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

Filed by the Registrant ☒Registrant☒

Filed by a party other than the Registrant ☐Registrant☐

Check the appropriate box:

Energy Recovery, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Energy Recovery, Inc.

1717 Doolittle Drive

San Leandro, CA 94577

NOTICE OF 20202021 ANNUAL MEETING OF STOCKHOLDERS

Dear Stockholders of Energy Recovery, Inc.:

We are pleased to invite you to attend our 20202021 Annual Meeting of Stockholders to be held on Thursday, July 16, 2020,June 10, 2021, at 10:00 a.m. Pacific Daylight Time (the “Annual Meeting”). In light of health and safety considerations and potential travel-related disruptions resulting from the COVID-19 pandemic, thisThis year’s Annual Meeting will be a virtual meeting of stockholders, conducted via live audio webcast. The virtual format also provides the opportunity for participation by a broader group of our stockholders and enables stockholders to participate fully, and equally, from any location around the world, at little to no cost to you. You can attend the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/ERII2020ERII2021 by using the 16-digit control number which appears on your Notice Regarding the Availability of Proxy Materials, your proxy card (printed in the box and marked by the arrow), and the instructions that accompanied your proxy materials. You will have the ability to submit questions during the Annual Meeting via the meeting website.

At the Annual Meeting, we will ask you to consider the following proposals:

Our Board of Directors has fixed the close of business on May 21, 2020,April 12, 2021, as the record date for the Annual Meeting. Stockholders of record as of May 21, 2020April 12, 2021 may vote at the Annual Meeting or any postponements or adjournments of the meeting. This notice of annual meeting, notice of internet availability, proxy statement, annual report on Form 10-K and form of proxy are being made available on or about May 28, 2020.April [●], 2021.

It is important that your shares are represented at the Annual Meeting, and regardless of whether you plan to attend, we respectfully request that you vote in advance on the matters to be presented at the Annual Meeting as described in these proxy materials.

You can help us reduce costs and the impact on the environment by electing to receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically by email. If your shares are registered directly in your name with our stock registrar and transfer agent, American Stock Transfer & Trust Company, LLC, you can make this election by going to its website (www.astfinancial.com) or by following the instructions provided when voting over the Internet. If you hold your shares in a brokerage account or otherwise through a third party in “street name,” please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to receive and view future annual meeting materials electronically.

		Sincerely,
		Sincerely, Robert Yu Lang Mao
		President and Chief Executive Officer and
		Executive Chairman of the Board

San Leandro, California

May 28, 2020April [●], 2021

Whether or not you expect to participate in the Annual Meeting, please vote via the Internet, by phone, or complete, date, sign and promptly return the accompanying proxy card or voting instruction card in the enclosed postage-paid envelope so that your shares may be represented at the Annual Meeting.

PROXY STATEMENT SUMMARY

This summary contains highlights about our Company and the upcoming 20202021 Annual Meeting of Stockholders (the “Annual Meeting”). This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire proxy statement and the Annual Report on Form 10-K for the year ended December 31, 20192020 that accompanies this Proxy Statement before voting.

2020 2021Annual Meeting of Stockholders

Date and Time: Thursday, July 16, 2020June 10, 2021 at10:00 a.m., Pacific Time	Virtual Meeting Access: www.virtualshareholdermeeting.com/ERII2020 ERII2021
Record Date:May 21, 2020April 12, 2021
	Proxy Mail Date:
	On or about May 28, 2020.April [●], 2021
Vote in Advance of the Meeting Over the internet at www.proxyvote.com; or By telephone at 1-800-690-6903; or By mail — sign, date and return the proxy card or voting instruction form mailed to you.	Vote During the Meeting
	Over the internet –– See page 3 of the Proxy —“—“How Do I Vote”Vote” for details on how to vote during the
By telephone at 1-800-690-6903; or	Annual Meeting
By mail — sign, date and return the proxy card or voting instruction form mailed to you.

Voting Matters and Board Recommendations

2020 Director NomineesPhased Declassification of the Board of Directors over Three-Year Period (Proposal No. 1)

The Board of Directors (the “Board”) has directed the submission for stockholder approval an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to declassify our Board over a three-year phase out period, which when completed will allow for the election of all directors on an annual basis, beginning with the 2023 Annual Meeting of Stockholders. This requires the affirmative vote of the holders of at least 66 2/3% of the voting power of the then outstanding shares of the Company, voting together as a single class. We recommend that our stockholders approve the amendments to the Certificate of Incorporation at the Annual Meeting.

2021 Director Nominee (Proposal No. 2)

Mr. Ole Peter Lorentzen, a Class I director, has notified the Board that he intends to resign upon the conclusion of his current board term and will not stand for re-election at the Annual Meeting. The Nominating and Corporate Governance Committee and the Board of Directors (the “Board”) have nominated Robert Yu Lang Mao and Alexander BuehlerOlav Fjell for election as a Class III directors. Each of ourI director. Our director nominees havenominee has demonstrated theirhis commitment to diligently executing theirhis fiduciary duties on behalf of our stockholders, and we recommend that our stockholders elect each of the nomineesnominee at the Annual Meeting. As a publicly traded company with a principal executive office in California, the Company is subject to the requirements of California Senate Bill 826, which was signed into law on September 30, 2018 (“SB 826”). Under SB 826, the Company was required to have a minimum of one female director by December 31, 2019 and is required to have at least three female directors by December 31, 2021. While the Company was in compliance with SB 826 as of December 31, 2020, the Company will need to increase female representation on the Board prior to December 31, 2021 to meet the requirements of SB 826. The Company intends to fill the Class I director vacancy with one female director prior to December 31, 2021 and will add an additional female director in order to satisfy such requirements.

Approval of 2020 Incentive Plan (Proposal 2)

The Board is asking our stockholders to approve the Energy Recovery, Inc. 2020 Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the Board on May 5, 2020 and will become effective upon receipt of stockholder approval at the Annual Meeting. The 2020 Plan will replace our 2016 Equity Incentive Plan (the “2016 Plan”), which was approved by stockholders in 2016. The Board believes that equity awards under the 2016 Plan have contributed to strengthening the incentive of participating employees to achieve the objectives of the Company and its stockholders by encouraging employees to acquire a greater proprietary interest in the Company. The Board believes that the number of shares of common stock currently available under the 2016 Plan is insufficient to meet our current and future equity compensation needs. Stockholder approval of the 2020 Plan is intended to ensure that we have sufficient shares available to attract and retain employees and to further our growth and development. For these reasons, we recommend that our stockholders approve the 2020 Plan at the Annual Meeting.

Ratification of Appointment of Deloitte & Touche LLP (Proposal No. 3)

The Board has directed that Deloitte & Touche LLP’s (“Deloitte”) appointment for the fiscal year ended December 31, 20202021 be submitted to our stockholders for ratification at the Annual Meeting. Deloitte is well qualified as our independent registered public accounting firm and has a deep understanding of our operations and accounting practices. The Audit Committee considered the qualifications, performance and independence of Deloitte, the quality of its discussions with Deloitte, and the fees charged by Deloitte for the level and quality of services provided during 20192020 and determined that the reappointment of Deloitte is in the best interest of the Company and its stockholders. For these reasons, we recommend that our stockholders ratify the appointment of Deloitte as the Company’s independent registered public accounting firm at the Annual Meeting.

Approval of Executive Compensation on an Advisory Basis (Proposal(Proposal No. 4)

Our CEO and other executive officers have demonstrated their commitment to fair pay and pay for performance. We are committed to effective compensation governance, as demonstrated by the following compensation policies and practices:

For these reasons, we recommend that our stockholders approve the advisory vote on the compensation of our executive officers at the Annual Meeting.

Stockholder Engagement and Governance Highlights

We believe that strong corporate governance includes consistent engagement with our shareholders.stockholders. We engage with shareholdersstockholders on a variety of topics throughout the year to ensure that we are addressing questions and concerns and to seek input on policies and practices. Our management team, including our CEO, Chief Financial Officer (“CFO”) and VP of Investor Relations, regularly engageengages in meaningful dialogue with our shareholdersstockholders through quarterly earnings calls, industry conferences and other channels of communication, which we regularly share with the Board. Stockholders may communicate with our Board as set forth under “Communications between Stockholders and Directors” on page 33.27.

2019 Financial HighlightsIn addition, our Board regularly assesses and refines our corporate governance policies and procedures to take into account evolving best practices and the valuable feedback of our shareholders and other stakeholders who have provided important external viewpoints that inform our decisions and strategy. For example, at this year’s Meeting, Proposal 1 involves the phased declassification of our Board over a three-year period. Other governance highlights include:

TABLE OF CONTENTSTable of Contents

Page

ENERGY RECOVERY, INC.

PROXY STATEMENT

2020

2021 ANNUAL MEETING OF STOCKHOLDERS

To Be Held at 10:00 a.m. Pacific Daylight Time on Thursday, July 16, 2020June10, 2021

This proxy statement and the enclosed form of proxy (“Proxy Statement”) are furnished in connection with the solicitation of proxies by our Board of Directors (the “Board” or “Board of Directors”) for use at the 2020 annual meeting2021 Annual Meeting of stockholdersStockholders of Energy Recovery, Inc., a Delaware corporation, and any postponements, adjournments or continuations thereof (the “Annual Meeting”). The Annual Meeting will be held in a virtual format via live audio webcast on Thursday, July 16, 2020June 10, 2021 at 10:00 a.m. Pacific Daylight Time. Stockholders can attend the meeting via the internet at www.virtualshareholdermeeting.com/ERII2020ERII2021 by using the 16-digit control number which appears on the Notice Regarding the Availability of Proxy Materials, the proxy card (printed in the box and marked by the arrow), and the instructions that accompanied your proxy materials. The telephone number at that location is (510) 483-7370. References in this Proxy Statement to “we,” “us,” “our,” “the Company” or “Energy Recovery” refer to Energy Recovery, Inc.

The Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this Proxy Statement and our Annual Report is first being mailed on or about May 28, 2020April [●], 2021 to all stockholders entitled to vote at the Annual Meeting.

The information provided in the “question and answer” format belowTHE INFORMATION PROVIDED IN THE “QUESTION AND ANSWER” FORMAT BELOW

is for your convenience only and is merely a summary ofIS FOR YOUR CONVENIENCE ONLY AND IS MERELY A SUMMARY OF

the information contained in this proxy statement.THE INFORMATION CONTAINED IN THIS PROXY STATEMENT.

You should read this entire proxy statement carefully.YOU SHOULD READ THIS ENTIRE PROXY STATEMENT CAREFULLY.

ENERGY RECOVERY, INC.

INFORMATION ABOUT THE annualANNUAL MEETING

Please note that the Internet and telephone voting facilities will close at 11:59 p.m. Eastern Daylight Time (8:59 p.m. Pacific Daylight Time) on July 15, 2020.June 9, 2021.

If, as of the Record Date, you are a beneficial owner of shares held in street name, you should have received from your broker, bank, trustee or other nominee instructions on how to vote or instruct the broker to vote your shares, which are generally contained in a “vote instruction form” sent by the broker, bank, trustee or other nominee. Please follow their instructions carefully. Street name stockholders generally may vote by one of the following methods:

If you are the stockholder of record, you may change your vote by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described on pages 1 and 2page 3 of this Proxy Statement (and until the applicable deadline for each method); (2) providing a written notice of revocation to the Company’s Secretary at Energy Recovery, Inc., 1717 Doolittle Drive, San Leandro, CA 94577 prior to your shares being voted; or (3) attending the Annual Meeting and voting at the Annual Meeting. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request or vote at the virtual Annual Meeting.

For shares you hold beneficially in street name, you generally may change your vote by submitting new voting instructions to your broker, bank, trustee, or nominee following the instructions they provided, or, if you have obtained a legal proxy from your broker, bank, trustee, or nominee giving you the right to vote your shares, by attending the virtual Annual Meeting and voting in person.

The Company will bear the costs of soliciting proxies, including the costs for the preparation, assembly, printing, and mailing of the Proxy Statement and related proxy materials. In addition, the Company will reimburse brokerage firms and other nominees representing beneficial owners of shares for their expenses in forwarding solicitation materials to beneficial owners of those shares. We have retained Alliance Advisors as our proxy solicitors, and proxies may be solicited by a representative of that firm. For its services, we will pay Alliance Advisors a fee of $9,000,

A:

The Company will bear the costs of soliciting proxies, including the costs for the preparation, assembly, printing, and mailing of the Proxy Statement and related proxy materials. In addition, the Company will reimburse brokerage firms and other nominees representing beneficial owners of shares for their expenses in forwarding solicitation materials to beneficial owners of those shares. We have retained Alliance Advisors as our proxy solicitors, and proxies may be solicited by a representative of that firm. For its services, we will pay Alliance Advisors a fee of $9,500 plus reasonable expenses. Proxies may also be solicited by certain of the Company’s directors, officers, and regular employees, without additional compensation, either personally, by telephone, facsimile, or mail.

Only stockholders of record at the close of business on May 21, 2020, the Record Date, will be entitled to notice of, and to vote at, our Annual Meeting. Each stockholder of record will be entitled to one vote on each matter for each share of common stock held on the Record Date. On the Record Date, the Company had 55,630,374 shares of common stock outstanding, held by 23

A:

Only stockholders of record at the close of business on April 12, 2020, the Record Date, will be entitled to notice of, and to vote at, our Annual Meeting. Each stockholder of record will be entitled to one vote on each matter for each share of common stock held on the Record Date. On the Record Date, the Company had 57,422,485 shares of common stock outstanding, held by 22 holders of record.

Proposal No. 2 (approval(election of 2020 Plan), director): The candidate who receives the greatest number of votes cast at the Annual Meeting will be elected, provided that a quorum is present. The Board recommends a vote “FOR” the nominee.

Proposal No. 3 (ratification of Deloitte & Touche LLP as our independent registered public accountants) and Proposal No. 4 (advisory approval of the Company’s executive compensation): An affirmative vote of a majority of the shares of the Company’s common stock present and entitled to vote is required to approve Proposals No. 2, No. 3 and No. 4, provided that a quorum is present. The Board recommends a vote “FOR”“FOR” each of the Proposals No. 2, No. 3 and No.4.

Your shares will be counted towards the quorum only if you submit a valid proxy or if you vote in person at the meeting. Stockholders who submit signed and dated proxies without specifying their votes and broker “non-votes” described below will be counted towards the quorum requirement. If there is no quorum, the chairperson of the meeting or a majority of the votes present at the meeting may adjourn the meeting to another date.

As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote your shares by using the voting instruction form included in the mailing or by following the instructions on the voting instruction card for voting via the Internet or telephone.

If there are multiple beneficial owners in the same household, your broker or other nominee may send only one set of voting instructions or copy of the proxy materials to your household. If you are receiving multiple copies of these materials and would like to receive a single copy in the future, please contact your broker, bank, or other nominee to request a single copy in the future.

Brokers, banks, and other nominees may submit a proxy card for shares of common stock that they hold for a beneficial owner but may decline to vote on certain items because they have not received instructions from the beneficial owner. These are called “Broker Non-Votes” and are not included in the tabulation of the voting results for the election of directors or for purposes of determining the number of votes cast with respect to a particular proposal. Consequently, Broker Non-VotesNon‑Votes will not count as votes cast for purposes of Proposals No. 1, 2, 3 and 4.

Brokers have the discretion to vote such shares for which they have not received voting instructions from the beneficial owners on routine matters but not on non-routine matters. The only routine matter up for vote this year is the ratification of the independent registered public accounting firm (Proposal No. 3).

A broker is prohibited from voting on a non-routine matter unless the broker receives specific voting instructions from the beneficial owner of the shares. The declassification of the board (Proposal No. 1) election of directors (Proposal No. 1), the approval of the 2020 Plan (Proposal No. 2) and the advisory vote on executive compensation (Proposal No. 4) are non-routine matters, and your broker cannot vote your shares on these proposals unless you have timely returned applicable voting instructions to your broker.

Abstentions have no effect on the outcome of voting for Proposal No. 1,2, election of directors. Abstentions are treated as shares present or represented and voting regarding Proposals No. 2,1, No. 3 and No. 4, so abstentions have the same effect as negative votes on those proposals.

A summary of the voting provisions, provided a valid quorum is present or represented at the Annual Meeting, for the matters described in “What is the purpose of the Annual Meeting?” is as follows:

If you have previously chosen to receive the proxy materials via the Internet, you will be receiving an e-mail on or about May 28, 2020April [●], 2021 with information on how to access stockholder information and instructions for voting over the Internet. Stockholders of record may vote via the Internet until 11:59 p.m. Eastern Daylight Time (8:59 p.m. Pacific Daylight Time) on July 15, 2020.June 9, 2021.

If your shares are registered in the name of a brokerage firm and you have not elected to receive proxy materials over the Internet, you may still be eligible to vote shares electronically over the Internet. Many brokerage firms participate in programs that provide eligible stockholders who receive a paper copy of the Proxy Statement and Annual Report the opportunity to vote via the Internet. If your brokerage firm participates in such a program, a form from the broker will provide voting instructions.

Stockholders can elect to view future Proxy Statements and Annual Reports over the Internet instead of receiving paper copies. Stockholders of record wishing to receive future stockholder materials electronically can elect this option by following the instructions provided when voting over the Internet at www.proxyvote.com.www.proxyvote.com.

Upon electing to view future Proxy Statements and Annual Reports over the Internet, you will receive an e-mail notification next year with instructions containing the Internet address of those materials. The choice to view future Proxy Statements and Annual Reports over the Internet will remain in effect until you contact your broker or the Company to rescind the instructions. Internet access does not have to be elected each year.

Stockholders who elected to receive this Proxy Statement electronically over the Internet and who would now like to receive a paper copy of this Proxy Statement so that they may submit a paper proxy in lieu of an electronic proxy should contact either their broker or the Company.

Brokers with account holders who are Energy Recovery stockholders may be house-holding our proxy materials. A single set of proxy materials may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be house-holding communications to your address, house-holding will continue until you are notified otherwise or until you notify your broker or The Company that you no longer wish to participate in house-holding.

If, at any time, you no longer wish to participate in house-holding and would prefer to receive a separate Proxy Statement and Annual Report, you may (1) notify your broker, (2) direct your written request to: Investor Relations, Energy Recovery, Inc., 1717 Doolittle Drive, San Leandro, CA 94577 or (3) contact our Investor Relations department by email at IR@energyrecover.com or by telephone at (281) 962-8105. Stockholders who receive multiple copies of the Proxy Statement or Annual Report at their address and would like to request house-holding of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the Annual Report and Proxy Statement to a stockholder at a shared address to which a single copy of the documents was delivered.

PROPOSALS TO BE VOTED ON AT THE MEETING

Proposal No.1: Amendment of Certificate of Incorporation to Effect a Declassification of the Board of Directors

Currently, the Company’s Certificate of Incorporation provides for a classified Board divided into three classes of directors, with each class elected for a three-year term. The classification of the Board results in staggered elections, with each class of directors standing for election every third year. One class consists of two members whose terms expire upon the election and qualification of their successors at the Annual Meeting (“ClassI”), one class consists of three members whose terms expire at the 2022 Annual Meeting of Stockholders (“ClassII”), and one class consists of two members whose terms expire at the 2023 Annual Meeting of Stockholders (“ClassIII”).

After careful consideration, the Board has determined that it is advisable and in the best interests of the Company and its stockholders to amend our Certificate of Incorporation to declassify the Board to allow the Company’s stockholders to vote on the election of the entire Board on an annual basis, rather than on a staggered basis.

The general description of the proposed amendments to our Certificate of Incorporation set forth in this Proposal No. 1 is qualified in its entirety by reference to the text thereof, which is attached as Appendix A to this proxy statement.

Declassification of the Board

If this Proposal No. 1 is approved by the Company’s stockholders at the Annual Meeting, the declassification of the Board will be phased in over a three-year period as follows:

Under the proposed amendments, the annual election of directors will be phased in gradually to assure a smooth transition. The proposed amendments will not shorten the term of a current director. If this Proposal No. 1 is approved by the requisite vote of the Company’s stockholders, any director elected to fill a vacancy that did not arise from an increase in the size of the Board will hold office for the term that remains for the applicable vacating director, and any director elected to fill a vacancy that resulted from an increase in the size of the Board will be elected to serve until the next annual meeting of stockholders.

If this Proposal No. 1 is not approved by the requisite vote of the Company’s stockholders, the Board will remain classified, with each class of directors serving a term expiring at the annual meeting of stockholders held in the third year following the year of their election.

If this Proposal No. 1 is passed by the requisite vote of the Company’s stockholders, it will become effective when the Company files the amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware, which the Company intends to do promptly following the 2021 Annual Meeting.

PROPOSALsConsiderations of the Board

The Company has historically had a classified board structure in which directors have been divided into three classes and one class is elected each year to be votedserve a three-year term. The Board has historically believed that this classified board structure promotes continuity and stability of strategy, ensures that a potential acquirer in a takeover situation negotiates with the Board, and facilitates the ability of the Board to focus on creating long-term stockholder value. The Board also is aware that the current trend in corporate governance is leading away from classified boards in favor of electing all directors annually and also recognizes that a classified board structure may reduce directors’ accountability to stockholders because such a structure does not enable stockholders to express a view on each director’s performance by means of an annual vote. Moreover, many institutional investors believe that the election of directors is the primary means for stockholders to influence corporate governance policies and to hold management accountable for implementing those policies.

In determining whether to support declassification of the Board, the Board carefully considered these factors and has determined that it is advisable and in the best interests of the Company and its stockholders to declassify the Board.

Vote Required

The affirmative vote of at least 66 2/3% of the voting power of the then outstanding shares of our stock that are present in person or by proxy and entitled to vote at the meetingAnnual Meeting.

Proposal NO. 1THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTEFORTHE ADOPTION OF THE PROPOSED AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS.

ELECTION OF DIRECTORSThe management proxy holders will vote all duly submitted Proxies FOR the adoption of the proposed amendments to our Certificate of Incorporation unless duly instructed otherwise.

Proposal No.2: Election of Director

The Company’s AmendedNominating and RestatedGovernance Committee has nominated, and our Board has designated, Mr. Olav Fjell to stand for election as a Class I director at the Annual Meeting. Mr.  Fjell is standing for re-election. Mr. Ole Peter Lorentzen, a Class I director, has notified the Board that he intends to resign upon the conclusion of his current board term and will not stand for re-election at the Annual Meeting.

As a publicly traded company with a principal executive office in California, the Company is subject to the requirements of California Senate Bill 826, which was signed into law on September 30, 2018. Under SB 826, the Company was required to have a minimum of one female director by December 31, 2019, and is required to have at least three female directors by December 31, 2021. While the Company was in compliance with SB 826 as of December 31, 2020, the Company will need to increase female representation on the Board prior to December 31, 2021 to meet the requirements of SB 826. The Company intends to fill the Class I director vacancy with one female director prior to December 31, 2021 and will add an additional female director in order to satisfy such requirements.

Term of Office

If Proposal No.1 is approved by the Company's stockholders at the Annual Meeting, upon the filing of the amendment to the Certificate of Incorporation, (our “Charter”) provides that the Board shall be divided into three classes, with the directors in each class serving three-year terms. At the Annual Meeting, two Class III directors will be elected for three-year terms.

The Nominating and Corporate Governance Committeeclassification of the Board of Directors has recommended, andwill be phased out over the Boardnext three annual meetings of Directors approved Alexander Buehler and Robert Yu Lang Maostockholders as nominees for election as Class III directors at the Annual Meeting. described in Proposal No. 1, such that:

If elected, each newly electedthe Class I director nominee will serve a term of 1 year on our Board, until the 2023 annual meetingour 2022 Annual Meeting of stockholders,Stockholders or until each director’shis successor is duly elected and qualified or until the director’s earlier removal or resignation.in accordance with our by-laws.

EachIf Proposal No.1 is not approved by the Company’s stockholders at the Annual Meeting, and if elected, the Class I director nominee will serve a term of the nomineesthree years on our board of directors, until our 2024 Annual Meeting of Stockholders or until his successor is duly elected and qualified in accordance with our by-laws.

The nominee is currently a director of the Company and each of the nominees named belowhe has consented, if elected as a director of the Company, to serve until his term expires.

In the event that any nominee of the Company is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as will assure the election of as many of the nominees listed below as possible. In such event, the specific nominees to be voted for will be determined by the proxy holders. The Board has no reason to believe that any of the personsperson named below will be unable or unwilling to serve as a director, if elected. Each of the two nomineesThe nominee for director who receives the greatest number of votes will be elected.

A plurality of the shares voted for eachthe nominee at the meeting is required to elect eachthe nominee as a director.

Set forth below are the names, ages,name, age, and certain biographical information relating to the Class IIII director nomineesnominee as of May 21, 2020.April [●], 2021.

DIRECTOR NOMINEESNOMINEE

	Age: 4569	Education: B.S. Civil Engineering, United States Military Academy at West Point M.B.A. WhartonM.S.c. in Business Administration and Economics (sivilokonom), Norwegian School at the University of PennsylvaniaEconomics and Business Administration
	Director Since: 2015 Current Board Committees: Audit Committee (Chairman)(Member) CompensationNominating and Corporate Governance Committee (Member)

Alexander J. BuehlerOlav Fjell joined our Board of Directors in FebruaryJune 2015. Mr. Buehler currently serves as Executive Vice President for Global Resources at Intertek,Fjell is a global, publicly-traded company headquarteredseasoned business leader with experience in Londonthe oil and leading providergas industry, finance industry, and high tech engineering industry. He is Chair of assurance, testing, inspection,the Boards of Moelven AS, Nofima AS, Concedo ASA, Bene Agere Norden AS, IFE and certification services.Franzefoss AS. He joined Intertek in September 2018. Previously, he served at Energy Maintenance Services (“EMS”) from July 2014 to September 2017, first with a brief stint as Chief Financial Officeris Deputy Chair of Lotos Exploration and then as President &Production Norge and member of the Board of Turbulent Flux AS. Mr. Fjell was the Chief Executive Officer during which time he steered the company through the market downturn in oil & gas, repositioned the businessof Statoil from 1999 to 2003, Lindorff from 2005 to 2007 and of Hurtigruten from 2007 to 2012. He has also served as the leading integrity maintenance companyChief Executive Officer of Postbanken and led the marketing and salebeen part of the business to First Reserve,senior management teams at Kongsberg Våpenfabrikk and DNB. Mr. Fjell holds a leading private equity companyM.Sc. in the oil & gas space. He served as our Chief Financial OfficerBusiness Administration and Economics (sivilokonom) from 2011 until he joined EMS in 2014. From 2004 to 2011, Mr. Buehler held executive-level positions at Insituform Technologies, Inc. (now Aegion Corporation; NASDAQ: AEGN), a global leader in water infrastructure technologyNorwegian School of Economics and services for municipalities and industry, including oil and gas. While at Insituform, Mr. Buehler worked in the U.S. and abroad, most recently as Vice President of Europe, leading all European operations from its regional headquarters in Paris, France. Mr. Buehler received a B.S. in Civil Engineering from the United States Military Academy at West Point and an M.B.A. in Finance from the Wharton School at the University of Pennsylvania. Since 2017, Mr. Buehler has served on the Board of LiqTech International (NASDAQ: LIQT), where he also chairs the Audit Committee. Previously, from 2014 to 2019, Mr. Buehler served on the Board of Viscount Systems and Chair of the Audit Committee before the company was acquired by Identiv.Business Administration. The Board selected Mr. Buehler to serveFjell because of his extensive and broad executive experience, both as a director because he is a highly impactful business executive with years of experienceChief Executive Officer and through directorships in general managementNorwegian businesses and strategic planning as well as new product development, corporate development, operations management, manufacturing process optimization, sales management, and back-office administration. Mr. Buehler has substantialhis experience in the global water, oil &and gas and manufacturing industries and was critical in a number of acquisitions.

	Age: 76	Education: B.S. Material Science, Cornell University M.S. Metallurgical Engineering, Cornell University M.B.A. Massachusetts Institute of Technology
	Director Since: 2010 Current Board Committees: Nominating and Corporate Governance Committee

Robert Yu Lang Mao has served as a member of our Board of Directors since September 2010 and was appointed Chairman of the Board in March 2019. Mr. Mao was appointed President and Chief Executive Officer in May 2020 and interim President and Chief Executive Officer in November 2019. Mr. Mao has more than thirty years of executive experience in the technology and telecommunications industries across Asia, the United States, and Europe.  Mr. Mao previously served as a Board Director of Hon Hai Precision Ind. Co. Ltd (Foxconn) during 2018 to 2019, the world’s largest contract manufacturer supplying high tech products to world leading companies including Apple, Amazon, Dell, Microsoft, and Hewlett-Packard Company (Hewlett-Packard).  Foxconn is a public company listed on the Taiwan Stock Exchange.  In addition to serving on Energy Recovery’s Board of Directors, he also serves on the Board of Directors of privately held Ubee Interactive Corporation, a supplier of broadband access equipment and devices to multimedia and telecom service providers worldwide. In 2013 Mr. Mao was named Chairman, China Region for Hewlett-Packard Company (Hewlett-Packard).   He retired from Hewlett-Packard in 2016.  Mr. Mao served as CEO of 3Com Corporation (3Com) from 2008 to 2010 and completed the sale of 3Com to Hewlett-Packard in 2010.  Mr. Mao was also a Board Director of 3Com from 2007 to 2010.  3Com was a Nasdaq listed S&P 500 company providing computer networking and security solutions and products to public and private enterprises worldwide.  Prior to 3Com Corporation, he worked for Nortel Networks, a broad-based communications technology company, as CEO of the company’s Greater China operations from 1997 to 2006.  Before joining Nortel, he was regional president of the Greater China region for Alcatel-Lucent from 1995 to 1997.  He also held executive positions at Alcatel and ITT in Asia and the United States. Mr. Mao holds a B.S. in Material Science and a M.S. in Metallurgical Engineering from Cornell University and a M.B.A. in Management from the Massachusetts Institute of Technology (MIT).  The Board selected Mr. Mao to serve as a director because of his prior executive experience helping technology companies and equipment manufacturers expand into new product and geographic markets, his knowledge of the China market, his strong strategic and analytic skills, and his many years of experience as board director in public and private companies based in high technology industries. He has a long record of distinction serving in senior executive management positions with a number of multi-national companies including serving as CEO of a U.S. public traded billion dollar company selling into world markets. He has also started and grown new ventures in the high technology industries. Mr. Mao possesses the experience, qualification, attributes and skills to serve as a Board Director of our Company.industry.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE “FOR”“FOR” THE ELECTION OF EACH OF Alexander Buehler
AND Robert YU LANG MaoOLAV FJELL AS CLASS IIi DIRECTORS.I DIRECTOR.

PROPOSAL NO. 2

APPROVAL OF THE ENERGY RECOVERY, INC.2020 INCENTIVE PLAN

The Board is asking our stockholders to approve the Energy Recovery, Inc. 2020 Incentive Plan (the “2020Proposal No. Plan”). The 2020 Plan was approved by the Board on May 5, 2020 and will become effective upon receipt3: Ratification of stockholder approval at the Annual Meeting. The 2020 Plan will replace our 2016 Equity Incentive Plan (the “2016 Plan”), which was approved by stockholders in 2016.

Background and Reasons for the Proposal

The BoardAppointment of Directors believes that equity awards under the 2016 Plan have contributed to strengthening the incentive of participating employees to achieve the objectives of the Company and its stockholders by encouraging employees to acquire a greater proprietary interest in the Company. The Board believes that the number of shares of common stock currently available under the 2016 Plan is insufficient to meet our current and future equity compensation needs. Stockholder approval of the 2020 Plan is intended to ensure that we have sufficient shares available to attract and retain employees and to further our growth and development. For a discussion of equity awards as components of our executive compensation program, please refer to the “Compensation Discussion and Analysis” section below.

HIGHLIGHTS OF THE 2020 pLAN AND KEY GOVERNANCE PROVISIONS

The 2020 Plan includes several features that are consistent with the interests of our stockholders and sound corporate governance practices, including the following:

Background for Requested Share Authorization

The 2020 Plan authorizes the issuance of an additional 4,500,000 shares. If the 2020 Plan is approved, the number of shares of our common stock authorized for grant under the 2020 Plan will be equal to the sum of up to (i) 4,500,000 shares authorized under the 2020 Plan plus (ii)1,394,727 shares remaining available for grant under the 2016 Plan as of the effective date of the 2020 Plan and (iii) 4,954,723 shares subject to awards granted under the 2016 Plan and the 2008 Equity Incentive Plan that were outstanding as of the effective date of the 2020 Plan and subsequently expire, terminate or are otherwise surrendered, cancelled or forfeited. As of May 21, 2020, we had the following awards outstanding under our equity compensation plans:

In setting the number of shares authorized for issuance under the 2020 Plan, the Compensation Committee and the Board of Directors considered a number of factors, including the number of outstanding equity awards, the number of shares available for grant under the 2016 Incentive Plan, our historical granting practices and burn rate, and the level of potential dilution that will result from adoption of the 2020 Plan.

In 2017, 2018 and 2019, we granted equity awards representing a total of approximately 838,711, 1,511,384 and 982,732 shares, respectively, as follows:

Our three-year average annual burn rate for the period from January 1, 2017 through December 31, 2019 was 2%. We calculated our burn rate by (i) counting the number of shares subject to awards granted during each year and (ii) dividing the resulting number by the average number of shares of our common stock outstanding as reported in our Form 10-K for each respective year. As of May 21, 2020, the number of shares subject to outstanding equity awards under our equity compensation plans plus the number of the shares available for grant under the 2016 Plan and the new shares to be authorized under the 2020 Plan (an aggregate of 10,849,450 shares), represented 20% of our outstanding common stock. We believe our three-year average annual burn rate and level of potential dilution assuming the 2020 Plan is approved by stockholders compare favorably to industry standards. On the effective date of the 2020 Plan, all shares previously available for future awards under the 2016 Plan as of that date will become available for issuance under the 2020 Plan, and no further awards will be made under the 2016 Plan.

Our future burn rate will depend on a number of factors, including the number of participants in the 2020 Plan, the price per share of our common stock, any changes to our compensation strategy, changes in business practices or industry standards, changes in the compensation practices of our competitors or changes in compensation practices in the market generally, and the methodology used to establish the equity award mix. Based on the factors above, the Board believes that the share reserve under the 2020 Plan is reasonable and appropriate at this time.

Our executive officers and directors have a financial interest in this proposal because they would be eligible to receive awards under the 2020 Plan

The closing sale price of a share of our common stock on the Nasdaq Market on May 21, 2020 was $7.77 per share.

Summary of the 2020 Plan

The following description is a summary of some of the key provisions of the 2020 Plan, and it is qualified in its entirety by reference to the full text of the 2020 Plan, which is attached to this proxy statement as AppendixA.

Purposes of the 2020 Plan

The 2020 Plan is intended to promote our long-term success and the creation of stockholder value by encouraging employees, officers, directors, consultants, agents, advisors, and independent contractors to focus on critical long-range objectives; encouraging the attraction and retention of employees, officers, directors, consultants, agents, advisors, and independent contractors with exceptional qualifications; and linking employees, officers, directors, consultants, agents, advisors, and independent contractors directly to stockholder interests through increased stock ownership.

Administration

The 2020 Plan will be administered by the Board of Directors or the Board’s Compensation Committee, which must be composed of directors who meet the independence requirements of Nasdaq and at least two or more of whom are “non-employee directors” within the meaning of Rule 16b-3(b)(3) under the Exchange Act. The Board may delegate concurrent administration of the 2020 Plan to different committees consisting of one or more members of the Board in accordance with the 2020 Plan’s terms. In addition, the Board or the Compensation Committee may delegate granting authority to one or more officers of the Company in accordance with the 2020 Plan’s terms. References to the “Committee” in this summary description are, as applicable, to the Board or the Compensation Committee, or other committees or officers authorized to administer the 2020 Plan.

The Committee is authorized to select the individuals to be granted awards, the types of awards to be granted, the number of shares to be subject to awards, and the other terms, conditions, and provisions of such awards, as well as to interpret and administer the 2020 Plan and any award or agreement entered into under the 2020 Plan.

Eligibility

Awards may be granted under the 2020 Plan to employees, officers, directors, consultants, agents, advisors, and independent contractors of the Company and its related companies selected by the Committee. As of May 21, 2020, approximately 196 employees, 2 consultants and 6 non-employee directors were eligible to receive grants under the 2020 Plan.

Number of Shares Authorized

Subject to adjustment as provided in the 2020 Plan, the number of shares of common stock initially authorized for issuance under the 2020 Plan is:

The number of shares of common stock that may be issued upon the exercise of incentive stock options, subject to adjustment as provided in the 2020 Plan, is limited to 10,849,450 shares.

Annual Limit on Employee Awards.

Subject to certain adjustment as provided in the 2020 Plan, participants may not be granted awards for more than 750,000 shares of common stock in any calendar year. However, additional one-time grants of such awards may be granted for up to 300,000 additional shares to newly hired or newly promoted individuals. The maximum dollar value payable to any participant with respect to performance units or any other awards denominated in cash cannot exceed $7,500,000 in any calendar year.

Annual Limit on Nonemployee Director Awards

The aggregate amount of compensation granted during any fiscal year of the Company to any director who is not an employee of the Company, including any equity awards and any cash retainers or fees, may not exceed $500,000.

Share Counting

If any award lapses, expires, terminates, or is canceled prior to the issuance of shares or if shares are issued under the 2020 Plan and thereafter are forfeited to the Company, the shares subject to such awards and the forfeited shares shall again be available for issuance under the 2020 Plan. The following shares will not become available for issuance under the 2020 Plan:

Awards granted in assumption of or in substitution for awards previously granted by an acquired company will not reduce the number of shares authorized for issuance under the 2020 Plan.

Types of Awards

The 2020 Plan permits the granting of any or all of the following types of awards:

Stock Options.Stock options entitle the holder to purchase a specified number of shares of common stock at a specified price, which is called the exercise price, subject to the terms and conditions of the stock option grant. The Committee may grant either incentive stock options, which must comply with Section 422 of the Code, or nonqualified stock options. The Committee sets exercise prices and terms, except that stock options must be granted with an exercise price not less than 100% of the fair market value of our common stock on the date of grant (excluding stock options granted in connection with assuming or substituting stock options in acquisition transactions). Unless the Committee determines otherwise, fair market value means, as of a given date, the closing price of our common stock. At the time of grant, the Committee determines when stock options are exercisable and what the term of the stock options will be, except that the term cannot exceed ten years.

In the event of termination of service with the Company or a related company, a participant will be able to exercise his or her stock option for the period of time and on the terms and conditions determined by the Committee and stated in the stock option agreement.

Stock Appreciation Rights (SARs).The Committee may grant SARs as a right in tandem with the number of shares underlying stock options granted under the 2020 Plan or as a freestanding award. Upon exercise, SARs entitle the holder to receive payment per share in stock or cash, or in a combination of stock and cash, equal to the excess of the share’s fair market value on the date of exercise over the grant price of the SAR. The grant price of a tandem SAR is equal to the exercise price of the related stock option, and the grant price for a freestanding SAR is determined by the Committee in accordance with the procedures described above for stock options. Exercise of an SAR issued in tandem with a stock option will reduce the number of shares underlying the related stock option to the extent of the SAR exercised. The term of a freestanding SAR cannot be more than ten years, and the term of a tandem SAR cannot exceed the term of the related stock option.

No Repricing or Cash Buyouts Without Shareholder Approval. Without stockholder approval, the Committee is not authorized to (a) lower the exercise or grant price of an option or SAR after it is granted, except in connection with certain adjustments to our corporate or capital structure permitted by the 2020 Plan, such as stock splits, (b) cancel a stock option or SAR at a time when its exercise or grant price exceeds the fair market value of the underlying stock, in exchange for cash, another stock option or SAR, restricted stock or other equity award, unless the cancellation and exchange occur in connection with a merger, acquisition, spin-off or similar corporate transaction, or (c) take any other action that is treated as a repricing under generally accepted accounting principles.

Stock Awards, Restricted Stock, and Stock Units.The Committee may grant awards of shares of common stock or awards designated in units of common stock. These awards may be made subject to repurchase or forfeiture restrictions at the Committee’s discretion. The restrictions may be based on continuous service with the Company or the achievement of specified performance criteria, as determined by the Committee. Stock units may be paid in stock or cash or a combination of stock and cash, as determined by the Committee.

Performance Awards.The Committee may grant performance awards in the form of performance shares or performance units. Performance shares are units valued by reference to a designated number of shares of common stock. Performance units are units valued by reference to a designated amount of property other than shares of common stock. Performance shares and performance units may be payable upon the attainment of performance criteria and other terms and conditions as established by the Committee. Performance awards may be payable in stock, cash or other property, or a combination thereof.

Other Stock- or Cash-Based Awards.The Committee may grant other incentives denominated in shares of common stock or in cash, which may be payable in shares of common stock or cash or a combination of both, subject to the terms of the 2020 Plan and any other terms and conditions determined by the Committee.

Performance Measures. The performance measures for any award of performance-based compensation must be set by the Compensation Committee at the start of each performance period and may, without limitation, be based on one or a combination of two or more of the following performance criteria as reported or calculated by the Company: cash flows (including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); working capital; earnings per share; book value per share; operating income (including or excluding depreciation, amortization, items that are unusual in nature or infrequently occurring or both, restructuring charges, or other expenses); revenues; operating margins; return on assets; return on equity; debt; debt plus equity; market or economic value added; stock price appreciation; total stockholder return; cost control; strategic initiatives; market share; net income; return on invested capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, subscriber, cash management, or asset management metrics. The performance goals also may be based on the achievement of specified levels of performance for the Company as a whole (or of any affiliate or business unit) under one or more of the performance criteria described above relative to the performance of other corporations.

The Compensation Committee may provide in any award of performance-based compensation that any evaluation of performance may, without limitation, include or exclude any of the following events that occur during a performance period:asset write-downs; litigation or claim judgments or settlements; the effect of changes in tax law or rate on deferred tax liabilities, accounting principles, or other laws or provisions affecting reported results; any reorganization and restructuring programs; items that are unusual in nature or infrequently occurring or both that the Company identifies in its audited financial statements, including notes to the financial statements, or the Management’s Discussion and Analysis section of our periodic reports; acquisitions or divestitures; foreign exchange gains and losses; gains and losses on asset sales; and impairments.

Change in Control

Effect of Change in Control. Under the 2020 Plan, the Committee may provide for the vesting acceleration of an award upon a change in control of the Company, whether or not the award is assumed by the successor corporation, or upon a termination of a participant’s employment following a change in control. A change in control includes:

Unless the Committee determines otherwise in the instrument evidencing an award or in a written employment, services or other agreement between a participant and the Company or a related company, in the event that we are a party to a merger or consolidation in which options or awards are not continued or assumed or substituted with comparable awards by the surviving corporation, all outstanding options or awards will be subject to the agreement of merger or consolidation, which shall provide for one or more of the following:

The acceleration of vesting of 100% of the then unvested portion of the common stock subject to any outstanding options and stock appreciation rights.

The cancellation of all outstanding options and stock appreciation rights in exchange for a payment to the holders thereof equal to the excess of (i) the fair market value of the common shares subject to such options and stock appreciation rights over (ii) their exercise price. Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent.

The cancellation of all outstanding stock units and a payment to the holders thereof equal to the fair market value of the common stock subject to such stock units. Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent.

Adjustments

If any change is made in the stock subject to the 2020 Plan, or subject to any award, without the receipt of consideration by us (through stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend or other change in our corporate or capital structure not involving the receipt of consideration by us), or in the event of an extraordinary cash dividend, then the Committee shall make proportional adjustments to (a) the maximum number and kind of securities available for issuance under the 2020 Plan, (b) the maximum number and kind of securities issuable as incentive stock options, (c) the maximum number and kind of securities subject to individual annual award limits and (d) the number and kind of securities subject to any outstanding awards and/or the per share price of such securities.

Acceleration of Awards, Lapse of Restrictions

Consistent with the terms of the 2020 Plan, the Compensation Committee may accelerate vesting requirements, performance periods, and the expiration of the applicable term or restrictions, and adjust performance targets and payments, upon such terms and conditions as are set forth in the participant’s award agreement, or otherwise in the Compensation Committee’s discretion, which may include, without limitation, acceleration resulting from the participant’s death, disability, or retirement.

Effective Date, Term, Termination, and Amendment

The 2020 Plan will become effective on the date it is approved by the requisite vote of our stockholders at the Annual Meeting or any adjournment thereof. Unless earlier terminated by the Board of Directors or the Compensation Committee, the 2020 Plan will terminate, and no further awards may be granted, ten years after the date on which it is approved by stockholders. The Board or the Compensation Committee may amend, suspend, or terminate the 2020 Plan at any time, except that, if required by applicable law, regulation, or stock exchange rule, stockholder approval will be required for any amendment, and only the Board may amend the 2020 Plan if stockholder approval of the amendment is required. The amendment, suspension or termination of the 2020 Plan or the amendment of an outstanding award generally may not, without a participant’s consent, materially adversely affect any rights under an outstanding award.

Recoupment of Awards

Awards made under the 2020 Plan are subject to any policy adopted by the Company pursuant to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules and regulations regarding the recoupment or clawback of incentive compensation and similar rules and laws in other jurisdictions, and any compensation recoupment or clawback policies we may have in place from time to time.

U. S. Federal Income Tax Considerations

The following is a general summary of the U.S. federal income tax consequences of awards under the 2020 Plan to us and to participants in the 2020 Plan who are citizens or residents of the United States for U.S. federal tax purposes. The summary is based on the Internal Revenue Code (the “Code”), applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local, or foreign tax laws.

Nonqualified Stock Options.    A participant generally will not recognize taxable income upon the grant or vesting of a nonqualified stock option with an exercise price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of a nonqualified stock option, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the option on the date of exercise and the option exercise price. When a participant sells the shares acquired upon exercise, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the option exercise price.

Incentive Stock Options.    A participant generally will not recognize taxable income upon the grant of an incentive stock option. If a participant exercises an incentive stock option during employment as an employee or within three months after his or her employment ends (12 months in the case of permanent and total disability), the participant will not recognize taxable income at the time of exercise for regular U.S. federal income tax purposes (although the participant generally will have taxable income for alternative minimum tax purposes at that time as if the option were a nonqualified stock option). If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year from the date the participant exercised the option and (b) two years from the grant date of the option, the participant generally will recognize long-term capital gain or loss equal to the difference between the amount the participant received in the disposition and the option exercise price. If a participant sells or otherwise disposes of shares acquired upon exercise of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a “disqualifying disposition,” and the participant generally will recognize taxable ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the option exercise price (or, if less, the excess of the amount realized on the disposition of the shares over the option exercise price). The balance of the participant’s gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be.

With respect to both nonqualified stock options and incentive stock options, special rules apply if a participant uses shares of our common stock already held by the participant to pay the exercise price or if the shares received upon exercise of the option are subject to a substantial risk of forfeiture by the participant.

Stock Appreciation Rights.    A participant generally will not recognize taxable income upon the grant or vesting of an SAR with a specified grant price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of an SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the specified grant price of the SAR. When a participant sells any shares acquired upon exercise, the participant generally will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the total base value.

Restricted Stock Awards.    A recipient of a restricted stock award generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares on the date the restrictions lapse over the amount, if any, paid by the participant with respect to the shares.

Instead of postponing the federal income tax consequences of a restricted stock award until the restrictions lapse, the participant may elect to recognize compensation taxable as ordinary income in the year of the award in an amount equal to the fair market value of the shares at the time of receipt. This election is made under Section 83(b) of the Code. A Section 83(b) election is made by filing a written notice with the Internal Revenue Service office with which the participant files his or her federal income tax return. The notice must be filed within 30 days of the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements.

The tax treatment of a subsequent disposition of restricted stock will depend upon whether the participant has made a timely and proper Section 83(b) election. If the participant makes a timely and proper Section 83(b) election, when the participant sells the restricted shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. If no Section 83(b) election is made, any disposition after the restrictions lapse generally will result in short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the amount, if any, paid by the participant with respect to the shares, plus the amount of taxable ordinary income recognized by the participant either at the time the restrictions lapsed or at the time of the Section 83(b) election, as the case may be. If the participant forfeits the shares to the Company (e.g., upon the participant’s termination prior to expiration of the restriction period), the participant may not claim a deduction with respect to the income recognized as a result of making a Section 83(b) election.

Restricted Stock Units.    A participant generally will not recognize income at the time a restricted stock unit is granted. When any part of a restricted stock unit is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the cash and then fair market value of any shares the participant receives.

Performance Share or Performance Unit Awards.    A participant generally will not recognize income at the time a performance share or performance unit award is granted. When any part of a performance share or performance unit award is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the cash and then fair market value of any shares the participant receives.

Other Awards.    The U.S. federal income tax consequences of other awards under the 2016 Plan will depend upon the specific terms of each award.

Tax Consequences to Us.    In the foregoing cases, we generally will be entitled to a deduction at the same time, and in the same amount, as a participant recognizes ordinary income, subject to certain limitations imposed under the Code.

Section 409A of the Code.    We intend that awards granted under the 2016 Plan comply with, or otherwise be exempt from, Section 409A of the Code, but make no representation or warranty to that effect.

Tax Withholding.    We are authorized to deduct or withhold from any award granted or payment due under the 2020 Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of our common stock or otherwise settle an award under the 2020 Plan until all tax withholding obligations are satisfied.

Plan Benefits

All awards to employees, officers, and consultants under the 2020 Plan are made at the discretion of the Compensation Committee. Therefore, the benefits and amounts that will be received or allocated to such individuals under the 2020 Plan are not determinable at this time. However, please refer to the description of grants made to our named executive officers in the last fiscal year described in the “Grants of Plan-Based Awards in 2019” table below. Grants made to our non-employee directors in the last fiscal year are described under “Director Compensation” below.

THE BOARD OF DIRECTORS unanimously RECOMMENDS that
stockholders VOTE “FOR” THE APPROVAL OF THE
ENERGY RECOVERY, INC. 2020INCENTIVE PLAN.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth equity compensation plan information as of May 21, 2020.

PROPOSAL NO. 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED

PUBLICIndependent Registered Public Accounting firmFirm

The Audit Committee has appointed Deloitte & Touche LLP, as our independent registered public accounting firm for the fiscal year ending December 31, 2020.2021. Deloitte & Touche LLP was retained by us on April 11, 2018, as announced in our Current Report on Form 8-K, filed on April 13, 2018. Prior to Deloitte & Touche LLP, BDO USA, LLP acted as our independent registered public accounting firm. BDO USA, LLP audited the Company’s financial statements for the fiscal years ending December 31, 2017 and 2016. On April 11, 2018, in connection with its selection of Deloitte & Touche LLP, the Audit Committee approved the dismissal of BDO USA, LLP. A representative of Deloitte & Touche LLP is expected to be present at the virtual Annual Meeting. The representative will have an opportunity to make a statement and to respond to any questions.

The Audit Committee recognizes the importance of maintaining the independence of the Company’s independent auditor, both in fact and appearance. Each year, the Audit Committee evaluates the qualifications, performance and independence of the Company’s independent auditor and determines whether to re-engage the current independent auditor. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the auditors, the auditors’ (global) capabilities and the auditors’ technical expertise and knowledge of the Company’s operations and industry. Based on this evaluation, the Audit Committee has retained Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year 2020.2021. The members of the Audit Committee and the Board believe that, due to Deloitte & Touche’sTouche LLP’s knowledge of the Company and of the industries in which the Company operates, it is in the best interests of the Company and its stockholders to retain Deloitte & Touche LLP to serve as the Company’s independent auditor during 2020.2021.

During the years ended December 31, 20192020 and 2018,2019, neither the Company nor anyone on its behalf has consulted with Deloitte & Touche LLP with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that Deloitte & Touche LLP concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K).

The report of Deloitte and& Touche LLP on the Company’s consolidated financial statements for the years ended December 31, 20192020 and 20182019 did not contain an adverse opinion or a disclaimer of an opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2017 and 2016 and for the period from January 1, 2018 to April 11, 2018, there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) with BDO USA, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of BDO USA, LLP, would have caused BDO USA, LLP to make reference to the subject matter of the disagreements in its reports on the consolidated financial statements for such years.

During the year ended December 31, 2017 and for the period from January 1, 2018 to April 11, 2018, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).

Principal Accountant Fees and Services

The following table sets forth all fees accrued or paid to Deloitte & Touche LLP, our independent registered public accountants and BDO USA, LLP, our former independent registered public accountants, for fiscal years ended December 31, 20192020 and 2018.2019.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee pre-approves audit, audit-related, tax, and all other services provided by our independent registered public accountants, Deloitte & Touche LLP and will not approve services that are impermissible under applicable laws and regulations. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision of that member to pre-approve specific services must be reported to the full Audit Committee at its next scheduled meeting. In the fiscal years ended December 31, 20192020 and 2018,2019, all fees identified above under the captions “Audit Fees” that were billed by Deloitte & Touche LLP for 20192020 and 2018,2019, were approved by the Audit Committee in accordance with SEC requirements.

In the fiscal years ended December 31, 20192020 and 2018,2019, there were no other professional services provided by Deloitte & Touche LLP, other than those listed above, that would have required our Audit Committee to consider their compatibility with maintaining the independence of Deloitte & Touche LLP.

Ratification of Deloitte & Touche LLP

Although ratification is not required, the appointment of Deloitte & Touche LLP as the Company’s independent auditors for fiscal year 20202021 is being submitted for ratification at the Annual Meeting because the Board believes doing so is a good corporate governance practice. Furthermore, the Audit Committee will take stockholders’ opinions regarding the appointment of Deloitte & Touche LLP into consideration in future deliberations. If Deloitte & Touche LLP’s appointment is not ratified at the Annual Meeting, the Audit Committee will consider the engagement of other independent auditors. The Audit Committee may terminate Deloitte & Touche LLP’s engagement as the Company’s independent accountants without the approval of the Company’s stockholders whenever the Audit Committee deems appropriate.

THE BOARD OF DIRECTORS unanimouslyUNANIMOUSLY RECOMMENDS thatTHAT

stockholdersSTOCKHOLDERS VOTE “FOR”“FOR” RATIFICATION

OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’SCOMPANY’S

INDEPENDENT REGISTERED PUBLIC accountINGACCOUNTING FIRM FOR

THE YEAR ENDING DECEMBER31, 20202021

PROPOSAL NO. Proposal No.44: Non-Binding Advisory Vote on Executive Compensation

non-binding ADVISORY vote ON EXECUTIVE COMPENSATION

The Compensation Discussion and Analysis beginning on page 38[34] of this Proxy Statement describes the Company’s executive compensation program and the compensation decisions made by the Compensation Committee for our fiscal year ended December 31, 2019,2020, with respect to the executive officers named in the Summary Compensation Table on page 49.45. The Board of Directors is asking our stockholders to cast a non-binding advisory vote to approve the following resolution:

“RESOLVED, that the stockholders of Energy Recovery, Inc. approve, on an advisory basis, the compensation of the executive officers named in the Summary Compensation Table for 2019, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Compensation Discussion and Analysis, the compensation tables (other than the pay ratio), and the related footnotes and narratives accompanying the tables).”

The Board is asking our stockholders to vote “FOR” this proposal because it believes that the policies and practices described in the Compensation Discussion and Analysis section of this Proxy Statement are necessary to achieve the Company’s primary objective of the executive compensation program, that of attracting, retaining, and motivating the talent we need to meet and/or exceed the strategic, operational, and financial goals of the Company. Additionally, we want to reward superior performance and align the long-term interests of our executives with our stockholders.

This proposal, commonly known as a “Say on Pay” proposal, gives you, as a stockholder, the opportunity to express your views on our executive compensation programs and policies and the compensation paid to the executive officers named in the Summary Compensation Table.

The Company’s current policy is to hold a Say on Pay vote each year. We expect to hold another advisory vote with respect to executive compensation at the annual meeting of stockholders to be held in 2021.2022.

Although your vote on this proposal is advisory and non-binding, the Compensation Committee values the views of our stockholders and will take into account the outcome of the vote when considering future compensation decisions for our named executive officers. We are providing this advisory vote pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”“FOR”

THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR

NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPENSATION DISCUSSION

AND ANALYSIS, THE ACCOMPANYING COMPENSATION TABLES AND THE RELATED

NARRATIVE DISCLOSURE INCLUDED IN THIS PROXY STATEMENT.

Information about the board of directors

andINFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS

Governance Overview

ERI is committed to maintaining superior governance practices, and we regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices.

Board Leadership and Governance Structure

ERI is committed to maintaining superior governance practices, and we regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices.

The Board is responsible for establishing and maintaining the most effective leadership structure for the Company. Historically, the Board has determined that the roles of the Chairman of the Board and the Chief Executive Officer should be separate, with the Chairman an independent director, because that structure affords independent Board leadership and allows the Chief Executive Officer to concentrate on the Company’s business. Nevertheless, the Board believes it is appropriate to retain the discretion and flexibility to change the structure from time to time as needed to provide appropriate leadership for the Company given the specific circumstances then facing the Company.

The Board is currently led by Mr. Robert Mao, our Chairman, President and Chief Executive Officer, and Ms. Pamela Tondreau, our Lead Independent Director. The Company believes that our current structure is appropriate at this time as it strikes a balance between effective and efficient Company leadership and oversight by the independent directors.

The Board believes that having Mr. Mao serve as both Chairman and Chief Executive Officer is the most effective leadership structure for the Company at this time. Energy Recovery is at an inflection point in its development as it transitions from a company focused on a single industry since its inception, desalination, to one focused on leveraging its unique IP to develop its PX technology into a more diverse set of industries. In addition, the Company is focused on rapid growth, evolving from a small niche company, to larger more diversified one which demands a new look at operations to assure success. Mr. Mao has over 30 years of experience in the technology and telecommunications industry worldwide, with extensive experience in incubating new and developing technologies, and prior service as a director of other large public companies. This experience makes him uniquely well positioned to lead the Company’s business, operations and strategy during this transition.

The combination of the Chief Executive Officer and Chairman roles allows consistent communication and alignment throughout the Company, assuring effective and efficient implementation of corporate strategy and is important in unifying our team members, including the members of the Board, behind a single vision. The combination of the Chief Executive Officer and Chairman roles is balanced by our strong Lead Independent Director position, by the independence of all our other directors, each of whom has significant business experience and by the three principal committees of the Board, each of which consists solely of independent directors.

The Lead Independent Director is an important element of ensuring strong independent Board leadership. We believe the Lead Independent Director provides the Company and the Board with the same independent leadership, oversight and benefits that would be provided by an independent chairman. Our Lead Independent Director is chosen by the independent Directors. In May 2020, Ms. Pamela Tondreau was elected the Lead Independent Director, succeeding Mr. Arve Hanstveit. Ms. Tondreau has been a member of the Board since 2019 and she currently serves as the Chairman of the Board’sCompensation Committee and a member of the Nominating and Corporate Governance Committee. Ms. Tondreau’s extensive corporate and legal experience make her qualified to serve as Lead Independent Director of our Board.

The Lead Independent Director’s duties include consulting with our Chairman and Chief Executive Officer and presiding over meetings of the Board at which the Chairman is not present, including executive sessions of the Board and the independent directors, and, together with our Chief Executive Officer, presiding over meetings of stockholders.directors. The Chairman of the Board’sLead Independent Director’s duties also include facilitating discussions among independent directors on key issues and concerns outside of Board meetings, serving as a liaison between the Chief Executive OfficerChairman and the other directors, reviewing information to be sent to the Board, collaborating with the Chief Executive OfficerChairman and other members of Company management to set meeting agendas and Board information, assisting the chairs of the committees of the Board as requested, and performing such other functions and responsibilities as requested by the Board or the independent directors from time to time. In performing the duties described above, the ChairmanLead Independent Director is expected to consult with, and does consult with, the chairs of the appropriate Board committees.

The Chief Executive Officer is responsible for managing the business and affairs of the Company, subject to the oversight of the Board. The Chief Executive Officer’s duties include leading the management team, representing the Company externally, consulting with the Chairman of the Board about developments in the Company, and communicating with all directors about key issues outside of Board meetings.

Upon the departure of the Company’s prior President and Chief Executive Officer, Chris Gannon, on November 1, 2019, the Board appointed Robert Yu Lang Mao, the Company’s Chairman of the Board, as the interim Chief Executive Officer, and on May 5, 2020, the Board appointed Mr. Mao as the President and Chief Executive Officer. Accordingly, the roles of Chairman and Chief Executive Officer are currently held by Mr. Mao. To maintain the independent leadership of the Board during this interim period, at the time Mr. Mao was appointed as the interim Chief Executive Officer, the independent members of the Board appointed Arve Hanstveit as the Board’s Lead Independent Director. On May 5, 2020, the Board appointed Pamela Tondreau as the Lead Independent Director succeeding Mr. Hanstveit. We believe that the Lead Independent Director provides the Company and the Board with the same independent leadership, oversight and benefits that has historically been provided by an independent Chairman. Ms. Tondreau has been a member of the Board since 2019 and she currently serves on the Compensation Committee. Ms. Tondreau’s extensive corporate and legal experience make her qualified to serve as Lead Independent Director of our Board.

Board of Directors

The number of directors is fixed by our Board of Directors, subject to the terms of our Charter and the Bylaws.Company’s Amended and Restated Bylaws (the “Bylaws”). Our Board of Directors currently consists of seven directors.

In accordance with our Charter and the Bylaws, our Board of Directors is divided into three classes with staggered three-year terms. Prior to the Annual Meeting, the Board consisted of:

ImmediatelyHowever, Mr. Lorentzen, a Class I director, has notified the Board that he will not stand for re-election upon the completion of his current term. Therefore, immediately following the Annual Meeting, our directors will be divided among the three classes as follows:

The division of our Board of Directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change of control. Under Delaware law, our directors may be removed for cause by the affirmative vote of the holders of a majority of our outstanding voting stock. Directors may not be removed by our stockholders without cause.

Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors.

Board Diversity and Tenure

Our Board believes that diversity is an important aspect of an effective board. The Nominating and Corporate Governance Committee seeks to recommend individuals to the Board with, among other things, a diversity of skills, experience, expertise and perspective appropriate for the business and operation of the Company. We recognize the benefits of racial and gender diversity in the boardroom, including better reflecting our diverse customer and employee base and the healthy debate that stems from different viewpoints that may result from diverse backgrounds. Accordingly, our Board is diverse in many ways, with differing geographic, business and racial backgrounds. Over forty percent of our Board members are diverse based on gender or ethnicity.

We believe that fresh perspectives and new ideas are critical to a forward-looking and strategic Board. At the same time, given the extremely complex nature of our business, it is equally important to benefit from the valuable experience and institutional knowledge that longer-serving directors bring to the boardroom. Our two newest Directors, Pamela Tondreau and Sherif Foda, joined the Board in 2019 and 2016 respectively. Mr. Buehler, Mr. Fjell and Mr. Lorentzen joined the Board in 2015. Mr. Mao and Mr. Hanstveit joined our Board in 2010 and 1995, respectively. The Board strongly believes that the current mix of directors provides the Company with an appropriate balance of knowledge, experience and capability, allowing us to leverage deep company experience and knowledge in addition to new viewpoints and innovative ideas among newer directors. Five out of our seven Directors have served on our Board for less than six years.

Director Independence

The Nominating and Corporate Governance Committee and the Board undertake an annual review of director independence. The Nominating and Corporate Governance Committee and the Board evaluated all business and charitable relationships between the Company and the Company’s non-employee directors and all other relevant facts and circumstances. Based on information provided by each director concerning his background, employment, and affiliations, including family relationships, our Board of Directors has affirmatively determined that, except for Mr. Mao who is currently serving as an employee, none of our directors have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC, and the listing standards of The Nasdaq Stock Market (the “Applicable Rules”). In making these determinations, our Board of Directors considered the current and prior relationships that each director has with our Company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence.

The Board of Directors also has determined that each director is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code, as amended.

The Board’s standards for determining director independence meet or exceed the applicable rules of the SEC and Nasdaq listing standards. In determining whether a director is “independent”, the Board considers whether the individual:

Relationships Among Directors or Executive Officers

There are no family relationships among any of the directors or executive officers of the Company.

Board Self-Evaluation

Our Nominating and Corporate Governance Committee charter provides that the Nominating and Corporate Governance Committee must conduct a periodic assessment of the performance of the Board, including the committees, and provide the results to the full Board for discussion. The purpose of the review is to increase the effectiveness of the Board as a whole and of each of the committees. The assessment includes an evaluation of the Board and each committee’s contribution as a whole, of specific areas in which the Board, the applicable committee and/or management believe better contributions could be made and of the overall make-up and composition of the Board and its committees.

Board Meetings

The Board conducts its business through meetings of the full Board and committees of the Board. The Board regularly meets in executive session with only independent directors of the Board present. During 2019,2020, the Board held 811 meetings. During 2019, other than Mr. Foda,2020, no director attended fewer than 75% of all the meetings of the Board or its committees on which he or she served after becoming a member. The Company encourages, but does not require, its directors to attend the annual meeting of stockholders.

Committees of the Board of Directors

The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The primary responsibilities, membership and meeting information for the committees of our Board during 20192020 are summarized below. A copy of the charter of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee is available on our website at www.energyrecovery.com under the links “Investor Relations” – “Corporate Governance.”

The Nominating and Corporate Governance Committee considers and makes recommendations to the Board regarding any stockholder recommendations for candidates to serve on the Board. Our Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board. In order to nominate a candidate for director, a stockholder must give timely notice in writing to our Secretary and otherwise comply with the provisions of our Bylaws. To be timely, a stockholder’s notice to our Secretary must be delivered to or mailed and received at our principal executive offices, in the case of an annual meeting, not later than the close of business on the 90120^th day, nor earlier than the close of business on the 120150^th day, prior to the anniversary date on which we first mailed our Proxy Statement to stockholders in connection with the immediately preceding annual meeting. If no annual meeting was held in the previous year or the annual meeting is called for a date that is not within 3025 days before or after such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business the 10^th day following the day on which such notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In the case of a special meeting of stockholders called for the purpose of electing directors, notice must be delivered to or mailed and received not later than the close of business on the 10^th day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first.

Stockholder nominations must also include the information required by our Bylaws. Under the Bylaws, information as to each person whom the stockholder proposes to nominate for election as a director must include (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the corporation that are owned beneficially or of record by the person, (iv) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of the person, or any affiliates or associates of such person, with respect to stock of the corporation, (v) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the corporation) has been made by or on behalf of the person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the corporation, (vi) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (vii) the written consent of such person to being named as a nominee and (v)to serving as a director if elected, (viii) the written representation and agreement of such person required by Section 3.16 of the Bylaws, and (ix) any other information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant SEC regulations. The stockholder giving notice must also provide certain other information required under our Bylaws.

A stockholder who wishes to nominate a candidate to serve on the Board should carefully review the applicable provisions of our Bylaws. Any such nomination must be made in accordance with the procedures outlined in, and include the information required by, the Bylaws. The nomination must be addressed to 1717 Doolittle Drive, San Leandro, California 94577 Attn: Secretary. You can obtain a copy of our Bylaws by writing to the Secretary at this address.

In addition, our Bylaws permit certain of our stockholders who have beneficially owned 3% or more of our outstanding common stock continuously for at least three years to submit nominations to be included in the Company’s proxy materials for a number not to exceed the greater of two (2) or twenty percent (20%) of the total number of directors then serving. Notice of proxy access director nominations for the 2022 Annual Meeting of Stockholders must be delivered to our Corporate Secretary at our principal executive offices no earlier than December [ ], 2021, and no later than the close of business on February [ ], 2022. The notice must set forth the information required by our Bylaws with respect to each proxy access director nomination that eligible stockholder or stockholders intend to present at the 2022 Annual Meeting of Stockholders and must otherwise be in compliance with our Bylaws.

While the Nominating and Corporate Governance Committee does not have a written policy regarding diversity in identifying nominees for directors, the committee takes diversity into account when looking for best available candidates to serve on the Board. In the past, when new directors have been added to our Board, the Board or Nominating and Corporate Governance Committee has endeavored to select director candidates who have business, scientific, or regulatory specializations; technical skills; or other backgrounds that increased the range of experience and diversity of perspectives within our Board in ways that pertain to our current and future business goals. The Committee also considers diversity in terms of gender, ethnic background, and national origin.

There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or by the Nominating and Corporate Governance Committee itself.

In reviewing potential candidates for the Board, the Nominating and Corporate Governance Committee considers numerous factors including:

Of greatest importance is the individual’s integrity and ability to bring to the Company experience and knowledge in areas related to the Company’s current and future business. The Board intends to continue using these criteria to evaluate candidates for election to the Board.

Board Role in Risk Management

The goal of the Company’s risk management process is to understand and manage material risks impacting our business. Management is responsible for identifying and managing the risks, while directors provide oversight to management in this process, which is designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance to enhance stockholder value. A fundamental part of risk management is not only understanding the risks we face and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate. Management is responsible for establishing our business strategy, identifying and assessing the related risks and establishing appropriate risk management practices.

The Board of Directors

The Board, either directly or through one or more of its committees, reviews our business strategy and management’s assessment of the related risk and discusses with management the appropriate level of risk. The Board relies on each Board committee to oversee management of specific risks related to that committee’s function. While the Board is responsible for setting, monitoring, and maintaining the Company’s risk management policies and practices, the Company’s executive officers, and members of our management team, are responsible for implementing and overseeing our day-to-day risk management processes.

Certain risks are reviewed and discussed with the entire board, such as (but not limited to):

Audit Committee

Our Audit Committee is primarily responsible for overseeing the Company’s risk management processes on behalf of the Board. The Audit Committee charter provides that the Audit Committee should discuss and consider the process by which senior management of the Company and the relevant departments assess and manage the Company’s exposure to risk and discuss the Company’s major financial risk exposure and the steps management has taken to monitor, control, and report such exposures. In addition, the Audit Committee reports to the Board of Directors, which also considers the Company’s risk profile. The Audit Committee and the Board of Directors obtain input from management regarding the most significant risks facing the Company, and the Company’s risk management strategy.

The Audit Committeestrategy, and the Board ensure that the risks undertaken are consistent with the Board’s tolerance for risk. While

Risks reviewed and discussed by the Board is responsible for setting, monitoring, and maintaining the Company’s risk management policies and practices, the Company’s executive officers and members of our management team are responsible for implementing and overseeing our day-to-day risk management processes.Audit Committee include (but not limited to):

Compensation Committee

The Compensation Committee oversees compensation risk management by participating in the creation of, and approving, compensation structures that create incentives that encourage an appropriate level of risk-taking behavior consistent with our business strategy.

Role of Independent Directors

In addition to the oversight provided by our full Board of Directors, Audit Committee, Compensation Committee, executive officers and the members of our management team, our independent directors hold regularly scheduled executive sessions as often as they deem appropriate, but in any event at least four times each year. These executive sessions provide an additional avenue through which we monitor the Company’s risk exposure and policies regarding risk management.

Cybersecurity

We rely on our information technology (“IT”) and data systems in connection with many of our business activities. As the role of technology in our business expands, so too does the importance of cybersecurity. We take protecting our brand, systems, data, intellectual property, and customer and employee information, seriously. We actively monitor and manage our IT for security risks (e.g., cybersecurity risks), and look to mitigate these risks through enterprise-wide programs, annual employee training and vulnerability assessments. We have made, and continue to make, investments in a skilled IT workforce and leadership, and critical technologies.

Our enterprise-wide programs include endpoint security and encryption, network intrusion prevention and detection, a system for managing and installing patches for third-party applications, and security information and event management (“SIEM”) systems that monitor our infrastructure and alert our security operations center of potential cybersecurity issues. We strictly regulate and limit all access to servers and networks at our facilities. Local network access is restricted by domain authentication, using stringent access control lists and virtual local area networks (“VLAN”). Multi-factor authentication is used to build an additional layer of security for remote-work access to critical applications. Our information security department regularly performs penetration testing and we engage a third-party penetration testing company to conduct penetration tests to identify and remediate any issues.

Under our enterprise-wide approach to risk management, cybersecurity is “high-level” risk that is reported to, and overseen by, our Audit Committee of the Board of Directors, which consists of three non-employee independent directors, of which one of these directors has information systems experience. In addition to the enterprise-wide initiatives, we purchase cybersecurity insurance to protect against a wide range of costs that could be incurred in connection with cybersecurity-related incidents. We continually strengthen and enhance our programs and controls around people, process and technology, and apply risk-based strategies to enhance prevention, detection, and response efforts

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee was at any time during fiscal year 20192020 or at any other time, an officer or employee of the Company, or had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. None of our current executive officers serve on the Compensation Committee or the Board of Directors of another entity whose executive officer(s) serve(s) on the Company’s Compensation Committee or Board of Directors.

Communication between Stockholders and Directors

Our Board currently does not have a formal process for stockholders to send communications to the Board. The Company, however, makes every effort to ensure that the views of stockholders are heard by the Board or individual directors and that the Company responds to stockholders on a timely basis. The Board does not recommend that formal communication procedures be adopted at this time because it believes that informal communications are sufficient to convey questions, comments, and observations that could be useful to the Board. Stockholders wishing to formally communicate with the Board may send communications directly to Secretary, Energy Recovery, Inc., 1717 Doolittle Drive, San Leandro, California 94577.

Codes of Business Conduct and Ethics

Our employees, including our principal executive officer and principal financial and accounting officer, and our directors are governed by a code of ethics of the Company (the “Codes“Codes of Ethics”Ethics”). The Codes of Ethics require our employees and directors to conduct Company business in the highest legal and ethical manner. The Codes of Ethics meet the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K and the requirements of a code of business conduct and ethics under applicable Nasdaq listing standards. The full texts of the Codes of Ethics and further details regarding the scope of each of the Codes of Ethics are available on our website at www.energyrecovery.com under the links “Investor Relations”—“Corporate Governance.” Any amendments to or waivers from the Codes of Ethics will be posted at this location on our website as required by applicable SEC and Nasdaq rules.

Environmental, Social and Governance Program

While our business has always been aligned with sustainability issues such as addressing global water scarcity and improving energy efficiency, the launch of a formal Environmental, Social and Governance (ESG) program in 2020 reflects our commitment to continuous improvement as we strive to become a more sustainable and resilient business. Ultimately, we believe that the strategic integration of ESG principles into how we operate as a company will leverage our end products’ inherent value proposition of creating a more sustainable future. This approach can help us achieve our ultimate goal of balancing long-term growth with strong governance, responsible business policies and practices, and positive environmental impact.

Our corporate governance structure is highly focused on effectively managing risk and preserving long-term, sustainable value for the benefit of our shareholders, our employees, and the broader ecosystem in which we operate. Relevant ESG topics, risks, issues, and considerations – largely informed by related stakeholder feedback and the use of the Sustainable Accounting Standards Board and Global Reporting Initiative frameworks, as well as the Sustainable Development Goals (SDGs) – are managed at the Board level and are not currently assigned to a specific committee. As the formal assessment of key ESG risks and opportunities has been elevated as a corporate priority and is relatively new to us as an organization, Energy Recovery’s Board decided these responsibilities should not be assigned to a particular committee at this time, but instead reviewed by the Board in its entirety.

As our ESG program and related initiatives evolve, the Board will play a key role in assessing our areas of greatest influence within the larger sustainability landscape and will be involved in the creation and subsequent execution of related goals. ESG topics, issues, and considerations relevant to Energy Recovery are discussed at each Board meeting, which occur at least four times per year, and have been formally incorporated into Board meeting agendas since 2019.

In September 2020, we released our inaugural ESG report, detailing our multi-pronged approach to accelerating environmental sustainability, managing and mitigating ESG related risks, and working to continually improve our performance across all ESG dimensions. To further guide our journey forward, we have aligned ourselves with the SDGs, a framework of global commitments to create a fairer and more sustainable world by 2030. Given our global involvement in the production of clean water and our focus on developing products to improve environmental sustainability, we play a role in advancing certain SDGs. Specifically, we have identified three SDGs with which our vision, products and operations best align: Clean Water and Sanitation (SDG 6), Affordable and Clean Energy (SDG 7), and Industry, Innovation and Infrastructure (SDG 9). We believe alignment with these SDGs will guide us in maximizing our role in the larger global effort towards a more sustainable future.

Just as our company is dedicated to accelerating the environmental sustainability of our customers’ operations, we are committed to investing in our talent and culture, ensuring the health, safety, and well-being of our employees and workplaces, and supporting the communities in which we operate and live. Our ability to retain 93% of employees with 38% headcount growth in fiscal year 2019, the reporting year of our most recent ESG report, is a testament to the commitment we have to our employees and the support provided to them in their professional development. We focus on empowering and enabling our team to continually improve, in turn driving development of high-impact solutions for our customers. In addition, we have launched several social investment initiatives including an employee donation match program and partnerships with non-profit organizations that align with our core values and serve on the front lines of our local and global communities. For more information on our social investment program, please visit our website at http://bit.ly/ERI-SIP.

Although we are early in our ESG journey, Energy Recovery’s efforts have been recognized by the investment research firm MSCI, who upgraded our ESG rating from BBB to A in early 2021. We’ve scored above industry average on several key issues including opportunities in clean tech and labor management.

As we further develop our ESG program, we plan to undertake a materiality and goal setting process to establish targets and key performance indicators for select topics, in addition to evaluating opportunities to increase our level of disclosure and reporting depth. Our goal is to communicate the results of our materiality assessment and ESG goals in our next ESG report, scheduled for publication in Q3 2021.

Our ESG report, in its entirety, can be found on our website at https://bit.ly/ERI-ESG. 

Director Compensation

Directors who are non-employees of the Company received the following fees for their services on the Board during the year ending December 31, 2019:2020:

Additionally, directors receive:

Our non-employee directors (except the Chairman) also receive:

Our Chairman also receives:

On the date of the 2019 annual meeting2020 Annual Meeting of stockholders,Stockholders, each continuing non-employee director (except the Chairman) received an option grant to purchase $85,000 of the Company’s common stock. The Chairman receivedAs an option awardemployee, Mr. Mao was not eligible to purchase $135,000 of the Company’s common stock.receive any annual retainers or stock grants for serving as our Chairman. The options have a one-year vesting period and become fully vested in June 2020,2021, subject to the director providing service to the Board through such date.

Our non-employee director compensation program for 20192020 was substantially similar to 2018,2019, with the exception of a reduction in the cashaddition of an annual retainer paid to the Chairman from $200,000 in 2018 to $100,000 in 2019 and an increase in the amountour Lead Independent Director of the option award from $85,000 in 2018 to $135,000 in 2019.$15,000.

Director Compensation for the Year Ended December31, 20192020

The table below summarizes the compensation paid to non-employee directors for the year ended December 31, 2019.2020. Directors who are also our employees receive no additional compensation for their service as a director. During the fiscal year ended December 31, 2019, Chris Gannon, our former President and Chief Executive Officer, was an employees of the Company through his departure on November 1, 2019. Mr. Mao was appointed asan employee of the interim President and Chief Executive Officer on November 1, 2019.Company. Mr. Gannon’sMao’s compensation is discussed in “Executive Compensation” and Mr. Mao’s compensation appears in both this section and in “Executive Compensation”.

Our non-employee directors are also reimbursed for travel, lodging and other reasonable expenses incurred in connection with their attendance at Board of Directors or committee meetings.

Stock Ownership Guidelines

The Board believes that our non-employee directors and executive officers should own and hold shares of our common stock to further align their interests with the long-term interests of stockholders and further promote our commitment to sound corporate governance. Toward this end, in April 2016, the Board adopted guidelines with respect to ownership levels of the Company’s common stock of our CEO, other executive officers, and members of our Board. The guidelines state that our CEO, other executive officers, and each director must beneficially own Common Stock having a value equal to:

The guidelines were established to promote a long-term perspective in managing the Company and align the interests of our stockholders, executives, and directors.

For purposes of determining ownership under these guidelines we include shares of common stock actually owned by the covered individual or family members, certain indirect forms of ownership, such as stock held in a grantor trust for the benefit of the covered individual, as well as the net exercise or “spread” value of vested stock options. Unvested options or restricted stock units (“RSUs”) and the unvested portion of any performance-based restricted stock or other equity-based award are not included. Directors and executive officers were given a period of three years from the adoption of the original guidelines to meet these ownership requirements while newly appointed directors or executive officers are given a period of five years from their date of appointment to meet these requirements. Covered individuals are required to hold 25% of the net shares acquired from all equity awards after deducting shares sold to cover the exercise price and/or taxes until the applicable guideline is reached. As of May 21,December 31, 2020, all of our directors and executive officers were either exceeding the minimum stock ownership requirements or were on track to comply in the relevant timeframe.

Prohibition on Hedging and Pledging Shares

Our insider trading policy provides that Company employees and directors may not engage purchase financial instruments (including prepaid variable forward contracts, equity swaps, puts, calls, straddles, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of the Company’s equity securities and entering into other transactions with the same economic effect, including short sales involving the Company’s securities. Our insider trading policy further prohibits Company employees and directors from entering into borrowing or other arrangements involving non-recourse pledge of Company securities. Finally, we do not permit our directors or employees to sell a security future with respect to Company securities that establishes a position that increases in value as the value of the underlying Company security decreases.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of May 21, 2020April [●], 2021 for (i) each person or group of affiliated persons who is known by the Company to beneficially own more than 5% of the Company’s common stock, (ii) each of the Company’s directors, (iii) each of the officers appearing in the “Summary Compensation Table” on Page 4945 and (iv) all directors and executive officers as a group.

We have determined beneficial ownership in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially own, subject to community property laws where applicable. To our knowledge, no person or entity except as set forth below, is the beneficial owner of more than 5% of the voting power of our common stock as of the close of business on May 21, 2020.April 12, 2021. The address of each executive officer and director is c/o Energy Recovery, Inc., 1717 Doolittle Drive, San Leandro, CA 94577.

*Less than 0.1%