Exchange Act of 1934
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Exchange Act of 1934
Registrant ☒
Registrant ☐
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Energy Recovery, Inc.
1717 Doolittle Drive
San Leandro, CA 94577
— 2024 Proxy Statement
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Date: | Place: | Record Date: |
Thursday, June 6, 2024 at 10:00 a.m. Pacific Time | www.virtualshareholdermeeting. com/ERII2024 | April 8, 2024 |
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Our
22, 2024
.By Order of the Board of Directors, | |
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William W. Yeung | |
Chief |
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.
Important Notice Regarding the Availability of Proxy Materials for the Annual Stockholder Meeting |
To Be Held on June the2023 Annual Report on Form 10-K for the fiscal year ended December 31, website:
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PROXY STATEMENT SUMMARY
This summary contains highlights about our Company and the upcoming 2021 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, 2020 that accompanies this Proxy Statement before voting.
2021Annual Meeting of Stockholders
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Voting Matters and Board Recommendations
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Phased 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 have nominated Olav Fjell for election as a Class I director. Our director nominee has demonstrated his commitment to diligently executing his fiduciary duties on behalf of our stockholders, and we recommend that our stockholders elect the nominee 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.
Name | Age | Director Since | Principal Occupation | Independent | Committee Membership | |||||
Olav Fjell | 69 | 2015 | Chair of the Boards of Moelven AS, Nofima AS, Concedo ASA, Bene Agere Norden AS, IFE and Franzefoss AS | Y | Audit Committee (Member) Nominating and Corporate Governance (Member) |
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, 2021 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 2020 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 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:
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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 stockholders. We engage with stockholders 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 engages in meaningful dialogue with our stockholders 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 27.
In 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:
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Sustainability | ||
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Executive Compensation Framework | ||
Table of Contents |
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December 31, 2023 | ||
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Table of Contents |
ENERGY RECOVERY, INC.
2021
Proxy Statement |
6, 2024
IN THE
ENERGY RECOVERY, INC.
INFORMATION ABOUT THE ANNUAL MEETING
Proxy Summary |
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Date and Time: | Virtual Meeting Access: |
Thursday, June 6, 2024, at 10:00 a.m., Pacific Time | www.virtualshareholdermeeting.com/ERII2024 |
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Record Date: | Proxy Mail Date: |
April 8, 2024 | On or about April 22, 2024 |
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Vote in Advance of the |
Over the internet at www.proxyvote.com; or |
Over the |
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By telephone at 1-800-690-6903; or |
By mail — sign, date and |
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the proxy card or |
Matter | Board Recommendation | Page | |||
1. | Election of six (6) Directors for a One-Year Term | FOR each Nominee | |||
2. | FOR | ||||
3. | FOR | ||||
Name | Age (1) | Director Since | Principal Occupation | Independent | Roles and Committee Memberships (1) | |||||
Alexander J. Buehler | 48 | 2015 | President and CEO of Integrated Water Services | Yes | Audit (Chair), Compensation | |||||
Joan K. Chow | 63 | 2021 | Former Executive Vice President and Chief Marketing Officer of Conagra Foods | Yes | Compensation (Chair), Audit | |||||
Arve Hanstveit | 69 | 1995 | CFO of Foldstar, Inc. | Yes | Nominating and Corporate Governance (Chair), Audit | |||||
David W. Moon | 62 | 2023 | President and CEO of Energy Recovery, Inc. | No | ||||||
Colin R. Sabol | 56 | 2023 | Former President of Measurement & Control Solutions at Xylem | Yes | Compensation, Nominating and Corporate Governance | |||||
Pamela L. Tondreau | 64 | 2019 | Executive Vice President and Chief Legal Officer of onsemi | Yes | Board Chair, Compensation, Nominating and Corporate Governance | |||||
Revenues |
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$128.3M |
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2%increase from prior year |
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Gross Margin | |
67.8% | ||
171 basis point decrease from prior year | ||
Net Income | ||
$21.5M |
Please note
If, asstyles that its diverse teams have to offer.
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| Proposal No. 1
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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:
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The authorized number |
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PROPOSALS TO BE VOTED ON AT THE MEETING
Proposal No.1: Amendment of Certificate of Incorporation to Effect a Declassification ofdirectors constituting 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 successorsis currently set 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:
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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. 1directors. Mr. Robert Yu Lang Mao 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.
Considerations 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 serve 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 Annual Meeting.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTEFORTHE ADOPTION OF THE PROPOSED AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS.
The 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 Nominating and Governance 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 2024Annual Meeting.
Term of Office
If Proposal No.1 is approved by the Company's stockholdersa one-year term expiring at the
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If elected, the Class I director nominee will serve a term of 1 year on our Board, until our 2022 Annual Meeting of Stockholders or until his successor is duly electedMeeting. All nominated directors are standing for re-election and qualified in accordance with our by-laws.
If 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 three 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 he has consented, if elected as a director of the Company, to serve until histheir term expires.
Set
Director Nominees (Term Expiring in 2025) |
Alexander J. Buehler |
Joan K. Chow |
Arve Hanstveit |
David W. Moon |
Colin R. Sabol |
Pamela L. Tondreau |
Director Since | Name, Principal Occupation, and Other Information | |
February 2015 | Alexander J. Buehler Age 48 |
Director Since | Name, Principal Occupation, and Other Information | |
December 2021 | Joan K. Chow Age 63 |
Director Since | Name, Principal Occupation, and Other Information | |
January 1995 | Arve Hanstveit Age 69 |
DIRECTOR NOMINEE
Director Since
| Name, Principal Occupation, and Other Information | ||
July 2023 | David W. Moon Age 62 |
Olav Fjell
Director Since | Name, Principal Occupation, and Other Information | |
July 2023 | Colin R. Sabol Age 56 |
Director Since | Name, Principal Occupation, and Other Information | |
July 2019 | Pamela L. Tondreau Age 64 |
executive compensation, enterprise risk management and domestic and international
the Board
The Audit Committee recognizes the importance of maintaining the independencelong-term interests of the Company’s stockholders. The Company’s governance framework
During the years ended December 31, 2020 and 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 & Touche LLP on the Company’s consolidated financial statements for the years ended December 31, 2020 and 2019 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.
Principal Accountant Fees and Services
The following table sets forth all fees accrued or paid to Deloitte & Touche LLP, our independent registered public accountants for fiscal years ended December 31, 2020 and 2019.
2020 | 2019 | |||||||
Audit Fees (1) | $ | 990,579 | $ | 850,000 | ||||
Audit-Related Fees (2) | 7,354 | 10,000 | ||||||
Tax Fees (3) | 189,453 | 168,081 | ||||||
All Other Fees (4) | 1,895 | 1,895 | ||||||
Total | $ | 1,189,281 | $ | 1,029,976 | ||||
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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, 2020 and 2019, all fees identified above under the captions “Audit Fees” that were billed by Deloitte & Touche LLP for 2020 and 2019, were approved by the Audit Committee in accordance with SEC requirements.
In the fiscal years ended December 31, 2020 and 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 2021 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 UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE “FOR” RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE YEAR ENDING DECEMBER31, 2021
Proposal No.4: Non-Binding Advisory Vote on Executive Compensation
The Compensation Discussion and Analysis beginning on page 20 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, 2020, with respect to the executive officers named in the Summary Compensation Table on page 27. The Board of Directors is asking our stockholders to cast a non-binding advisory vote to approve the following resolution:
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 compensationdirector nominees are elected at the annual meeting of stockholders to be held in 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”
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 AND CORPORATE GOVERNANCE MATTERS
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,In October 2023, the Board has determined thatelected Ms. Tondreau as the roles of the ChairmanChair of the Board and appointed
The Board is currently led by Mr. Robert Mao, our Chairman,Company’s 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 CompanyCEO and the Board with Chair of
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. The Lead Independent Director’s duties also include facilitating discussions amongBoard’s independent directors on key issues and concerns outside of Board meetings, serving aswould elect a liaison between the Chairman and the other directors, reviewing information to be sent to the Board, collaborating with the Chairman 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 Lead
In accordance with our Charter and
Board Committee Memberships | ||||||||||||||||
Director | Age (1) | Audit | Compensation |
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Alexander J. Buehler | 48 | Chair | Member | |||||||||||||
Joan K. Chow | 63 | Member | Chair | |||||||||||||
Arve Hanstveit | 69 | Member | Chair | |||||||||||||
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Robert Yu Lang Mao | 80 | |||||||||||||||
David W. Moon | 62 | |||||||||||||||
Colin R. Sabol | 56 | Member | Member | |||||||||||||
Pamela L. Tondreau(2) | 64 | Member |
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However, 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:
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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
Record Date.
Our
We believeethnicity
At Record Date | After Shareholders’ Meeting | ||||||
Total Number of Directors | 7 | 6 | |||||
Female | Male | Female | Male | ||||
Part I: Gender Identity | |||||||
Directors | 2 | 5 | 2 | 4 | |||
Part II: Demographic Background | |||||||
Asian | 1 | 1 | 1 | — | |||
White | 1 | 4 | 1 | 4 | |||
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Risks reviewed and discussed by the Audit Committee include (but not limited to): While Our2020,2023, the Board held 1114 meetings. During 2020,2023, no director attended75%82% of all the meetings of the Board or its committees on which he or she serveditsthe directors toour the20202023 are summarized below. A copy of the charter of the Audit Committee, theourthe Company’s website at www.energyrecovery.com under the links “InvestorMembers: All IndependentAlexander Buehler (Chair)Olav FjellArve HanstveitMeetings in 2020: 4The Board has unanimously determined that each member of the Audit Committee meets Nasdaq’s “financial sophistication” requirements, and that Mr. Buehler has the financial education and experience to qualify as an “Audit Committee financial expert” within the meaning of SEC regulations.Key Responsibilities:● Oversees and reports to the Board with respect to the quality and integrity of the Company’s financial statements, accounting, and financial reporting processes, and audits of the financial statements and internal controls over financial reporting● Appoints, compensates, and evaluates the qualifications, independence, and performance of the independent auditor● Oversees the performance of the internal audit function● Establishing policy standards and guidelines for the Company’s risk assessment and risk management● Monitors the Company’s compliance with legal and regulatory requirements, including the Company’s disclosure controls and procedures, and the Company’s anonymous whistleblower hotline● Reviews and approves related party transactions● Reviews cyber-security and other risks relevant to the Company’s information system controls and securityMembers: All IndependentPamela Tondreau (Chair)Alexander BuehlerSherif FodaArve HanstveitOle Peter LorentzenMeetings in 2020:7The Board has determined that each member is independent under Nasdaq rules and the Company’s Corporate Governance Guidelines and is a “non-employee director” as defined by Rule 16b-3 under the Exchange Act.Key Responsibilities:● Reviews and approves the Company’s overall compensation philosophy● Designs and administers the Company’s executive compensation programs and policies that are aligned with business and compensation objectives● Evaluate the performance of the Chief Executive Officer and approve his compensation and other terms of employment● Determines and approves the annual compensation of the executive officers and Section 16 officers● Administers the Company’s incentive and stock plans, including establishing guidelines, interpreting plan documents, selecting participants, approving grants and awards and making other decisions regarding the operation of such plans● Reviews and makes recommendations to the Board concerning director compensation● Retain outside advisors; directly retains and oversees its independent compensation consultant● Reviews our compensation policies and practices to determine areas of resulting riskMembers: All IndependentOle Peter Lorentzen (Chair)Olav FjellSherif FodaPamela TondreauMeetings in 2020:6The Board has determined that each member is independent under NASDAQ rules.Key Responsibilities:● Identifies and recommends to the Board, nominees to serve on the Board● Monitors the independence of directors of the Board and Board Committees● Oversees the Board and Board Committees annual evaluation process● Develops and oversees compliance with the Company’s corporate governance functions, including the procedures for compliance with significant applicable legal, ethical and regulatory requirements that impact corporate governance● Reviews and makes recommendations to the Board with respect to corporate governance matters generallyNominatingBoard has determined that each memberCorporate Governance Committee considers and makes recommendationsrecommend to the Board regarding any stockholder recommendations for candidates Ourourthe Company’s Corporate Secretaryourthe Bylaws. To be timely, a stockholder’s notice to ourourtheon which we first mailed our Proxy Statement to stockholders in connection withof the immediately preceding annual meeting. If no annual meeting was heldourthe Bylaws. of the corporation that are owned beneficially or ofstock of the corporation)Company’s capital stock) has been made by or on behalf of the person,stock of the corporation,Company’s capital stock, (vi) a description of all arrangements or understandings3.162.15 of the Bylaws, and (ix) any other information relating to such person that isregulations.regulations. The stockholder giving notice must alsoourthe Bylaws. In addition to satisfying the15Tableshareholders who intend to solicit proxies in support of Contentsdirector nominees other than theAwhorecommendations for candidates tonominaterecommend a candidate to serve on the Board, itourthe Bylaws. Any such nomination must be Attn: Secretary.). You can also obtain a copy of ourthe Bylaws by writing to the Company’s Corporateourthe Bylaws permit certain of ourthe Company’s stockholders who haveourthe Company’s outstanding common stock continuously for20222025 Annual of Stockholders must be delivered to ourthe Company’s Corporate Secretary at ourthe Company’s principal27, 2022,25, 2024, and no later than the close of business on27, 2022.23, 2024. The notice must set forth the information required by ourthe Bylaws with20222025 Annual Meeting of Stockholders and must otherwise be in compliance with our thecommitteeNominating and Corporateourthe Board, theour theourthe Company’s current and future business goals. The●whether or not the person has any relationships that might impair his or her independence, such as any business, financial, or family relationships with the Company, its management, its stockholders, or their affiliates;●whether or not the person serves on boards of, or is otherwise affiliated with, competing companies;●whether or not the person is willing to serve as, and willing and able to commit the time necessary for the performance of the duties of, a director of the Company; and●the contribution that the person can make to the Board and the Company, with consideration given to the person’s experience in the fields of energy, technology, and manufacturing as well as leadership or entrepreneurial experience in business or education.to the Company experience andourthe Company’s business. ManagementThe Company’s management is responsiblewe facethe Company faces and what steps the Company’s management isManagementTheourthe Company’s business strategy,The ourthemanagement’sthe Company’s management assessment of the related risk,ourthe Company’s management team are responsible for implementingourthe Company’s day-to-day risk management processes.● Significant commercial risks● Capital market risks● Material legal or reputational matters● Mergers and acquisitions● Strategy● Competitive developments● Risks related to ESGOursenior management of the CompanyCompany’s senior of Directors, which also considers the Company’s risk profile. The Audit Committee and the Board of Directors facing the Company, ●●●●Financial statements and financial risk exposuresTax strategy and related risksBusiness ethics and anti-corruption programSignificant commercial risks●●●Oversight of overall risk management processes and policiesAccounting, controls and financial disclosuresCybersecurity and information security related risksourthe Company’s business●●●Executive compensation philosophy and program designExecutive development and leadershipDiversity and inclusion●●●●Talent managementCEO succession planningSenior Management succession planningTurnover and employee risksourthe full Board, of Directors,the Audit Committee, theourtheourand the Company’s independent directors, hold regularlywe monitor the Company’sCybersecurityWe rely on our information technology (“IT”) and data systems in connection with manyour 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 accessrestricted 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 Committeeacutely aware of the critical nature of managing risks associated withwhich consists of three non-employee independent directors, of which one of these directors has information systems experience. In additionOversightenterprise-wide initiatives, we purchaseBoard’s oversight of cybersecurity insurancerisks and bearsprotect againstoverseewideregular basis, with a minimum frequency of once per year. Thesecosts that could be incurred in connectiontopics, including:cybersecurity-related incidents. We continually strengthenregulatory requirements and enhance our programs and controls around people, process and technology, and apply risk-based strategies to enhance prevention, detection, and response efforts20202023 or at any other time, an officer or employee of the Company, or had anyrequiringthat required disclosure under Item 404 of Regulation S-K.ourtheBoardboard of DirectorsCompany’s Compensation CommitteeBoardthe Board.OurOurourthe Company’s principal executive officer andourthe Company’s directors are governed by a codetheethics of the Company (the “Codes of Ethics”).Ethics. The Codes of Ethics require ourthe Company’s employees and directors to conduct CompanyNasdaqNASDAQ listingourthe Company’s website at www.energyrecovery.comourthe Company’s website as requiredNasdaqNASDAQ rules.17Environmental, Social and Governance Programourthe Company’s business has always been aligned with sustainability issues such asa formal Environmental, Social and Governance (ESG) program20202019 reflects ourthe Company’s commitment to continuouswe strivethe Company strives to become a more sustainable and resilient business.we believethe Company believes that the strategic integration of ESGsustainability principles intowe operatethe Company operates as a company will leverage our endcomplements the Company’s products’ inherentproposition of creatingproposition: helping the Company’s customers achieve environmentally sustainablemore sustainable future.lower cost. This approach can help usthe Company achieve ourits ultimate goal ofOur
As our ESG program and related initiatives evolve,goals provides the Board will playCompany with 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 strategic roadmap
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 towardsbecome a more sustainable future.
Justand resilient business, and holds the Company accountable as our company is dedicatedit
Retainer Fee | ||
$ | ||
Board Fees | ||
Cash Retainer | 50,000 | |
Equity Retainer (1) | 100,000 | |
150,000 | ||
Chair of the Board Fees(2) | ||
Cash Retainer | 50,000 | |
Equity Retainer (1) | 35,000 | |
85,000 | ||
Committee and Lead Independent Director Fees (2) (3) | ||
Lead Independent Director | 15,000 | |
Chair of the Audit Committee | 15,000 | |
Chair of the Compensation Committee | 10,000 | |
Chair of the Nominating & Corporate Governance Committee | 5,000 | |
Although wethe earlier of 1-year or on date of the
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 levelbase Board Fees.
Our ESG report, in its entirety, can be found on our website at https://bit.ly/ERI-ESG.
Directors who are non-employeesCEO,
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Our non-employee directors also receive:
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On the date of the 2020 Annual Meeting of Stockholders, each continuing non-employee director received an option grant to purchase $85,000 of the
Our non-employee director compensation program for 2020 was substantially similar to 2019, with the exception of the addition of an annual retainer to our Lead Independent Director of $15,000.
2023 Director Fees Earned Option Total Mr. Alexander J. Buehler(2) Mr. Sherif Foda Mr. Olav Fjell Mr. Arve Hanstveit (3) Mr. Ole Peter Lorentzen(4) Ms. Pamela Tondreau (5) TOTAL Shares Percent of 5% or Greater Common Stockholders: Arvarius AS c/o Marius Skaugen (3) Parkv.57 c/o B. Skaugen AS 0256 Oslo, Norway Ludvig Lorentzen AS (4) Postboks A, Bygdoy, 0211 Oslo, Norway Trigran Investment, Inc. (5) 630 Dundee Road, Suite 230 Northbrook, IL 60062 Sundt AS (6) Dronningen 1, 2087 Oslo, Norway BlackRock, Inc. (7) 55 East 52nd Street New York, NY 10055 Directors, Named Executive Officers, and Current Group: Ole Peter Lorentzen (4) Arve Hanstveit (8) Robert Yu Lang Mao (9) Joshua Ballard (10) Alexander J. Buehler (11) Olav Fjell (12) Emily Smith (13) Farshad Ghasripoor (14) Rodney Clemente (15) Sherif Foda (16) Pamela Tondreau (17) All named executive officers and directors as a group (11 persons) (18) William W. In addition, the Compensation Committee reviews industries the Company participate. At Base Salary Named Executive Officers 2020 2019 Robert Mao (1) Joshua Ballard Rodney Clemente (2) Emily Smith (3) Farshad Ghasripoor For following formula: Corporate MBO Weight % Achievement % 1 – Financial Performance – meet or exceed adjusted operating income target 2 – Water – meet or exceed water revenue and adjusted operating income targets 3 – Water – meet or exceed water initiative order targets 4 – Oil & Gas – advance VorTeq towards commercialization by completing multiple live well fracs with a partner or other third party 5 – Oil & Gas – advance VorTeq towards commercialization by completing the requirements of M1 6 – Emerging Technologies –complete design, commercial value propositions and related materials in connection with emerging technology 1 7 – Emerging Technologies – complete design and meet emerging technology order target for emerging technology 2 8 – ESG – achieve target rating from MSCI ESG Research Overall The Compensation Committee Named Executive Officer 2020 2020 2020 Paid (1) 2020 (%) ($) (%) ($) Robert Yu Lang Mao (2) Joshua Ballard Rodney Clemente Emily Smith Farshad Ghasripoor equity. Named Executive Officer Option Awards Value RSUs Value (#) ($) (#) ($) Robert Yu Lang Mao (1) Joshua Ballard Rodney Clemente Emily Smith Farshad Ghasripoor20202020.2023. Directors who are also ourthe Company’s employees receive no2019, 2023, Mr. Mao wasMoon became an employee of the Company. Company on October 23, 2023. Compensation”
and Paid in
Cash
Awards (1) $ 65,000 $ 85,000 $ 150,000 50,000 85,000 135,000 50,000 85,000 135,000 55,430 85,000 140,430 55,000 85,000 140,000 61,445 85,000 146,445 $ 336,875 $ 510,000 $ 846,875 (1)The amount in the Option Awards column sets forth the fair value on the grant date of the options awards granted in 2020 as calculated in accordance with FASB ASC Topic 718 without regard to estimated forfeitures. The method and assumptions used to calculate the fair value on the grant date of our equity awards is discussed in Note 11 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ending December 31, 2020. As of December 31, 2020, the number of shares underlying unvested stock options held by each of the directors was 18,669 shares.(2)Mr. Buehler is a director and the Chairman of the Audit Committee.(3)Mr. Hanstveit is a director and served as the Chairman of the Compensation Committee through July 16, 2020. His compensation for this position has been prorated.(4)Mr. Lorentzen is a director and the Chairman of the Nomination and Corporate Governance Committee. Mr. Lorentzen has notified the Board that he will not stand for re-election upon the completion of his current term.(5)Ms. Tondreau is a director and was appointed lead independent director and Chairman of the Compensation Committee on July 16, 2020. Her compensation for these positions has been prorated.Ourof Directors or Boardourthe Company’s non-employee directors and executive officersourits common stock to further align their interests with the long-termlong-ourthe Company’s commitment to soundour the Company’s President andourthe Board. These guidelines were amendedour the President andCommon Stockthe Company’s●For our CEO, three times his annual base salary;●For our other executive officers, one time his or her annual base salary; and●For each non-employee director, three times the amount of the annual cash retainer paid to directors for general service on the Board.ourthe Company’s stockholders, executives and directors.we include the Company includesindividual, as well as the net exercise or “spread” value of vested stock options. Unvestedindividual. Vested and unvested options or restricted stock units (“unvested RSUs”) and the unvested portion ofa periodperiods of three and five years, respectively, fromadoptionmost recent amendment of the original guidelines to meet these ownership requirementsCovered individuals are required to hold 25%As of the net shares acquired from all equity awards after deducting shares sold to coverrecord date, each of the exercise price and/or taxes until the applicable guideline is reached. As of December 31, 2020, all of ourwereare either exceedingin compliance with or on pace tominimum stock ownership requirements or were on track to comply inguidelines by the relevant timeframe.Our insider trading policyCompanytheengage purchase financial instruments (including prepaidOur insider trading policyThe Insider Trading Policy further prohibits Companythe Company the Company’s securities. Finally, we dothe Company does notourits directors or employees to sell a security future with respect to Company the Company’sSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTfollowing table sets forth certain informationCompensation Discussion and Analysis beginning on page 42 of this Proxy Statementbeneficial ownershipexecutive officers named in the Summary Compensation Table on page 70. Theour common stock as of April 12, 2021 for (i) each person or group of affiliated persons who is known byEnergy Recovery, Inc. approve, on an advisoryCompany to beneficially own more than 5%compensation of the Company’s common stock, (ii) each of the Company’s directors, (iii) each of theexecutive officers appearingnamed in the “Summary SummaryTable” on Page 45 and (iv) all directors and executive officersTable for 2023, as a group.We have determined beneficial ownershipdisclosed in accordance withthis Proxy Statement pursuant to theinformationrelated footnotes and narratives accompanying the tables).”not necessarily indicativeasking the Company’s stockholders to vote “FOR” this proposal because itbeneficial ownership for any other purpose. Unless otherwise indicated below,this Proxy Statement are necessary to our knowledge,achieve the personsCompany’s primary objective ofentitiesmotivating the talent thetable have sole voting and sole investment powerSummaryall shares that they beneficially own, subject to community property laws where applicable. To our knowledge, no person or entity except as set forth below,executive compensation at the 2025beneficial owner of more than 5%Compensationvoting power of our common stock asCompany’s stockholders and will take into account theclose vote when considering future compensation decisions for the Company’sbusiness on April 12, 2021. The addressthe Securities Exchange Act of each executive officer and director is c/o 1934, as amended (the “Exchange Act”)., 1717 Doolittle Drive, San Leandro, CA 94577.
Beneficially
Owned (1)
Class (2) 7,532,490 13.1 % 6,200,000 10.8 % 5,540,420 9.6 % 4,400,000 7.7 % 3,266,530 5.7 % 6,990,189 12.2 % 1,141,983 2.0 % 470,333 0.8 % 174,150 0.3 % 159,855 0.3 % 151,406 0.3 % 147,444 0.3 % 68,177 0.1 % 10,147 * 55,319 * 28,964 * 9,397,967 16. 4 % * Less than 0.1%(1)Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options and warrants held by that person that are currently exercisable, or exercisable within 60 days after April 12, 2021, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of each other person.(2)Percent of class is based on the number of shares of Common Stock outstanding as of April 12, 2021, the Record Date, which were 57,422,485 shares.(3)Based on a Schedule 13G/A and a Form 4 filed with the SEC on March 19, 2010 and April 30, 2010, respectively, which together showed 7,641,103 shares beneficially owned by Arvarius AS and 7,641,103 shares beneficially owned by Mr. Skaugen, the controlling stockholder of Arvarius. Each reported shared voting and dispositive power over the shares respectively reported for that beneficial owner. The shares reported by Arvarius included 800,000 shares that could be acquired under exercisable warrants. Subsequent to the foregoing reports, warrants to purchase 200,000 shares were exercised in December 2013 for 180,276 shares, the remaining warrants to purchase 19,724 shares of this exercise were cancelled and considered payment for the exercise. Warrants to purchase 400,000 shares were exercised in July 2014 for 311,111 shares, the remaining warrants to purchase 88,889 shares of this exercise were cancelled and considered payment for the exercise. Warrants to purchase 200,000 shares were exercised in July 2015.(4)Based on a Form 4 jointly-filed by Ole Peter Lorentzen and Ludvig Lorentzen AS with the SEC on May 14, 2020, which reported 6,200,000 shares directly held by Ludvig Lorentzen AS, 640,334 shares held by companies directly owned by its controlling shareholder, Mr. Lorentzen, and options to purchase 149,855 shares of common stock that are exercisable within 60 days of April 12, 2021.(5)Based on a Schedule 13G/A filed with the SEC on February11, 2021, which reported 5,540,420 shares beneficially owned by Trigran Investments, Inc., Douglas Granat, Lawrence A. Oberman, Steven G. Simon, Bradley F. Simon, and Steven R. Monieson having shared voting power and shared dispositive power of 5,540,420 shares.(6)Based on a Schedule 13G/A filed with the SEC on February 16, 2018, which reported 4,400,000 shares beneficially owned by Sundt AS, CGS Holdings AS, Helene Sundt AS, Christian Gruner Sundt, Else Helene Sundt, Leiv Askvig, and Jacob Asif Iqbal having shared voting power and shared dispositive power of 4,400,000 shares.(7)Based on a Schedule 13G filed with the SEC on February 2, 2021, which reported 3,266,530 shares beneficially owned by BlackRock, Inc. having sole voting power.(8)Consists of 924,733 shares held by Mr. Hanstveit; 120,000 shares held by Mr. Hanstveit’s daughters; and options to purchase 97,250 shares of common stock that are exercisable within 60 days of April 12, 2021. Mr. Hanstveit has shared voting and investment power over the shares that are owned by his daughters.(9)Consists of 217,611 shares held by Mr. Mao as trustee of The R. Mao Trust and options to purchase 252,722 shares of common stock that are exercisable within 60 days of April 12, 2021.(10)Consists of 6,979 shares held by Mr. Ballard, and options to purchase 167,171 shares of common stock that may be exercised within 60 days of April 12, 2021.(11)Consist of 10,000 shares held by Mr. Buehler and options to purchase 149,855 shares of common stock that may be exercised within 60 days of April 12, 2021.(12)Consists of 18,000 shares held by Mr. Fjell and options to purchase 133,406 shares of common stock that may be exercised within 60 days of April 12, 2021.(13)Consists of 10,386 shares held by Ms. Smith and options to purchase 137,058 shares of common stock that are exercisable within 60 days of April 12, 2021 by Ms. Smith.(14)Consists of 27,075 shares held by Mr. Ghasripoor and options to purchase 41,102 shares of common stock that may be exercised within 60 days of April 12, 2021.(15)Consists of 10,147 shares of common stock that are exercisable within 60 days of April 12, 2021 by Mr. Clemente.(16)Consists of options to purchase 55,319 shares of common stock that are exercisable within 60 days of April 12, 2021 by Mr. Foda.(17)Consists of option to purchase 28,964 shares of common stock that are exercisable within 60 days of April 12, 2021 by Ms. Tondreau.(18)Consists of 9,397,967 shares held by 5 executive officers and 6 directors as a group and options to purchase 1,222,849 shares of common stock that may be exercised within 60 days of April 12, 2021.ourthe Company’s executiveour “namedthe Company’s named executive2020,2023, were:Robert Yu Lang MaoJoshEmily SmithSenior Vice President, Corporate Development and OperationsChief Executive OfficerCEO on2020 and2020. Prior to that, Mr. Mao served as the Company’s interim President and Chief Executive OfficerCEO from2019. Mr.2019 until his appointment in 2020. Joshua Ballard has been Chief Financial Officer the Company’s CFO2018. Mr. 2018, and will cease service in that role, effective June 30, 2024. RodneyMs. SmithFarshad Ghasripoor has been the Senior Vice President, Corporate Development and Operations since December 22, 2019. Prior to that Ms. Smith was the Vice President of Marketing since November 2015. Ms. Smith joined the Company in August 2011, where she has held several positions spanning multiple disciplines, including Senior Director of Corporate Development, Director of Financial Planning & Analysis and the Strategic Analyst to the CEO. Ms. Smith resigned from the Company on April 20, 2021. Mr. Ghasripoor has been ofas the Company’s Chief Technology Officer since November 16, of the Board of Directors has principal responsibility for establishing, implementingourthe Company’s compensation philosophy and objectives. Theadvising recommending toonfor approval the compensation of our Chief Executive Officer,the Company’s President and CEO, recommendingourtheour the Company’s2020 Corporate Performance HighlightsWe are an energy solutions providerindustrial fluid flow markets worldwide. Our74% of compensation at risk for the President and CEO role and up to
2020 corporate performance highlights2023 to the Company’s President andfollowing:Company’s executive compensation●Total revenue of $119.0 million, an increase of 37% year-over-year; highest revenue in Company history.●Water revenue of $92.1 million, an increase of 26% year-over-year; 5th consecutive year of record revenue.●Healthy product gross margin of 69.3% despite Covid-19 challenges.●Operating cash flow of $16.9 million; 6th consecutive year of positive operating cash flow and more than 3x growth over 2019.●Net income of $26.4 million, or $0.47 per diluted share; 5th consecutive year of profitability.●Maintained commanding market share in seawater reverse osmosis desalination energy recovery solutions.●Launched our new Ultra PX™ energy recovery device for industrial wastewater treatment.●Issued our first Environmental, Social and Governance (“ESG”) report”.●Completed construction and commenced production at our new manufacturing facility located in Tracy, California finalizing a doubling of capacity begun in 2019.ourthe Company’s executive compensation program is to attract,we needit needs to meet and/or exceed the Company’s strategic,goals ofgoals. Additionally, the Company. Additionally, we wantCompany wants to reward superiorourits executives with our the Company’sourthe Company’s compensation program involve:●incentivizing our key executives to exceed strategic, operational, and financial goals;●attracting and retaining mission critical executive talent;●aligning outcomes and rewards with stockholder expectations; and●rewarding superior performance.ourthe Company’s compensation policiesourthe Company’s business needs and the interests of our the Company’sOurThe Company’s executive compensation programs are reviewed to ensure theythe Company’sits share utilization rate to minimize the dilutiveourthe Company’s compensation policieswe havethe Company has taken,ourthe Company’s compensation policies and practices with inputs from its independentwe dothe Company does not believe that any risks relating from ourtheourits employees are reasonably likely to haveourthe Company’s business.ourthe Company’s executive compensation philosophy policy is designed to linkourthe Company’s performance through at-risk compensationourthe Company’s success. Asourthe Company’s executive officers���officers’ totalourthe Company’s short and long-term performance.ourthe Company’s executive officers’ compensation isCompanythe Company’s financial and operationalourthe Company’s executive officers’ target totalExecutives at objectives.2020,2023, the Board of Directors eight majorthree pre-determined, rigorous objectivesperformance measures for the Chief Executive OfficerCompany’sour cash-basedthe Company’s cash-MBOMBOs %targettarget.30.0%2 Water – meet or exceed water revenue and adjusted operating income targets14.7%3 – Water – meet or exceed water initiative order targets6.3%4 – Oil & Gas – advance VorTeq towards commercialization by completing multiple live well fracs with a partner or other third party12.6%5 – Oil & Gas – advance VorTeq towards commercialization by completing the requirements of M18.4%6 – Emerging Technologies –complete design, commercial value propositions and related materials in connection with emerging technology 114.7%7 – Emerging Technologies – complete design and meet emerging technology order target for emerging technology 26.3%8 – ESG – achieve target rating with MSCI ESG Research7.0%Overall100.0%Chief Executive Officer establishes individual objectives2023 MBOs for the other executive officers thatOther NEOs included the two financial performance objectivesgenerally derived from or related to the Company objectives described above.responsible. Each executive officerOther NEO receives an annual performance review from our Chief Executive Officer or her performance on both a qualitative and quantitative basis inhis or hertheir individual objectives. OurThe Compensation Committee, however, ultimatelyour executive officers.the Company’s NEOs. For 2020, 2023, the 79% approximately 82%of the Chief Executive Officer’sCompany’s President andmet.met, however, due to the Company’s President and CEO transition thatother employees, Other NEOs, their actual AIP payout was determined based on aobjectives.objectives. For a more detailed discussion of the AIP, please refer to “Annual“Annual Cash2020,2023, the CompanyCompany’s granted to its named executive officers a combination of stock options and restricted stock units (“NEOs RSUs. RSUs”). This approach is intended to align management’s long-term goals and realizable pay outcomes with those of our stockholders. The stock options provide no value to our executives if our share price does not increase above the exercise price (set based on the fair market value of our common stock at grant) following the date of grant. RSUs also serve as aourits compensation program that the Compensation Committee believes isourthe Company’s executive officers and be competitive withour 2020theourthe Company’s executive compensation program. For a2020 Incentive Plan and 2016 Incentive Plan,Company’s incentive plans, please refer to “Equity-Based●Substantial Portion of Compensation is At-Risk: Up to 75% and 65% of the pay mix for our Chief Executive Officer and current named executive officers, respectively, for 2020 were variable and/or performance-based.●Long-Term Vesting: Our option and RSU awards have multi-year vesting periods to reward long-term performance and deter inappropriate risk taking.●Stock Ownership Guidelines: We have stock ownership requirements for our directors and executive officers; our Chief Executive Officer and executive officers must hold three-times and one-times, his or her base salary in company stock, respectively; and our directors must hold three-times his or her annual cash retainer.●No Repricing: Our stock options cannot be repriced, reset or exchanged for cash or other equity awards if underwater without stockholder approval.●Double Trigger Change in Control: Our Change in Control Severance Plan requires a double trigger (i.e., change in control plus qualifying termination) to receive severance benefits and accelerated vesting of equity awards under a change in control.●At-Will Employment of Executive Officers: All of our executive officers, including our Chief Executive Officer and our Chief Financial Officer, are employed by us on an “at will” basis. We do not provide guaranteed annual bonus or equity award rights. Compensation is reviewed and approved by the Compensation Committee in its sole discretion each year.●Independent Compensation Committee: The Compensation Committee consists entirely of independent directors who select and utilize an independent outside compensation consultant.●Independent Compensation Consultant: The Compensation Committee’s independent compensation consultant, Compensia, is retained directly by the Compensation Committee and performs no other consulting or other services for the Company.●Risk Assessment: The Compensation Committee and its independent advisor perform an annual review of the risks related to our compensation program.●No Gross-Ups or Excessive Perquisites: We do not provide for tax gross-ups in connection with any “golden parachute” excise taxes. We do not provide excessive benefits or perquisites for our executive officers outside the scope of what we provide generally for all employees.●No Excessive Severance: Our executive officers are not entitled to change in control cash severance payments in excess of one times their annual base salary plus target bonus. We do not provide severance to executives who are terminated for cause.●Clawback Policy: In March 2021, the Company adopted a compensation recovery (“clawback”) policy that provides that our Board of Directors may require the forfeiture, recovery or reimbursement of cash and equity incentive compensation from an officer in the event our Board has determined such officer has engaged in detrimental activity.●Standard Retirement Plan Benefits: We do not maintain a defined benefit pension plan or retirement plan for our executive officers other than a 401(k) plan, which provides for broad-based employee participation in the United States.ourthe Company’s compensationDirectors.Directors However,Company’s industries.Officers. OfficersOur Chief Executive OfficerThe Company’sVice President of Human Resources, along with legal counsel as appropriate,CEO and CFO work together to design and develop compensation programs for ourourthe Company’s independent compensation consultant so that it canour Chief Executive Officerthe Company’s President and CEO providesnamed executive officers other than his own,theother named executive officer’sOther NEO’s performance andourthe Company’s management team, including our Chief Executive Officerthe Company’sVice President of Human Resources,CEO and CFO, attend portions of the Compensation Committee meetings tonamed executive officerNEO voted in the final determinations regardinghistheir compensation package.Ourourthe Company’s executive officers. For all executive officers, as part of its deliberations, the Company executive compensation levels and currentourthe Company’s peer companies developed by a compensation consultant, (iii) an, and (v) our Chief Executive Officer’sthe Company’s President and CEO’s recommendations basedourthe Company’s peer group discussed below under “Competitive Positioning”,ourthe a national compensation consulting firm, to advise on matters related to the compensation of its executive officers,Chief Executive Officer.Company’s President and CEO, and the Board. For 2020,2023, Compensia advised theour the Company’sourthe Company’s compensation plan, and derived the peerthe Nasdaq Stock Market,NASDAQ, the Compensation Committee has determined that its“Say“Say on Pay”Pay” ResultsWeouran advisory vote on executive compensation at our annual meeting of stockholders held in 2020.the 2023 Annualof Directors or us, we believethe Company, the Companyourits stockholders to have an opportunity to express their viewsourthe Company’s executive compensation as disclosed in ourthe Proxy Statement. Theourthe Compensation Committee value stockholders’ opinions, and, to the extent thereour named executive officers,the Company’s NEOs, the Compensationour 2020the 2023 Annual Meeting, wethe Company received strong stockholder support for our “sayits97.7%94.3% of the votes cast voted in favor of ourthe “say on pay” proposal. We believeourits stockholders are alignedourthe Company’s approach to executive compensation. However, the Company continues to to outreach to key large stockholders to discuss in detail the Company’sits overall compensation philosophy industry conferences and other channels of communication.ourthe Company’s stockholders are regularlyByAs in large,past years, the Company’s stockholders expressed a better understanding of the compensation philosophy and were continue to be largelyeffortseffort of rewarding and retaining its key personnel. As a result, for 2021,our the Company’sHowever, we continueThe Companyourits compensation programs as evidenced by our recent implementation of a rigorous clawback policy earlier in 2021. Weprograms. Theourits compensation process and look for ways to enhance ourthewe needit needs to achieve or exceed ourthe20212024 and beyond.We intendourits effortsourthe Company’s stockholders. OurThe Company’s goal in solicitingourthe Company’s stockholders’ views on executiveourthe Company’s stockholders’ views expressed in a say onourthe Company’s compensationour the Company’sWe intendThe Company intends to hold a “say on pay” advisory vote at each annualEnergy Recovery’sthe Company’s overall compensation may be compared. While we havethewe haveit has a unique footprint that makes such comparisonsourthe Company’s advisors, we are attemptingthe Company attempts tocomparisons. Compensia updated the peer groupcomparisons and completed an executive compensationperiodically test and adjust such peers to better reflect its20182022 and early 2019, whichupdated its listCompensation Committee utilized in making its 2020Company’s 2023 compensation decisions. Ourdecisions utilizing a processoil and gas industriesenergy, and broader technology and health care equipment industries thatusthe Company in terms of revenue, market capitalization, headcount andOur The Company’s peers were relatively similar to the Company in terms$97 $190 million and a$581 million$1.04 billion at the time of our 2020the Company’s 2023 executive20202023 compensation assessment:assessment that was relied upon by the Compensationourthe Company’s executives with a stable source ofourtheChief Executive OfficerCompany’s President andMr. Clemente received a 14% increase to his base salary in connection with his promotion to Senior Vice President, Water. The other Named Executive Officers’Company’s NEOs’ base salaries were increased on average by 2.5% $ 500,000 $ 450,000 333,125 325,000 315,000 270,608 300,000 — 281,973 275,096 (1)Mr. Mao was appointed as the interim President and Chief Executive Officer on November 1, 2019. The 2019 Base Salary reflects Mr. Mao’s annualized base salary. Mr. Mao was appointed Chief Executive Officer on May 5, 2020. The 2020 Base Salary reflects Mr. Mao’s annualized base salary.(2)Mr. Clemente’s Base Salary increased to $315,000 when he was appointed to Sr. VP of Water on December 22, 2019.(3)Ms. Smith was named as Senior Vice President, Corporate Development and Operations in December 2019. Ms. Smith’s Base Salary increased to $300,000 when she was appointed to Senior Vice President of Corporate Development and Operations. Before taking the position of Senior VP, Ms. Smith was VP of Corporate Development since August 2018. Prior to taking the position of VP of Corporate Development, Ms. Smith was the VP of Marketing of the Company since November 2015. Ms. Smith joined the Company in August 2011 and resigned from the Company on April 20, 2021.25Contentseach of Messrs. Mao, Ballard, Clemente, Ghasripoor and Yeung wereor (“AIP”), is our annuala cash incentive plan and is designed tosuccesssuccess.Company the Company’sa participanttheCompanythe Company’s performance goals for the year and the level of achievement of individualThe AIP includes the following performance characteristics:●At the onset of each year, the Compensation Committee establishes the total annual bonus pool (the “Bonus Pool”), the profitability target or other financial metrics applicable to that year (the “Performance Target”) and the minimum performance threshold;●If the Company’s performance equals or exceeds the Performance Target, the Bonus Pool is funded at 100%;●If the Company’s performance exceeds the minimum performance threshold but is less than the Performance Target, the Bonus Pool is calculated based on the allocation curve set forth in the AIP;●If the Company’s performance is less than the minimum performance threshold, the Bonus Pool is not funded; however, the Compensation Committee, in its sole discretion, may elect to approve some funding for the Bonus Pool to be awarded to individual participants for extraordinary performance as determined by the AIP plan committee and approved by the Compensation Committee;●Payments to participants in the AIP if individual performance objectives established under the AIP are met is based on a percentage of base salary; and●The AIP limits the Bonus Pool and individual targets to 100% of target.2020, the Compensation Committee elected to embed the Performance Target directly into the individual MBOs of the Chief Executive Officer and other plan participants in place of the funding mechanism described above. This was due, in large part, to the large number of variables in the Company’s 2020 projected budget. Accordingly, in 2020, a Participant’sPlanAIP wasby multiplying such participant’s base salary by their AIP target bybased on the percentage of achievement of his/her individual MBOs. The Performance Target in 2020 was met 100% by the Company.2020,2023, the Board of Directors enumerated eight majorthree key objectives (“MBOs”) for the Chief Executive Officer,Company’sChief Executive Officer had enumerated specificBoard approved aobjectivesMBOs. The Financial Performance MBOeach other named executive officer in the contextless than 90%Company’s business plan and his own objectivestarget to up to 150% for such officers. These Chief Executive Officer objectives are reflected in the table below. 30.0 % 100 % 14.7 % 100 % 6.3 % 100 % 12.6 % 0 % 8.4 % 0 % 14.7 % 100 % 6.3 % 100 % 7.0 % 100 % 100 % 79 % For 2020, the Compensation Committee determined that 79%110% or greater achievement of the Chief Executive’s objectives were met and, accordingly, awardedtarget.Chief Executive Officer an AIP award of 79% of his target. With respect to each other employeeFinancial Performance MBO – meet or exceed adjusted operating income – wasCompany, as described above, the funding mechanism target to up to 150%the AIP was embedded in each participant’s individual MBOs rather than plan wide. Accordingly, for 2020, a participant’s bonus determination under the Plan was determined by multiplying such participant’s base salary by their AIP target by the percentage of145% or greater achievement of his/her individual 2020 MBOs. The Performance Target in 2020 was met 100% by the Company.target. Adjusted operating income is a non-GAAP26alsomet in January 2024 to consider the performance of theof the Company’s executive officers, including the named executive officers,NEO, as set forth in the table below, based in part on the CEO’s recommendation and reconciliation of each named executive officer’s individual accomplishment of their performance objectives.below. Importantly, the Compensation Committee did notnamed executive officers.
AIP Target (1)
AIP Target
Actual AIP
Actual AIP Paid 100 481,539 79 381,473 60 199,875 57 188,632 60 189,000 60 189,000 60 180,000 58 174,600 60 169,184 54 152,942 (1)Percentage of annual base salary. Mr. Mao’s 2020 Actual AIP Paid % is based on his actual salary paid during fiscal year 2020 that is calculated on his lower salary amount paid as interim President and Chief Executive Officer. His base salary from January 1, 2020 to May 4, 2020 was $450,000. Mr. Mao’s annual salary increased to $500,000 on May 5, 2020. Mr. Mao’s actual paid salary in 2020 was $481,539.(2)Mr. Mao’s 2020 AIP Target and 2020 Actual AIP Paid amounts are based off of the blended base salary during 2020. Mr. Mao’s base salary from January 1, 2020 to May 4, 2020 was $450,000, and from May 5, 2020 to December 31, 2020 was $500,000. Mr. Mao’s total salary paid in 2020 was $481,539.We grantnamed executive officersNEOs and other employees pursuant to our 2016 Incentive Plan andits 2020 Incentive Plan. As with other ourWeThe Company periodically collectcollects and reviewourthereview of individualseveral other factors, including such and future potential as well as existingtheretention hold.2020,2023, the Company granted stock options and RSUs to executives and other key employees to providewe usethe Company uses stock options, RSUs and RSUsother equityourits efforts to retain and recruit key talent. TheJanuary 2020, as2023, the Compensation Committee explored whether to shift a portion of its long-anthe Company’s annual equity grant program, for eligible employees,inoptions and RSUs to purchase the Company’s common stockNEOs infollowing named executive officers: 273,613 1,223,600 — — 54,429 325,000 — — 29,308 175,000 17,140 175,000 29,308 175,000 17,140 175,000 27,215 162,500 15,915 162,500 (1)Mr. Mao was appointed the President and Chief Executive Officer on May 5, 2020 and had served as the interim President and Chief Executive Officer since November 1, 2019. Mr. Mao received 223,613 options to purchase the Company’s Common Stock in connection with his appointment as President and Chief Executive Officer and 50,000 options to purchase shares of the Company’s Common Stock in connection with his service as interim President and Chief Executive Officer.The Company believes that a large percentage of the equity-based incentiveintent togranted to its executive officers should belater in the form year once those award terms wereoption awards. this performance-based equity program and issued an additional grant of RSUs to NEOs to2020, 100%addition, in October 2023, thetheannual compensation planning.thehis appointment as Interim President and Chief Executive Officer and Chief Financial Officer and 50% of the awards to our other named executive officers were in the form of option awards. The Company believes that option awards align the interests of our executives to our common stockholders since stock price appreciation is necessary for our executives to derive financial benefit from the option awards. Accordingly, the Company believes that our use of option awards properly incentivize our executives to focus on the long-term performance of the Company, and as such, are performance-based in nature.The vesting schedule for the option awards provides that 25% of the options vest on the one-year anniversary of the vesting commencement date, and thereafter, 1/36th of the remaining options vest at the end of each month of active service. Officer.eachthe first four anniversaries of the vestingsecond, third and fourth anniversarythree anniversaries of the vesting commencement date. Ourour Chief Executive Officer’s recommendations tiedwith respect to histhe President and CEO, the Compensation Committee’s annual review andeach executive officer’sthe President and CEO’s performance and contributions during the previous year (other than his own) 2020,2023, (ii) with respect to the NEOs, other than(iii)(iv) the (including our our company-wide compensation levels, including the2020.2023.27
In 2020, our named executive officers2023, the Company’s NEOs were eligible to participate in ourthe Company’s standard
We
In August 2009, the Company’s Board of Directors adopted a Change in Control Severance Plan for key employees. In March 2012, the Board adopted a revised
The CIC Plan is summarized below under the caption “Potential Payments Upon Termination or Change of Control” following the compensation tables. Designed as a retention tool, the CIC Plan protects participating executives from economic harm in the event that their employment is actually or constructively terminated after a change in control of the Company. Under this “double trigger” approach, participating executives are eligible for severance and other benefits under the CIC Plan if they are terminated without “Cause” or leave for “Good Reason,” as those terms are defined below, within 18 months after a change in control of the Company.
We believe these change of control severance benefits are an essential element of our executive compensation program and assist us in recruiting and retaining talented individuals. By establishing these change in control severance benefits, we believe we can mitigate the distraction and loss of executive officers that may occur in connection with a rumored or actual change in control and protect stockholder interests while a transaction is under consideration or pending.
Severance and Termination Compensation
In February 2021, the Company’s Board of Directors approved, adopted and established the Energy Recovery, Inc. Severance Plan for the benefit of certain key members of management and other senior employees (the “Severance Plan”), including each of the Named Executive Officers. The Severance Plan sets forth severance benefits in the event of a Qualifying Termination (as defined in the Severance Plan), which includes (i) all payments required by applicable law, including all earned and unpaid salary, all earned but unpaid and un-deferred bonus attributable to the year that ends immediately before the year in which the termination occurs, and other benefits under applicable benefit plans to which the employee was entitled upon such termination; (ii) six (6) months’ salary based on the employee’s annual base salary in effect on the effective date of their termination; (iii) to the extent the Eligible Employee (as defined in the Severance Plan) is eligible and timely elects to continue coverage under the Employer’s health or other benefits plans pursuant to COBRA, payment of Employer’s portion of any such health or other benefit plans premiums on behalf of the Eligible Employee (at the employer level in effect immediately prior to the effective date of termination) towards the Eligible Employee’s COBRA premiums until the earlier of (A) six (6) months following the effective date of termination, or (B) the date the Eligible Employee becomes eligible for coverage under a subsequent employer health plan, whether the Eligible Employee enrolls in such coverage or not, and whether or not the benefit levels and costs are comparable; and (iv) immediate vesting of twenty-five percent (25%) of all unvested equity compensation held by the Eligible Employee on the effective date of termination (the “Accelerated Equity”) which Accelerated Equity, notwithstanding anything to the contrary, may be exercised, where applicable, for up to six (6) months after the effective date of termination; in the case of unvested equity compensation where the amount payable is based on the satisfaction of performance criteria, the amount of unvested equity will be determined by deeming all performance criteria satisfied at 100% target; to the extent the equity compensation is subject to Code Section 409A, the vesting acceleration of the equity compensation shall not cause any distribution or payment under the equity compensation to be made before the earliest date it may be made without violating Code Section 409A. The severance benefits are contingent upon the employee meeting certain eligibility requirements, including delivering to the Company a general release. Because it may be difficult for our executive officers to find comparable employment following a termination without cause, these severance benefits are intended to ease the consequences to an executive officer of an unexpected termination of employment. We also believe that having such arrangements in place can help us attract and retain key employees in a marketplace where these types of arrangements are commonly offered by our peer companies.
Compensation Policies and Practices as They Relate to Risk Management
Our Compensation Committee has reviewed our compensation programs for our employees and believes that our compensation programs are structured in a manner that does not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee considered, among other factors, the allocation of compensation among annual base salary, AIP and long-term equity awards.
Report of the Compensation Committee
This report is not deemed to be soliciting material filed with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed with the SEC.
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) set forth above with the Company’s management. Based on the review and discussions, the Compensation Committee recommended to the Company’s Board of Directors that the CD&A be included in this Proxy Statement.
MEMBERS OF THE COMPENSATION COMMITTEE
Pamela Tondreau, Chairman of the Compensation Committee
Sherif Foda
Alexander Buehler
Arve HanstveitOle Peter Lorentzen
The table below summarizes certain compensation information with respect to the named executive officers for the applicable fiscal years ending December 31, 2020; December 31, 2019; and December 31, 2018. All amounts are in dollars.
Name | Year | Salary | Bonus | Stock | Option | Non-Equity Incentive Plan Compensation | All | Total | ||||||||||||||||||||||
($)(1) | ($) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($) | ||||||||||||||||||||||||
Robert Yu Lang Mao (6) | 2020 | 481,539 | — | — | 1,223,600 | 381,473 | 5,395 | 2,092,007 | ||||||||||||||||||||||
President and Chief Executive Officer | 2019 | 62,308 | — | — | — | — | — | 62,308 | ||||||||||||||||||||||
Joshua Ballard (7) | 2020 | 332,813 | — | — | 325,000 | 188,632 | 9,383 | 855,828 | ||||||||||||||||||||||
Chief Financial Officer | 2019 | 325,000 | — | 162,496 | 162,511 | 195,000 | 2,692 | 847,699 | ||||||||||||||||||||||
2018 | 118,750 | 100,000 | — | 999,839 | 195,000 | 25,783 | 1,439,372 | |||||||||||||||||||||||
Rodney Clemente | 2020 | 315,000 | — | 175,000 | 175,000 | 189,000 | 30,032 | 884,032 | ||||||||||||||||||||||
Senior Vice President, Water | 2019 | 290,702 | — | 162,496 | 162,511 | 159,181 | 9,667 | 784,557 | ||||||||||||||||||||||
2018 | 265,202 | — | 137,497 | 137,500 | 159,181 | 80,165 | 779,545 | |||||||||||||||||||||||
Emily Smith | 2020 | 300,000 | — | 175,000 | 175,000 | 174,600 | 1,387 | 825,987 | ||||||||||||||||||||||
Senior Vice President, of Corporate Development and Operations | ||||||||||||||||||||||||||||||
Farshad Ghasripoor | 2020 | 281,709 | — | 162,500 | 162,500 | 152,942 | 11,497 | 771,148 | ||||||||||||||||||||||
Chief Technology Officer | 2019 | 283,844 | — | 162,496 | 162,511 | 100,400 | 10,657 | 719,908 | ||||||||||||||||||||||
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Name | Year | Insurance | 401(k) | Other(a) | Total | |||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||||
Robert Yu Lang Mao (6) | 2020 | 5,395 | — | — | 5,395 | |||||||||||||
2019 | — | — | — | — | ||||||||||||||
Joshua Ballard (7) | 2020 | 1,567 | 7,816 | — | 9,383 | |||||||||||||
2019 | 1,567 | 1,125 | — | 2,692 | ||||||||||||||
2018 | 627 | 1,125 | 24,031 | 25,783 | ||||||||||||||
Rodney Clemente | 2020 | 1,417 | 8,400 | 20,215 | 30,032 | |||||||||||||
2019 | 1,417 | 8,250 | — | 9,667 | ||||||||||||||
2018 | 2,211 | 9,250 | 68,704 | 80,165 | ||||||||||||||
Emily Smith (8) | 2020 | 1,387 | — | — | 1,387 | |||||||||||||
Farshad Ghasripoor | 2020 | 3,097 | 8,400 | — | 11,497 | |||||||||||||
2019 | 2,407 | 8,250 | — | 10,657 | ||||||||||||||
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Additional Information Regarding Executive Compensation
Grants of Plan-Based Awards in 2020
The following table sets forth information concerning non-equity and equity incentive plan awards to the named executive officers during 2020. The non-equity incentive plan consists of the 2020 cash incentive plan described in the “Compensation Discussion and Analysis” section above. The actual amounts realized in accordance with the non-equity incentive plan are reported in the “Summary Compensation Table” under the column entitled “Non-Equity Incentive Plan Compensation.” The table also depicts information with respect to stock option awards granted by the Company during 2020.
Estimated future payouts under non-equity incentive plan awards | Estimated future payouts under equity incentive plan awards | |||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | All other stock awards: Number of shares of stock or units(1) | All other option awards: Number of securities underlying options(2) | Exercise or base price of option awards | Grant date fair value of stock and option awards | |||||||||||||||||||||||||||||||
($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($) | |||||||||||||||||||||||||||||||||
Robert Yu Lang Mao (3)(4) | 5/20/2020 | — | 481,539 | — | — | — | — | — | 273,613 | 7.79 | 1,223,663 | |||||||||||||||||||||||||||||||
Joshua Ballard(4) | 1/31/2020 | — | 199,875 | — | — | — | — | — | 54,429 | 10.21 | 324,627 | |||||||||||||||||||||||||||||||
Rodney Clemente(4) | 1/31/2020 | — | 189,000 | — | — | — | — | 29,308 | 10.21 | 174,800 | ||||||||||||||||||||||||||||||||
1/31/2020 | — | — | — | — | — | 17,140 | — | 10.21 | 174,999 | |||||||||||||||||||||||||||||||||
Emily Smith(4) | 1/31/2020 | — | 180,000 | — | — | — | — | — | 29,308 | 10.21 | 174,800 | |||||||||||||||||||||||||||||||
1/31/2020 | — | — | — | — | — | 17,140 | — | 10.21 | 174,999 | |||||||||||||||||||||||||||||||||
Farshad Ghasripoor(4) | 1/31/2020 | — | 169,184 | — | — | — | — | — | 27,215 | 10.21 | 162,317 | |||||||||||||||||||||||||||||||
1/31/2020 | — | — | — | — | — | 15,915 | — | 10.21 | 162,492 | |||||||||||||||||||||||||||||||||
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Outstanding Equity Awards as of December31, 2020
The following table presents certain information concerning equity awards held by our named executive officers as of December 31, 2020.
Option Awards (1) | Stock Awards | ||||||||||||||||||||||||||
Name | Date of Grant | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested (2) | ||||||||||||||||||||
(#) | (#) | ($) | (#) | ($) | |||||||||||||||||||||||
Robert Yu Lang Mao | (3) | 9/3/2013 | 17,236 | — | 5.43 | 9/3/2023 | — | — | |||||||||||||||||||
| (3) | 2/6/2015 | 44,456 | — | 3.53 | 2/6/2025 | — | — | ||||||||||||||||||||
| (3) | 6/23/2015 | 53,392 | — | 2.92 | 6/23/2025 | — | — | ||||||||||||||||||||
| (3) | 6/23/2016 | 15,327 | — | 8.60 | 6/23/2026 | — | — | ||||||||||||||||||||
| (3) | 6/22/2017 | 16,726 | — | 7.71 | 6/22/2027 | — | — | ||||||||||||||||||||
| (3) | 6/14/2018 | 15,879 | — | 8.49 | 6/14/2028 | — | — | ||||||||||||||||||||
| (3) | 6/13/2019 | 21,303 | — | 9.98 | 6/13/2029 | — | — | ||||||||||||||||||||
| (3) | 5/20/2020 | — | 223,613 | 7.79 | 5/20/2030 | — | — | ||||||||||||||||||||
| (3) | 5/20/2020 | — | 50,000 | 7.79 | 5/20/2030 | — | — | ||||||||||||||||||||
| 184,319 | 273,613 | — | — | ||||||||||||||||||||||||
Joshua Ballard | (4) | 8/13/2018 | 108,729 | 77,664 | 9.27 | 8/13/2028 | — | — | |||||||||||||||||||
| (4) | 1/31/2019 | 17,154 | 18,646 | 7.60 | 1/31/2029 | — | — | ||||||||||||||||||||
| (5) | 1/31/2019 | — | — | — | — | 16,036 | 218,731 | ||||||||||||||||||||
| (4) | 1/31/2020 | — | 54,429 | 10.21 | 1/31/2030 | — | — | ||||||||||||||||||||
| 125,883 | 150,739 | 16,036 | 218,731 | ||||||||||||||||||||||||
Rodney Clemente | (6) | 3/12/2014 | 42,000 | — | 6.00 | 3/12/2024 | — | — | |||||||||||||||||||
| (6) | 3/8/2016 | 26,247 | — | 8.52 | 3/8/2026 | — | — | ||||||||||||||||||||
| (4) | 2/2/2017 | 20,955 | 912 | 10.19 | 2/2/2027 | — | — | ||||||||||||||||||||
| (4) | 2/1/2018 | 22,529 | 9,278 | 7.50 | 2/1/2028 | — | — | ||||||||||||||||||||
| (4) | 1/31/2019 | 17,154 | 18,646 | 7.60 | 1/31/2029 | — | — | ||||||||||||||||||||
| (5) | 2/2/2017 | — | — | — | — | 3,374 | 46,021 | ||||||||||||||||||||
| (5) | 2/1/2018 | — | — | — | — | 9,167 | 125,038 | ||||||||||||||||||||
| (5) | 1/31/2019 | — | — | — | — | 16,036 | 218,731 | ||||||||||||||||||||
| (5) | 1/31/2020 | — | 29,308 | 10.21 | 1/31/2030 | 17,140 | 233,790 | ||||||||||||||||||||
| 128,885 | 58,144 | 45,717 | 623,580 | ||||||||||||||||||||||||
Emily Smith | (6) | 9/30/2015 | 35,000 | — | 2.14 | 9/30/2025 | — | — | |||||||||||||||||||
| (6) | 3/8/2016 | 26,247 | — | 8.52 | 3/8/2026 | — | — | ||||||||||||||||||||
| (4) | 2/2/2017 | 20,955 | 912 | 10.19 | 2/2/2027 | — | — | ||||||||||||||||||||
| (4) | 2/1/2018 | 22,529 | 9,278 | 7.50 | 2/1/2028 | — | — | ||||||||||||||||||||
| (4) | 1/31/2019 | 14,515 | 15,778 | 7.60 | 1/31/2029 | — | — | ||||||||||||||||||||
| (4) | 1/31/2020 | — | 29,308 | 10.21 | 1/31/2030 | — | — | ||||||||||||||||||||
| (5) | 2/2/2017 | — | — | — | — | 3,374 | 46,021 | ||||||||||||||||||||
| (5) | 2/1/2018 | — | — | — | — | 9,167 | 125,038 | ||||||||||||||||||||
| (5) | 1/31/2019 | — | — | — | — | 13,569 | 185,081 | ||||||||||||||||||||
| (5) | 1/31/2020 | — | — | — | — | 17,140 | 233,790 | ||||||||||||||||||||
| 119,246 | 55,276 | 43,250 | 589,930 | ||||||||||||||||||||||||
Farshad Ghasripoor | (6) | 3/14/2013 | 5,388 | — | 3.92 | 3/14/2023 | — | — | |||||||||||||||||||
| (6) | 3/12/2014 | 31,667 | — | 6.00 | 3/12/2024 | — | — | ||||||||||||||||||||
| (6) | 3/10/2015 | 39,720 | — | 2.75 | 3/10/2025 | — | — | ||||||||||||||||||||
| (6) | 3/8/2016 | 26,247 | — | 8.52 | 3/8/2026 | — | — | ||||||||||||||||||||
| (4) | 2/2/2017 | 17,145 | 746 | 10.19 | 2/2/2027 | — | — | ||||||||||||||||||||
| (4) | 2/1/2018 | 22,529 | 9,278 | 7.50 | 2/1/2028 | — | — | ||||||||||||||||||||
| (4) | 1/31/2019 | 17,154 | 18,646 | 7.60 | 1/31/2029 | — | — | ||||||||||||||||||||
| (4) | 1/31/2020 | — | 27,215 | 10.21 | 1/31/2030 | — | — | ||||||||||||||||||||
| (5) | 2/2/2017 | — | — | — | — | 2,760 | 37,646 | ||||||||||||||||||||
| (5) | 2/2/2018 | — | — | — | — | 9,167 | 125,038 | ||||||||||||||||||||
| (5) | 1/31/2019 | — | — | — | — | 16,036 | 218,731 | ||||||||||||||||||||
| (5) | 1/31/2020 | — | — | — | — | 15,915 | 217,081 | ||||||||||||||||||||
| 159,850 | 55,885 | 43,878 | 598,496 | ||||||||||||||||||||||||
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Option Exercises and Stock Vested in 2020
The table below provides supplemental information relating to the value realized upon the vesting of restricted stock units during fiscal year 2020 for each named executive officer based on the closing share price of the Company’s common stock on the Nasdaq Stock Market on the applicable vesting date.
Option Awards | Stock Awards | |||||||||||||||
Number of shares acquired on exercise | Value realized on exercise | Number of shares acquired on vesting | Valued realized on vesting | |||||||||||||
(#) | ($) | (#) | ($) | |||||||||||||
Robert Mao | 45,708 | 451,607 | — | — | ||||||||||||
Joshua Ballard | — | — | 5,345 | 54,572 | ||||||||||||
Rodney Clemente | — | — | 14,290 | 145,934 | ||||||||||||
Emily Smith | — | — | 13,468 | 137,542 | ||||||||||||
Farshad Ghasripoor | — | — | 13,677 | 139,676 | ||||||||||||
Potential Payments Upon Termination or Change of Control
Change in Control Plan
We adopted the CIC Plan in March 2012 to provide change in control severance benefits for certain designated key employees. Each of the named executive officers currently serving participates in the CIC Plan described below.
The CIC Plan became effective on March 5, 2012. On December 31, and on each anniversary thereafter, the CIC Plan is extended automatically for an additional year unless the Compensation Committee of the Company’s Board of Directors delivers written notice, at least six months prior to the end of each such term, to each participant that the CIC Plan will not be extended. As a result, on December 31, 2020,2023, the CIC Plan was
2024
.Cash Compensation |
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•Additional 12 months of | ||
•100% of occurrence of the change |
COBRA Benefits |
•Company paid coverage following first eligibility limited to the lower of 12 months or re-employment eligibility of a comparable plan with another employer | ||
Equity Compensation | •Immediate vesting of termination | ||
Other Compensation | •Maximum of |
| reasonable outplacement costs |
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The CIC Plan also provides that if a change in control occurs and a participant’s equity
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| Energy Recovery, Inc. — 2024 Proxy Statement | 59 (ii)changes in the composition of the Board over a rolling twelve-month period, which changes result in less than a majority of the directors consisting of Incumbent Directors. “Incumbent Directors” include directors who are or were either (x) members of the Board as of the effective date, as defined in the CIC Plan or (y) elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination. Incumbent Directors do not include any individual not otherwise an Incumbent Director whose election or nomination resulted from an actual or threatened proxy contest (relating to the election of directors to the Board); or (iii)consummation of a complete liquidation or dissolution of the Company, or a merger, consolidation, or sale of all or substantially all of the Company’s then existing assets (collectively, a |
“Business Combination”) other than a Business Combination: (x) in
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Benefits
Name | Lump-Sum | Vesting of all Unvested Equity Compensation Awards, Including Time and Performance Vesting | COBRA Benefits for up to 12 Months (Medical, Dental, and Vision Benefits) (3) | Maximum Outplacement Services Reimbursement | ||||||||||||
($) | ($) | ($) | ($) | |||||||||||||
Robert Yu Lang Mao | 981,539 | 1,600,636 | — | 10,000 | ||||||||||||
Joshua Ballard | 533,000 | 857,436 | 31,722 | 10,000 | ||||||||||||
Rodney Clemente | 504,000 | 896,841 | 24,920 | 10,000 | ||||||||||||
Emily Smith | 480,000 | 845,868 | 11,258 | 10,000 | ||||||||||||
Farshad Ghasripoor | 451,157 | 864,006 | 24,499 | 10,000 | ||||||||||||
Named Executive Officer | Lump-Sum Payment (1) | Vesting of all Unvested Equity Compensation Awards (2) | COBRA Benefits for up to 12 Months (Medical, Dental and Vision Benefits) (3) | Maximum Outplacement Services Reimbursement | ||||
($) | ($) | ($) | ($) | |||||
David W. Moon (4) | — | — | — | — | ||||
Robert Yu Lang Mao (5) | — | — | — | — | ||||
Joshua Ballard | 605,664 | 757,372 | 38,141 | 10,000 | ||||
Rodney Clemente | 608,505 | 1,480,943 | 29,739 | 10,000 | ||||
Farshad Ghasripoor | 512,662 | 1,264,506 | 28,182 | 10,000 | ||||
William W. Yeung | 534,744 | 854,952 | 42,026 | 10,000 | ||||
Cash Compensation |
•Additional 6 months of | ||
COBRA Benefits | •Company paid coverage following first eligibility limited to the lower of plan with another employer |
Equity Compensation |
•Immediate vesting of 25% of unvested equity termination | ||
•Extension of post-termination exercise period of vested stock options from 3 months to |
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For
Named Executive Officer | Lump-Sum Payment (1) | Vesting of 25% of all Unvested Equity Compensation Awards (2) | COBRA Benefits for up to 6 Months (Medical, Dental and Vision Benefits) (3) | |||
($) | ($) | ($) | ||||
David W. Moon (4) | — | — | — | |||
Robert Yu Lang Mao (5) | — | — | — | |||
Joshua Ballard | 189,270 | 189,343 | 19,071 | |||
Rodney Clemente | 178,972 | 370,236 | 14,870 | |||
Farshad Ghasripoor | 160,207 | 316,127 | 14,091 | |||
William W. Yeung | 167,108 | 213,738 | 21,013 | |||
We identified a new Median Employee in 2020. To identify the Median Employee, we first determined our employee populationCompany’s Severance Plan as of October 23, 2023.
programs are structured in a
Stockholders Holding more than 5% of Common Stock | Shares Beneficially Owned (1) | Percent of Class (2) | ||
(#) | (%) | |||
BlackRock, Inc. (3) | 4,950,433 | 8.6 | ||
50 Hudson Yards New York, NY 10001 | ||||
Brown Capital Management, LLC (4) | 4,356,963 | 7.6 | ||
1201 North Calvert Street Baltimore, MD 21202 | ||||
FMR LLC (5) | 4,122,663 | 7.2 | ||
245 Summer Street Boston, MA 02210-1133 | ||||
The Vanguard Group, Inc. (6) | 2,955,709 | 5.2 | ||
100 Vanguard Boulevard Suite V26 Malvern, PA 19355 | ||||
Directors, Named Executive Officers, and Current Group | Number of Shares Owned Directly and Indirectly | Number of Shares Exercisable or Vested within 60 days after April 8, 2024 | Total Shares Beneficially Owned (1) | Percent of Class (2) | ||||
(#) | (#) | (#) | (%) | |||||
Arve Hanstveit (7) | 923,352 | 68,390 | 991,742 | 1.7 | ||||
Robert Yu Lang Mao (8) | 278,928 | 142,382 | 421,310 | 0.7 | ||||
Joshua Ballard | 14,129 | 330,700 | 344,829 | 0.6 | ||||
William W. Yeung (9) | 22,351 | 186,136 | 208,487 | 0.4 | ||||
Alexander J. Buehler | 19,619 | 103,558 | 123,177 | 0.2 | ||||
Farshad Ghasripoor (10) | 50,764 | 65,987 | 116,751 | 0.2 | ||||
Rodney Clemente | 11,365 | 54,268 | 65,633 | 0.1 | ||||
Pamela L. Tondreau | 17,969 | 34,114 | 52,083 | * | ||||
David W. Moon (11) | 19,250 | 3,232 | 22,482 | * | ||||
Joan K. Chow (12) | 8,654 | 3,703 | 12,357 | * | ||||
Colin R. Sabol (13) | 3,000 | 3,232 | 6,232 | * | ||||
All named executive officers and directors as a group (11 persons) | 1,369,381 | 995,702 | 2,365,083 | 4.1 | ||||
Named Executive Officer | Year | Salary | Stock Award (1) | Option Award (2) | Non-Equity Incentive Compensation (3) | All Other Compensation (4) | Total | |||||||
($) | ($) | ($) | ($) | ($) | ($) | |||||||||
David W. Moon | (5) | 2023 | 84,615 | 279,983 | — | — | 618 | 365,216 | ||||||
President and Chief Executive Officer | ||||||||||||||
Robert Yu Lang Mao | (6) | 2023 | 470,999 | 1,298,829 | — | — | 23,643 | 1,793,471 | ||||||
Former President and Chief Executive Officer | 2022 | 534,016 | — | 999,997 | 473,454 | 25,698 | 2,033,165 | |||||||
2021 | 514,423 | — | 1,000,771 | 463,500 | 28,239 | 2,006,934 | ||||||||
Joshua Ballard | 2023 | 372,897 | 832,756 | — | 153,819 | 22,277 | 1,381,748 | |||||||
Chief Financial Officer | (7) | 2022 | 355,788 | 149,993 | 349,996 | 218,385 | 22,558 | 1,096,720 | ||||||
(7) | 2021 | 342,735 | — | 375,244 | 205,871 | 21,091 | 944,941 | |||||||
Rodney Clemente | (8) | 2023 | 352,608 | 1,281,286 | — | 192,173 | 19,067 | 1,845,133 | ||||||
Senior Vice President, Water | (8) | 2022 | 336,430 | 324,985 | 174,998 | 221,248 | 18,013 | 1,075,675 | ||||||
2021 | 324,087 | 174,989 | 175,138 | 194,670 | 17,132 | 886,015 | ||||||||
Farshad Ghasripoor | (9) | 2023 | 315,637 | 1,141,052 | — | 168,156 | 30,600 | 1,655,445 | ||||||
Chief Technology Officer | 2022 | 301,156 | 162,497 | 162,498 | 191,647 | 30,722 | 848,521 | |||||||
2021 | 290,107 | 162,494 | 162,624 | 174,259 | 26,133 | 815,617 | ||||||||
William W. Yeung | 2023 | 332,732 | 659,389 | — | 177,135 | 26,413 | 1,195,669 | |||||||
Chief Legal Officer | (10) | 2022 | 320,409 | 299,976 | 150,006 | 213,447 | 27,147 | 1,010,984 | ||||||
2021 | 308,654 | 137,492 | 137,606 | 185,400 | 21,433 | 790,585 | ||||||||
Named Executive Officer | Year | Insurance Premiums | 401(k) Match | Other (a) | Total | |||||
($) | ($) | ($) | ($) | |||||||
David W. Moon | 2023 | 442 | — | 176 | 618 | |||||
Robert Yu Lang Mao | 2023 | 13,743 | 9,900 | — | 23,643 | |||||
2022 | 16,250 | 9,150 | 298 | 25,698 | ||||||
2021 | 19,058 | 8,700 | 481 | 28,239 | ||||||
Joshua Ballard | 2023 | 13,110 | 8,991 | 176 | 22,277 | |||||
2022 | 13,110 | 9,150 | 298 | 22,558 | ||||||
2021 | 11,910 | 8,700 | 481 | 21,091 | ||||||
Rodney Clemente | 2023 | 8,565 | 9,900 | 601 | 19,067 | |||||
2022 | 8,565 | 9,150 | 298 | 18,013 | ||||||
2021 | 7,951 | 8,700 | 481 | 17,132 | ||||||
Farshad Ghasripoor | 2023 | 21,424 | 9,000 | 176 | 30,600 | |||||
2022 | 21,424 | 9,000 | 298 | 30,722 | ||||||
2021 | 17,301 | 8,700 | 132 | 26,133 | ||||||
William W. Yeung | 2023 | 16,513 | 9,900 | — | 26,413 | |||||
2022 | 16,513 | 9,150 | 1,484 | 27,147 | ||||||
2021 | 12,252 | 8,700 | 481 | 21,433 | ||||||
Year | Principal Executive Officer (1) | Other Named Executive Officers (2) | Value of Initial Fixed $100 Investment Based On: | Net Income | Operating Income | |||||||||||
Summary Compensation Table | Compensation Actually Paid (3) | Summary Compensation Table | Compensation Actually Paid (4) | Total Shareholder Return (5) | Peer Group Total Shareholder Return (6) | |||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||
(In thousands, except value of initial fixed investment which are presented in whole dollars) | ||||||||||||||||
2023 | 2,159 | 1,886 | 1,519 | 1,289 | 192.44 | 177.93 | 21,504 | 19,050 | ||||||||
2022 | 2,033 | 2,123 | 1,008 | 1,004 | 209.30 | 136.03 | 24,049 | 24,829 | ||||||||
2021 | 2,007 | 4,671 | 859 | 1,736 | 219.51 | 161.44 | 14,269 | 13,831 | ||||||||
2020 | 2,092 | 3,266 | 834 | 1,110 | 139.33 | 118.52 | 26,387 | 31,294 | ||||||||
Deductions | Adjustments | |||||||||||||
Year | Summary Compensation Table | Stock Awards Granted in the Year | Fair Value of Equity Awards Granted in the Year and Unvested at Year End | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | Total Adjustments from Amounts Presented in the Summary Compensation Table * | Total Compensation * | |||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||
(In thousands) | ||||||||||||||
2023 | 2,159 | (1,579) | 1,167 | (251) | 390 | (273) | 1,886 | |||||||
2022 | 2,033 | (1,000) | 1,218 | (101) | (28) | 89 | 2,123 | |||||||
2021 | 2,007 | (1,001) | 2,161 | 978 | 525 | 2,664 | 4,671 | |||||||
2020 | 2,092 | (1,224) | 2,430 | — | (32) | 1,174 | 3,266 | |||||||
Deductions | Adjustments | |||||||||||||
Year | Summary Compensation Table | Stock Awards Granted in the Year | Fair Value of Equity Awards Granted in the Year and Unvested at Year End | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | Total Adjustments from Amounts Presented in the Summary Compensation Table * | Total Compensation * | |||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||
(In thousands) | ||||||||||||||
2023 | 1,519 | (979) | 729 | (70) | 90 | (230) | 1,289 | |||||||
2022 | 1,008 | (444) | 508 | (31) | (37) | (4) | 1,004 | |||||||
2021 | 859 | (331) | 629 | 388 | 191 | 877 | 1,736 | |||||||
2020 | 834 | (337) | 450 | 172 | (9) | 276 | 1,110 | |||||||
Estimated future payouts under non-equity incentive plan awards | All other stock awards: Number of shares of stock or units | All other option awards: Number of securities underlying options | Base price of stock awards or fair value of option awards | Grant date fair value of stock and option awards (1)(2) | ||||||||||||
Named Executive Officer | Grant Date | Threshold | Target | Maximum | ||||||||||||
($) | ($) | ($) | (#) | (#) | ($/Sh) | ($) | ||||||||||
David W. Moon (3) | 10/24/23 | — | — | — | 15,233 | — | 18.38 | 279,983 | ||||||||
Robert Yu Lang Mao (4) (5) | 1/30/23 | — | (5) | — | 14,012 | — | 21.41 | 299,997 | ||||||||
7/25/23 | — | — | — | 32,695 | — | 30.55 | 998,832 | |||||||||
Joshua Ballard (4) | 1/30/23 | — | 224,184 | — | 8,173 | — | 21.41 | 174,984 | ||||||||
7/25/23 | — | — | — | 21,531 | — | 30.55 | 657,772 | |||||||||
Rodney Clemente (4) (6) | 1/30/23 | — | 229,883 | — | 8,173 | — | 21.41 | 174,984 | ||||||||
7/25/23 | — | — | — | 23,120 | — | 30.55 | 706,316 | |||||||||
10/24/23 | — | — | — | 21,762 | — | 18.38 | 399,986 | |||||||||
Farshad Ghasripoor (4) (6) | 1/30/23 | — | 189,760 | — | 7,589 | — | 21.41 | 162,480 | ||||||||
7/25/23 | — | — | — | 18,939 | — | 30.55 | 578,586 | |||||||||
10/24/23 | — | — | — | 21,762 | — | 18.38 | 399,986 | |||||||||
William W. Yeung (4) | 1/30/23 | — | 199,886 | — | 7,006 | — | 21.41 | 149,998 | ||||||||
7/25/23 | — | — | — | 16,674 | — | 30.55 | 509,391 | |||||||||
Option Awards (1) | Stock Awards (1) | ||||||||||||||
Named Executive Officer | Date of Grant | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested (2) | ||||||||
(#) | (#) | ($) | (#) | ($) | |||||||||||
David W. Moon | (3) | 7/10/23 | 3,232 | 60,891 | |||||||||||
(4) | 10/24/23 | 15,233 | 286,990 | ||||||||||||
— | — | 18,465 | 347,881 | ||||||||||||
Robert Yu Lang Mao | (5) | 2/6/15 | 44,456 | — | 3.53 | 2/6/25 | |||||||||
(5) | 6/23/15 | 53,392 | — | 2.92 | 6/23/25 | ||||||||||
(5) | 6/23/16 | 15,327 | — | 8.60 | 6/23/26 | ||||||||||
(5) | 6/22/17 | 16,726 | — | 7.71 | 6/22/27 | ||||||||||
(5) | 6/14/18 | 15,879 | — | 8.49 | 6/14/28 | ||||||||||
(5) | 6/13/19 | 21,303 | — | 9.98 | 6/13/29 | ||||||||||
(6) | 5/20/20 | 9,317 | 23,294 | 7.79 | 5/20/30 | ||||||||||
(6) | 5/20/20 | 2,083 | 5,209 | 7.79 | 5/20/30 | ||||||||||
(6) | 2/1/21 | 7,980 | 55,865 | 13.96 | 2/1/31 | ||||||||||
(6) | 1/28/22 | 64,822 | 70,459 | 18.99 | 1/28/32 | ||||||||||
(9) | 1/30/23 | 14,012 | 263,986 | ||||||||||||
(8) | 7/25/23 | 32,695 | 615,974 | ||||||||||||
(5) | 10/26/23 | 4,153 | 78,243 | ||||||||||||
251,285 | 154,827 | 50,860 | 958,203 | ||||||||||||
Option Awards (1) | Stock Awards (1) | ||||||||||||||
Named Executive Officer | Date of Grant | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested (2) | ||||||||
(#) | (#) | ($) | (#) | ($) | |||||||||||
Joshua Ballard | (7) | 8/13/18 | 186,393 | — | 9.27 | 8/13/28 | |||||||||
(7) | 1/31/19 | 20,800 | — | 7.60 | 1/31/29 | ||||||||||
(7) | 1/31/20 | 53,295 | 1,134 | 10.21 | 1/31/30 | ||||||||||
(7) | 2/1/21 | 44,092 | 18,156 | 13.96 | 2/1/31 | ||||||||||
(7) | 7/26/21 | 3,840 | 2,516 | 20.86 | 7/26/31 | ||||||||||
(7) | 1/28/22 | 22,687 | 24,661 | 18.99 | 1/28/32 | ||||||||||
(8) | 3/7/22 | 5,274 | 99,362 | ||||||||||||
(9) | 1/30/23 | 8,173 | 153,979 | ||||||||||||
(8) | 7/25/23 | 21,531 | 405,644 | ||||||||||||
331,107 | 46,467 | 34,978 | 658,985 | ||||||||||||
Rodney Clemente | (7) | 1/31/20 | 13,107 | 611 | 10.21 | 1/31/30 | |||||||||
(7) | 2/1/21 | 23,742 | 9,777 | 13.96 | 2/1/31 | ||||||||||
(7) | 1/28/22 | 11,343 | 12,331 | 18.99 | 1/28/32 | ||||||||||
(9) | 1/31/20 | 4,285 | 80,729 | ||||||||||||
(9) | 2/1/21 | 6,268 | 118,089 | ||||||||||||
(9) | 1/28/22 | 6,912 | 130,222 | ||||||||||||
(8) | 3/7/22 | 5,274 | 99,362 | ||||||||||||
(9) | 1/30/23 | 8,173 | 153,979 | ||||||||||||
(8) | 7/25/23 | 23,120 | 435,581 | ||||||||||||
(10) | 10/24/23 | 21,762 | 409,996 | ||||||||||||
48,192 | 22,719 | 75,794 | 1,427,958 | ||||||||||||
Farshad Ghasripoor | (7) | 2/2/17 | 1,119 | — | 10.19 | 2/2/27 | |||||||||
(7) | 1/31/20 | 26,648 | 567 | 10.21 | 1/31/30 | ||||||||||
(7) | 2/1/21 | 22,046 | 9,078 | 13.96 | 2/1/31 | ||||||||||
(7) | 1/28/22 | 10,533 | 11,450 | 18.99 | 1/28/32 | ||||||||||
(9) | 1/31/20 | 3,979 | 74,964 | ||||||||||||
(9) | 2/1/21 | 5,820 | 109,649 | ||||||||||||
(9) | 1/28/22 | 6,418 | 120,915 | ||||||||||||
(9) | 1/30/23 | 7,589 | 142,977 | ||||||||||||
(8) | 7/25/23 | 18,939 | 356,811 | ||||||||||||
(10) | 10/24/23 | 21,762 | 409,996 | ||||||||||||
60,346 | 21,095 | 64,507 | 1,215,312 | ||||||||||||
Option Awards (1) | Stock Awards (1) | ||||||||||||||
Named Executive Officer | Date of Grant | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested (2) | ||||||||
(#) | (#) | ($) | (#) | ($) | |||||||||||
William W. Yeung | (7) | 6/20/16 | 46,331 | — | 8.95 | 6/20/26 | |||||||||
(7) | 2/2/17 | 21,867 | — | 10.19 | 2/2/27 | ||||||||||
(7) | 2/1/18 | 31,807 | — | 7.50 | 2/1/28 | ||||||||||
(7) | 1/31/19 | 30,293 | — | 7.60 | 1/31/29 | ||||||||||
(7) | 1/31/20 | 22,547 | 480 | 10.21 | 1/31/30 | ||||||||||
(7) | 2/1/21 | 18,654 | 7,682 | 13.96 | 2/1/31 | ||||||||||
(7) | 1/28/22 | 9,723 | 10,570 | 18.99 | 1/28/32 | ||||||||||
(9) | 1/31/20 | 3,367 | 63,434 | ||||||||||||
(9) | 2/1/21 | 4,925 | 92,787 | ||||||||||||
(9) | 1/28/22 | 5,924 | 111,608 | ||||||||||||
(8) | 3/7/22 | 5,274 | 99,362 | ||||||||||||
(9) | 1/30/23 | 7,006 | 131,993 | ||||||||||||
(8) | 7/25/23 | 16,674 | 314,138 | ||||||||||||
181,222 | 18,732 | 43,170 | 813,322 | ||||||||||||
Option Awards | Stock Awards | |||||||
Named Executive Officer | Number of shares acquired on exercise | Value realized on exercise | Number of shares acquired on vesting | Valued realized on vesting (1) | ||||
(#) | ($) | (#) | ($) | |||||
Robert Yu Lang Mao (2) | 361,399 | 2,491,737 | — | — | ||||
Joshua Ballard | 15,000 | 214,212 | 7,983 | 179,459 | ||||
Rodney Clemente | 31,373 | 593,803 | 17,705 | 393,597 | ||||
Farshad Ghasripoor | 51,131 | 1,040,375 | 14,374 | 317,158 | ||||
William W. Yeung | — | — | 14,963 | 333,022 | ||||
Proposal No. 3 – Ratification of Appointment of Independent Registered Public Accounting Firm |
2023 | 2022 | ||
($) | ($) | ||
Audit Fees (1) | 1,093,105 | 1,019,105 | |
Tax Fees (2) | 57,750 | 47,959 | |
All Other Fees (3) | 66,895 | 1,895 | |
Total | 1,217,750 | 1,068,959 | |
Olav Fjell
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
OTHER MATTERS |
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Olav Fjell joined our Board of Directors in June 2015. Mr. Fjell isthe fiscal year ending
Robert Yu Lang Mao has served as a member of our Board of Directors since September 2010 and was appointed Chairman
Alexander J. Buehler
Sherif Fodajoined our Boardcommon stock you
Arve Hanstveit joined our Board of Directors in August 1995. Between August 1997 and November 2010, Mr. Hanstveit served as Partner and Vice President of ABG Sundal Collier, a Scandinavian investment bank, where he was responsible for advising U.S. institutional investors on equity investments in Nordic companies. Prior to joining ABG Sundal Collier, Mr. Hanstveit worked as a securities analyst and as a portfolio manager for TIAA-Cref, a large U.S. institutional investor. From February 2007 to January 2010, Mr. Hanstveit served on the Board of Directors of Kezzler AS, a privately-held Norwegian company, which delivers secure track and trace solutions
Pamela Tondreau joined our Board of Directors in July 2019. Ms. Tondreau was elected as Lead Independent Director in May 2020. Ms. Tondreau served as a consultant to Infineon Technologies AG, which purchased Cypress Semiconductor Corporation (“CY”) on April 16, 2020 until July 1, 2020. Prior to her consulting role, Ms. Tondreau served as Chief Legal Officer, Corporate Secretary and Executive Vice President of Human Resources of CY from 2014 through 2016. Ms. Tondreau is a member of the Alumni Board of McGeorge School of Law. Prior to her tenure with CY, Ms. Tondreau was an executive with Hewlett-Packard Corporation (“HP”) from 1999-2012 holding various positions including Chief Intellectual Property Counsel, Deputy General Counselrevocation to the Chief Technology Officer, counselCompany’s
Proposal No. | Vote | Board Voting Recommendation | Routine or Non- Routine (1) | Discretionary Voting by Broker Permitted? | Vote Required for Approval | Impact of Abstention | Impact of Broker Non-votes (Uninstructed Shares) | |||||||
1 | Election of the director nominees | FOR | Non- routine | No | Plurality (2) | No impact | No impact | |||||||
2 | Advisory, non- binding approval of executive compensation | FOR | Non- routine | No | Majority of shares present or represented by proxy and entitled to vote | Has the same effect as a vote against | No impact | |||||||
3 | Ratification of independent public accountants | FOR | Routine | Yes | Majority of shares present or represented by proxy and entitled to vote | Has the same effect as a vote against | Broker has the discretion to vote | |||||||
those materials. The following is biographical information for our current executive officers.
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Robert Yu Lang Mao has served aschoice to view future proxy statements and annual reports
Joshua Ballard joined
Farshad Ghasripoor joined
Rodney Clemente joined Energy Recovery in 1998 and currently holds the position of Senior Vice President, Water. Responsible for all of Energy Recovery, Inc.’s sales, technical service, support and aftermarket activities for the Water business unit, Mr. Clemente provides a high level of system design, technical consultation and commercial support for desalination customers worldwide. During Mr. Clemente’s tenure with the Company, he has gained intimate knowledge of energy recovery technologies, pumping systems, desalination systems and various industrial processes. His expertise also spans several verticals, including manufacturing, marketing and business development. He is an active member of many of the leading industry organizations such as IDA and AMTA. Mr. Clemente has a BS in Engineering from California State University, East Bay and an Executive MBA from the University of Virginia’s Darden School of Business.
William W. Yeung joined Energy Recovery in June 2016 and is the Chief Legal Officer. Mr. Yeung brings over 20 years of legal experience, with extensive experience in securities law, corporate governance and compliance, corporate strategy, SEC reporting and regulatory compliance, mergers and acquisitions, and general contracts. His clients have included Goldman Sachs, JP Morgan, Credit Suisse, Citigroup Global Markets, Lehman Brothers, UBS, Salomon Smith Barney, BNP Paribas, Del Monte, Sony Capital Corporation, McDonald’s Corporation, KBC Bank, The Interpublic Group of Companies, The Bank of New York, United Technologies Corporation, and Nortel Networks. Prior to joining the Company, Mr. Yeung was the General Counsel of SharesPost, Inc. and served as a senior legal executive for Thomas Weisel Partners Group Inc. and Socialutions Inc. Mr. Yeung began practicing law at Cleary, Gottlieb, Steen & Hamilton LLP in New York and practiced at Morrison & Foerster LLP in San Francisco. He holds a JD from New York University School of Law and a BA from Boston College.
Reports 2023 ourthe Bylaws regarding the requirementsourthe Bylaws, to be2022,2025, a stockholder’s notice must27, 202125, 2024 and December 27, 2021.23,ourthe Bylaws, a stockholder’s notice to the Secretary must set forth as to eachourthe Company’s capital stock that are owned beneficially or of record bycorporation;Company; (c) whether and the extent to which any other transaction,corporation)Company) has been made by or on behalf of the stockholder,corporation;Company; (d) a representation that“Board and Corporate Governance Matters“Committees of the Board of Directors – The Nominating andCompany’sCompany’s Proxy MaterialsCompany’s annual meeting of stockholders to be held in 20222025 Annual Meeting, must be received by the Corporate CA , California94577 Attn: Secretary)) no later than January10, 2022December 23, 2024 in order to beourthe Bylaws permit certain of ourthe Company’s stockholders who haveourthe Company outstanding common stock continuously for at20222025 Annual of Stockholders must be delivered to ourthe Company’s Corporate Secretary at our principal executive offices the Company (at Energy27, 2021,25, 2024 and no later than the close of business on December 27, 2021.23,ourthe Bylaws with respect to each20222025 Annual Meeting of Stockholders and must otherwise be in compliance with ourthe Bylaws.Beneficial Ownership Reporting Complianceourthe Company’s review of copies of the reports we havethe Company has’ receivedusthe Company from the individuals required to file thewe believethe Company believes that each of ourits executive officers and directors has compliedourthe Company’s common stock during2020. Matters of Directors does not know of any other matters to be presented at the 2024Annual2020 (our “Annual Report”2023 (theourthe Company’s proxy soliciting materials), is beingourthe 2023 Annual Report atourthe 2023 Annual Report may also be directed to the Corporate Secretary at (at Attn: Secretary.Weourthe 2023 Annual Report filed with the SEC on March 11, 2021.February 22, 2024. It iswethe Company will mail without charge a copy of ourthe 2023 Annualourthe 2023 Annual Report. Exhibits to ourthe 2023 Annual Report are available uponourthe Company’s expenses in furnishing theat(at Energy Attn: Secretary.By Order of the Board of Directors,
William YeungChief Legal OfficerApril 26, 2021San Leandro, CaliforniaProposed Amendment to the Company’s Amended and Restated Certificate of Incorporation to Provide for the Annual Election of DirectorsThe proposed amendment to the Company’s Amended and Restated Certificate of Incorporation would revise Section 2 ARTICLE V thereof as shown below (new language is indicated by bolded underlined text, and deletions are indicated by strikethroughs).Section 5.2. The directors of the Corporation shall be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the date hereof, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years.Notwithstanding the foregoing, (1)at the 2021 annual meeting of stockholders, the ClassI directors whose terms expire at that meeting shall be elected to hold office for a one-year term expiring at the 2022 annual meeting of stockholders; (2)at the 2022 annual meeting of stockholders, the ClassI and ClassII directors whose terms expire at that meeting shall be elected to hold office for a one-year term expiring at the 2023 annual meeting of stockholders; and (3)at the 2023 annual meeting of stockholders and each annual meeting of stockholders thereafter, all directors shall be elected for a one-year term expiring at the next annual meeting of stockholders. At and after the annual meeting of stockholders to be held in 2023, the directors shall no longer be classified with respect to the time for which they hold office.The proposed amendment to the Company’s Amended and Restated Certificate of Incorporation would revise Section 1 Article VI thereof as shown below (new language is indicated by bolded underlined text, and deletions are indicated by strikethroughs).Section 6.1. Any director or the entire Board of Directors may be removed from office at any time, but with respect to any director who has been elected for a term in excess of one year, only for cause, and only by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors.
