits generally available to salaried employees. Benefits and payments are calculated using a termination date of December 31, 2021. For equity valuation purposes, the table below uses $43.09, the closing price of the Common Stock on December 31, 2021. For purposes of presenting amounts payable over a period of time (e.g. salary continuation), the amounts are shown as a single total but not as a present value (i.e., the single sum does not reflect any discount). COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Material underperformance, as reflected in two consecutive performance reviews provided no less than six months apart; or
Inability to obtain and maintain the appropriate level of U.S. security clearance.
Voluntary Termination without Good Reason
In the event Mr. Gentile had voluntarily terminated his employment with the Company before April 1, 2018, any unvested shares of restricted stock that were awarded as a signing bonus under his employment agreement will immediately vest. This provision no longer applies.
Awards under the Omnibus Incentive Plan: ACI and Long-Term Incentives
In the event of a “qualifying retirement” that occurs 90 days or more after the beginning of the plan year, the participant will be entitled to receive a prorated ACI based on full-year performance metrics actually achieved for such year. Other than Mr. Pilla, none of the NEOs qualify for this benefit as of December 31, 2018.
In the event of a change-in-control of the Company, each participant who incurs a qualifying termination, either in anticipation of the change-in-control or during the period beginning 30 days before the date of the change-in-control and ending two years after the change-in-control, will be entitled to receive a cash award equal to the full-year ACI that the participant would have been entitled to receive for the year during which such termination occurs had the target performance metrics established for that year been met.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 59
2018Long-TermIncentives
In addition to the change-in-control treatment described below, each participant who is terminated due to death, disability, or retirement (termination after the employee has attained age 62) will (i) fully vest in his or her outstanding time-based restricted stock award and (ii) vest in a prorated portion of his or her performance-based restricted stock award, based on target performance in the case of death or disability, and actual performance measured at the end of the applicable performance period in the case of retirement. None of our NEOs are currently entitled to the retirement benefits.
2017and2018Long-TermIncentives
Each participant who incurs a qualifying termination, either in anticipation of the change-in-control or during the period beginning 30 days before the date of the change-in-control and ending two years after the change-in-control, will become fully vested upon termination of employment. If an award is subject to performance conditions, the portion that vests will, at the discretion of the Compensation Committee, be determined based upon actual performance through the date of the change-in-control (or, if later, the date of the qualifying termination) or, if the Compensation Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance.
In addition, each such participant who qualifies for accelerated vesting above will also receive a cash award equal to the dollar value of the long-term incentive that would have been made to the participant in the ordinary course of business within the 12-month period following the date of qualifying termination, based on the participant’s annual base pay in effect on the date of qualifying termination.
2016Long-TermIncentives
The unvested long-term incentives of a participant who is employed by Spirit on the date of a change-in-control, or whose employment was involuntarily terminated by Spirit (other than for cause) within the ninety (90) days preceding a change-in-control, become fully vested upon a change-in-control. If an award is subject to performance conditions, the portion that vests will, at the discretion of the Compensation Committee, be determined based upon actual performance through the date of the change-in-control or, if the Compensation Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance.
In addition, each such participant who qualifies for accelerated vesting above will also receive a cash award equal to the dollar value of the long-term incentive that would have been made to the participant in the ordinary course of business within the 12-month period following the date of the change-in-control, based on the participant’s annual base pay in effect on the date of the change-in-control or termination, if earlier.
“Qualifying termination” means a participant’s termination either (i) by the Company without cause, or (ii) by the participant for good reason.
“Cause” means that the Company has “cause” to terminate the employee, as defined in any applicable employment or consulting agreement, or any of the following has occurred:
Gross negligence or willful misconduct in the exercise of responsibilities;
Breach of fiduciary duty;
Material breach of any provision of an employment contract or consulting agreement;
The commission of a felony crime or crime involving moral turpitude;
Theft, fraud, misappropriation, or embezzlement (or reasonable suspicion of the same);
Willful violation of any federal, state, or local law (except traffic violations and other similar matters not involving moral turpitude); or
Refusal to obey any resolution or direction of the participant’s supervisor or the Board.
“Good reason” means a voluntary termination within ninety (90) days after the participant is assigned to a diminished position, so long as the participant has, within thirty (30) days after being assigned to such diminished position, notified the Company of the participant’s intent to terminate as a result of such assignment, and within thirty (30) days after receipt of that notice the Company has not reassigned the participant to a position that is not a diminished position.
“Diminished position” means a position that reflects any of the following changes or actions, unless the participant has consented to the change or action in writing: (1) a material diminution in the participant’s base compensation; (2) a material diminution in the participant’s authority, duties, or responsibilities or associated job title; (3) relocation of the participant’s principal office to a location that is greater than 50 miles from the location of the participant’s principal office immediately before such relocation; or (4) any action or inaction with respect to the terms and conditions of the participant’s service that constitutes a material breach by the
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 60
Company of any written agreement between the participant and the Company.
“Retirement” is defined, for purposes of 2018 Long-Term Incentives, as termination on or after the date when the grantee has attained age 62.
“Qualifying retirement” is defined, for purposes of the ACI, as a voluntary termination of employment on or after attaining the age of 55 with at least 10 years of service with the Company and its affiliates or the age of 60 with at least five years of such service.
A “change-in-control” is (1) a transaction pursuant to which a person, or more than one person acting as a group, acquires more than 50% of the total voting power of the stock of the Company, (2) a merger or consolidation involving the Company in which the Company is not the surviving entity, or (3) a transaction that is a sale of all or substantially all the assets of the Company if all or substantially all the proceeds from such transaction are distributed to the stockholders of the Company.
Upon the occurrence of a change-in-control of the Company, an NEO who incurs a qualifying termination (as defined under the OIP above) either in anticipation of the change-in-control or during the period beginning 30 days before the change-in-control and ending two years after the closing of the change-in-control, is entitled to receive a cash award equal to (1) any remaining unused portion of the NEO’s allowance for the calendar year in which the qualifying termination occurs, plus (2) an amount equal to 100% of the NEO’s allowance for the calendar year in which the qualifying termination occurs.
Individuals participating in the DCP are entitled to receive payment of amounts credited to their deferred compensation accounts under the DCP upon a separation from service. However, in the event of a termination for cause, no amounts credited to the employer-match account or employer discretionary contribution amount shall be payable to the participant. Payment to a participant of any employer -matching or discretionary contributions made under the DCP is subject to compliance by the participant with non-competition, non-solicitation, and confidentiality requirements during the term of the participant’s employment and for so long as the participant receives payments under the DCP.
For purposes of the DCP, a “termination for cause” means a separation from service involving (1) gross negligence or willful misconduct in the exercise of responsibilities; (2) breach of fiduciary duty; (3) material breach of any provision of an employment contract; (4) the commission of a felony crime or crime involving moral turpitude; (5) theft, fraud, misappropriation, or embezzlement (or suspicion of the same); (6) willful violation of any federal, state, or local law (except traffic violations and other similar matters not involving moral turpitude); or (7) refusal to obey any resolution or direction of the participant’s supervisor or the Board.
Pursuant to the SERP, Mr. Pilla holds 16,023 phantom stock units. Upon a “Change-in-Control’’ or “Separation from Service’’ following a “Liquidity Event’’ (each as defined in the SERP), Mr. Pilla is entitled to receive payment with respect to each of those phantom stock units in an amount equal to (i) the market value of one share of Class A Common stock in the Company (determined as of the business day immediately preceding the date of payment), plus (ii) the amount of all dividends (other than stock dividends), if any, actually paid on one share of Class A Common stock in the Company during the period from June 16, 2005, through the date payment is made. A “Change-in-Control’’ under the SERP is a transaction pursuant to which a person acquires (i) more than 50% of the total voting power of the stock of the Company, or (ii) all or substantially all the assets of the Company or Spirit AeroSystems, Inc., the Company’s wholly owned subsidiary, and all or substantially all the proceeds from such transaction are distributed to the stockholders of the Company. A “Separation from Service’’ under the SERP is the termination of employment, including, without limitation, terminations of employment arise from a person’s death, disability, retirement, discharge (with or without cause), or voluntary termination. A “Liquidity Event’’ under the SERP includes the initial public offering consummated by the Company on November 27, 2006. Thus, Mr. Pilla will be entitled to payment under the SERP with respect to his phantom stock units upon any future “Change-in-Control’’ or “Separation from Service.’’ Payment under the SERP will be made in a single lump sum in cash or Common Stock following the change-in-control or separation from service.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 61
Summary Table-Potential Payments Upon Termination or Change-in-Control
The following table summarizes the value of compensation and benefits payable to each NEO upon termination that would exceed the compensation or benefits generally available to salaried employees. Benefits and payments are calculated using a termination date of December 31, 2018. For equity valuation purposes, the table below uses $72.09, the closing price of Common Stock on December 31, 2018. For purposes of presenting amounts payable over a period of time (e.g. salary continuation), the amounts are shown as a single total but not as a present value (i.e., the single sum does not reflect any discount).
Name | Severance ($) | (1)
| ACI ($) | (2)
| RS ($) |
| PB One-Time, PB-TSR and PB-FCF ($) |
| Cash Award in Respect of LTIP Awards ($) | (10)
| Perquisite Allowance Plan ($) | (11)
| Other Benefits ($) | (12)
| Total(13) ($) |
Thomas C. Gentile III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination without Cause/ Termination by Executive for Good Reason | 1,250,000 |
|
|
| 2,339,465 | (3) |
|
|
|
|
|
| 20,713 |
| 3,589,465 |
Change-in-Control and Qualifying Termination |
|
| 1,737,726 |
| 5,687,829 | (4) | 5,810,523 | (7) | 6,250,000 |
| 50,000 |
|
|
| 19,536,078 |
Death or Disability(14) |
|
|
|
| 3,026,627 |
| 603,793 |
|
|
|
|
|
|
| 3,630,356 |
Sanjay Kapoor(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination without Cause/ Termination by Executive for Good Reason | 650,000 |
|
|
|
|
|
|
|
|
|
|
| 10,699 |
| 660,699 |
Termination Upon Expiration of Employment Agreement | 650,000
|
|
|
|
|
|
|
|
|
|
|
| 10,699
|
| 660,699 |
Change-in-Control |
|
|
|
| 548,389 | (5) | 438,019 | (8) | 1,950,000 |
|
|
|
|
| 2,936,407 |
Change-in-Control and Qualifying Termination | 650,000 |
| 650,000 |
| 2,428,568 | (6) | 2,449,903 | (9) | 1,950,000 |
| 26,000 |
| 10,699 |
| 8,165,170 |
Death or Disability(14) |
|
|
|
| 944,307 |
| 188,395 |
|
|
|
|
|
|
| 1,132,702 |
Samantha J. Marnick |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change-in-Control |
|
|
|
| 285,837 | (5) | 228,309 | (8) | 1,182,500 |
|
|
|
|
| 1,696,646 |
Change-in-Control and Qualifying Termination |
|
| 522,877 |
| 1,268,279 | (6) | 1,262,937 | (9) | 1,182,500 |
| 26,000 |
|
|
| 4,262,593 |
Death or Disability(14) |
|
|
|
| 503,693 |
| 100,493 |
|
|
|
|
|
|
| 604,186 |
Duane F. Hawkins |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change-in-Control |
|
|
| �� | 415,527 | (5) | 331,830 | (8) | 1,230,500 |
|
|
|
|
| 1,977,857 |
Change-in-Control and Qualifying Termination |
|
| 533,685 |
| 1,599,677 | (6) | 1,597,005 | (9) | 1,230,500 |
| 26,000 |
|
|
| 4,986,867 |
Death or Disability(14) |
|
|
|
| 595,896 |
| 118,876 |
|
|
|
|
|
|
| 714,772 |
John A. Pilla |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change-in-Control |
|
|
|
| 319,647 | (5) | 255,343 | (8) | 902,500 |
|
|
| 1,168,557 |
| 2,646,047 |
Change-in-Control and Qualifying Termination |
|
| 456,041 |
| 1,576,320 | (6) | 1,111,174 | (9) | 902,500 |
| 26,000 |
| 1,168,557 |
| 5,240,593 |
Death or Disability(14) |
|
|
|
| 860,971 |
| 83,528 |
|
|
|
|
| 1,168,557 |
| 2,113,057 |
Qualifying Retirement |
|
| 422,978 |
|
|
|
|
|
|
|
|
| 1,168,557 |
| 1,591,535 |
Any Other Termination (including for cause) |
|
|
|
|
|
|
|
|
|
|
|
| 1,168,557 |
| 1,168,557 |
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 62
| RSUs and PB-TSR and Cash Award Perquisite Severance(1) RS(2) PB-FCF(3) under LTIP(4) Plan(5) Other(6) Total(7) Name ($) ($) ($) ($) ($) ($) ($) Thomas C. Gentile III Termination without Cause 1,300,000 15,404 1,315,404 Change in Control and Qualifying Termination 1,300,000 7,405,964 7,150,000 25,000 15,404 15,896,368 Death or Disability 7,405,964 4,663,753 12,069,717 Mark J. Suchinski Termination without Cause 550,000 7,702 557,702 Change in Control and Qualifying Termination 550,000 970,645 1,210,000 13,000 7,702 2,751,347 Death or Disability 970,645 604,102 1,574,747 Samantha J. Marnick Change in Control and Qualifying Termination 1,413,481 1,785,000 13,000 3,211,481 Death or Disability 1,413,481 830,833 2,244,314 Duane F. Hawkins Termination without Cause 1,014,726 1,014,726 Change in Control and Qualifying Termination 1,014,726 1,322,500 13,000 2,350,226 Death or Disability 1,014,726 802,671 1,817,397 Qualifying Retirement/Retirement 1,014,726 1,014,726 Kevin Matthies Change in Control and Qualifying Termination 669,489 735,000 13,000 1,417,489 Death or Disability 669,489 406,512 1,076,001 (1)
2020, and accordingly, will become 100% vested in the RSUs and RS when he departs the Company. (3)Under the “Change-in-Control and Qualifying Termination” row, represents
2021.9 (4)Represents a cash amount equal to the value of the full-year long-term incentive that would have been made to such NEO in the ordinary course of business within the 12-month period following the date of the change-in-control
|
| 58 Spirit AeroSystems 2022 Proxy Statement Employment and Separation Agreements Spirit has employment agreements with all of
|
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 63
The 2018 annual total compensation of the Company’s CEO was $9,899,693. The 2018 annual total compensation of the median employee (excluding the CEO) was $78,740. The ratio between the two amounts is 126:1.
Determining the Median Employee
The Company believes that the ratio of pay included above is a reasonable estimate calculated in a manner consistent with applicable SEC rules.
Due to a change in individual compensation circumstances, it is no longer appropriate for the Company to use the median employee identified in 2017, and, therefore, the Company has identified a new median employee for 2018.
To identify the median employee in 2018, we reviewed base pay paid to all of our employees as of October 1, 2017 (the “Pay Ratio Employee Population”). We used base pay as our compensation measure to avoid variations in pay due to overtime worked or other items that may yield one-time pay increases. As a result of such review, we identified 901 employees with similar median base pay. Subsequently, we reviewed total compensation paid to each of those 901 employees as of October 12, 2017, as reflected in the Company’s payroll records, and estimated total compensation for each of those employees through December 31, 2017. Comparing total and expected earnings of each of the 901 employees, we identified 10 employees with similar median pay. In 2018, we studied each of the ten employees’ specific pay and employment circumstances and eliminated nine employees from the group, including the median employee from 2017, who had significant variations in their pay due to one-time events occurring in 2018. The remaining employee from that analysis is our median employee.
The Pay Ratio Employee Population was the same as the population identified in 2017, and included all U.S. and non-U.S. persons employed by the Company on a full-time, part-time, seasonal, or temporary basis. Further, the Pay Ratio Employee Population excluded independent contractors and leased workers who provide services to the Company but are employed, and whose compensation is determined, by an unaffiliated third party. In calculating base pay for the Pay Ratio Employee Population, we did not make any assumptions, adjustments (including cost of living adjustments), or estimates with respect to base pay, and we did not annualize base pay. In calculating the total compensation of each person in the group of 901 employees, we did not make any assumptions or adjustments (including cost of living adjustments), and we did not estimate annualized compensation for any full-time employees who were not employed by us for the full 2017-year through October 12, 2017.
As required by SEC rules, after identifying our median employee, we calculated annual total compensation for both our median employee and our CEO using the same methodology that we used to determine our NEOs’ annual total compensation for the “Summary Compensation Table.”
Given the different methodologies that companies use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
The Compensation Committee establishes and oversees the design and functioning of the Company’s executive compensation program. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section in this Proxy Statement with the Company’s management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2019 Annual Meeting of Stockholders and also be incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year 2018.
CompensationCommittee
Paul E. Fulchino, ChairmanCharles L. ChadwellRobert D. Johnson
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 64
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP (“E&Y”) conducted the audit of the Company’s accounts for fiscal year 2018. The Audit Committee has selected E&Y as the Company’s independent registered public accounting firm for fiscal year 2019, and the Board is asking the Company’s stockholders to ratify that selection. The Company expects that representatives of E&Y will be present at the Annual Meeting and they may make a statement if they desire to do so. Further, the Company expects that such representatives will be available to respond to appropriate questions.
The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non-binding approval with respect to Proposal 3. With respect to Proposal 3, a stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions will not be counted as votes “FOR” or “AGAINST” Proposal 3; however, because abstentions will be counted as present at the Annual Meeting, they will have the effect of votes “AGAINST” Proposal 3. Proposal 3 is considered a routine matter under NYSE rules. As a result, brokers who do not receive voting instructions generally may vote on Proposal 3 in their discretion. Unless otherwise instructed, the proxy holders will vote proxies received by them “FOR” the proposal.
If a majority of votes cast on this matter are not cast in favor of the selection of E&Y, the Audit Committee will reconsider the selection of such firm as the Company’s independent registered public accounting firm. Even if the Company’s stockholders vote on an advisory (non-binding) basis in favor of the selection, the Audit Committee may, in its discretion, direct the selection of a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
The Board recommends you vote “FOR” the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm.
The Audit Committee has adopted a policy governing the pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. Under this policy, the Audit Committee has delegated approval authority to the Chair of the Audit Committee provided the Chair reports all pre-approval decisions in writing to the Audit Committee and the decisions are discussed at the Audit Committee’s next scheduled meeting. In 2018, all audit and permissible non-audit services provided by E&Y were pre-approved by the Audit Committee.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 65
The fees incurred by the Company, including its majority-owned subsidiaries, for services provided by E&Y in 2017 and 2018 are set forth below. All the fees set forth below and associated services were pre-approved by the Audit Committee. The Audit Committee concluded that the provision of the non-audit services listed below was compatible with E&Y’s independence.
| December 31, | |
(Dollars in thousands) | 2017 ($) | 2018 ($) |
Audit Fees(1) | 3,724.9 | 3,822.1 |
Audit-Related Fees(2) | 960.1 | 1,639.2 |
Tax Fees(3) | 259.5 | 206.4 |
All Other Fees(4) | 2.0 | 2.0 |
TOTAL | 4,946.5 | 5,669.7 |
(1) Represents fees and expenses for professional services provided in connection with the audit of the Company’s annual financial statements and review of the Company’s quarterly financial statements, statutory audits, and advice on accounting matters directly related to the audit. (2) For 2018, represents $188.0 in fees related to the implementation of FASB’s new revenue recognition standard, $43.5 in fees related to the implementation of FASB’s new leasing standard, $1,333.1 in fees related to merger and acquisition analysis, and $74.6 in fees related to comfort letters. For 2017, represents $575.3 in fees related to implementation of FASB’s new revenue recognition standard, $367.0 related to merger and acquisition analysis, and $17.8 in fees related to Exchange Act filings, comfort letters, and related matters. 2017 fees related to merger and acquisition analysis were reclassified from All Other Fees to Audit-Related Fees to be consistent with 2018 presentation. (3) Represents fees and expenses for tax consultations and advice related to compliance with tax laws and tax-planning strategies. (4) For 2018 and 2017, represents fees related to research tools. 2017 fees related to merger and acquisition analysis were reclassified from All Other Fees to Audit-Related Fees to be consistent with 2018 presentation. | ||
The Audit Committee currently consists of three non-employee directors. Each of the Audit Committee members satisfies the NYSE’s requirements with respect to independence and financial literacy and qualifies as an audit committee financial expert as defined by the SEC. The responsibilities of the Audit Committee are set forth in its charter, which is available on our website at http://investor.spiritaero.com/govdocs. The Audit Committee’s responsibilities include the appointment, compensation, and oversight of the independent registered public accounting firm. The Audit Committee met nine times in 2018.
The Company’s management is responsible for preparing and presenting the Company’s consolidated financial statements, and developing and maintaining the Company’s system of internal control over financial reporting. The Company’s internal auditors are responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of this system. Ernst & Young LLP (“E&Y”), the Company’s independent registered public accounting firm for 2018, is responsible for auditing the Company’s consolidated financial statements and issuing an opinion as to whether the financial statements fairly present the Company’s financial position in conformity with U.S. generally accepted accounting principles. E&Y is also responsible for auditing the Company’s internal control over financial reporting.
In fulfilling its oversight responsibilities, the Audit Committee has:
Reviewed and discussed with management and E&Y the Company’s audited financial statements as of and for the year ended December 31, 2018, as well as the representations of management regarding the Company’s internal control over financial reporting;
| Employment Agreements Only the employment agreements of Messrs. Gentile and Suchinski provide for any payments to be made, or benefits provided, beyond the date of termination as of December 31, 2021. These benefits are paid only in the circumstances described below. Receipt of these benefits is conditioned upon the execution of a release of claims against the Company and satisfaction of certain covenants, including non-solicitation and non-competition covenants. Pursuant to Mr. Gentile’s and Mr. Suchinski’s employment agreement, the non-solicitation and non-competition covenants apply for one year post- termination if terminated without cause, or two years post-termination if terminated for any other reason. Termination by the Company for Cause Upon a termination for cause, Messrs. Gentile and Suchinski are only entitled to their compensation through the date of termination. For Mr. Gentile, a “for cause” termination is defined as a termination resulting from the following: commission of a material breach of the employment agreement, acts involving fraud, material and intentional dishonesty, material and intentional unauthorized disclosure of confidential information, a felony or other crime involving moral turpitude, or a material violation of Company policies; direct and deliberate acts constituting a material breach of the duty of loyalty; refusal or material failure (other than by reason of disability) to perform duties and responsibilities, if such refusal or failure is not remedied within 30 days after receipt of written notice thereof from the Board; material underperformance, as reflected in two consecutive written performance reviews not less than six months apart; or inability to obtain and maintain the appropriate level of U.S. security clearance. For Mr. Suchinski, a “for cause” termination is defined as a termination resulting from the following: commission of a material breach of the employment agreement that, if curable, is not cured within 10 business days after written notice thereof; acts involving moral turpitude, including fraud, material and willful dishonesty, material and intentional unauthorized disclosure of confidential information, the commission of a felony or other crime involving moral turpitude, or material violation of Company policies; direct and deliberate acts constituting a material breach of the duty of loyalty; or willful or continuous refusal, or material failure, other than by reason of disability, to perform the duties reasonably assigned to Mr. Suchinski if such refusal is not remedied within 10 business days after written notice thereof. Termination without Cause Upon a termination by the Company without cause, Messrs. Gentile and Suchinski are entitled to one year of their base salary in effect prior to termination and the costs of providing COBRA medical and dental benefits coverage over a period of 12 months for Mr. Gentile and six months for Mr. Suchinski. Long-Term Incentives under the Omnibus Incentive Plan Pursuant to the provisions of the OIP, the LTIP, and/or the relevant award agreements, our NEOs are entitled to the following payments or benefits upon retirement, death or disability, or qualifying termination in connection with a change in control. Retirement Upon a participant’s termination due to “retirement,” the participant will (i) become 100% vested in outstanding Time- Based Restricted Stock Unit and Restricted Stock awards, and (ii) vest in a prorated portion of outstanding Spirit AeroSystems 2022 Proxy Statement 59 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Reviewed and discussed with E&Y all items required by the standards of the Public Company Accounting Oversight Board (“PCAOB”), including the Statement on Auditing Standards, No. 61, as amended by the American Institute of Certified Public Accountants, Professional Standards, Vol. 1, AU section 380, as adopted by the PCAOB in Rule 3200T, CommunicationwithAuditCommittees; and
| 60 Spirit AeroSystems 2022 Proxy Statement Performance-Based Restricted Stock awards (prorated based on the number of days continuously employed during the performance period) based on actual performance measured at the end of the applicable performance period. As of December 31, 2021, Mr. Hawkins was the only NEO who qualified for these benefits. Death or Disability Upon a participant’s termination due to death or disability prior to vesting, the participant will (i) fully vest in his or her outstanding Time-Based Restricted Stock Unit and Restricted Stock awards, and (ii) vest in a prorated portion of his or her outstanding Performance-Based Restricted Stock Unit and Restricted Stock awards (prorated based on the number of days continuously employed during the performance period) based on target performance. Qualifying Termination in Connection with a Change in Control Each participant who incurs a “qualifying termination” will become fully vested upon termination of employment. If an award is subject to performance conditions, the portion that vests will, at the discretion of the Compensation Committee, be determined based upon actual performance through the date of the change in control (or, if later, the date of the qualifying termination) or, if the Compensation Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance. In addition, each such participant will also receive a cash award equal to the dollar value of the long-term incentive award that would have been made to the participant in the ordinary course of business within the 12-month period following the date of qualifying termination, based on the participant’s annual base pay in effect on the date of qualifying termination. Definitions: “Qualifying termination” means the participant’s termination, either in anticipation of the change in control or during the period beginning 30 days before the date of the change in control and ending two years after the closing of the change in control, (i) by the Company without cause, or (ii) by the participant for good reason. “Cause” means that the Company has “cause” to terminate the employee, as defined in any applicable employment or consulting agreement, or any of the following has occurred: gross negligence or willful misconduct in the exercise of responsibilities; breach of fiduciary duty; material breach of any provision of an employment contract or consulting agreement; the commission of a felony crime or crime involving moral turpitude; theft, fraud, misappropriation, or embezzlement (or reasonable suspicion of the same); willful violation of any federal, state, or local law (except traffic violations and other similar matters not involving moral turpitude); or refusal to obey any resolution or direction of the participant’s supervisor or the Board. “Good reason” means a voluntary termination within 90 days after the participant is assigned to a diminished position (provided certain conditions are met). “Diminished position” means a position that reflects any of the following changes or actions, unless the participant has consented to the change or action in writing: a material diminution in the participant’s base compensation, authority, duties, responsibilities, or associated job title; relocation of the participant’s principal office to a location that is greater than 50 miles from the location of the participant’s principal office immediately before such relocation; or any action or inaction with respect to the terms and conditions of the participant’s service that constitutes a material breach by the Company of any written agreement between the participant and the Company. COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Received and reviewed the written disclosures and the letter from E&Y required by applicable requirements of the PCAOB regarding E&Y’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with E&Y its independence from the Company and its management.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the SEC, and the Board approved the Audit Committee’s recommendation. The Audit Committee selected E&Y as the Company’s independent registered public accounting firm for fiscal year 2019.
AuditCommitteeIrene M. Esteves, ChairJohn L. PluegerLaura H. Wright
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 66
| “Retirement” is defined as: For purposes of the 2018 Long-Term Incentives, termination on or after the date when the grantee has attained age 62; and For purposes of all Long-Term Incentives issued after 2018, termination on or after the date when the grantee has attained age 62, other than a termination by the Company for cause or termination by the Company at the time cause exists. A “change-in-control” is (1) a transaction pursuant to which a person, or more than one person acting as a group, acquires more than 50% of the Common Stock; or (2) a merger or consolidation involving the Company in which the Company is not the surviving entity; or (3) a transaction that is a sale of all or substantially all of the Company’s assets if all or substantially all the proceeds from such transaction are distributed to the stockholders of the Company. Perquisite Plan Upon the occurrence of a change in control of the Company, a participant who incurs a qualifying termination (as defined under the OIP above) either in anticipation of the change in control or during the period beginning 30 days before the change in control and ending two years after the closing of the change in control, is entitled to receive a cash award equal to (i) any remaining unused portion of the participant’s allowance for the calendar year in which the qualifying termination occurs, plus (ii) an amount equal to 100% of the participant’s allowance for the calendar year in which the qualifying termination occurs. Deferred Compensation Plan Individuals participating in the DCP are entitled to receive payment of amounts credited to their deferred compensation accounts under the DCP upon a separation from service (subject to the expiry of any applicable waiting period). However, in the event of a termination for cause (as defined under the OIP), no amounts credited to the employer-match account or employer discretionary contribution amount shall be payable to the participant. Payment to a participant of any employer-matching or discretionary contributions made under the DCP is subject to compliance by the participant with non-competition, non-solicitation, and confidentiality requirements during the term of the participant’s employment and for so long as the participant receives payments under the DCP. The descriptions of the amounts payable by the Company that are included in the section entitled “Nonqualified Deferred Compensation” are incorporated by reference herein. DCP amounts are excluded from the table above titled “Potential Payments Upon Termination or Change in Control” because, while certain DCP benefits may become payable upon a separation from service, no DCP benefits are enhanced or accelerated as a result of a termination of employment or change in control. 2021 CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of annual total compensation of our median employee and the annual total compensation of our President and CEO. For 2021, our last completed fiscal year, our ratio as calculated pursuant to Item 402(u) was as follows: The 2021 annual total compensation of the Company’s CEO was $10,849,938. The 2021 annual total compensation of the median employee (excluding the CEO) was $66,544. Based on this information, for 2021, the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee was reasonably estimated to be 163:1. Spirit AeroSystems 2022 Proxy Statement 61 COMPENSATION DISCUSSION AND ANALYSIS (continued) |
| 62 Spirit AeroSystems 2022 Proxy Statement Determining the Median Employee The Company believes that the ratio of pay included above is a reasonable estimate calculated in a manner consistent with applicable SEC rules. To identify the median employee for 2021, we reviewed pay to all of our employees as of December 31, 2021 (the “Pay Ratio Employee Population”). As a result of such review, we identified the 50 middlemost employees of the Pay Ratio Employee Population. Subsequently, we reviewed the pay of each of those 50 employees as of December 31, 2021, as reflected in the Company’s payroll records. Comparing the pay of each of the 50 employees, we identified the eight middlemost employees. For 2021, we studied each of the eight employees’ pay for the year of performance to determine the median and eliminated seven employees from the group. The remaining employee from that analysis is our median employee for 2021. The Pay Ratio Employee Population included all U.S. and non-U.S. individuals employed by the Company on a full-time, part-time, seasonal, or temporary basis as of December 31, 2021. Further, the Pay Ratio Employee Population excluded independent contractors and leased workers who provide services to the Company but are employed, and whose compensation is determined, by an unaffiliated third party. In calculating pay for the Pay Ratio Employee Population and the group of eight employees, we did not make any assumptions, adjustments (including cost of living adjustments), or estimates with respect to compensation, and we did not annualize compensation for any full-time employees who were not employed by us for all of 2021 through December 31, 2021. As required by SEC rules, after identifying our median employee, we calculated annual total compensation for both our median employee and our CEO for 2021 using the same methodology that we used to determine our NEOs’ annual total compensation for the “Summary Compensation Table.” Given the different methodologies that companies use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies. Compensation Committee Report The Compensation Committee establishes and oversees the design and functioning of the Company’s executive compensation program. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section in this Proxy Statement with the Company’s management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2022 Annual Meeting of Stockholders, and also be incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year 2021. Compensation Committee Paul E. Fulchino, Chair Charles L. Chadwell Robert D. Johnson James R. Ray, Jr. Patrick M. Shanahan Laura H. Wright COMPENSATION DISCUSSION AND ANALYSIS (continued) |
STOCKHOLDER PROPOSAL: ENHANCE SHAREHOLDER PROXY ACCESS
Resolved: Stockholders ask the board of directors to amend its proxy access bylaw provisions and any associated documents, to include the following change:
A shareholder proxy access director candidate shall not need to obtain a specific percentage vote in order to qualify as a shareholder proxy access director candidate at any future shareholder meeting.
This proposal is important because a shareholder proxy access candidate might not get a 25%-vote even if he or she is the most qualified candidate to join our Board of Directors. Currently, a proxy access director candidate must obtain a 25% vote or that candidate is disqualified to be a candidate in the following year.
Shareholders may simply believe that at the time of the annual meeting that the company is not ripe for a proxy access candidate and hence may not vote in favor of the candidate simply because the timing is not right. A year later a majority of shareholders might determine that the timing is right and hence they should not be deprived of voting for the most qualified candidate.
The following are just a few of the companies that do not require a proxy access director candidate to obtain a specific percentage vote:
Citigroup (C)eBay (EBAY)FedEx (FDX)Goodyear (GT)Home Depot (HD)
Please vote yes: Enhance Shareholder Proxy Access — Proposal 4.
| PROPOSAL 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OVERVIEW Ernst & Young LLP (“E&Y”) conducted the audit of the Company’s accounts for fiscal year 2021. The Audit Committee has selected E&Y as the Company’s independent registered public accounting firm for fiscal year 2022, and the Board is asking the Company’s stockholders to ratify that selection. The Company expects that representatives of E&Y will be virtually present at the Annual Meeting and they may make a statement if they desire to do so. Further, the Company expects that such representatives will be available to respond to appropriate questions. The Board recommends you vote “FOR” ratification of the appointment of Ernst & Young LLP as the Company’s independent auditors for 2022. If a majority of votes cast on this matter are not cast in favor of the selection of E&Y, the Audit Committee will reconsider the selection of such firm as the Company’s independent registered public accounting firm. Even if the Company’s stockholders vote on an advisory (non-binding) basis in favor of the selection, the Audit Committee may, in its discretion, direct the selection of a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Pre-Approval Policy The Audit Committee has adopted a policy governing the pre-approval of all audit and permissible non-audit services provided by the independent auditors. Under this policy, the Audit Committee has delegated approval authority to the Chair of the Audit Committee, provided the Chair reports all pre-approval decisions in writing to the Audit Committee, and the decisions are discussed at the Audit Committee’s next scheduled meeting. For the fiscal years ended December 31, 2020, and December 31, 2021, all of the Company’s audit and permissible non-audit services provided by E&Y were pre-approved by the Audit Committee. Voting Standard The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non- binding approval with respect to this Proposal 3. A stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions will be counted as present at the Annual Meeting; therefore, they will have the effect of votes “AGAINST” Proposal 3. Proposal 3 is considered a routine matter under NYSE rules. As a result, brokers who do not receive voting instructions generally may vote on Proposal 3 in their discretion. Unless otherwise instructed, the proxy holders will vote proxies received by them “FOR” the proposal. Spirit AeroSystems 2022 Proxy Statement 63 |
The Company is committed to robust corporate governance practices and stockholder rights with appropriate safeguards against abuse. In November 2016, after careful consideration, the Board adopted its proxy access bylaw. The bylaw permits a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s outstanding Common Stock continuously for at least three years, to nominate and include in the Company’s proxy materials directors constituting up to the greater of 2 individuals or 20% of the Company’s Board of Directors, provided that the stockholder(s) and nominee(s) satisfy certain requirements. The Board believes that the Company’s current proxy access bylaw, including the minimum level of support for renomination that Proposal 4 seeks to eliminate, provides meaningful and robust proxy access rights to our stockholders with appropriate safeguards against abuse by stockholders with special interests that are not shared by a significant percentage of our stockholders. Further, a majority of our peer group and S&P 500 index companies that have adopted proxy access bylaws also require a minimum level of support for renomination. Implementation of the change sought by Proposal 4 would make the Company an outlier among public companies that have adopted proxy access.
The Board believes this proposal is not in the best interest of stockholders because it will effectively eliminate one of the safeguards against abuse of the proxy access process by small groups of stockholders. The provision that Proposal 4 seeks to eliminate states that a proxy access nominee who does not receive at least 25% of the votes cast in favor of the nominee’s election at an annual meeting cannot be renominated for the next 2 years. The Board believes this provision is reasonable because each time a stockholder nominates a director nominee using proxy access, it will require a commitment of time and resources by the Board and Governance Committee in order to effectively evaluate the candidate. As described under “Board and Governance Matters — Board Composition” in this Proxy Statement, the Governance Committee and Board engage in a thorough evaluation process with respect to each nominee, including those nominated by stockholders. Once that evaluation is completed, the Company would expend further time and resources putting together appropriate proxy materials with respect to the nominee. The safeguard Proposal 4 seeks to eliminate ensures that the Company’s time and money will not be devoted to nominees who only represent narrow, unpopular interests that appeal to less than 25% of our stockholder base. Generally, as was the case in 2018, our director nominees are elected by a significant margin above 90%. A nominee vote of less than 25% of our stockholders would represent a clear departure from that trend, and continuing to put such candidate up for election in subsequent years would put the Company and stockholders through the unnecessary expense and effort of responding consecutively to proxy access for a particular candidate whom stockholders did not elect or meaningfully support. Further, this provision does not prevent any such director nominee from being renominated in the third year following his or her original nomination.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 67
| Audit and Other Fees The fees incurred by the Company, including its majority-owned subsidiaries, for services provided by E&Y in 2021 and 2020 are set forth below. The Audit Committee concluded that the provision of the non-audit services listed below was compatible with E&Y’s independence. December 31, 2021 2020 (Dollars in thousands) ($) ($) Audit Fees(1) 4,697.0 4,630.0 Audit-Related Fees(2) 196.9 140.0 Tax Fees(3) 6.0 10.0 All Other Fees(4) 109.2 7.2 TOTAL 5,009.1 4,787.2 (1)Represents fees and expenses for professional services provided in connection with the audit of the Company’s annual financial statements and review of the Company’s quarterly financial statements, statutory audits, and advice on accounting matters directly related to the audit. (2)For 2021, represents fees related to non-financial assurance and due diligence. For 2020, represents fees related to comfort letters. (3)Represents fees and expenses for tax consultations and advice related to compliance with tax laws and tax-planning strategies. (4)For 2021, represents fees related to assessment and other training services. For 2020, represents fees related to research tools. Audit Committee Report The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent we specifically incorporate this report by reference. The Audit Committee currently consists of five non-employee directors. Each of the Audit Committee members satisfies the NYSE’s requirements with respect to independence and financial literacy. Ms. Esteves and Mr. Plueger qualify as audit committee financial experts as defined by the SEC. The responsibilities of the Audit Committee are set forth in its charter, which is available at http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx. The Audit Committee’s responsibilities include the appointment, compensation, and oversight of the independent registered public accounting firm. The Audit Committee met six times in 2021. The Company’s management is responsible for preparing and presenting the Company’s consolidated financial statements, and developing and maintaining the Company’s system of internal controls over financial reporting. The Company’s internal auditors are responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of this system. E&Y, the Company’s independent registered public accounting firm for 2021, is responsible for auditing the Company’s consolidated financial statements and issuing an opinion as to whether the financial statements fairly present the Company’s financial position in conformity with U.S. generally accepted accounting principles. E&Y is also responsible for auditing the Company’s internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee has: Reviewed and discussed with management and E&Y the Company’s audited financial statements as of and for the year ended December 31, 2021, as well as the representations of management regarding the Company’s internal controls over financial reporting; Reviewed and discussed with E&Y the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC; and Received and reviewed the written disclosures and the letter from E&Y required by applicable requirements of the PCAOB regarding E&Y’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with E&Y its independence from the Company and its management. 64 Spirit AeroSystems 2022 Proxy Statement |
The Board believes that the Company’s current proxy access bylaw reflects an appropriate balance between stockholder rights and misuse of the proxy access right that is fair to both the Company and its stockholders. For the reasons noted above, the Board requests that you vote “AGAINST” the foregoing stockholder proposal, Proposal 4.
| Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the SEC, and the Board approved the Audit Committee’s recommendation. The Audit Committee selected E&Y as the Company’s independent registered public accounting firm for fiscal year 2022. Audit Committee Irene M. Esteves, Chair Stephen A. Cambone William A. Fitzgerald John L. Plueger Patrick M. Shanahan Spirit AeroSystems 2022 Proxy Statement 65 |
The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non-binding approval with respect to Proposal 4.
With respect to Proposal 4, a stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will not be counted as votes “FOR” or “AGAINST” Proposal 4. However, because abstentions and broker non-votes will be counted as present at the Annual Meeting, they will have the effect of votes “AGAINST” Proposal 4.
Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on non-routine matters unless the beneficial owner of such shares has given voting instructions on the matter. This means that if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 4 if you want your broker to vote your shares on the matter.
The Board recommends that you vote “AGAINST” the foregoing stockholder proposal.
SPIRIT AEROSYSTEMS - 2019 Proxy Statement 68
| PROPOSAL 4 STOCKHOLDER PROPOSAL: SHAREHOLDER RATIFICATION OF TERMINATION PAY The Company has received a stockholder proposal titled “Shareholder Ratification of Termination Pay” from John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, beneficial owner of 200 shares of Common Stock. After careful consideration, the Board recommends that stockholders vote “AGAINST” this proposal. The proposal and supporting statement are presented below as received. The Company is not responsible for their content. Stockholder Proposal: Proposal 4 — Shareholder Ratification of Termination Pay Shareholders request that the Board seek shareholder approval of any senior manager’s new or renewed pay package that provides for severance or termination payments with an estimated value exceeding 2.99 times the sum of the executive’s base salary plus target short-term bonus. “Severance or termination payments” include cash, equity or other compensation that is paid out or vests due to a senior executive’s termination for any reason. Payments include those provided under employment agreements, severance plans, and change-in-control clauses in long-term equity plans, but not life insurance, pension benefits, or deferred compensation earned and vested prior to termination. “Estimated total value” includes: lump-sum payments; payments offsetting tax liabilities; perquisites or benefits not vested under a plan generally available to management employees; post-employment consulting fees or office expense; and equity awards if vesting is accelerated, or a performance condition waived, due to termination. The Board shall retain the option to seek shareholder approval after material terms are agreed upon. Generous performance-based pay can be good but shareholder ratification of “golden parachute” severance packages with a total cost exceeding 2.99 times base salary plus target bonus better aligns management pay with shareholder interests. For instance at one company if the CEO is terminated without cause, whether or not his termination follows a change in control, he will receive $39 million in termination payments, nearly 7-times his base salary plus short-term bonus. It is in the best interest of Spirit shareholders to be protected from such lavish management termination packages for one person. It is important to have this policy in place so that Spirit management stays focused on improving company performance as opposed to seeking a merger mostly to trigger a management golden parachute windfall. FOR Shareholder Rights 66 Spirit AeroSystems 2022 Proxy Statement |
| This proposal topic won 58% support at the 2021 FedEx annual meeting. A proposal similar to this proposal won 41% support at the 2013 Alaska Air annual meeting in spite of a special management effort against it. A 2015 General Electric shareholder proposal similar to the FedEx proposal won 40% GE shareholder support with 2.2 billion votes in favor. This may have represented 51% support from the GE shares that had access to independent proxy voting advice and are not forced to rely on the biased recommendations of management especially on issues of management pay. Please vote yes: Shareholder Ratification of Termination Pay — Proposal 4 The Board of Directors’ Statement in Opposition: The Board does not believe that adoption of this proposal is in the best interests of our stockholders as it would unduly restrict the ability of the Compensation Committee and the Board to structure appropriate executive compensation in response to business exigencies. The Compensation Committee, which is composed entirely of independent directors, provides strong independent leadership and oversight. Our independent directors are ideally positioned to design and implement executive compensation that is aligned with the interests of our stockholders. In order to do so, the Compensation Committee and Board must have the flexibility and discretion to structure effective compensation programs that take into account existing business and market circumstances. The proposal would prevent this. When designing executive compensation programs, the Compensation Committee is focused on driving performance, increasing stockholder value, and protecting the long-term interests of the Company (see “Compensation Discussion and Analysis” above for more details on our compensation plan design). Setting appropriate limits on termination payments is an important part of designing effective compensation. Termination payments can be a valuable tool for the Compensation Committee to safeguard the Company’s interests by: Procuring ongoing executive cooperation following termination; Ensuring satisfaction of certain post-termination obligations; Protecting the Company’s sensitive information, reputation, and human capital; Attracting and retaining talent generally; Procuring the release of claims against the Company, if any; Ensuring alignment of executive and stockholder interests in a change in control scenario; and Avoiding protracted disputes that can consume substantial resources We do not believe that requiring stockholder approval for certain senior manager termination payments will provide appreciable improvements. Rather, it could undermine the objectives of our compensation programs and cause inefficiency in Board and management functions as the Company continues to navigate an especially challenging time framed by the ongoing effects of the COVID-19 pandemic and the 737 MAX return to service. The Board recommends that you vote “AGAINST” the foregoing stockholder proposal. Voting Standard The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non- binding approval with respect to Proposal 4. With respect to Proposal 4, a stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will be counted as present at the Annual Meeting; therefore, they will have the effect of votes “AGAINST” Proposal 4. Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on non-routine matters unless the beneficial owner of such shares has given voting instructions on the matter. This means that if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 4 if you want your broker to vote your shares on the matter. Spirit AeroSystems 2022 Proxy Statement 67 |
Questions and Answers About the Annual Meeting and Voting
The Company’s Board of Directors is asking you to vote with respect to proposals being presented at the Company’s Annual Meeting. You may either vote in person at the Annual Meeting, via the internet, or, if you received a paper copy of the materials, by returning a proxy card or voting information form. If you want to vote in person by attending the Annual Meeting, please read “How do I attend the Annual Meeting?”
Who can vote at the Annual Meeting?
You are entitled to vote if our records show that you were a stockholder of record as of the record date, February 25, 2019 (the “Record Date”). On the Record Date, there were 105,671,395 shares of Common Stock outstanding. Each outstanding share of Common Stock is entitled to one vote.
Why did I receive a Notice and not a full set of materials?
| Questions and Answers About the Annual Meeting and Voting Why am I being asked to vote? The Company’s Board of Directors is asking you to vote with respect to proposals being presented at the Company’s Annual Meeting. This Proxy Statement includes information that is relevant to the proposals to be voted on at the Annual Meeting and is otherwise required by SEC rules. The Annual Meeting will take place virtually on April 27, 2022, at 11:00 a.m. Central Time. See “How can I vote my shares before the Annual Meeting?” and “How can I vote my shares during the Annual Meeting?” below for information on how you can vote your shares. What is included in these materials? These materials include: The Proxy Statement for the 2022 Annual Meeting of Stockholders; and The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. If you wish to receive printed versions of the above, please reference “How do I request a printed set of proxy materials?” Who can vote at the Annual Meeting? You are entitled to vote if our records show that you were a stockholder of record as of the Record Date, March 1, 2022. On the Record Date, there were 104,941,679 shares of Common Stock outstanding. Each outstanding share of Common Stock is entitled to one vote. Why is the Annual Meeting being held in a virtual format? The Annual Meeting will be conducted virtually via live audio webcast. We are conducting the Annual Meeting solely online again due to the continuing impact of and uncertainty surrounding the COVID-19 pandemic and to support the health and well-being of our stockholders; however, we also believe a virtual format facilitates stockholder attendance and participation by leveraging technology to allow us to communicate more effectively and efficiently with our stockholders. For example, We Encourage Questions. Stockholders may submit questions before the meeting and during the meeting by following the instructions under “How can I submit questions for the Annual Meeting?” We Believe in Transparency. Although the live audio webcast is available only to stockholders at the time of the meeting, following completion of the Annual Meeting, a webcast replay will be posted to our Investor Relations website at http://investor.spiritaero.com/news-presentations/Presentations/default.aspx. We Proactively Take Steps to Facilitate Your Participation. During the Annual Meeting, technicians will be available to assist you with technical difficulties. Anyone who has technical difficulties accessing or using www.virtualshareholdermeeting.com/SPR2022 during the Annual Meeting should call the technical support number on the website. The virtual meeting site is supported on browsers (e.g., Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Each participant should ensure strong Wi-Fi or other internet connection. The Company is committed to returning to in-person annual stockholder meetings as soon as practicable. Why did I receive a Notice and not a full set of materials? We |
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