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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ProProxy xy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant |
| Filed by a Party other than the Registrant |
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| Preliminary Proxy Statement |
| Confidential, for Use of the Commission Only (as permitted by Rule |
| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material under |
ADVANCED ENERGY INDUSTRIES, INC.
(Name of Registrant Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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A Message from Our CEO
Dear Stockholders:
It is our pleasure to invite you to attend ourPlease join us at Advanced Energy’s 2022 Annual Meeting of Stockholders at 9:00 a.m., Mountain Daylight Time, on Thursday, April 30, 2020,Monday, May 9, 2022, at our offices located at 1595 Wynkoop Street, Suite 800, Denver, Colorado, 80202.
Fiscal 2019 was a transformational yearIn 2021, we experienced an unprecedented level of demand for Advanced Energy as we accelerated our strategy to be a diversified global leader of precision electricEnergy’s industry-leading power conversion and control solutions. ThroughThe strong demand validates the acquisitionsuccess of Artesyn Embedded Power,our strategic focus on precision power. Despite industry-wide supply constraints limiting our ability to meet customer demand, our mitigation efforts enabled us to deliver a year of revenue growth and solid profitability.
During 2021, we took several actions to accelerate our growth and scale the company. We expanded the capabilities of our leadership team by bringing in strong and experienced leaders, including a new Chief Operations Officer. We reorganized our product development and marketing teams to increase focus and speed and to better serve our customers. Lastly, we have allocated more engineering and customer facing resources to the Semiconductor, Industrial and Medical markets, accelerating our new product introduction and design wins in these verticals.
As we look forward, we see exciting growth opportunities ahead of us. We enter the new year with record backlog and significant potential earnings power as the supply environment improves. With 70% of our revenue coming from proprietary products, we are strategically targeting long life-cycle markets with our comprehensive portfolio of power solutions. Our customers have come to rely on Advanced Energy’s innovation and technical talent to solve their most challenging power delivery problems. With a strong lineup of differentiated products targeting the right markets, I believe Advanced Energy is now a leading supplier in each of the four major market verticals we serve: Semiconductor Equipment, Industrial & Medical applications, Data Center Computing,well positioned to deliver sustained profitable growth and Telecom & Networking. At the same time, we took actions to streamline our Company while increasing investment in our critical power technologies. As a result, we delivered record revenue and solid profitability during a period of served market weakness and believe we are positioned for accelerated earnings growth going forward.
We are in the midst of the 4th Industrial Revolution. The ability to collect, compute, store and transmit data continues to transform our lives. The use of data analytics is impacting many industries such as health care, automation, manufacturing, security, safety, entertainment and education. These complex analytics are enabled by innovations in technologies such as advanced computing, data storage, Internet of Things and high-speed connectivity. Our broad portfolios of power delivery solutions are at the center of these essential technologies and applications that enable the 4th Industrial Revolution.
During fiscal 2019, we:
Delivered record revenue with nearly 10% growth over 2018
Acquired Artesyn Embedded Power and increased our served applications
Increased our market presence and content
Invested in next generation technologies, scale and business continuity
Continued to develop our culture across our growing global organization
Developed initiatives around our environment & sustainability goals
As we continue to pursue our growth strategy, with our increased addressable market, new verticals, additional applications, continuing focused innovation, and the efficiency gains we can achieve through the integration of Artesyn Embedded Power, we are very excited about the future of Advanced Energy.shareholder value.
On behalf of our employees and directors,the Board of Directors, we thank you for your continued support and confidence in our Company.confidence.
Best Regards,
Yuval Wasserman
Stephen D. Kelley
President &and Chief Executive Officer
March 10, 202017, 2022
2022 ANNUAL | |
PROXY STATEMENT |
Notice of the Annual Meeting of Stockholders
To be held on April 30, 2020May 9, 2022
To Our Stockholders:
You are cordially invited to attend the 20202022 annual meeting of stockholders (the “Annual Meeting”) of Advanced Energy Industries, Inc. (“Advanced Energy” or the “Company”). Please see below for the meeting logistics and business matters to be addressed at the Annual Meeting.
Logistics |
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When
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| Board Recommendation |
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| 1 | Election of eight (8) directors; |
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| 2 | Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2020; |
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| 3 | Advisory approval of Advanced Energy’s compensation of its named executive officers; |
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| 4 | Any other matters of business properly brought before the Annual Meeting. |
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| Each of matters 1 through 3 is described in detail in the accompanying proxy statement, dated March 10, 2020. | |||||||||||||||||
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| Your vote is important. All stockholders are cordially invited to attend the Annual Meeting in person. If you do not plan to attend the Annual Meeting and vote your shares of common stock in person, please authorize a proxy to vote your shares in one of the following ways: | |||||||||||||||||
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| Place your vote via internet at www.proxypush.com/aeis | Call toll-free (if US or Canada) | Mark, date, sign and mail your proxy card in the postage-paid envelope provided | |||||||||||||||
When Where Suite 800 Denver, Colorado 80202 Who Can Vote | | | | Board Recommendation | | Page | ||||||||||||
| 1 | Election of ten (10) directors; | | “FOR” | | 4 | ||||||||||||
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| 2 | Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2022; | | “FOR” | | 24 | ||||||||||||
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| 3 | Advisory approval of Advanced Energy’s compensation of its named executive officers; | | “FOR” | | 26 | ||||||||||||
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| | 4 | Any other matters of business properly brought before the Annual Meeting. | | | | 56 | |||||||||||
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| Each of matters 1 through 3 is described in detail in the accompanying proxy statement, dated March 17, 2022. | |||||||||||||||||
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| Your vote is important. All stockholders are cordially invited to attend the Annual Meeting in person. We will follow appropriate health protocols such as mask wearing and social distancing that are applicable and advisable considering the COVID-19 pandemic as it exists on the meeting date. If you do not plan to attend the Annual Meeting and vote your shares of common stock in person, please authorize a proxy to vote your shares in one of the following ways: | |||||||||||||||||
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| Place your vote via internet at www.proxypush.com/aeis | Call toll-free (if US or Canada) | Mark, date, sign and mail your proxy card in the postage-paid envelope provided |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 30, 2020May 9, 2022
This notice for the Annual Meeting, the proxy statement.statement, the proxy card, and the Company’s 20192021 Annual Report including the Annual Report on Form 10-K are available online at: www.proxydocs.com/aeis.
Any proxy may be revoked at any time prior to its exercise at the Annual Meeting.
| By Order of the Board of Directors, |
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Denver, Colorado | Thomas O. McGimpsey |
March |
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PROXY STATEMENT |
Proxy Summary
The Board of Directors of the Company requests your proxy in connection with the Annual Meeting. This proxy statement and the accompanying proxy card and materials are first being sent to stockholders of Advanced Energy Industries, Inc. or made available electronically on or about March 11, 2020.25, 2022.
This summary highlights key information presented elsewhere in this year’s proxy statement. This section does not contain all the information that you should consider, and you should read the entire proxy statement before voting.
Our Meeting Agenda
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PROPOSAL |
| BOARD | EFFECT OF BROKER NON-VOTES AND ABSTENTIONS | VOTES REQUIRED | ||
1 | Election of | Page 4 | FOR | No Effect | Plurality of votes present (by proxy or in person) - subject to the resignation policy described on | |
2 | Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for | Page | FOR | No Effect | Majority of votes cast at the Annual Meeting | |
3 | Advisory | Page | FOR | No Effect | Majority of votes cast |
We do not know of any other matters to be submitted to the stockholders at the Annual Meeting. If any other matters properly come before the Annual Meeting, the proxy holders intend to vote the shares they represent on such matters as the Board of Directors may recommend. The proposed corporate actions on which the stockholders are being asked to vote at the Annual Meeting are not corporate actions for which stockholders of a Delaware corporation have the right to exercise appraisal rights under the Delaware General Corporation Law.
Our Governance Best Practices
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WHAT WE DO | | WE DO NOT DO |
√To ensure effective management oversight, our Board Governance Guidelines specify that the Chairman of the Board and CEO positions be held by separate persons. √A substantial portion of compensation is performance-based. √We maintain a highly independent, √We maintain robust stock ownership requirements for directors and executives. | | xThere are no interlocking relationships among our directors. xThere are no excise tax gross-up arrangements with any of our executive xWe do not guarantee incentive xOur policies prohibit hedging or pledging of company xWe do not provide significant perquisites or separate pension programs to our executive |
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PRECISION | POWER | PERFORMANCE | 1 |
2022 ANNUAL | |
PROXY STATEMENT |
Advanced Energy’s Environmental, Social and Governance Initiatives
We are dedicated to improving lives through innovation by creating industry-leading power conversion solutions. From smartphone and video streaming to medical equipment and robots, our products and solutions are used to create the essential technologies that touch our everyday life. But how we do business is as important as the products we produce. We drive business success by delighting our customers, empowering our employees, and supporting our communities. Sustainability is key to our strategy in the products we make, the way we operate, and how we govern as a public company. We incorporate environmental, social, and governance (“ESG”) responsibility across our business with the same focus and dedication we approach all our initiatives.
We are excited to share our “value driven” ESG initiatives, areas of focus, and accomplishments. Our results and ongoing efforts related to ESG are an integral part of our commitment to deliver long-term value to our global stakeholders. This commitment is driven from the highest levels of the Company, including our Chief Executive Officer, executive management team, and Board of Directors. We look forward to making a difference in the markets and communities we serve.
In 2020, our Board officially added oversight of the Company’s sustainability program to the Nominating, Governance & Sustainability Committee (“NG&S”). As indicated in its charter, this committee is directed to review the Company’s progress towards achieving its sustainability goals as well as to review environmental, governance, and social trends that could impact the Company’s operations, performance, and reputation. We believe that our goals to increase the energy efficiency of our products, and to improve the efficiency of our operations, reflect our efforts to reduce the environmental impact and carbon emissions that may be linked to the industries we serve.
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2 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
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Corporate Social Responsibility and Sustainability
Our goal as a company is to lead the world in the application of precision power conversion to improve lives and to create value for our global stakeholders. In every aspect of our business operation we strive to be a positive force for our employees and in our communities, while conserving resources to minimize any negative impact on the environment and the planet. We incorporate these principles into everything we do.
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| Recycling. We are committed to recycling the waste generated from our business activities as much as possible. |
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Diversity and Inclusion. We have approximately 10,000 employees located across the globe. Each person’s background and unique skill set are fundamental to our success. In 2020, the Company launched the AE Diversity Scholarship Program, aimed at developing emerging talent and promoting greater ethnic, racial and gender diversity in STEM fields. In 2021, the Company continued to accept applications from undergraduate and post-graduate students attending the five leading institutions in the field of power technologies. The Corporate DE&I Steering Committee provides guidance and direction on DE&I while enabling local activities to develop specific, targeted initiatives as appropriate. |
| Volunteerism. We offer each employee eight hours of paid time off to volunteer with a self-selected 501(c)(3) organization. |
| Community Involvement. We work closely with community organizations, including supporting STEM education in local schools, working with universities around the world to facilitate their innovative research projects, participating in local chambers of commerce and partnering with local nonprofit |
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Governance | | Ethical Business Practices |
Commitment. Advanced Energy is firmly committed to strong and effective corporate governance practices and accountability to its stockholders. Continuous Improvement. We routinely review our governance practices against evolving best practices and consider feedback and input from our stockholders. We encourage you to review our Board Governance Guidelines on our website: https://www.advancedenergy.com/about-us/leadership-team/board-governance-guidelines/. |
| Human Rights. Respecting the human rights of our employees and all those involved in our business operations is a core principle for Advanced Energy. Our Code of Conduct, which also applies to our suppliers, specifically prohibits activities involving slave or forced labor, human trafficking, and child labor. |
| Employee Training and Helplines. We actively and regularly train all our employees on ethical business practices and provide a 24-hour hotline to address ethics issues should they arise. |
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PRECISION | POWER | PERFORMANCE | 3 |
2022 ANNUAL | ||
PROXY STATEMENT |
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
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What am I voting on and how should I vote? | You are being asked to elect We believe that each of the nominees The Board of Directors therefore recommends you vote“FOR”each of the nominees set forth below. |
We routinely evaluate the composition of the Board to ensure we have a balanced mix of expertise. Accordingly, this year brings a new addition and a departure to our Board.
David W. Reed, the former Executive Vice President Global Operations at NXP Semiconductors N.V. joined the Board in February 2022. Mr. Reed is the fourth independent director to join our Board since 2018 and brings more than 25 years of executive management and operations experience in the semiconductor capital equipment and manufacturing industry, particularly in the areas of global operations and supply chain management. Thomas M. Rohrs is not a nominee for reelection at the Annual Meeting and will be departing as a Board member. The Board thanks Mr. Rohrs for his many years of dedicated and committed service since 2006 to the Board and to the stockholders of the Company.
A board of eight (8)ten (10) directors is to be elected at the Annual Meeting. The Board of Directors has nominated for reelection the persons listed below. Each nominee was recommended for reelection by our Nominating, and Governance & Sustainability Committee. Each of the nominees is currently a director of Advanced Energy. In the event that any nominee is unable to or declines to serve as a director at the time of the Annual Meeting, the proxy holders will vote in favor of a nominee designated by the Board of Directors, on recommendation by the Nominating, and Governance & Sustainability Committee, to fill the vacancy. We are not aware of any nominee who will be unable or who will decline to serve as a director. The term of office of each person elected as a director at the Annual Meeting will continue from the end of the Annual Meeting until the next annual meeting of the Company’s stockholders, or until a successor has been elected and qualified or until such director’s earlier resignation or removal.
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4 | PRECISION | POWER | PERFORMANCE | |
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PROXY STATEMENT |
Overview of Board Nominees
The nominees presented below represent a broad group of experienced business leaders. The below table provides a summary of our nominees’ background and responsibilities.responsibilities as of February 1, 2022.
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Name and Principal Occupation | Age | Director |
| Audit & | Nominating & | Compensation | Pricing | Age | Director |
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GRANT H. BEARD (Chairman) Currently serves as Sr. Executive Operating Partner for Blue Point Capital | 59 | 2014 |
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GRANT H. BEARD (Chairman) Currently serves as Sr. Executive Operating Partner for Blue Point Capital, a private equity firm | 61 | 2014 | | | C | |||||||||
FREDERICK A. BALL Former EVP & Chief Administrative Officer of Marketo Inc. | 57 | 2008 |
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| M | 59 | 2008 | | C | M | ||
ANNE T. DELSANTO Currently serves as a limited partner at Operator Collective and Stage 2 Capital | 58 | 2020 | | | M | M | | |||||||
TINA M. DONIKOWSKI Former Vice President, Global Locomotive Business at General Electric Company | 60 | 2018 |
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RONALD C. FOSTER Former Chief Financial Officer of Micron Technology, Inc. | 69 | 2014 |
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| M | 71 | 2014 | | C | | M | |
EDWARD C. GRADY Former Chief Executive Officer of Electro Scientific Industries, Inc. | 72 | 2008 |
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| 74 | 2008 | | M | | ||
THOMAS M. ROHRS Currently serves as Executive Chairman and director of Ichor Systems, Inc. | 69 | 2006 |
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STEPHEN D. KELLEY Currently serves as President, CEO, and director of Advanced Energy | 59 | 2021 | | | | | | |||||||
LANESHA T. MINNIX Currently serves as Senior Vice President, Chief Legal Officer and Corporate Secretary of Flowserve Corporation | 46 | 2020 | | M | M | | | |||||||
DAVID W. REED Former Executive Vice President Global Operations at NXP Semiconductors N.V. | 63 | 2022 | | M | | |||||||||
JOHN A. ROUSH Currently serves as operating executive advisor to ACON Investments, LLC, a private equity firm. | 55 | 2016 |
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YUVAL WASSERMAN Currently serves as President, CEO, and director of Advanced Energy | 65 | 2014 |
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Board Nominee Highlights
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PRECISION | POWER | PERFORMANCE | 5 |
2022 ANNUAL | |
PROXY STATEMENT |
Nominees
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Grant H. Beard (Chairman) | |
Director Since: 2014 | Committees: |
Age: | |
Independent Director | |
Business Experience: | |
Grant H. Beard currently serves as a senior executive Operating Partner for Blue Point Capital, a private equity firm, and as a senior advisor to Center Rock Capital, a global alternative investment firm. Mr. Beard served as Chairman and Chief Executive Officer of Wynnchurch Industries, LLC, a diversified holding company investing in engineered product businesses, from January 2016 to June 2017. Mr. Beard also served as a Senior Advisor to Wynnchurch Capital Ltd. Prior to joining Wynnchurch, Mr. Beard served as the Chairman and Chief Executive Officer of Wolverine Advanced Materials LLC, a Wynnchurch company, from July 2012 until October 2015. Mr. Beard served as President and Chief Executive Officer of Constar International, Inc. from 2010 to 2012, where he led the financial and operational restructuring of Constar’s global packaging business that was later sold to Plastipak Corporation. Prior to that, Mr. Beard served as President & CEO of TriMas Corporation, Chairman & CEO of Health Media, and Global Group President of Fluid Management Products at Dana/Echlin Corporation. In addition, Mr. Beard served as a senior executive Operating Partner with Blue Point Capital from 2009 to 2014. Mr. Beard also has experience at two private equity/merchant banking groups, Anderson Group and Oxford Investment Group, where he was actively involved in corporate development, strategy and operations management. | |
Key Skills and Qualifications: | |
| ● Global Expertise
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Frederick A. Ball | |
Director Since: 2008 | Committees: |
Age: | |
Independent Director | |
Business Experience: | |
Frederick A. Ball previously served as Executive Vice President and Chief Administrative Officer of Marketo Inc., a leading provider of a cloud-based marketing platform, from February 2016 through August 2016. Prior to that, Mr. Ball was Marketo’s Senior Vice President and Chief Financial Officer from May 2011 to February 2016. Prior to joining Marketo, Mr. Ball was the Chief Financial Officer for a number of private and public technology companies including Webroot Software, BigBand Networks, Inc., and Borland Software Corporation. Mr. Ball also served as Vice President, Mergers and Acquisitions for KLA-Tencor Corporation, a manufacturer of semiconductor equipment, and prior to that as its Vice President of Finance. Mr. Ball was with PricewaterhouseCoopers LLC for over 10 years. | |
Key Skills and Qualifications: | |
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6 | PRECISION | POWER | PERFORMANCE | |
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PROXY STATEMENT |
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Director Since: | Committees: |
Age: | |
Independent Director | |
Business Experience: | |
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Key Skills and Qualifications: | |
● Senior Leadership Experience ● Public Board Experience ● Global Expertise | ● Technical Expertise ● Financial Expertise |
Tina M. Donikowski | |
Director Since: 2018 | Committees: Audit and Finance, Nominating, Governance & Sustainability |
Age: 62 | |
Independent Director | |
Business Experience: | |
Tina M. Donikowski retired from General Electric Company, a diversified industrial company, in October 2015 after 38 years with the company. Ms. Donikowski served in a number of senior positions during her career at General Electric Company, including most recently as Vice President, Global Locomotive Business, GE Transportation, from January 2013 until her retirement. Ms. Donikowski currently serves on the Board of Directors of Atlas Copco AB (STOCKHOLM: ATCO), a world-leading provider of sustainable productivity solutions based in Stockholm, Sweden, CIRCO International (NYSE: CIR), a leading provider of flow control solutions and other highly engineered products and subsystems used in energy, aerospace and industrial markets based in Burlington, Massachusetts, TopBuild (NYSE: BLD) a leading installer and distributor of insulation and building material products to the U.S. construction industry based in Daytona Beach, Florida, and Eriez Magnetics, a privately held manufacturer and designer of magnetic, vibratory, and metal detection applications based in Erie, Pennsylvania. Ms. Donikowski also serves as a member of the Board of Trustees, Gannon University, and the Board of Trustees, Boys & Girls Club of Erie, Pennsylvania. Ms. Donikowski holds a Bachelor of Science degree in Industrial Engineering, as well as an Honorary Doctorate, from Gannon University. | |
Key Skills and Qualifications: | |
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PRECISION | POWER | PERFORMANCE | 7 |
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Ronald C. Foster | |
Director Since: 2014 | Committees: Audit and Finance, |
Age: | |
Independent Director | |
Business Experience: | |
Ronald C. | |
Key Skills and Qualifications: | |
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Edward C. Grady | ||
Director Since: | Committees: |
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Independent Director | |
Business Experience: | |
Edward C. Grady is currently on the Southern Illinois University Edwardsville SIUE Foundation board. He served as President and Chief Executive Officer of Electro Scientific Industries, Inc., a leading supplier of innovative laser-based microfabrication solutions for industries reliant on micro technologies, from February 2014 to September 2016. Mr. Grady served as Chairman and Chief Executive Officer of Reel Solar Inc., an | |
Key Skills and Qualifications: | |
| ● Global Expertise
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8 | PRECISION | POWER | PERFORMANCE | |
| 2022 ANNUAL |
PROXY STATEMENT |
Stephen D. Kelley | |
Director Since: 2021 | |
Age: 59 | |
Business Experience: | |
Stephen D. Kelley currently serves as President & Chief Executive Officer of Advanced Energy Industries, Inc., and as a member of our Board of Directors since March 2021. Mr. Kelley served as President & CEO and a board member of Amkor Technology, Inc. (AMKR), a publicly traded leading semiconductor package and test company, from May 2013 to June 2020. Prior to joining Amkor, Mr. Kelley served as Senior Advisor to Advanced Technology Investment Company, the Abu Dhabi-sponsored investment company that owns GlobalFoundries, until December 2012. Mr. Kelley served as Executive Vice President and Chief Operating Officer of Cree from 2008 to 2011. Previously, Mr. Kelley held executive leadership roles of various businesses at companies including Texas Instruments, Philips Semiconductors, National Semiconductor and Motorola. Mr. Kelley holds an SB ChE from the Massachusetts Institute of Technology and a JD from Santa Clara University. | |
Key Skills and Qualifications: | |
● Senior Leadership Experience ● Public Board Experience ● Industry and Technical Expertise | ● Global Operations Expertise ● Financial Expertise |
Lanesha T. Minnix | ||
Director Since: | Committees: Nominating, Governance & Sustainability, Audit and Finance | |
Age: | ||
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Business Experience: | | |
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PRECISION | POWER | PERFORMANCE | 9 |
2022 ANNUAL | |||
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Director Since: | Committees: |
Age: | |
Independent Director | |
Business Experience: | |
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Key Skills and Qualifications: | |
● Senior Leadership Experience ● International Experience | ● Global Operations Expertise ● Industry and Technical Expertise |
John A. Roush | |
Director Since: 2016 | Committees: Nominating, Governance & Sustainability, Compensation |
Age: 57 | |
Independent Director | |
Business Experience: | |
John A. Roush currently serves as an operating executive advisor to ACON Investments, LLC, a private equity firm. Mr. Roush serves | |
Key Skills and Qualifications: | |
| ● Global Expertise
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10 | PRECISION | POWER | PERFORMANCE | |
| 2022 ANNUAL |
PROXY STATEMENT |
Summary of Director Nominee Qualifications and Attributes
This table provides a summary view of the qualifications and attributes of each director nominee.
GRANT H. BEARD | FREDERICK A. BALL | ANNE T. DELSANTO | TINA M. DONIKOWSKI | RONALD C. FOSTER | EDWARD C. GRADY | STEPHEN D. KELLEY | LANESHA T. MINNIX | DAVID W. REED | JOHN A. ROUSH | |
Qualifications and Experience | | | | | | | | | | |
Finance | | | | | | | | | | |
Finance/Accounting | · | · | · | · | · | · | · | · | ||
External Reporting | · | · | | · | · | · | · | · | ||
Capital Markets & Capital Allocation | · | · | · | · | · | · | · | · | ||
Markets | | | | | | | | | | |
Semiconductor | · | | · | · | · | | · | · | ||
Industrial | · | | | · | · | · | · | · | · | |
Medical | · | · | · | |||||||
Asia | · | · | · | · | · | · | · | · | ||
Functional Expertise | | | | | | | | | | |
Sales/Channel/Marketing | · | · | · | · | · | | · | |||
R&D/Product Development | · | | · | · | · | · | | · | · | |
HR – Talent Management | · | · | · | · | · | · | · | · | ||
Tech – IT/Cyber | · | · | · | · | ||||||
Procurement & Supply Chain | · | · | | · | | · | · | | · | · |
M&A Transactions and Integrations | · | · | · | · | · | · | · | · | · | · |
Software & Controls | | · | · | · | | · | ||||
Leadership | | | | | | | | | | |
CEO – Public Company | · | | | | | · | · | | · | |
CEO – Private/Division President | · | | · | · | | · | · | | · | |
Strategy | · | · | · | · | · | · | · | · | · | · |
Demographic Background | | | | | | | | | | |
Tenure (Years) | 7 | 12 | 1 | 3 | 7 | 13 | 1 | 1 | 0 | 5 |
Age (Years) | 61 | 59 | 58 | 62 | 71 | 74 | 59 | 46 | 63 | 57 |
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PRECISION | POWER | PERFORMANCE | 11 |
2022 ANNUAL | |
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The table below provides certain highlights of the composition of our Board members as of February 1, 2022. Each of the categories listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f).
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Board Diversity Matrix (as of February 1, 2022) | ||||
Total Number of Directors | 11 | |||
| Female | Male | Non-Binary | Did Not Disclose Gender |
Part I: Gender Identity | ||||
Directors | 3 | 8 | 0 | 0 |
Part II: Demographic Background | ||||
African American or Black | 1 | 0 | 0 | 0 |
Alaskan Native or Native American | 0 | 0 | 0 | 0 |
Asian | 0 | 0 | 0 | 0 |
Hispanic or Latinx | 0 | 0 | 0 | 0 |
Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 |
White | 2 | 8 | 0 | 0 |
Two or More Races or Ethnicities | 0 | 0 | 0 | 0 |
LGBTQ+ | 0 | |||
Did Note Disclose Demographic Background | 0 |
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2022 ANNUAL | ||
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Director Qualifications
The Board respects its responsibility to provide oversight, counseling and direction to the management of the Company in the interest and for the benefit of the stockholders. Accordingly, it seeks to be composed of directors with diverse skills, experience, qualifications and characteristics. It is critical that directors understand the markets in which the Company operates, particularly in thespecifically semiconductor capital equipment, industrial and industrial powermedical, data center, and telecom markets. It is equally important that, collectively, the directors have successful experience in each of the primary aspects of our business, including engineering, research and development, finance and audit, product strategy and development, customer relations, supply chain management and sales and marketing. The following are certain qualifications, experience and skills for Board members which are important to the Company’s business and its future:
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Directors who have served in senior leadership positions are important to the Company, as they bring experience and perspective in analyzing, shaping, and overseeing the execution of important operational and policy issues at a senior level. These directors’ insights and guidance and their ability to assess and respond to situations encountered in serving on our Board may be enhanced if their leadership experience has been developed at businesses or organizations that operated on a global scale, faced significant competition and/or involved technology or other rapidly evolving business models. | |
Senior Leadership Experience | |
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Directors who have served on other public company boards can offer advice and insights with regard to the dynamics and operation of a board of directors; the relations of a board to the | |
Public Company Board Experience | |
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Because the Company is a global leader in innovative power solutions for semiconductor, data center, telecom, and industrial and medical markets, experience in relevant technology is useful in understanding the Company’s research and development efforts, competing technologies, the various products and processes the Company develops, the manufacturing and assembly-and-test operations and the market segments in which the Company competes. | |
Industry & Technical Expertise | |
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Because the Company is a global organization with research and development, manufacturing, assembly and test facilities, and sales and other offices in many countries, directors with global expertise can provide a useful business and cultural perspective regarding many significant aspects of our business. | |
Global Expertise | |
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Knowledge of financial markets, financing and funding operations, and accounting and financial reporting processes is important because it assists the directors in understanding, advising and overseeing the Company’s capital structure, financing and investing activities, financial reporting and internal control of such activities. | |
Financial Expertise |
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PRECISION | POWER | PERFORMANCE | 13 |
2022 ANNUAL | |||
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Grant H. Beard brings to the Board significant senior management and public company board experience, together with global expertise in industrial and related markets and in the private equity/merchant banking industry, as well as experience in strategy, operations, and M&A transactions.
Frederick A. Ball brings to the Board significant management level experience together with experience in the private equity/merchant banking industry. He currently serves as a senior executive Operating Partner for Blue Point Capital and as an Executive in Residence at Summit Partners. Mr. Beard served as Chairman and CEO of Wynnchurch Industries, LLC and has served in various executive level positions including Chairman, President and CEO of Wolverine Advanced Materials LLC and President and CEO of Constar International Inc. and Trimas Corporation. Mr. Beard’s experience also includes serving as Operating Partner at private equity/merchant banking groups Anderson Group and Blue Point Capital.
Frederick A. Ball brings to the Board his extensive experience in senior management, operations, finance and auditing, having recently served as the Chief Financial Officer of a leading provider of cloud-based marketing software. He has also servedsoftware, as CFO, Chief Operating Officerwell as experience in strategy and Senior Vice President of various public and private technology companies. Mr. Ball’s greater than 10 years ofexecutive compensation.
Anne T. DelSanto brings to the Board significant experience as an accountanta veteran technology executive with PricewaterhouseCoopers alsomore than three decades driving organizations towards exponential growth and provides financevaluable insight relative to the Company’s growth strategies in Data Center Computing and accounting expertise. In addition, he served on two other public company boards as either a chair or member of their audit, compensation, and nominating and governance committees. Mr. Ball’s balance of experience enables him to work very productively with both the Board and senior management, particularly on strategic, finance and audit, and executive compensation matters.Telecom Networking markets.
Tina M. Donikowski brings to the Board broad senior management, operations and global experience having served for 38 years in various leadership positions at General Electric Company, most recently as Vice President, Global Locomotive Business, GE Transportation. Ms. Donikowski’sCompany. Her experience provides the Board with valuable input on strategic, operational, market and product strategies and initiatives. In addition, Ms. Donikowski’s experience as a board member of Atlas Copco AB, a large industrial multi-national corporation based in Sweden, CIRCO International and TopBuild as well as boards of other companies, provides our Board with valuable insight in terms of a broad range of governance topics and international developments.strategies.
Ronald C. Foster brings to the Board significant knowledge andsenior management experience in the semiconductor and high-tech industry. Mr. Foster servedindustries as the Chief Financial Officer and Vice President of Finance at Micron Technology, Inc., and has significant experience in executive level management positions in the semiconductor and high-tech industries. Mr. Foster also bringswell as significant experience in financial management, accounting and finance issues, having served as he has served in the role of CFOChief Financial Officer for various companies focused on the semiconductor industry.companies.
Edward C. Grady brings to the Board his significant senior management and public company board experience, knowledge and experience in bothof the semiconductor capital equipment and solar equipment industries,industry, as he has servedwell as Chairman and Chief Executive Officer of an early stage solar equipment company, and has served as CEO of two companies providing services to the semiconductor industry. He shares with the Board and senior management the insight and understanding he has developed from his leadership at several companies, including in the areas of product strategy and development, service and organizational development. Mr. Grady also served on
Stephen D. Kelley brings more than 30 years of significant senior management experience in the boardsglobal semiconductor and electronics industry as well as broad management experience in strategic planning, business development, technology, manufacturing and operations.
Lanesha T. Minnix brings to the Board leadership and public company experience and has had broad exposure to advanced industrial markets for a range of several other technology companies, providing cross-board experience.applications. Her legal and business skills add significant value to the Board.
Thomas M. RohrsDavid W. Reed brings to the Board executivesignificant senior management and operations experience in the semiconductor capital equipment and manufacturing industry, particularly in the areas of researchglobal operations and development, supply chain management and product development. The Board and senior management benefit from his strategic thinking and prior involvement in the semiconductor capital equipment and solar equipment industries. Mr. Rohrs also has significant experience serving on several other public company boards, where he has been Chairman, as well as a member of the compensation and nominating committees.management.
John A. Roush brings to the Board significant senior management level experience in the medical and industrial markets together with public company experience. Mr. Roush most recently served as Chief Executive Officer of a leading global supplier of precision photonic components and subsystems to original equipment manufacturersleadership in the medical and advanced industrial markets. The Boardmarkets and senior
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management benefit from his extensiveapplications, as well as significant public company board experience and experience in the industrial markets, which are a strategic focus area for the Company, and his knowledge of leading a public company.private equity.
Yuval Wasserman brings years of management experience in the semiconductor and electronics industries and has significant knowledge of the Company’s history and operations. Mr. Wasserman has held various executive level positions at the Company and currently serves as the Company’s President and Chief Executive Officer. Mr. Wasserman also currently serves on the board of FARO Technologies, Inc., a publicly traded manufacturer of three-dimensional (3D) measurement, imaging and realization systems, providing cross-board experience.
The Board believes that the qualities and skills listed above for each of the nominees, qualifiedqualifies each such nominee for service as a director of Advanced Energy.
Independence
The Board of Directors has determined that each of the nominees, other than Yuval WassermanStephen D. Kelley (i.e., Grant H. Beard, Frederick A. Ball, Anne T. DelSanto, Tina M. Donikowski, Ronald C. Foster, Edward C. Grady, Thomas M. RohrsLanesha T. Minnix, David W. Reed and John A. Roush), is an “independent director” within the meaning of the Nasdaq Stock Market Rules. Furthermore, Thomas M. Rohrs was “independent” during the time he served on the Board of Directors. Under these rules, to be considered independent, the Board must affirmatively determine, among other things, that neither the director nor any immediate family member of the director has had any direct or indirect material relationship with the Company within the last three years. The Board of Directors has made an affirmative determination that none of the independent directors has had any relationship with Advanced Energy or with another director that would interfere with the exercise of his or her
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14 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
independent judgement in carrying out his or her responsibilities as a director. The independent directors, if all of them are elected at the Annual Meeting, will constitute a majority of the Board of Directors. There is no family relationship amongst any of the directors and executive officers of the Company. The Company’s executive officers serve at the discretion of the Board.
Involvement in Certain Legal Proceedings
During the past ten years none of the persons currently serving as executive officers and/or directors of the Company has been the subject matter of any of the following legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S‑KS-K including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting their involvement in any type of business, securities or banking activities; (d) any finding by a court, the Securities and Exchange Commission (the “SEC”) or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered entity or equivalent exchange, association or entity. Further, noNor are any such legal proceedings are believed to be contemplated by governmental authorities against any director or executive officer. Further, no executive officers, directors, beneficial owners of more than five percent of the Company’s common stock, or any other actor mentioned in Item 103(c)(2) of Regulation S-K is a party adverse to the Company in a material proceeding or has a material interest adverse to the Company.
Required Vote
Our Board has adopted a Director resignation policy (the “Policy”), which is included in the Company’s Board Governance Guidelines. The Policy applies to uncontested elections of directors, in other words, an election of directors where the number of nominees for election does not exceed the number of directors to be elected. A copy of the Policy is available on the Company’s website at http://www.advancedenergy.com within the Company’s Board Governance Guidelines. Under the Policy, any nominee for director in an uncontested
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election who does not receive a majority vote “FOR” that director’s election to the Board relative to the number of votes cast with respect to that director’s election (excluding broker non-votes, abstentions and failures to vote with respect to that director’s election) will promptly tender a written offer of resignation to the Board. The Policy provides that the Nominating, and Governance & Sustainability Committee of the Board will promptly consider the director’s offer of resignation and make a recommendation to the Board. Pursuant to the Policy, the Board would then act on that recommendation within 90 days of receiving the recommendation. When deciding what action to recommend or take regarding the director’s resignation, the Policy permits each of the Nominating, and Governance & Sustainability Committee and the Board to consider any factors they deem relevant, including the best interests of the Company and its stockholders.
Under Delaware law, a nominee who receives a plurality of the votes cast at the Annual Meeting will be elected as a Director (subject to the Policy described above). The “plurality” standard means the nominees who receive the largest number of “FOR” votes cast are elected as directors of the Company. Thus, the number of shares not voted for the election of a nominee (and the number of “withhold” votes cast with respect to that nominee) will not affect the determination of whether that nominee has received the necessary votes for election under Delaware law. However, the number of “withhold” votes with respect to a nominee will affect whether or not our Policy will apply to that individual. If any nominee is unable or declines to serve, proxies will be voted for the balance of those named and for such person as shall be designated by the Board to replace any such nominee. However, the Board does not anticipate that this will occur.
Stockholders do not have the right to cumulate their votes for the election of directors. Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” each of the eight (8)ten (10) nominees.
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PRECISION | POWER | PERFORMANCE | 15 |
2022 ANNUAL | |
PROXY STATEMENT |
Votes withheld from a nominee will be counted for purposes of determining whether a quorum is present but will not be counted as an affirmative vote for such nominee.
The Board of Directors recommends a vote “FOR” the election of each of the nominees named above.
Director Compensation
The compensation policy for non-employee directors for the fiscal year ended December 31, 20192021, was as follows:
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Compensation Elements for Non-Employee Directors | ||
Compensation Element | 2021 Compensation Program | |
Annual Board Cash Retainer | | ● $45,000 annual cash retainer paid in equal quarterly installments |
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Annual Board Equity Retainer |
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● The Board may (but is not required) to grant | ||
Annual Chair Cash Fees | | ● $26,000 annual cash retainer fee for Audit and Finance Chair. ● $18,000 annual cash retainer fee for Compensation Chair. ² ● $13,000 annual cash retainer fee for Nominating, Governance & Sustainability Chair. ³ | |
Annual Committee Member Retainer | | ● $13,000 annual cash retainer fee for Audit and Finance. ● $7,500 annual cash retainer fee for Compensation. ● $5,000 annual cash retainer fee for Nominating, Governance & Sustainability. | |
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¹The Board approved an increase of $15,000 in April 2021 for the Chairman of the Board retainer.
²The Board approved an increase of $3,000 in April 2021 for the Compensation Committee Chair retainer.
³The Board approved an increase of $3,000 in April 2021 for the Nominating, Governance and Sustainability Committee Chair retainer.
At this time, directors are not separately compensated for their service on the Pricing Committee.
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In February 2014, our Board of Directors adopted a Stock Ownership Policy that requires non-employee directors to own an amount of stock of the Company with a value equal to at least five times the annual retainer for Board service (exclusive of any compensation for Committee service, meeting fees, leadership roles, etc.), based in each case, on the volume weighted average closing price of the Company’s stock for the two fiscal years as of December 31 of the applicable year and subject to the terms in the Stock Ownership Policy. The Stock Ownership Policy provides for a phase‑inphase-in period over five years for each member to
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16 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
achieve the requisite ownership requirements. All non-employee members of the Board either currently conform to the policy or are on track to meet the policy within the required time frame.
The Compensation Committee regularly reviews non-employee director compensation with its independent compensation consultant. Semler Brossy acted as the Company’s independent compensation consultant Semler Brossy.until July 2021, and thereafter, the Company engaged Compensia, Inc. to act as its independent compensation consultant.
Non-employeeAs part of the Compensation Committee’s continuous review and monitoring of non-employee director compensation market data from comparisons to peer programs, and based on analysis from the independent compensation consultant, the Compensation Committee revised its granting of equity compensation has historically been denominated asto non-employee directors from a fixed number of units rather thanto a specific dollar amount. The Company’s closing stock price on June 4, 2019, the date of the restricted stock unit grants, was $51.87.
The average annualdesignated award value of a non-employee director restricted stock unit award from 2010 through 2019 is $210,159.in August 2020. The Compensation Committee believes that this long-term view validates the use of a fixed number of units approach, under which the award value is aligned with the Company’s publicly traded stock price. The Compensation Committee will continue to reviewcontinually reviews and monitormonitors non-employee director compensation, useuses market data for comparisons to peer programs, and workworks with Semler Brossythe Company’s independent compensation consultant to ensure the program remains appropriate.
The following table details director compensation for 2019.2021.
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| | Paid in Cash | | Stock Awards | | Awards | | Compensation | | Earnings | | Compensation | | Total | ||||||||||||||||||||
Name |
| ($) |
| ($) (1) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
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Grant H. Beard |
| $ | 112,500 |
| $ | 181,545 |
| — |
| — |
| — |
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| $ | 294,045 | | $ | 111,500 | | $ | 199,992 | | — | | — | | — | | — | | $ | 311,492 |
Frederick A. Ball |
| $ | 76,000 |
| $ | 181,545 |
| — |
| — |
| — |
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| $ | 257,545 | | $ | 61,500 | | $ | 199,992 | | — | | — | | — | | — | | $ | 261,492 |
Anne T. DelSanto | | $ | 52,500 | | $ | 199,992 | | — | | — | | — | | — | | $ | 252,492 | |||||||||||||||||
Tina M. Donikowski |
| $ | 63,000 |
| $ | 181,545 |
| — |
| — |
| — |
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| $ | 244,545 | | $ | 69,500 | | $ | 199,992 | | — | | — | | — | | — | | $ | 269,492 |
Ronald C. Foster |
| $ | 63,000 |
| $ | 181,545 |
| — |
| — |
| — |
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| $ | 244,545 | | $ | 71,000 | | $ | 199,992 | | — | | — | | — | | — | | $ | 270,992 |
Edward C. Grady |
| $ | 65,000 |
| $ | 181,545 |
| — |
| — |
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| $ | 246,545 | | $ | 61,750 | | $ | 199,992 | | — | | — | | — | | — | | $ | 261,742 |
Lanesha T. Minnix | | $ | 50,000 | | $ | 199,992 | | — | | — | | — | | — | | $ | 249,992 | |||||||||||||||||
Thomas M. Rohrs |
| $ | 63,000 |
| $ | 181,545 |
| — |
| — |
| — |
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| $ | 244,545 | | $ | 57,500 | | $ | 199,992 | | — | | — | | — | | — | | $ | 257,492 |
John A. Roush |
| $ | 57,500 |
| $ | 181,545 |
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| — |
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| $ | 239,045 | | $ | 57,500 | | $ | 199,992 | | — | | — | | — | | — | | $ | 257,492 |
Yuval Wasserman |
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Stephen D. Kelley | | $ | — | | $ | — |
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(1) |
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Board of Directors Meetings
Each DirectorWith one exception, each of the directors attended well above 75% of the aggregate number of meetings of the Board of Directors (held during the period for which he or she was a director) and the committees (held duringthat he or she served on (during the period for which he or she was a director) on which he or she served.committee member). One Director, Mr. Rohrs, attended fewer than 75% of the aggregate number of meetings.
The Board of Directors held ninetwelve meetings in 2019.2021. During 2019,2021, four executive sessions of the Board of Directors were held. The Board’s committees consist of the Audit and Finance Committee, Nominating, and Governance & Sustainability Committee, Compensation Committee and Pricing Committee.
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Members of the Board of Directors are welcomed and encouraged, but not required, to attend the Annual Meeting. The Company’s annual meeting of stockholders held on June 4, 2019April 30, 2021 (the “2019“2021 Annual Meeting”) was attended in person or by telephone by sixall of the then-members of the Board of Directors.
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PRECISION | POWER | PERFORMANCE | 17 |
2022 ANNUAL | ||
PROXY STATEMENT |
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AUDIT AND FINANCE COMMITTEE | ||
Meetings: | ||
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| ● Lanesha T. Minnix (Joined February 2022) | ||
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Independence: 100% compliance with NASDAQ and SEC rules. The Board of Directors determined that each of the members of the Audit and Finance Committee is “independent” in accordance with the Nasdaq Stock Market Rules and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended. | |||
Financial Expertise: 100% compliance with SEC rules. The Board of Directors has evaluated the credentials of Messrs. | |||
Charter: Available atwww.advancedenergy.com/about-us/leadership-team/audit--finance-committee-charter/. | |||
Key Responsibilities: | | | |
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● other functions as may be delegated to it by the Board, such as the current delegation for the declaration of quarterly dividends; and cybersecurity oversight; and | |||
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18 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
The Audit and Finance Committee approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Approval is provided on a service-by-service basis. In The Audit and Finance Committee also conducts financial reviews with Advanced Energy’s independent registered public accounting firm prior to the release of financial information in the Company’s Forms |
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Report of the Audit and Finance Committee
In accordance with the Audit and Finance Committee’s written charter duly adopted by the Board of Directors, we have reviewed Advanced Energy’s audited financial statements, as of and for the year ended December 31, 2019,2021, and met together and separately with both management and Ernst & Young LLP, the Company’s independent registered public accounting firm for 2019,2021, to discuss Advanced Energy’s audited financial statements as of and for the year ended December 31, 2019.2021. In addition, the Audit and Finance Committee has discussed with the independent registered public accounting firm the matters outlined in Statement on Auditing Standards No. 1301, as amended (Communication with Audit Committees), to the extent applicable and received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Further, the Audit and Finance Committee received the written disclosures and the letter from the independent accountants required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit and Finance Committee concerning independence, and discussed with the independent registered public accounting firm the independent accountant’s independence.
Based on its review and discussion of the foregoing matters and information, the Audit and Finance Committee recommended to the Board of Directors that the audited financial statements referenced above be included in Advanced Energy’s 20192021 Annual Report on Form 10‑K.10-K. The Audit and Finance Committee has recommended the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2020,2022, subject to stockholder ratification.
The Audit and Finance Committee
Frederick A. Ball,Ronald C. Foster, Chairman
Tina M. Donikowski
RonaldEdward C. FosterGrady
Thomas M RohrsLanesha T. Minnix (Joined February 2022)
This report of the Audit and Finance Committee is not deemed “soliciting material” and is not deemed filed with the SEC or subject to Regulation 14A or the liabilities under Section 18 of the Exchange Act.
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PRECISION | POWER | PERFORMANCE | 19 |
2022 ANNUAL | ||
PROXY STATEMENT |
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NOMINATING, GOVERNANCE & SUSTAINABILITY COMMITTEE | ||
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Independence: 100% compliance with NASDAQ rules. Each of the members of the Nominating, | ||
Charter: In 2020, the Board and the Committee added sustainability to the Committee’s name and charter with certain of the key responsibilities noted below.Available at https://www.advancedenergy.com/about-us/leadership-team/nominatinggovernance-comm.-charter/ | ||
Key Responsibilities: | | |
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● reviewing the Company’s sustainability program and goals and the Company’s progress towards achieving those goals; and | ||
● reviewing environmental, social, governance trends that could impact the Company’s business operations, performance and reputation. |
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20 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
Director Nominations
The Nominating, and Governance & Sustainability Committee evaluates and interviews potential director candidates. All members of the Board may interview the final candidates. The Nominating, and Governance & Sustainability Committee of the Board considers candidates for director nominees proposed by directors and stockholders, as described in more detail below. This committee may retain recruiting professionals to assist in identifying and evaluating candidates for director nominees.nominees but does not retain any recruiters currently. The Nominating and Governance Committeecommittee has no stated specific or minimum qualifications that must be met by a Board candidate. However, as set forth in the Company’s Board Governance Guidelines, the Nominating, and Governance & Sustainability Committee strives for a mix of skills and diverse perspectives (functional, cultural and geographic) that is effective for the Board. To that end, on February 1, 2022, the Board added David W. Reed as a new Board member. In selecting nominees, the
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Nominating, and Governance & Sustainability Committee assesses the independence, character, and acumen of candidates. The Nominating and Governance Committeecommittee also endeavors to establish a number of areas of collective core competency of the Board. Therefore, the NominatingBoard and Governance Committee assessesassess whether a candidate possesses skills including business judgment, leadership, strategic vision and knowledge of management, accounting, finance, industry, technology, manufacturing, international markets and marketing.marketing that would be complementary to the Board. Additional criteria include a candidate’s personal and professional ethics, integrity and values, as well as his or her willingness to devote sufficient time to prepare for and attend meetings and participate effectively on the Board.
The Board Governance Guidelines provide that the Nominating, and Governance & Sustainability Committee is responsible for reviewing with the Board, from time to time, the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. In assessing the diversity of the Board, the Nominating, and Governance & Sustainability Committee assessesconsiders such factors as leadership, character, reputation, integrity, judgment, diversity, age, understanding of and experience in manufacturing, technology expertise, finance and marketing acumen and exposure and experience in international markets. The Board values a diverse set of viewpoints and experiences, and also considers gender and ethnic diversity. These factors, which are among the factors the Board and the Nominating, and Governance & Sustainability Committee considers useful to a well-functioning board, are reviewed in the context of assessing the perceived needs of the Board at any particular point in time and in its search for potential nominees.
The Nominating, and Governance & Sustainability Committee will consider any and all director candidate recommendations by our stockholders that are submitted in accordance with the procedures set forth in the Company’s Amended and Restated By-laws. The Nominating, and Governance & Sustainability Committee will apply the same processes and criteria in evaluating director candidates recommended by stockholders as it applies in evaluating director candidates recommended by directors, members of management or any other person. If you are a stockholder and wish to recommend a candidate for nomination to the Board of Directors, you should submit your recommendation in writing to the Nominating, and Governance & Sustainability Committee, in care of the Corporate Secretary of Advanced Energy at 1595 Wynkoop St., Suite 800, Denver, Colorado 80202. Your recommendation must include all of the information set forth in Article III, Section 6(a) of the Amended and Restated By-laws of Advanced Energy, including but not limited to, your name and address, the number of shares of Advanced Energy common stock that you own, the name of the person you recommend for nomination, the reasons for your recommendation, a summary of the person’s business history and other qualifications as a director of Advanced Energy and whether such person has agreed to serve, if elected, as a director of Advanced Energy. Please also see the information under the section entitled “Proposals of Stockholders” on page 5256 of this proxy statement.
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PRECISION | POWER | PERFORMANCE | 21 |
2022 ANNUAL | ||
PROXY STATEMENT |
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COMPENSATION COMMITTEE | ||
Meetings: | ||
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Chair: Fred A. Ball | ||
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| | ● David W. Reed (Joined February 2022) |
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● Thomas M. Rohrs | | |
Independence: 100% compliance with NASDAQ rules. Each of the members of the Compensation Committee is an “independent director” within the meaning of the Nasdaq Stock Market Rules. | ||
Non-Employee: 100% compliance with Securities Exchange Act of 1934. Each of the members of the Compensation Committee is an “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. | ||
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Charter: Available at https://www.advancedenergy.com/about-us/leadership-team/compensation-committee-charter/ | ||
Key Responsibilities: | | |
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The Compensation Committee has
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22 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
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Independence: 100% compliance with NASDAQ | |||
Key Responsibility: | | | |
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Board Governance Structure
The Board Governance Guidelines set forth the Board’s policy that the positions of Chairman of the Board and Chief Executive Officer should be held by separate persons to aid in the Board’s oversight of management. The Board Governance Guidelines are available on our website at https://www.advancedenergy.com/about-us/leadership-team/board-governance-guidelines/. The Company believes this Board leadership structure is most appropriate for the Company because it provides the Board with increased independence. Additionally, we separate the roles of Chairman of the Board and Chief Executive Officer in recognition of the differences between the two roles as they are presently defined. The principal responsibility of the Chief Executive Officer is to manage the business of the Company. The principal responsibilities of the Chairman of the Board are to manage the operations of the Board of Directors and its committees and provide oversight and counsel to the Chief Executive Officer on behalf of the Board.
Senior management manages material risks and reviews such risks with the Chief Executive Officer, and if warranted, the Board. As part of its general oversight role, the Board reviews business reports from management that routinely outline operational risks that may exist from time to time. Consistent with this oversight role, the Board received regular updates from management as to potential impacts to operations, including the Company’s labor force and supply chain vulnerabilities from the COVID-19 pandemic. In addition, for risks related more specifically to the financial operations of the Company, such as credit risk, and liquidity risk, and cybersecurity, the Audit and Finance Committee examines reports from management and reviews such risks in light of the Company’s business operations.
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PRECISION | POWER | PERFORMANCE | 23 |
2022 ANNUAL | ||
PROXY STATEMENT |
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PROPOSAL NO. 2 - RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS ADVANCED ENERGY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20202022
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What am I voting on and how should I vote? | You are being asked to ratify the appointment of Ernst & Young LLP as the We believe that Ernst &Young LLP is sufficiently qualified to conduct their duties as independent auditor. The Board of Directors therefore recommends you vote“FOR” the ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for |
Ratification of Independent Registered Accounting Firm
The Audit and Finance Committee is directly responsible for the appointment, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company and its subsidiaries.
If stockholders do not ratify the appointment of Ernst & Young LLP, the Audit and Finance Committee will regard such vote as a direction to consider the appointment of a different independent registered public accounting firm. Even if the appointment of Ernst & Young LLP is ratified by the stockholders, the Audit and Finance Committee has the discretion to select a different independent registered public accounting firm at any time if it determines that a change would be in our and our stockholders’ best interests.
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24 | PRECISION | POWER | PERFORMANCE | |||
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PROXY STATEMENT |
Change in Independent Registered Public Accounting Firm in 2019
The Audit and Finance Committee is directly responsible for the appointment, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us and our subsidiaries.
After completing a comprehensive competitive bid process to select an independent registered public accounting firm to provide audit and related services to Advanced Energy for the year ending December 31, 2019, on March 25, 2019, the Audit and Finance Committee dismissed Grant Thornton LLP (“Grant Thornton”) as the Company’s independent registered public accounting firm, effective immediately, and provided Grant Thornton with notice of such dismissal. The audit reports of Grant Thornton on the Company’s consolidated financial statements for each of the two most recent fiscal years ended December 31, 2018 and December 31, 2017 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. On March 27, 2019, Grant Thornton confirmed in a filing with the SEC that, during our two most recent fiscal years ended December 31, 2018 and December 31, 2017, and during the subsequent interim period through March 25, 2019, the date of the Audit and Finance Committee’s dismissal of Grant Thornton, (i) there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference to the subject matter of the disagreements in connection with its reports, and (ii) there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
On March 27, 2019, Advanced Energy engaged Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019, which engagement was approved by the Audit and Finance Committee and effective on March 27, 2019.
During the Company’s two fiscal years ended December 31, 2018 and December 31, 2017, and during the subsequent interim period through March 27, 2019, neither the Company, nor anyone on its behalf, consulted Ernst & Young LLP regarding 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 Ernst & Young LLP concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, of (ii) any matter that was either the subject of a “disagreement” (as defined in Regulation S-K Item 304(a)(1)(iv)) or a “reportable event” (as defined in Regulation S-K Item 304(a)(1)(v)). Ernst & Young LLP provided Advanced Energy with notice of acceptance of such engagement.
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Independent Registered Public Accounting Firm Fees and Services
The following table presents fees billed to Advanced Energy for professional services rendered by Grant ThorntonErnst & Young LLP, our prior independent registered public accounting firm for 20182021 and Ernst & Young LLP, our current registered public accounting firm for 2019.2020. All of the fees in the following table were approved by the Audit Committee in conformity with its pre-approval process. Pre-approval generally is provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and generally is subject to a specific budget. The independent registered public accounting firm and Advanced Energy’s management are required to periodically report to the Audit and Finance Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, including the fees for the services performed to date. In addition, the Audit and Finance Committee also may pre-approve particular services on a case-by-case basis, as required.
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Fee Category |
| 2019 |
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| 2021 |
| 2020 | ||
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Audit Fees |
| $ | 2,650 | $ | 2,033 | (1) | $ | 4,128 | $ | 3,747 |
Audit Related Fees |
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| 175 |
| — | (2) | | — |
| 56 |
Tax Fees |
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| 891 |
| — | (3) | | 1,237 |
| 1,255 |
Other Fees (4) |
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All Other Fees | (4) | | — |
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Total Fees |
| $ | 3,716 | $ | 2,033 | | $ | 5,365 | $ | 5,058 |
(1) |
| Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Advanced Energy’s consolidated financial statements and internal controls over financial reporting, (b) review of the interim consolidated financial statements included in quarterly reports, and (c) services that are typically provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements. |
(2) |
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(3) |
| Tax Fees |
(4) |
| All Other Fees are not applicable. |
Required Vote
Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for Advanced Energy for 20202022 requires the affirmative “FOR” vote of a majority of the shares of common stock cast on this proposal. For purposes of determining the number of votes cast on this proposal, only those votes cast as either “FOR” or “AGAINST” are included. Abstentions and broker non-votes are not considered votes cast on this proposal.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire.
The Board of Directors recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2020.2022.
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PRECISION | POWER | PERFORMANCE | 25 |
2022 ANNUAL | |||
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PROPOSAL NO. 3 - ADVISORY APPROVAL OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
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What am I voting on and how should I vote? | We are providing our stockholders an opportunity to indicate whether they approve of our named executive officer compensation as disclosed pursuant to Item 402 of Regulation Although this vote is advisory and is not binding on the Company, the Compensation Committee of the Board will take into account the outcome of the vote when considering future executive compensation decisions. We believe that our compensation philosophy and practices are consistent with market practices, designed to retain key executives and reward company performance, and aligned with long term stockholder interests. Accordingly, stockholders are being asked to vote “FOR”the below resolution. |
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S‑K,S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
This advisory vote, commonly referred to as “say on pay,” is not intended to address any specific item of compensation, but instead relates to our overall compensation philosophy as described in the Compensation Discussion and Analysis, the tabular disclosures regarding named executive officer compensation, and the narrative disclosure accompanying the tabular presentation. These disclosures allow you to view the trends in our executive compensation program and the application of our compensation philosophies for the years presented. |
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At the |
Advanced Energy’s compensation program is designed and administered by the Compensation Committee, which is composed entirely of “independent directors” within the meaning of the Nasdaq Stock Market Rules. We carefully consider many different factors, as described in the Compensation Discussion and Analysis, in order to provide appropriate compensation for our executives. Our executive compensation program is intended to attract, motivate and reward the executive talent required to achieve our corporate objectives and increase stockholder value. The Compensation Committee has designed our compensation program to be competitive with the compensation offered by those peers with whom we compete for executive talent. Targets for base salaries, annual cash incentive and long-term equity incentive awards for executives factor in competitive data. A large proportion of our executive officers’ total potential compensation is performance-
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basedperformance-based in order to align their interests with those of our stockholders, place more of their compensation at risk
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26 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
and emphasize a long-term strategic view. The Compensation Committee deliberately designs compensation objectives in order to allocate a significant percentage of each of our named executive officers’ compensation to performance-based measures.
As discussed in the Compensation Discussion and Analysis beginning on page 2930 of this proxy statement, we believe that our executive compensation program properly links executive compensation to Company performance and aligns the interests of our executive officers with those of our stockholders. For example:
Executive Compensation Objectives
The Compensation Committee believes that executive compensation is a meaningful tool to communicate, align and reinforce business priorities that support our stockholders’ interests. We also believe it is an important element in the attraction, retention, and recognition of leadership and key talent for the Company. In designing an effective structure, the Compensation Committee follows these key principles:
● | Pay for performance – aligning pay with a balanced view of performance across leadership priorities to support stockholders’ interest in sustainable results; |
● | Appropriate pay levels – ensuring targets are reasonable based on the position, performance and market context; and |
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Required Vote
Advisory approval of the Company’s named executive officer compensation requires the affirmative “FOR” vote of a majority of the shares of common stock cast on this proposal. For purposes of determining the number of votes cast on this proposal, only those votes cast as either “FOR” or “AGAINST” are included. Abstentions and broker non-votes are not considered votes cast on this proposal. The vote on this proposal is advisory in nature and, therefore, is not binding on the Company; provided, however, the Board and Compensation Committee will review the results of and take into consideration such results when making future executive compensation decisions.
The Company will ask its stockholders to consider an advisory vote on the compensation of our named executive officers every year until otherwise determined by a vote of our stockholders pursuant to applicable Securities and Exchange Commission rules.
The Board of Directors recommends a vote “FOR” the approval of the Company’s named executive officer compensation.
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PRECISION | POWER | PERFORMANCE | 27 |
2022 ANNUAL | |||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 1, 2020,2022, there were 38,357,87037,506,873 shares of the Company’s common stock outstanding. The following table sets forth the beneficial ownership of Advanced Energy common stock as of February 1, 20202022 (unless otherwise noted) by:
| each person known to us to beneficially own more than five percent (5%) of the outstanding common stock; |
| each director and nominee for director; |
| each named executive |
| the directors and executive officers as a group. |
Unless otherwise indicated, the address of each individual named below is c/o Advanced Energy Industries, Inc., 1595 Wynkoop St., Suite 800, Denver, Colorado 80202.
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Name of Stockholder |
| Owned ** |
| Percent Owned |
| Owned ** | | Percent Owned |
BlackRock, Inc. |
| 5,753,164 | (1) | 15% |
| 5,609,092 | (1) | 15% |
The Vanguard Group |
| 4,092,565 | (2) | 11% |
| 4,148,451 | (2) | 11% |
FMR LLC |
| 2,435,972 | (3) | 6% | ||||
Ameriprise Financial, Inc. |
| 2,318,893 | (4) | 6% | | 3,017,176 | (3) | 8% |
Victory Capital Management Inc. |
| 2,243,625 | (5) | 6% | ||||
Yuval Wasserman, President, Chief Executive Officer and Director |
| 307,322 | (6)(7) | * | ||||
Paul Oldham, Executive Vice President and Chief Financial Officer |
| 18,804 | (6)(7) | * | ||||
Neil Brinker, Executive Vice President and Chief Operating Officer |
| 25,078 | (6)(7) | * | ||||
Thomas O. McGimpsey, Executive Vice President, General Counsel, Government Affairs & Corporate Secretary |
| 59,619 | (6)(7) | * | ||||
Stephen D. Kelley, President and Chief Executive Officer |
| 19,051 | (4)(5) | * | ||||
Paul R. Oldham, Executive Vice President and Chief Financial Officer |
| 16,816 | (4)(5) | * | ||||
Yuval Wasserman, Former President and Chief Executive Officer |
| 240,176 | (4)(5) | * | ||||
Thomas O. McGimpsey, Executive Vice President and General Counsel |
| 42,676 | (4)(5) | * | ||||
Eduardo Bernal Acebedo, Executive Vice President and Chief Operations Officer | | — | (4)(5) | * | ||||
Dana Huth, Former Chief Revenue Officer | | 3,247 | (4)(5) | * | ||||
Grant H. Beard, Chairman of the Board of Directors |
| 51,500 | (8) | * |
| 55,025 | (6) | * |
Frederick A. Ball, Director |
| 32,500 | (8) | * |
| 36,105 | (6) | * |
Anne T. DelSanto, Director |
| 1,772 | (6) | * | ||||
Tina M. Donikowski, Director |
| 9,500 | (8) | * |
| 5,300 | (6) | * |
Ronald C. Foster, Director |
| 41,500 | (8) | * |
| 45,000 | (6) | * |
Edward C. Grady, Director |
| 48,300 | (8) | * |
| 51,800 | (6) | * |
Lanesha T. Minnix, Director |
| 1,153 | (6) | * | ||||
David W. Reed, Director | | — | (6) | * | ||||
Thomas M. Rohrs, Director |
| 23,500 | (8) | * |
| 27,000 | (6) | * |
John A. Roush, Director |
| 25,500 | (8) | * |
| 29,000 | (6) | * |
All executive officers and directors, as a group (11 persons) |
| 643,123 |
| 2% | ||||
All executive officers and directors, as a group (16 persons) |
| 574,121 | (7) | 2% |
* | Less than 1% |
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28 | PRECISION | POWER | PERFORMANCE | |
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PROXY STATEMENT |
(1) | Information as to the amount and nature of beneficial ownership was obtained from the Schedule |
(2) |
| Information as to the amount and nature of beneficial ownership was obtained from the Schedule |
(3) | ||
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| Includes beneficial ownership of the following numbers of shares that may be acquired within 60 days of February 1, |
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Stephen Kelley |
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Paul Oldham |
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Thomas McGimpsey |
| 6,995 |
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Yuval Wasserman* | | 97,374 |
Dana Huth** | — | |
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*Mr. Wasserman retired as President and CEO on March 1, 2021.
**Mr. Huth resigned as an officer on July 7, 2021, and left the Company on September 13, 2021.
(5) | Includes beneficial ownership of the following numbers of shares that will be acquired within 60 days of February 1, |
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Stephen Kelley |
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Yuval Wasserman* | | 18,614 |
Dana Huth** | — |
*Mr. Wasserman retired as President and CEO on March 1, 2021.
**Mr. Huth resigned as an officer on July 7, 2021, and left the Company on September 13, 2021.
(6) |
| The shares reported in the table do not include awards that will be granted to each non-employee director if such person is reelected to the Board of Directors at the Annual |
(7) | Includes 27,000 shares held by Mr. Rohrs who will not be standing for reelection at the Annual Meeting. |
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PRECISION | POWER | PERFORMANCE | 29 |
2022 ANNUAL | |||
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our overall executive compensation philosophy and objectives with a particular focus on the compensation offor our named executive officers that appear in the Summary Compensation Table. officers.
Our named executive officers for 20192021 were the following foursix individuals:
Name | Position |
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| President and Chief Executive Officer |
Paul Oldham | Executive Vice President and Chief Financial Officer |
| Executive Vice President and Chief |
Thomas McGimpsey | Executive Vice President, General Counsel |
Yuval Wasserman* | Former President and Chief Executive Officer |
Dana Huth** | Former Executive Vice President and Chief Revenue Officer |
*Mr. Wasserman retired as President and CEO on March 1, 2021.
*Mr. Huth resigned as an officer on July 7, 2021, and left the Company on September 13, 2021.
Our Compensation Committee reinforced our philosophy of “pay for performance culture” by making the majority of our named executive officers’ 2021 pay contingent on the achievement of financial and stock price performance through our Short-Term Incentive Plan (referred to as the 2021 STI Plan) and our Long-Term Incentive Plan (referred to as the 2021 LTI Plan), which we discuss in more detail below. In 2021, 85% of our Chief Executive Officer’s target compensation and, on average, over 75% of our other named executive officers’ target compensation was performance based. For the purposes of these calculations, performance-based compensation includes the 2021 STI Plan at target and the 2021 LTI Plan grant date fair value of annual equity grants. We have excluded Mr. Wasserman and Mr. Huth from this analysis due to their limited time as executive officers in 2021.
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30 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
Executive Summary and Overview of 20192021 Compensation
Our Company’s long-term success depends on our ability to fulfill the expectations of our customers in a competitive environment and deliver value to stockholders. To achieve these goals, it is critical that we can attract, motivate, and retain highly talented individuals at all levels of the organization who are committed to the Company’s values and objectives. |
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Our Compensation Committee reinforces our philosophy of “pay for performance culture” by making the majority of our named executive officers’ 2019 pay contingent on the achievement of financial performance goals through our Short Term Incentive Plan (which we refer to as the 2019 STI Plan) and our Long Term Incentive Plan (which we refer to as the 2019 LTI Plan), which we discuss in more detail below. In 2019, 88% of our Chief Executive Officer’s target compensation was performance based, and over 75% of our other named executive officer’s target compensation was performance based.
Fiscal Year 20192021 Business Performance
We entered 2019 with continued weakness in our business driven by several global factors including slowing growth in end marketIn 2021, we experienced an unprecedented level of demand for semiconductor devices (especially from memory devices), digestionAdvanced Energy’s industry-leading power conversion and control solutions. Our backlog increased to record levels at $928 million as of equipment capacity,December 31, 2021. In addition, we introduced several new products and uncertainty around trade policies and global economic growth. Our business was further impacted by inventory reductionssecured new design wins in both semiconductor devices and finished goods inventory atmany of our customers. Despitetarget applications. This strong demand validates the significant reduction insuccess of our semiconductor market during this time, the company remained profitable and generated positive cash flow each quarter.strategic focus on precision power.
Throughout 2019, we took actions to streamline our cost structure and improve efficiency, including reducing our total headcount by approximately 10%. At the same time, the year was characterized by ongoing COVID restrictions and by significant, industry wide supply chain constraints and component shortages, particularly for Integrated Circuits (IC’s), which are used broadly across our product portfolio. These supply chain challenges limited our revenue, impacted our gross margins, and resulted in higher inventory as we pursued the critical parts needed to complete orders. In this environment we worked closely with our customers and suppliers to optimize our output to meet their needs.
Despite these industry-wide supply constraints, our mitigation efforts enabled us to deliver record revenues for the Company and in our Semiconductor and Industrial & Medical markets. We generated solid profitability and cash flow and finished the year strong with our highest quarterly revenue levels in history. Although we expect these challenging conditions to continue into 2022, we believe that the Company has strong revenue potential, based on our healthy backlog position, as the supply environment improves.
During 2021, we continued to invest in critical programs and took several actions to accelerate our growth and scale the futureCompany. Following Yuval Wasserman’s retirement in March of 2021, we hired Steve Kelley, an experienced and proven Chief Executive Officer to lead the company in its next stage of growth. We expanded the capabilities of our broader leadership team by increasing R&D spending, winning several keybringing in strong and experienced leaders across multiple functions, including a new Chief Operations Officer, Eduardo Bernal Acebedo, in September 2021. We invested in new factory capacity in Malaysia and initiated efforts to strengthen our strategic sourcing and procurement organizations. We reorganized our product development and marketing teams to increase focus and speed and to better serve our customers. Lastly, we allocated more engineering and customer facing resources to our Semiconductor and Industrial and Medical markets, accelerating our new product introduction and design wins strengthening customer relationships and accelerating our strategyin these verticals.
Although we continue to diversify our operational risk by opening a major factory outside of China. Weface supply constraints entering 2022, we believe these actions will better position the company for growth and profitability and are already beginning to see the benefits as our semiconductor markets began to improveinvestments, combined with underlying demand in the second half of the year.
Perhaps most importantly, we continued to execute our strategy to diversify the company and accelerate earnings growth with the acquisition of Artesyn Embedded Power on September 10, 2019. This highly strategic and transformational acquisition strengthens our position as a leader in electrical power conversion, increases our addressable market by almost four times, doubles our revenue, and broadens and diversifies our markets with greater exposureand our healthy backlog, positions Advanced Energy to industrialgrow, scale, and medical markets, and new positions in data center computing and telecom & networking. Most importantly, it positions us for accelerateddeliver higher earnings growth as we execute on our plan to deliver significant synergies as a combined company.supply conditions improve.
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PRECISION | POWER | PERFORMANCE | 31 |
2022 ANNUAL |
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Highlights of our consolidated fiscal year 2017, 20182019, 2020 and 20192021 financial performance and key business metricsmetrics* are provided below.
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| Operating Income ($M) | | | Earnings Per Share Summary | | | ||
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*Note: A reconciliation of the non-GAAP measures is provided in Appendix A to this proxy statement.
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32 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
Compensation Philosophy and Objectives
The Company’s executive compensation program is based on the same objectives that guide the Company in establishing all of its compensation programs:
| Compensation should reflect the level of job responsibility as well as Company and individual performance. As employees progress to higher levels in the organization, an increasing proportion of their pay is linked to Company performance because those employees are more able to affect the Company’s results. Compensation should reflect the value of the job in the |
Pay for Performance Philosophy |
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Overview of Executive Compensation Program
The Compensation Committee
The Compensation Committee is responsible for establishing, implementing, and monitoring adherence with the Company’s compensation philosophy. Accordingly, the Compensation Committee strives to develop and maintain competitive, progressive programs that reward executives for continuous improvement in key financial metrics that drive Company performance and stockholder value. The Compensation Committee also recognizes the need for compensation programs to attract, retain and motivate high caliber employees, foster teamwork, and maximize the long-term success of Advanced Energy by appropriately rewarding our executives for their achievements. The Compensation Committee evaluates risk and rewards associated with the Company’s overall compensation philosophy and structure. In accordance with the Compensation Committee Charter, the Compensation Committee may delegate authority to subcommittees when appropriate.
The Compensation Committee has the authority to engage independent advisors to assist it in making determinations with respect to the compensation of our executives and other employees. For the 20192021 fiscal year the Compensation Committee engaged Semler Brossy to conduct a competitive review of executive compensation and advise the Committee on other compensation related matters. Information regarding the competitive review is provided below under the heading “Use of Market Data for Comparison Against Peer Companies.” Semler Brossy has not provided any other services to the Company or the Compensation Committee and has not received compensation other than with respect to the services provided to the Compensation Committee. In connection with its engagement of Semler Brossy the Compensation Committee (a) evaluated Semler Brossy’s independence from management including the independence of the individual representatives of Semler Brossy who served as the Compensation Committee’s consultants, and (b) determined that Semler Brossy is independent based on the Nasdaq Stock Market’s independence factors, as well as free of conflicts of interest. In July of 2021, the Compensation Committee conducted a formal evaluation of multiple independent compensation consultants. Based on this evaluation, the Compensation Committee selected Compensia, Inc. as its compensation consultant. The Compensation Committee chose Compensia after a full vetting of Compensia’s independence based on the same factors used for Semler Brossy’s evaluation, as outlined above.
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PRECISION | POWER | PERFORMANCE | 33 |
2022 ANNUAL | |
PROXY STATEMENT |
Role of Executive Officers in Compensation Decisions
The Compensation Committee meets with the Company’s Chief Executive Officer and other senior executives to obtain recommendations with respect to the Company’s compensation programs and practices for executives and other employees. The Compensation Committee takes management’s recommendations into consideration but is not bound by management’s recommendations with respect to executive compensation. The compensation for the Chief Executive Officer is recommended by the Compensation Committee to the Board for its review and ratification. While management attends certain meetings of the Compensation Committee, the Compensation Committee also holds executive sessions not attended by any members of management or by non-independent directors.
Use of Market Data for Comparison Against Peer Companies
One factor that the Compensation Committee considers when making compensation decisions is the compensation paid to executives of a peer group of companies. The Compensation Committee also considers other factors discussed below under the heading “Components of Executive Compensation.”
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The Compensation Committee reviews the peer companies annually to take into account the volatility and breadth of the industries in which Advanced Energy participates. While the Compensation Committee attempts to maintain consistency year to year, adjustments are made as needed. In consultation with Semler Brossy, the Compensation Committee reviewed its list of peer companies in August 2018on July 28, 2021, that was used for comparative review for 20192021 compensation, and made severalno changes to better reflectfrom the company’s size and markets.prior year. The list of peer companies consists of the following 1415 publicly traded companies of roughly similar size to Advanced Energy, all of which are from related industries, including the semiconductor and electronic equipment industries, and compete with Advanced Energy for executive talent:
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Peer Companies | ||||
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Astronics |
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| Kulicke & Soffa Industries, Inc. |
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| | Littelfuse | | OSI Systems, Inc. |
Coherent, Inc. | | MKS Instruments, Inc. | |
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FLIR Systems* | | MTS Systems Corporation | | Teradyne, Inc. |
*FLIR Systems was acquired by Teledyne Technologies in May 2021.
Components of Executive Compensation
For 2019,2021, the principal components of compensation for named executive officers were: (1) base salary, (2) annual performance basedperformance-based cash compensation under the 20192021 STI Plan, (3) long term performance-based equity incentive compensation under the 20192021 LTI Plan, and (4) other benefits, each of which areis described in more detail below. In determining the amount and relative allocation among each component of compensation for each named executive officer, the Compensation Committee considered, among other factors, the Company’s and each executive officer’s performance during the year, historical rates of executive compensation, data obtained from management’s recruitment activities, the comparative review and analysis provided by Semler Brossy and alignment with the Company’s overall compensation philosophy. As we mentioned above, the Compensation Committee allocated thea majority of our named executive officersofficers’ target compensation in 2019 to2021 was performance-based compensation under our 20192021 STI Plan and 20192021 LTI Plan, consistent with our “pay for performance” philosophy.performance culture”.
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34 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | ||
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PRINCIPAL COMPENSATION COMPONENTS FOR | ||||||
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Base Salary | | Long-Term | | Short-Term | |
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Base Salary
Base salaries are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. Base salaries of our named executive officers are also set with the goal of rewarding executive officers on a day to day basis for their time and services. For 2019, the Compensation Committee decided to award Mr. Wasserman, Mr. Brinker and Mr. McGimpsey a merit increase in base salary. The higher 2019 base salary increase for Mr. Oldham was based on a combination of merit increase and factors including review of his most recent salary, peer company compensation, general market trends, as well as consideration of the current salaries of the Company’s executives and senior leadership. The base salaries of each of our named executive officers in 2019 were as follows:
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| Base Salary |
| % Increase |
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Name |
| Position |
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| from 2018 |
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Yuval Wasserman |
| President and Chief Executive Officer |
| $ | 721,000 |
| 3.0 | % |
Paul Oldham |
| Executive Vice President and Chief Financial Officer |
| $ | 425,200 |
| 6.3 | % |
Neil Brinker |
| Executive Vice President and Chief Operating Officer |
| $ | 437,750 |
| 3.0 | % |
Thomas McGimpsey |
| Executive Vice President, General Counsel, Government Affairs & Corporate Secretary |
| $ | 360,500 |
| 3.0 | % |
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2019 Short Term Incentive Plan Compensation
The 2019 STI Plan provides the Company’s management team including each of the named executive officers with an opportunity to earn an annual cash bonus based on the Company’s achievement of certain financial performance goals and in the case of Mr. Wasserman a portion is based on the achievement of individual strategic goals.
The Compensation Committee set each of our named executive officers’ target bonus opportunity as a percentage of his base salary. Actual bonuses awarded to each of our named executive officers may range from 0% to 200% of target depending on actual company and individual performance as described below. For 2019 these annual bonus targets were as follows:
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Name |
| Target as a % of Base Salary |
| Target ($) | |
Yuval Wasserman |
| 100% |
| $ | 721,000 |
Paul Oldham |
| 70% |
| $ | 297,640 |
Neil Brinker |
| 70% |
| $ | 306,425 |
Thomas McGimpsey |
| 60% |
| $ | 216,300 |
Our named executive officers’ annual bonuses are paid out of a bonus pool, the size of which is contingent on the achievement of certain financial performance goals. Achievement of the various performance goals listed in the table below determines the size of the bonus pool for Messrs. Wasserman, Oldham, Brinker and McGimpsey, subject to, with respect to Mr. Wasserman, a +/- 10% strategic modifier. The Compensation Committee selected the specific financial performance metrics for the 2019 STI Plan because such metrics are aligned with the Company’s overall strategic plan. Specifically, the Compensation Committee believes that the non-GAAP metrics are better indicators of the operating performance.
Values in $MM, except as noted
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| Actual Performance |
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| Performance Goals |
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| Stretch |
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Financial Performance Metric |
| Weight |
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| Payout) |
| Payout) |
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| Earned |
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Revenue ** |
| 50 | % |
| $ | 525 |
| $ | 700 |
| $ | 875 |
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| $ | 569 |
| 62 | % |
| 31 | % |
Non-GAAP Operating Income from Continuing Operations** |
| 30 | % |
| $ | 55 |
| $ | 140 |
| $ | 220 |
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| $ | 85 |
| 67 | % |
| 20 | % |
Operational Cash Flow *** |
| 20 | % |
| $ | 62 |
| $ | 83 |
| $ | 104 |
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| 142 | % |
| 28 | % |
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| Overall Achievement |
| 80 | % |
* The Compensation Committee made the decision to exclude Artesyn results from the performance calculation.
** Non-GAAP Operating Income from Continuing Operations must be met to trigger pool funding for that goal and for the Revenue goal. Under the 2019 STI Plan, Non-GAAP Operating Income from Continuing Operations excludes non-cash related charges and non-recurring items.
***Operational Cash Flow is not dependent on the other goals and represents cash flow from non-GAAP operating income, adjusted for changes in working capital and excluding any tax rate on repatriation of capital. For changes in working capital, the Compensation Committee excluded impacts resulting from acquired cash in acquisitions.
**** Achievement percentages between the threshold and target and between the target and stretch levels are linearly interpolated.
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Based on our 2019 performance excluding Artesyn, the bonus pool was funded at 80%. Applying this percentage to Mr. Wasserman resulted in $576,800 for his bonus payout. In addition, Mr. Wasserman also received $58,200, or a 10% strategic modifier since he achieved the following strategic goals.
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Based on the corporate achievement of 80% as noted above and Mr. Wasserman’s strategic modifier, the NEOs achieved the following payouts for 2019:
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| Financial | ||||
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Name |
| Target |
| Actual | ||
Yuval Wasserman |
| $ | 721,000 |
| $ | 635,000 |
Paul Oldham |
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| 297,640 |
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| 238,112 |
Neil Brinker |
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| 306,425 |
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| 245,140 |
Thomas McGimpsey |
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| 216,300 |
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| 173,040 |
2020 Short-Term Incentive Plan Performance Period
In an effort to address volatility in the markets the Company serves, we changed the 2020 Short Term Incentive Plan to provide for two six-month performance periods (January 1 – June 30 and July 1 – December 31) instead of a fiscal year performance period (January 1 – December 31). The Company’s management team including each of the named executive officers will have the opportunity to earn 50% of their target bonus opportunity with respect to each 6-month performance period. Please see the Company’s Form 10-K, Item 9B for further information on the 2020 Short-Term Incentive Plan.
2019 Long-Term Equity Incentive Compensation
During 2019 each of our named executive officers also participated in the 2019 LTI Plan, pursuant to which we granted equity awards under the Company’s 2017 Omnibus Incentive Plan as amended. For 2019 the Compensation Committee determined the following 2019 target dollar value for equity awards granted to each of our named executive officers:
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LTI Plan targets are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. In consultation with Semler Brossy, the Compensation Committee reviewed the LTI Plan targets of the Company’s executive officers compared to the peer group and general market data to determine an LTI Plan target award value. The Committee determined that each of the named executive officers listed above would receive (a) 50% of the LTI Plan award value in the form of time-based restricted stock units and (b) 50% of the LTI Plan award value in the form of performance stock units. We determined the number of restricted stock units and performance stock units to be granted to each named executive officer by dividing each named executive officer’s target grant date value indicated above by the 30‑day trailing average of the closing price of the Company’s common stock leading up to the grant date. The grant date was February 22, 2019 for the named executive officers. Further details regarding the number of restricted stock units and performance stock units that we granted to each of the named executive officers under the 2019 LTI Plan can be found in the “Grants of Plan Based Awards” table below.
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The grants of restricted stock units in 2019 vest ratably over a three-year period with 1/3 vesting on each anniversary of the grant date.
The performance stock units will vest based on the achievement of revenue and non-GAAP earnings per share (“Non-GAAP EPS”) from continuing operations over a three-year performance period (2019‑2021). All or a portion of such performance stock units can vest in any quarter during such three-year performance period if any of the performance goals are independently met over a trailing four quarter period (with the first measurement occurring at the end of the fourth quarter of 2019), contingent upon non-GAAP EPS achievement for the revenue measure. The Compensation Committee believes this early earning opportunity aligns incentives with the business strategy of accelerating growth of the organization. Three-year targets are based on aspirational goals and represent growth rates well above the underlying markets in which we operate. Some or all of the awards may be earned prior to the end of the 3‑year performance period if growth rates exceed these difficult targets. Since awards are granted annually, there is an “overlapping” effect mitigating the risk of actions to accelerate the earning of any specific year’s award. A threshold level of Non-GAAP EPS (indicated in the table below) must be met for any performance stock units to vest, including the performance stock units that would otherwise vest based on the achievement revenue goals. The performance goals for the 2019 LTI performance stock units were as follows and include Artesyn financial contribution to the overall achievement:
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2019 LTI Performance Stock Unit Performance Goals | |||||||||||
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Financial Performance Metric |
| Weight |
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Revenue |
| 50 | % | $ | 950 M |
| $ | 1.19 B |
| $ | 1.31 B |
Non-GAAP EPS |
| 50 | % | $ | 6.50 |
| $ | 7.00 |
| $ | 7.50 |
At the end of the 3‑year performance period, we will interpolate performance between threshold and target and target and stretch for the last trailing four quarter period in the 3‑year performance period and vest any remaining performance stock units accordingly.
Over the four-quarter period beginning on January 1, 2019 and ending on December 31, 2019, the Company did not achieve the threshold performance goals for revenue or Non-GAAP EPS, and accordingly, no vesting of such performance stock units occurred during 2019. As a result, Messrs. Wasserman, Oldham, Brinker and McGimpsey were each granted and earned the number of 2019 LTI stock units reported in the table below:
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| 2019 LTI Restricted | 2019 LTI Performance | 2019 LTI Performance | ||
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| 2019 LTI Restricted | Stock Units Vested | Stock Units Granted | Stock Units Earned | |||
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| Stock Units Granted | during 2019 | during 2019 | during 2019 | |||
Name |
| (#) | (#) | (at Target) (#) | (#) | |||
Yuval Wasserman |
| 31,256 |
| 10,418 |
| 31,256 | (1) | 0 |
Paul Oldham |
| 8,930 |
| 2,976 |
| 8,930 | (1) | 0 |
Neil Brinker |
| 9,922 |
| 3,307 |
| 9,922 | (1) | 0 |
Thomas McGimpsey |
| 6,945 |
| 2,315 |
| 6,945 | (1) | 0 |
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2018 Long-Term Incentive Plan Performance Stock Units
In 2018, we awarded each of our named executive officers performance stock units under our 2018 LTI Plan that vest based on our achievement of performance metrics over a three (3) year performance period (2018‑2020). Like the performance stock units that we granted in 2019, all or a portion of the 2018 LTI performance stock units can vest in any quarter during the three-year performance period if any of the
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performance goals are independently met over a trailing four quarter period. The performance goals for the 2018 LTI performance stock units were as follows:
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2018 LTI Performance Stock Unit Performance Goals | |||||||||||
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Financial Performance Metric |
| Weight |
| (50% payout) |
| (100% payout) |
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Revenue |
| 50 | % | $ | 900 M |
| $ | 1.13 B |
| $ | 1.25 B |
Non-GAAP EPS |
| 50 | % | $ | 5.50 |
| $ | 6.00 |
| $ | 6.50 |
Under the 2018 LTI Plan, the revenue and the Non-GAAP EPS thresholds required to trigger vesting of either the revenue or Non-GAAP EPS financial metrics were both not met; therefore, no performance stock units vested in 2019 under the 2018 grant.
2017 Long-Term Incentive Plan Performance Stock Units
In 2017, we awarded each of our named executive officers (of which, Messrs. Wasserman and McGimpsey are also current named executive officers) performance stock units under our 2017 LTI Plan that vest based on our achievement of performance metrics over a three (3) year performance period (2017‑2019). Like the performance stock units that we granted in 2019, all or a portion of the 2017 LTI performance stock units can vest in any quarter during the three-year performance period if any of the performance goals are independently met over a trailing four quarter period, contingent upon non-GAAP EPS achievement for the revenue measure. The performance goals for the 2017 LTI performance stock units were as follows:
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2017 LTI Performance Stock Unit Performance Goals | |||||||||||
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Financial Performance Metric |
| Weight |
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Revenue |
| 50 | % | $ | 650 M |
| $ | 750 M |
| $ | 850 M |
Non-GAAP EPS |
| 50 | % | $ | 3.00 |
| $ | 3.50 |
| $ | 4.00 |
Prior to 2019, all the 2017 LTI performance stock units based on Non-GAAP EPS had already vested because we achieved the Non-GAAP EPS stretch goal in 2017 (the first four quarters of the performance period), and a 25% portion of the 2017 LTI performance stock units based on revenue had already vested because we achieved the threshold revenue goal during 2017. During 2019, an additional 44.4% of the 2017 LTI performance stock units based on revenue vested because we achieved revenue of $788.9M by the end of 2019. As a result, Messrs. Wasserman and McGimpsey each earned the number of 2017 LTI stock units reported in the table below during 2019. After 2019, there will be no more vesting of the 2017 LTI performance stock units because the performance period expired, and any unearned 2017 LTI performance stock units were forfeited at the end of 2019.
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Additional information regarding the number of stock units that vested under our 2017‑2018 and 2019 LTI Plans for each named executive officer in 2019 can be found below in the “2019 Option Exercises and Stock Vested” table and information regarding the number of stock units that are unvested but remain outstanding for each named executive officer can be found below in the “2019 Outstanding Awards at Fiscal Year End” table.
Artesyn Performance-Based Integration Cash Incentive Program
On October 25, 2019, the Company approved a performance-based cash integration incentive program for select employees and members of management (including the named executive officers) that would reward
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participants should the Company achieve identified synergies, accretion targets and significant milestones related to factory and facility optimization, all with respect to the integration of Artesyn Embedded Technologies, Inc.’s Embedded Power business during the 2020 and 2021 performance period (the “Integration Incentive Program”). The Integration Incentive Program is in addition to other incentive programs and may pay out early if targets and milestones are achieved early. Under the Integration Incentive Program, an eligible participant can achieve between 0% and 150% of target with a threshold achievement of 50% of target based on achievement of specific financial and integration goals. The eligible named executive officers under the Integration Incentive Program and their target cash incentive opportunity (shown in parenthesis) are as follows: Yuval Wasserman, President & Chief Executive Officer ($725,000), Paul Oldham, EVP & Chief Financial Officer ($725,000), Neil Brinker, EVP & Chief Operating Officer ($725,000) and Tom McGimpsey, EVP - Integration Manager ($600,000).
Other Benefits
As U.S. employees,
The amount and relative allocation of each of the executivesabove components at target depends on the following factors:
Historical rates of Executive Compensation
Data obtained from management’s recruitment activities
Comparative review and analysis provided by the independent compensation consultant
Alignment with the Company’s overall compensation philosophy, the executives’ responsibilities and their performance
Base Salary
Base salaries are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. Base salaries of our named executive officers are also set with the goal of rewarding executive officers on a day-to-day basis for their time and services. For 2021, the Compensation Committee decided to increase each of the named executive officers’ base salary based on a combination of merit increase, peer company compensation and general market trends. The base salaries of each of our named executive officers in 2021 were as follows:
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Name |
| Position |
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| from 2020 | | |
Stephen Kelley |
| President and Chief Executive Officer | | $ | 850,000 | | — | * |
Paul Oldham |
| Executive Vice President and Chief Financial Officer | | $ | 485,000 | | 5.4 | % |
Eduardo Bernal Acebedo (1) | | Executive Vice President and Chief Operations Officer | | $ | 417,853 | | — | * |
Thomas McGimpsey |
| Executive Vice President, General Counsel and Corporate Secretary | | $ | 393,500 | | 3.0 | % |
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Yuval Wasserman (2) | | Former President and Chief Executive Officer | | $ | 850,000 | | 6.3 | % |
Dana Huth (3) | | Former Executive Vice President and Chief Revenue Officer | | $ | 410,000 | | 5.1 | % |
* Mr. Kelley and Mr. Bernal Acebedo joined the company in 2021.
(1) Mr. Bernal Acebedo is paid in Singapore Dollars (“SGD”) and his salary was converted to USD using an exchange rate of 0.74115 as of December 31, 2021.
(2) Mr. Wasserman’s base salary increase was approved prior to the announcement of his retirement. Mr. Wasserman retired as President and CEO on March 1, 2021.
(3) Mr. Huth resigned as an officer on July 7, 2021, and left the company on September 13, 2021.
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PRECISION | POWER | PERFORMANCE | 35 |
2022 ANNUAL | |
PROXY STATEMENT |
2021 Short Term Incentive Plan Compensation
The 2021 STI Plan provides the Company’s named executive officers with an opportunity to earn an annual cash bonus based on the Company’s achievement of certain financial performance goals. For 2021, the financial measures were revenue, weighted at 40%, Non-GAAP operating income from continuing operations weighted at 40%, and adjusted cash flow weighted at 20%. The Compensation Committee believes that these metrics help to drive balanced performance across the business.
To address ongoing volatility in the markets the Company serves, the 2021 STI Plan provided two six-month performance periods (January 1 - June 30 and July 1 - December 31). The two six-month performance periods applied to Revenue and Non-GAAP operating income from continuing operations. The adjusted cash flow metric was calculated as an annual measure based on fiscal year performance (January 1 – December 31). The Compensation Committee did not adjust the financial goals for either performance period from the original metrics established at the beginning of the year. Any bonus earned during either six-month performance period is not paid until after the end of the fiscal year.
The Compensation Committee set each of our named executive officers’ annual target bonus opportunity as a percentage of his base salary. Actual bonuses awarded to each of our named executive officers may range from 0% to 200% of target depending on actual company performance over the performance periods, as described below. For 2021 these annual bonus targets were as follows:
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Name | Target as a % of Base Salary | Target | |||
Stephen Kelley* |
| 100 | % | | $ 850,000 |
Paul Oldham |
| 70 | % | | $ 339,500 |
Eduardo Bernal Acebedo* |
| 70 | % | | $ 292,497 |
Thomas McGimpsey |
| 65 | % | | $ 255,775 |
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Yuval Wasserman** |
| 100 | % | | $ 850,000 |
Dana Huth*** |
| 70 | % | | $ 287,000 |
*Messrs. Kelley and Bernal Acebedo’s payments are prorated based on their hire dates of March 1, 2021, and September 13, 2021, respectively.
**Mr. Wasserman retired as President and CEO on March 1, 2021, and was eligible for a prorated portion of the 2021 STI payout.
***Mr. Huth resigned as an officer on July 7, 2021, and left the Company on September 13, 2021, and was not eligible for a 2021 STI payout.
Our named executive officers’ bonuses are paid out of a bonus pool, the size of which is contingent on the achievement of certain financial performance goals during the relevant six-month performance period. Achievement of the various performance goals listed in the table below determines the size of the bonus pool for Messrs. Kelley, Oldham, Bernal Acebedo, McGimpsey and Wasserman. Because Mr. Huth left the Company in September 2021, he forfeited his right to receive any payout under the 2021 STI Plan.
The Compensation Committee selected the specific financial performance metrics for 2021 as shown below. These metrics are aligned with the Company’s overall strategic and operating plan. Specifically, the Compensation Committee believes that the non-GAAP metrics are better indicators of the operating performance of the company.
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36 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
2021 Short Term Incentive Metrics (Values in $M, except as noted)
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2021 STI Plan | | | | | | | | | | | | | | | | | |
| | | | Performance Goals | | Actual Performance | | ||||||||||
| | | | Threshold | Target | | Stretch | | | | | %. | | ||||
| | | | (50 % | | (100 % | | (200 % | | Dollar | | Incentive | | ||||
Financial Performance Metric |
| Weight |
| Payout) |
| Payout) |
| Payout) |
| Value |
| Earned |
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Revenue* |
| 40 | % | $ | 1,255 | | $ | 1,476 | | $ | 1,698 | | $ | 1,456 |
| 38.2 | % |
Non-GAAP Operating Income from Continuing Operations** |
| 40 | % | $ | 160 | | $ | 262 | | $ | 357 | | $ | 211 |
| 30.1 | % |
Cash Flow*** |
| 20 | % | $ | 217 | | $ | 273 | | $ | 321 | | $ | 158 |
| — | % |
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| | | | | | | Overall Achievement | | | | | 68.3 | % |
* | Revenue targets based on total company operations for 2021. The full year targets include a first half target of $725.8M and a second half target of $750.1M. Achievement for 2021 was $712M in the first half and $744M in the second half. |
** | Non-GAAP Operating Income from Continuing Operations must be met at threshold to |
*** | Cash flow is a full year 2021 target. |
Note: Achievement percentages between the threshold and target and between the target and stretch levels are linearly interpolated.
Results of the 2021 Short Term Incentive Plan
Based on the corporate achievement of 68.3% for 2021, the Company’s payouts under the 2021 Short Term Incentive Plan were as follows:
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Name | | Target | | Actual | ||
Stephen Kelley* | | | $ 850,000 | | | $ 486,708 |
Paul Oldham | |
| $ 339,500 | |
| $ 231,879 |
Eduardo Bernal Acebedo* | |
| $ 292,497 | |
| $ 60,206 |
Thomas McGimpsey | |
| $ 255,775 | |
| $ 174,694 |
| | | | | | |
Yuval Wasserman** | |
| $ 137,397 | |
| $ 93,842 |
Dana Huth*** | |
| — | |
| — |
*Messrs. Kelley and Bernal Acebedo’s payments are prorated based on their hire dates of March 1, 2021, and September 13, 2021, respectively.
**Mr. Wasserman retired as President and CEO effective March 1, 2021, and is eligible for a prorated portion of the 2021 STI payout.
***Mr. Huth resigned as an officer on July 7, 2021, and left the company on September 13, 2021, and was not eligible for the 2021 STI payout.
Changes for the 2022 STI Plan
The Compensation Committee, in consultation with Compensia, Inc., maintained the 2022 STI plan largely as designed in 2021, but approved adding a discretionary individual performance-based modifier ranging from 0% to 150% for the named executive officers. The modifier has a cap in which no executive can achieve greater than 200% of the target incentive. The Compensation Committee also approved weighting the potential 2022 STI earned over the two six-month performance periods proportional to the 2022 annual
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operating plan where 40% of the incentive potential is calculated in the first half and 60% of the incentive potential is calculated in the second half. Each half will be a stand-alone performance period.
2021 Long-Term Equity Incentive Compensation
During 2021 each of our named executive officers also participated in the 2021 LTI Plan, pursuant to which we granted equity awards under the Company’s 2017 Omnibus Incentive Plan as amended. For 2021, the Compensation Committee determined the following 2021 target dollar value for equity awards granted to each of our named executive officers:
| | | | |
Name |
| 2021 LTI Plan Target Grant Date Fair Value | ||
Stephen Kelley | | $ | 4,800,000 | (1) |
Paul Oldham | | $ | 1,200,000 | |
Eduardo Bernal Acebedo | | $ | 298,630 | (2) |
Thomas McGimpsey | | $ | 800,000 | |
| | | | |
Yuval Wasserman | |
| — | (3) |
Dana Huth | | $ | 900,000 | (4) |
(1) | Mr. Kelley was granted $3.6 million in |
(2) | Mr. Bernal Acebedo’s 2021 grant was prorated based on his start date in September 2021. |
(3) | Mr. Wasserman retired as President and |
(4) | Mr. Huth resigned as |
LTI Plan targets are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. In consultation with Semler Brossy, the Compensation Committee reviewed the LTI Plan targets of the Company’s executive officers compared to the peer group and general market data to determine an LTI Plan target award value. The Committee determined that each of the named executive officers listed above would receive (a) 50% of the LTI Plan award value in the form of time-based restricted stock units and (b) 50% of the LTI Plan award value in the form of performance stock units. We determined the number of restricted stock units and performance stock units to be granted to each named executive officer by dividing each named executive officer’s target grant date value indicated above by the 30-day trailing average of the closing price of the Company’s common stock leading up to the grant date. With one exception, the grant date was March 1, 2021, for the named executive officers. Mr. Bernal Acebedo’s grant date was September 13, 2021. Further details regarding the number of restricted stock units and performance stock units that we granted to each of the named executive officers under the 2021 LTI Plan can be found in the “Grants of Plan Based Awards” table below.
The grants of restricted stock units in 2021 vest ratably over a three-year period with 1/3 vesting on each anniversary of the grant date.
The Compensation Committee, in consultation with its independent compensation consultant Semler Brossy, re-designed the metrics for the achievement of the performance-based stock units granted as part of the 2021 LTI Plan. In 2021 the performance stock units were based 35% (70% of the 50% PSU target) on our relative total shareholder return (“rTSR”) performance compared to a benchmark performance of the S&P1000, consistent with the Company’s strategy to diversify its markets as an industrial technology growth company, and 15% (30% of the 50% PSU target) based on achievement of strategic goals. A portion of the strategic goals is tied to ESG metrics. The Compensation Committee believes that these metric changes more closely align management’s interests with stockholders and maintains a focus on achieving strategic objectives.
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With respect to the rTSR component, eligible participants have the opportunity to earn up to one-third of the performance stock units during each of the 12-month, 24-month and 36-month measurement periods, respectively, based on our rTSR performance compared to the S&P 1000. Eligible participants also have the ability to earn any additional performance stock units not earned in the first two measurement periods if our rTSR ranking relative to the S&P 1000 meets or exceeds the rTSR target percentile during the 36-month performance period. Any earned performance stock units are not eligible to vest until the end of the 36-month performance period. The multi-year structure reflects the cyclical nature of the markets that the Company operates in and encourages performance each year while the 36-month performance period reflects the long- term incentive structure of the plan. For further information on the 2021 LTI Plan, please see the Current Report on Form 8-K filed with the SEC on February 4, 2021. As of December 31, 2021, there was no attainment against this plan.
| | | | | | | | |
2021 LTI Performance Stock Unit Performance Goals | ||||||||
| | | | Threshold | | Target | | Stretch |
| | | | (0% | | (100% | | (200% |
Financial Performance Metric |
| Weight |
| payout) |
| payout) |
| payout) |
Relative Total Shareholder Return |
| 70 | % | -50pp to Index |
| At Index |
| +50pp to Index |
Strategic Goals* |
| 30 | % | Varies |
| Varies |
| Varies |
*Management believes that disclosing the specific strategic goals in the 2021 LTI program would cause competitive harm without adding meaningfully to the understanding of our business.
The chart set forth below shows the 2021 LTI restricted stock units granted in 2021 (which vest in three equal installments on each of the first three anniversaries of the grant date) and the 2021 LTI performance unit awarded and earned as a result of the performance for the year.
| | | | | | | | |
| | | | 2021 LTI Restricted | | 2021 LTI Performance | | 2021 LTI Performance |
| | 2021 LTI Restricted | | Stock Units Earned | | Stock Units Granted | | Stock Units Earned |
| | Stock Units Granted | | During 2021 | | During 2021 | | During 2021 |
Name |
| (#) |
| (#) |
| (at Target) (#) |
| (#) |
Stephen Kelley |
| 22,052 |
| — |
| 22,052 | (1) | — |
Paul Oldham |
| 5,513 |
| — |
| 5,513 | (1) | — |
Eduardo Bernal Acebedo |
| 7,459 |
| — |
| 7,459 | (1) | — |
Thomas McGimpsey |
| 3,675 |
| — |
| 3,675 | (1) | — |
Yuval Wasserman* |
| — |
| — |
| — | | — |
Dana Huth** |
| 4,134 |
| — |
| 4,134 | (1) | — |
(1) | Granted at 200% of the target amount should stretch targets be met. |
*Mr. Wasserman retired as President and CEO on March 1, 2021, and was not granted units under the 2021 LTI Plan.
**Mr. Huth resigned as an officer on July 7, 2021, and left the company on September 13, 2021, and therefore forfeited all units under the 2021 LTI Plan.
2020 Long-Term Incentive Plan Performance Stock Units
In 2020, we awarded each of our named executive officers performance stock units under our 2020 LTI Plan that vest based on our achievement of performance metrics over a three-year performance period (2020-2022). Under the 2020 LTI Plan, the performance stock units will vest based on the achievement of revenue and non-GAAP earnings per share (“Non-GAAP EPS”) from continuing operations over a three-year performance period (2020-2022). All or a portion of such performance stock units can vest in any quarter during such three-year performance period if any of the performance goals are independently met over a trailing four quarter period (with the first measurement occurring at the end of the fourth quarter of 2020), contingent upon non-GAAP EPS achievement for the revenue measure. The Compensation Committee believes this early earning opportunity aligns incentives with the business strategy of accelerating growth of the organization. Three-year targets are based on aspirational goals and represent growth rates well above
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PRECISION | POWER | PERFORMANCE | 39 |
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the underlying markets in which we operate. Since awards are granted annually, there is an “overlapping” effect mitigating the risk of actions to accelerate the earning of any specific year’s award. A threshold level of non- GAAP EPS (indicated in the table below) must be met for any performance stock units to vest, including the performance stock units that would otherwise vest based on the achievement revenue goals. The performance goals for the 2020 LTI performance stock units were as follows and include Artesyn’s financial contribution to the overall achievement:
| | | | | | | | | | | |
2020 LTI Performance Stock Unit Performance Goals | |||||||||||
| | | | Threshold | | Target | | Stretch | |||
| | | | (50% | | (100% | | (200% | |||
Financial Performance Metric |
| Weight |
| payout) |
| payout) |
| payout) | |||
Revenue |
| 50 | % | $ | 1.30 | B | $ | 1.53 | B | $ | 1.7B |
Non-GAAP EPS |
| 50 | % | $ | 4.00 | | $ | 6.33 | | $ | 7.00 |
For the 2020 LTI Plan, we intend to evaluate business results quarterly against the established performance metrics of Revenue and Non-GAAP EPS for the preceding four (4) fiscal quarters to determine the percentage of the PSU grant that is eligible to vest; provided, however, that with respect to the CEO, the Board shall be consulted prior to any final determination. These quarterly reviews will continue until the end of the Performance Period.
At the end of the three-year performance period, we will interpolate final performance between threshold and target and target and stretch for the highest consecutive trailing four quarter period in the three-year performance period and vest any remaining performance stock units accordingly.
Over the four-quarter period beginning on January 1, 2021, and ending on December 31, 2021, the Company achieved Revenue of $1.456B and $4.79 non-GAAP EPS from continuing operations. The chart set forth below shows the 2020 LTI restricted stock units granted in 2020 (which vest in three equal installments on each of the first three anniversaries of the grant date, which was March 3, 2020) and the 2020 LTI performance units awarded and earned as a result of the performance for the year.
| | | | | | ��� | | |
|
| |
| 2020 LTI Restricted | 2020 LTI Performance | 2020 LTI Performance | ||
| | 2020 LTI Restricted | Stock Units Earned | Stock Units Granted | Stock Units Earned | |||
| | Stock Units Granted | During 2021 | During 2020 | During 2021 | |||
Name | | (#) | (#) | (at Target) (#) | (#) | |||
Stephen Kelley | (1) | — |
| — | | — | (2) | 0 |
Paul Oldham |
| 7,231 |
| 2,411 | | 7,231 | (2) | 3,616 |
Eduardo Bernal Acebedo | (1) | — | | — | | — | (2) | — |
Thomas McGimpsey |
| 5,423 |
| 1,808 | | 5,423 | (2) | 2,712 |
|
| |
| | | | | |
Yuval Wasserman* | | 24,587 | | 8,196 | | 24,587 | | 12,294 |
Dana Huth** |
| 5,062 |
| 1,688 | | 5,062 | (2) | 2,530 |
(1) | Messrs. Kelley and |
(2) | Granted at 200% of |
*Mr. Wasserman retired as President and CEO on March 1, 2021.
**Mr. Huth resigned as an officer on July 7, 2021, and left the company on September 13, 2021, and therefore was not eligible to receive any of the 2020 LTI awards during 2021.
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2019 Long-Term Incentive Plan Performance Stock Units
In 2019, we awarded each of our named executive officers performance stock units under our 2019 LTI Plan that vest based on our achievement of performance metrics over a three-year performance period (2019-2021). Like the performance stock units that we granted in 2020, all or a portion of the 2019 LTI performance stock units can vest in any quarter during the three-year performance period if any of the performance goals are independently met over a trailing four quarter period. The performance goals for the 2019 LTI performance stock units were as follows:
| | | | | | | | | | | |
2019 LTI Performance Stock Unit Performance Goals | |||||||||||
| | | | Threshold | | Target | | Stretch | |||
Financial Performance Metric |
| Weight |
| (50% payout) |
| (100% payout) | | (200% payout) | |||
Revenue |
| 50 | % | $ | 950 | M | $ | 1.19 | B | $ | 1.31B |
Non-GAAP EPS |
| 50 | % | $ | 6.50 | | $ | 7.00 | | $ | 7.50 |
Under the 2019 LTI Plan, the non-GAAP EPS thresholds required to trigger vesting were not met and no 2019 LTI performance units were earned.
The chart set forth below shows the 2019 LTI restricted stock units awarded in 2019 and vested in 2021 and the 2019 LTI performance units granted (subject to performance) and earned as a result of the performance for the year.
| | | | | | | | |
|
| |
| 2019 LTI Restricted | 2019 LTI Performance | 2019 LTI Performance | ||
| | 2019 LTI Restricted | Stock Units Earned | Stock Units Granted | Stock Units Earned | |||
| | Stock Units Granted | During 2021 | During 2019 | During 2021 | |||
Name | | (#) | (#) | (at Target) (#) | (#) | |||
Stephen Kelley | (1) | — |
| — | | — | (2) | — |
Paul Oldham |
| 8,930 |
| 2,976 | | 8,930 | (2) | — |
Eduardo Bernal Acebedo | (1) | — |
| — | | — | (2) | — |
Thomas McGimpsey |
| 6,945 |
| 2,315 | | 6,945 | (2) | — |
|
| |
| | | | | |
Yuval Wasserman* | | 31,256 | | 10,418 | | 31,256 | | — |
Dana Huth** |
| 2,722 | | 907 | | 5,445 | | — |
(1) | Messrs. Kelley and Bernal Acebedo did not receive grants for the 2019 plan year. |
(2) | Granted at 200% of this amount should stretch targets be met. |
*Mr. Wasserman retired as President and CEO on March 1, 2021
**Mr. Huth left the Company on July 7, 2021, and therefore was not eligible to receive any of the 2019 LTI awards during 2021.
Additional information regarding the number of stock units that vested under our 2019, 2020, and 2021 LTI Plans for each named executive officer in 2021 can be found below in the “2021 Option Exercises and Stock Vested” table and information regarding the number of stock units that are unvested but remain outstanding for each named executive officer can be found below in the “2021 Outstanding Awards at Fiscal Year End” table.
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Potential Changes for the 2022 LTI Plan
The Compensation Committee, in consultation with Compensia, Inc., is in the process of exploring changes to our 2022 Long Term Incentive Plan, including potentially including other equity compensation vehicles, such as stock options, for our named executive officers, to further align performance incentives with shareholder interests, and help to retain our key staff for 2022 and beyond.
Artesyn Performance-Based Integration Cash Incentive Program
On October 25, 2019, given the importance of executing the successful integration of the Artesyn acquisition to the Company’s strategy and financial results, the Company approved a performance-based cash integration incentive program for select employees and members of management (including the named executive officers) that would reward participants should the Company achieve identified synergies, accretion targets and significant milestones related to factory and facility optimization, all with respect to the integration of Artesyn Embedded Technologies, Inc.’s Embedded Power business during the 2020 and 2021 performance period (the “Integration Incentive Program”). The Integration Incentive Program was in addition to other incentive programs and may have an accelerated pay-out if targets and milestones are achieved early. Under the Integration Incentive Program, an eligible participant can achieve between 0% and 150% of target with a threshold achievement of 50% of target based on achievement of specific financial and integration goals. The eligible named executive officers under the Integration Incentive Program and their target cash incentive opportunity at 100% of target (shown in parenthesis) are as follows: Yuval Wasserman, former President & Chief Executive Officer ($725,000), Paul Oldham, EVP & Chief Financial Officer ($725,000), and Thomas O. McGimpsey, EVP and General Counsel ($600,000).
Performance against goals for the performance period ending November 1, 2021 was in excess of target, resulting in payouts to executives as follows: Yuval Wasserman ($241,425) Paul Oldham ($241,425) and Thomas McGimpsey ($199,800). No other named executive officer received an award from this program. All awards were reviewed and recommended by the Compensation Committee and approved by the Board.
Other Benefits
As U.S. employees, the executive officers were eligible to participate in health and welfare benefits, as offered to our U.S. workforce. These benefits are designed to attract and retain a skilled workforce in a competitive marketplace. These benefits also help ensure that the Company has a healthy and focused workforce through reliable and competitive health and other personal benefits. These benefits were considered in relation to the total compensation package but did not materially impact decisions regarding other elements of executive officer compensation.
All U.S. employees of the Company including the executive officers are eligible to participate in the Company’s 401(k) savings plan and are eligible to receive matching contributions from the Company of fifty percent (50%) of the first six percent (6%) of compensation contributed to the plan by the employee. The Company’s 401(k) savings plan was amended in 2021 to provide for immediate vesting of the Company’s matching contributions.
Deferred Compensation Plan
In 2021, the Company established a deferred compensation plan that commenced in 2022. The plan will allow a group of management employees, including the named executive officers, to defer receiving certain of their cash compensation.
The Company will also credit to each participant’s account under the plan an amount equal to the employer matching contribution that would have been made for the participant under the Company’s 401(k) plan that
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42 | PRECISION | POWER | PERFORMANCE | |
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could not be made under that plan due to limitations under the tax code. The Company also may make discretionary contributions to participants’ accounts in the Company’s 401(k) savings plan and are eligible to receive matching contributions from the Company of fifty percent (50%) of the first six percent (6%) of compensation contributed to the plan by the employee. All U.S. employees of the Company excluding the executive and senior leadership team through vice presidents are eligible to participate in the Company’s Employee Stock Purchase Plan (“ESPP”) which allows for employees to purchase shares of the Company’s common stock with funds withheld directly from their pay. The ESPP also provides participants with a right to purchase a limited number of shares of common stock of the Company at a purchase price equal to the lesser of eighty five percent (85%) of the fair market value of the stock on either the opening or closing date of an offering period under the plan.
Earnings and losses on amounts deferred under the plan will be determined on the basis of the participants’ deemed investments of their account balances into commercially available investment funds selected by the participants from among the funds made available from time to time by the Compensation Committee.
Generally, distributions under the plan will be paid in a lump sum in cash six months after the participant’s separation from service unless the participant has elected to receive annual installments over a period of up to ten years or the participant has begun receiving distributions as a result of an election to receive distributions on a specified date prior to separation from service. A participant also may elect to receive distributions on the participant’s death or disability.
Tax and Accounting Implications
When determining the compensation packages of our named executive officers, the Compensation Committee considers all factors that may have an impact on our financial performance, such as accounting rules and tax regulations, including Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows a tax deduction to publicly traded corporations for compensation in excess of $1 million paid for any fiscal year to certain covered employees, generally including our named executive officers. The Compensation Committee believes that the tax deduction limitation should not compromise the Company’s ability to design and maintain executive compensation arrangements necessary to attract and retain strong executive talent. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes.
Response to the 2021 Advisory Vote on Executive Compensation
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the SEC’s rulemakings thereunder, we offered our stockholders an advisory vote on executive compensation as set forth more fully in our 2021 proxy statement. As reported on the Current Report on Form 8-K filed with the SEC on April 30, 2021, over 34.6 million shares of our common stock voted in favor of the executive compensation paid to our named executive officers at our 2021 Annual Meeting, representing approximately 99% of the votes cast on the proposal. In light of this approval rate, our Compensation Committee believed that no significant changes to our compensation programs were required. We will continue to carefully consider our annual votes in making future compensation decisions. We value the feedback of all of our stockholders and encourage all of our stockholders to vote on Proposal No. 3 as contained in this proxy statement.
Anti-Hedging and Anti-Pledging Policies
The Company’s insider trading policy prohibits all employees, officers, directors and their family and controlled entities from engaging in any hedging or pledging transactions with respect to the Company’s common stock without prior approval.
Stock Ownership Policy
We maintain a Stock Ownership Policy that is applicable to the Chief Executive Officer, the named executive officers reporting to the Chief Executive Officer and non-employee members of the Board of Directors. The Stock Ownership Policy provides that (a) the Chief Executive Officer shall own an amount of stock of the Company with a value equal to at least five (5) times his or her annual base salary (excluding any bonus, award or special compensation), (b) the named executive officers reporting to the Chief Executive Officer shall own an amount of stock of the Company with a value equal to at least three (3) times his or her annual base salary (excluding any bonus, award or special compensation), and (c) non-employee members of the Board of Directors shall own an amount of stock of the Company with a value equal to at least five (5) times
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the annual retainer for Board service (exclusive of any compensation for Committee service, meeting fees, leadership roles and the like), based in each case, on the volume weighted average closing price of the Company’s stock for the two fiscal years as of December 31 of the applicable year and subject to the terms in the policy. The policy provides for a phase-in period over five years to achieve the respective ownership goal. The CEO, named executive officers and non-employee members of the Board either currently conform to the policy or are on track to fully comply within the required time period.
Compensation Committee Report
The information contained in this report shall not be deemed to be “soliciting material” or “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 such information by reference in a document filed under the Securities Act or the Exchange Act.
The Compensation Committee of the Board has reviewed and discussed with management the above Compensation Discussion and Analysis for fiscal year 2021. Based upon the review and discussions, the Compensation Committee recommended to the Board, and the Board has approved, that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for its 2022 Annual Meeting.
This report is submitted by the Compensation Committee.
Frederick A. Ball, Chair
Anne T. DelSanto
Lanesha T. Minnix*
David W. Reed*
Thomas M. Rohrs
John A. Roush
*On February 1, 2022, Ms. Minnix left the Compensation Committee to join the Audit & Finance Committee and Mr. Reed joined the Compensation Committee.
Compensation Risk Assessment
In 2021, the Compensation Committee, with the assistance of our new compensation consultant, Compensia, Inc., reviewed the formal risk assessment for all our incentive compensation programs that have material impact on our financial performance such as accounting rules and tax regulations, including Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows a tax deduction to publicly traded corporations for compensation in excess of $1 million paid for any fiscal year to certain covered executives. Prior to the Tax Cuts and Jobs Act enacted in 2017 (the “Tax Reform Act”), certain performance-based compensation was potentially exempt from the $1 million deduction limit. However, under the Tax Reform Act, only qualifying performance-based compensation that is paid pursuant to a written binding contract in effect on November 2, 2017 will be exempt from the deduction limit. Only Mr. Wasserman and Mr. McGimpsey have qualifying performance-based compensation that may be paid pursuant to written binding contracts in effect as of November 2, 2017.
Accordingly, any compensation paid pursuant to new compensation arrangements entered into after November 2, 2017, even if performance based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive.
Response to the 2018 Advisory Vote on Executive Compensation
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the SEC’s rulemakings thereunder, we offered our stockholders an advisory vote on executive compensation as set forth more fully in
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our 2019 proxy statement. As reported on the Current Report on Form 8‑K filed with the SEC on June 5, 2019, over 32.8 million shares of our common stock voted in favor of the executive compensation paid to our named executive officers at our 2019 Annual Meeting, representing approximately 96% of the votes cast on the proposal. In light of this approval rate, our Compensation Committee believed that no significant changes to our compensation programs were required. We will continue to carefully consider our annual votes in making future compensation decisions. We value the feedback of all of our stockholders and encourage all of our stockholders to vote on Proposal No. 3 as contained in this proxy statement.
Anti-Hedging Policy
The Company’s insider trading policy prohibits all employees, officers, directors and their family and controlled entities from engaging in any hedging transactions with respect to the Company’s common stock.
Stock Ownership Policy
In February 2014, our Board of Directors adopted a Stock Ownership Policy, effective for years beginning with 2014, which is applicable to the Chief Executive Officer, the named executive officers reporting to the Chief Executive Officer and non-employee members of the Board of Directors. The Stock Ownership Policy provides that (a) the Chief Executive Officer shall own an amount of stock of the Company with a value equal to at least five (5) times his or her annual base salary (excluding any bonus, award or special compensation), (b) the named executive officers reporting to the Chief Executive Officer shall own an amount of stock of the Company with a value equal to at least three (3) times his or her annual base salary (excluding any bonus, award or special compensation), and (c) non-employee members of the Board of Directors shall own an amount of stock of the Company with a value equal to at least five (5) times the annual retainer for Board service (exclusive of any compensation for Committee service, meeting fees, leadership roles and the like), based in each case, on the volume weighted average closing price of the Company’s stock for the two fiscal years as of December 31 of the applicable year and subject to the terms in the policy. The policy provides for a phase‑in period over five years to achieve the respective ownership goal. The CEO, named executive officers and non-employee members of the Board either currently conform to the policy or are on track to fully comply within the required time period.
Compensation Committee Report
The information contained in this report shall not be deemed to be “soliciting material” or “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 such information by reference in a document filed under the Securities Act or the Exchange Act.
The Compensation Committee of the Board has reviewed and discussed with management the above Compensation Discussion and Analysis for fiscal year 2019. Based upon the review and discussions, the Compensation Committee recommended to the Board, and the Board has approved, that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for its 2020 Annual Meeting.
This report is submitted by the Compensation Committee.
Edward C. Grady, Chair
Grant H. Beard
John A. Roush
Compensation Risk Assessment
In 2019, the Compensation Committee, with the assistance of Semler Brossy, reviewed the formal risk assessment for all our incentive compensation programs that have material impact on our financial
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statements. In conducting such review, the Compensation Committee considered key information about each incentive compensation plan within our compensation program, including the number of participants, target annual awards, performance metrics, and design features. As a result of such review, the Compensation Committee determined that none of our incentive plans presents a material adverse risk to the financial statements of the Company.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. GradyBall (Chair), BeardReed, Rohrs, Roush and Roush.Ms. DelSanto. There are no interlocking relationships as defined in the applicable SEC rules.
During 2019,2021, no executive officer of Advanced Energy served as a member of the board of directors or compensation committee of another company that has any executive officers or directors serving on Advanced Energy’s Board of Directors or its Compensation Committee.
Change in Control and General Severance Agreements
The Company entered into certain executive change in control and general severance agreements (the “agreements”) in 2018 with Messrs. Wasserman, Oldham Brinker and McGimpsey.McGimpsey, and in 2021 with Mr. Kelley. The agreements
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44 | PRECISION | POWER | PERFORMANCE | |
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provide each of the executive officers with severance payments and certain benefits in the event of a termination without cause (as defined in the agreements) at any time (known as the “General Severance Benefits”), or a termination without cause or for good reason (as defined in the agreements) following an actual, or during a pending, change in control (known as “CIC Benefits”). The Company provides CIC Benefits in order to keep management focused on the Company’s stated corporate objectives irrespective of whether the achievement of such objectives makes the Company attractive for acquisition, and to avoid the distraction and loss of key management that could occur in connection with a rumored or actual change in corporate control. The Company decided to also provide General Severance Benefits in these agreements after determining that such benefits were commonly provided by the Company’s peers. The Compensation Committee approved the terms and conditions of the agreements based on consideration of marketplace benchmark data and the Company’s retention objectives.
Under these agreements, if the executive’s employment is terminated without cause (and not in connection with a change in control), then the General Severance Benefits provided to the executive are: (a) all then accrued compensation, (b) a lump sum payment equal to one times (1x) (or in the case of the Chief Executive Officer, one and a half times (1.5x)) the executive’s then current annual base salary, (c) continuation of insurance and other benefits for twelve (12) months following the date of termination, (d) an amount equal to the contributions that would have been made to the Company’s retirement plans on behalf of executive, if the executive had continued to be employed for twelve (12) months following the date of termination, and (e) reimbursement, up to $15,000, for outplacement services.
Under these agreements, in the event of an executive’s termination without cause or for good reason within 12 months following an actual, or during a pending, change in control, the CIC Benefits provided to the executive are: (a) all then accrued compensation and a pro-rata portion of executive’s target bonus for the year in which the termination is effected, (b) a lump sum payment equal one and a half times (1.5x) the executive’s then current annual base salary and target bonus for the year in which the termination is effected (or in the case of the Chief Executive Officer, two times (2x) the then current annual base salary and target bonus amount), (c) continuation of insurance and other benefits for 18 months following the date of termination, (d) an amount equal to the contributions that would have been made to the Company’s retirement plans on behalf of executive, if the executive had continued to be employed for twelve (12) months following the date of termination, (e) reimbursement, up to $15,000, for outplacement services, and (f) full vesting and right to exercise all stock options, equity grants and other equity awards (at maximum) then held by the executive so terminated.
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The payment of the General Severance Benefits and CIC Benefits under these agreements are conditioned upon the executive’s execution of a release of claims against the Company.
CEO Pay Ratio
As required by Securities and Exchange Commission rules we are providing the following information about the ratio of the median annual total compensation of our employees and the annual total compensation of Mr. WassermanKelley, our CEO.President and Chief Executive Officer. For the year ended December 31, 2019:2021:
| the median of the annual total compensation of all |
| the annual total compensation of Mr. |
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PRECISION | POWER | PERFORMANCE | 45 |
*The median employee calculation for 2019 for purposes of CEO pay ratio comparison excludes Artesyn employees (approximately 8,317 employees) because the acquisition occurred late in the fiscal year.
2022 ANNUAL | |
PROXY STATEMENT |
Excluding our CEO, we previously identified the median employee by examining the 2019 total actual compensation, which includes annual base salary cash allowances, cash incentives and long-term equity, for all individuals who we employed on December 31, 2019,2021, the last day of our payroll year (excluding Artesyn).year. We included all our employees globally, whether full-time, part-time, or seasonal, including any interns, fixed-term, apprentice, or agency temporary employees, or individuals that we employ through an agency.employees. We annualized the total actual compensationbase salary for any individual that works full-time but was hired after January 1, 2019.2021. For any employee that we paid in currency other than U.S. Dollars, we then applied the applicable foreign currency exchange rate as of December 31, 20192021 to convert such employee’s total compensation into U.S. Dollars.
Once we identified our median employee, we added together all of the elements of such employee’s compensation for 20192021 in the same way that we calculate the annual total compensation of our named executive officers in the Summary Compensation Table. To calculate our ratio, we divided Mr. Wasserman’s annualKelley’s annualized total compensation as reported in the Summary Compensation Table by the median employee’s annual total compensation.
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Mr. Kelley’s compensation in the Summary Compensation Table listed below reflects his compensation from his start date of March 1, 2021, without annualization.
Equity Compensation Plan Information
The Company currently maintains two equity compensation plans: The Company’s 2017 Omnibus Incentive Plan, as amended, and the Employee Stock Purchase Plan (“ESPP”). Both plans were approved by the Company’s stockholders. The following table sets forth the number of shares of common stock subject to outstanding options and other rights, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of December 31, 20192021, in each of the equity compensation plans.
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Equity Compensation plans approved by security holders |
| 185,084 | (1) | 21.56 |
| 2,543,919 | (2) |
| 112,239 | (1) | 24.41 |
| 2,553,620 | (2) |
Equity compensation plans not approved by security holders |
| — |
| — |
| — |
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| — |
| — | |
Total |
| 185,084 |
| 21.56 |
| 2,543,919 |
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| 112,239 |
| 24.41 |
| 2,553,620 | |
(1) |
| Includes |
(2) |
| Includes |
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46 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | ||
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Management
Executive officers of the Company are appointed by the Board and serve until their successors have been appointed and qualified or until their earlier resignation or removal by the Board. The following table sets forth names and ages of our current executive officers of the Company and their respective positions with the Company as of the date of this proxy.
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Name | Age | Position | Principal Occupation and Business Experience | ||||||||||
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STEPHEN KELLEY | | 59 | |||||||||||
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| | President, Chief Executive Officer and Director | |
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PAUL OLDHAM | | 59 | |||||||||||
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| | Executive Vice President, Chief Financial Officer | | Mr. Oldham joined the Company in May 2018 as its Executive Vice President & Chief Financial Officer. Previously Mr. Oldham served as the Senior Vice President of Administration, Chief Financial Officer and Corporate Secretary of Electro Scientific Industries, Inc., a developer and manufacturer of laser-based production equipment (“ESI”), from February 17, 2016, until December 4, 2017, and as the Vice President of Administration, Chief Financial Officer and Corporate Secretary of ESI from January 7, 2008 until February 16, 2016. Prior to joining ESI, Mr. Oldham was employed at Tektronix, Inc., a test, measurement, and monitoring company, since 1988, where he held several senior leadership positions, including Vice President Finance and Corporate Controller, Vice President - Treasurer and Investor Relations and European Operations Controller. Mr. Oldham has a bachelor’s degree in Accounting and an MBA in accounting and finance from Brigham Young University. | ||||||||
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| | Executive Vice President, Chief | | Mr. | |||||||
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PRECISION | POWER | PERFORMANCE | 47 |
2022 ANNUAL | |||
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THOMAS MCGIMPSEY | | 60 | ||||||||||
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| | Executive Vice President, General Counsel | | Mr. McGimpsey joined the Company in April 2009 and currently serves as its Executive Vice President, |
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48 | PRECISION | POWER | PERFORMANCE | |
2022 ANNUAL | |
PROXY STATEMENT |
Summary Compensation
The following table shows compensation information for fiscal 2017, 2018,2019, 2020, and 20192021 for the named executive officers. We did not have any other executive officers during fiscal 2021.
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| | | | | | | | Stock | | Option | | Incentive Plan | | Compensation | | All Other | | | ||||||||||||||||||
| | | | Salary | | Bonus | | Awards | | Awards | | Compensation | | Earnings | | Compensation | | Total | ||||||||||||||||||
Name and Principal Position |
| Year |
| ($) |
| ($) |
| ($)(2) |
| ($) |
| ($)(3) |
| ($) |
| ($)(4) |
| ($) |
| Year |
| ($) |
| ($) |
| ($)(4) |
| ($) |
| ($)(5) |
| ($) |
| ($)(6) |
| ($) |
Yuval Wasserman |
| 2019 |
| 721,000 |
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| 3,246,873 |
| — |
| 635,000 |
| — |
| 10,552 |
| 4,613,425 | ||||||||||||||||||
President and Chief |
| 2018 |
| 700,000 |
| — |
| 2,880,846 |
| — |
| 725,000 |
| — |
| 10,867 |
| 4,316,713 | ||||||||||||||||||
Executive Officer |
| 2017 |
| 650,000 |
| — |
| 3,900,326 |
| — |
| 977,250 |
| — |
| 12,415 |
| 5,539,991 | ||||||||||||||||||
Stephen Kelley |
| 2021 |
| 656,571 |
| 203,299 | (1) | 5,147,213 | | — |
| 488,133 | | — |
| 10,805 |
| 6,506,021 | ||||||||||||||||||
President and |
| 2020 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||||||||||
Chief Executive Officer |
| 2019 |
| — |
| — |
| — |
| — |
| — | | — |
| — |
| — | ||||||||||||||||||
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Paul Oldham |
| 2019 |
| 425,200 |
| — |
| 927,648 |
| — |
| 238,112 |
| — |
| 10,233 |
| 1,601,193 |
| 2021 |
| 470,051 |
| — | | 1,286,759 | | — |
| 473,983 | (2) | — |
| 10,677 |
| 2,241,470 |
Executive Vice President |
| 2018 |
| 267,397 |
| — |
| 520,998 |
| — |
| 121,940 |
| — |
| 7,626 |
| 917,961 |
| 2020 |
| 460,000 |
| — | | 862,254 | | — |
| 1,256,300 | | — |
| 11,906 |
| 2,590,460 |
and Chief Financial Officer |
| 2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 2019 |
| 425,200 |
| — |
| 927,648 |
| — |
| 238,112 |
| — |
| 10,233 |
| 1,601,193 |
Neil Brinker |
| 2019 |
| 437,750 |
| — |
| 1,030,749 |
| — |
| 245,140 |
| — |
| 10,313 |
| 1,723,952 | ||||||||||||||||||
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Eduardo Bernal Acebedo |
| 2021 |
| 116,881 | (7) | 200,111 | (7) | 822,259 |
| — |
| 60,383 | | — |
| 37,903 | (8) | 1,237,537 | ||||||||||||||||||
Executive Vice President |
| 2018 |
| 229,384 |
| 150,000 | (1) | 855,867 |
| — |
| 104,423 |
| — |
| 965 |
| 1,340,639 |
| 2020 | | — | | — | | — | | — | | — | | — | | — | | — |
and Chief Operating Officer |
| 2017 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||||||||||
and Chief Operations Officer |
| 2019 | | — | | — | | — | | — | | — | | — | | — | | — | ||||||||||||||||||
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Thomas McGimpsey |
| 2019 |
| 360,500 |
| — |
| 721,447 |
| — |
| 173,040 |
| — |
| 10,073 |
| 1,265,060 |
| 2021 |
| 382,036 |
| — | | 857,800 | | — |
| 375,006 | (2) | — |
| 10,428 |
| 1,625,270 |
Executive Vice President |
| 2018 |
| 350,000 |
| — |
| 672,090 |
| — |
| 136,500 |
| — |
| 10,352 |
| 1,168,942 |
| 2020 |
| 382,000 |
| — | | 646,668 | | — |
| 978,180 | | — |
| 11,906 |
| 2,018,754 |
and General Counsel |
| 2017 |
| 340,000 |
| — |
| 975,020 |
| — |
| 404,960 |
| — |
| 11,173 |
| 1,731,153 |
| 2019 |
| 360,500 |
| — |
| 721,447 |
| — |
| 173,040 |
| — |
| 10,073 |
| 1,265,060 |
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Yuval Wasserman* | | 2021 | | 819,168 | | — | | — | | — | | 335,542 | (2) | — | | 10,335 | | 1,165,045 | ||||||||||||||||||
Former President and | | 2020 | | 800,000 | | — | | 2,931,784 | | — | | 2,045,000 | | — | | 17,605 | | 5,794,389 | ||||||||||||||||||
Chief Executive Officer | | 2019 | | 721,000 | | — | | 3,246,873 | | — | | 635,000 | | — | | 10,552 | | 4,613,425 | ||||||||||||||||||
Dana Huth** | | 2021 | | 296,788 | | | | 964,940 | | | | 165,000 | (3) | | | 121,845 |
| 1,548,573 | ||||||||||||||||||
Former Executive Vice President |
| 2020 |
| 390,000 |
| — |
| 603,593 |
| — |
| 563,970 | | — |
| 61,754 |
| 1,619,317 | ||||||||||||||||||
and Chief Revenue Officer |
| 2019 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
(1) |
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(2) | The amounts shown for 2021 include amounts earned and paid during 2021 under the Company’s performance-based cash integration incentive program relating to the integration of Artesyn Embedded Technologies, Inc.’s Embedded Power business as described above under the heading “Artesyn Performance-Based Integration Cash Incentive Program.” The amounts paid to Messrs. Oldham, McGimpsey and Wasserman were $241,425, $199,800 and $241,425, respectively. |
(3) | Includes a payment made to Mr. |
(4) |
| The value of the Stock Awards listed relate to the |
(5) |
| For each named executive officer, the amount shown in this column for the STI plan represents the amount earned under the STI plan with respect to the year shown, though the amounts were actually paid in the subsequent fiscal year pursuant to the terms of the STI plan. |
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PRECISION | POWER | PERFORMANCE | 49 |
2022 ANNUAL | |
PROXY STATEMENT |
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(6) | All other compensation for each named executive officer consists of a 401(k) employer matching contribution (in the amount of |
(7) | |||
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| Payments made to Mr. Bernal Acebedo have been converted from SGD to USD using an exchange rate of 0.74115 as of December 31, 2021, including the cash signing bonus paid to Mr. Bernal Acebedo when he joined the Company. |
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*Mr. Wasserman retired as President and CEO effective March 1, 2021.
2019**Mr. Huth resigned as an officer on July 7, 2021, and left the company on September 13, 2021.
2021 Grants of Plan-Based Awards
The following table shows all plan-based awards for each of the named executive officers during 2019.2021. The unvested portion of the stock awards identified in the table below are also reported in the Outstanding Equity Awards at 20192021 Year-End Tabletable on the following page.
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| | | | | | | | | | | | | | | | Awards: | | Number of | | Exercise or | | | ||||||||||||||||||||||
| | | | Estimated Future Payouts Under Non-Equity | | Estimated Future Payouts Under Equity | | Number of | | Securities | | Base Price of | | Grant Date | ||||||||||||||||||||||||||||||
| | | | Incentive Plan Awards (1) | | Incentive Plan Awards (2) | | Shares of | | Underlying | | Option | | Fair Value of | ||||||||||||||||||||||||||||||
| | Grant | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | Stock or Units | | Options | | Awards | | Stock and | ||||||||||||||||||||||
Name |
| Date |
| ($) |
| ($) |
| ($) |
| (#) |
| (#) |
| (#) |
| (#)(3) |
| (#) |
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| Date |
| ($) |
| ($) |
| ($) |
| (#) |
| (#) |
| (#) |
| (#)(3) |
| (#) |
| ($/share) |
| Option Awards ($)(4) |
Yuval Wasserman |
| 2/22/2019 |
| 360,500 |
| 721,000 |
| 1,442,000 |
| 15,628 |
| 31,256 |
| 62,512 |
| 31,256 |
| - |
| - |
| 3,246,873 | ||||||||||||||||||||||
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Stephen Kelley | | 3/1/2021 | | 425,000 | | 850,000 | | 1,700,000 | | - | | - | | - | | 22,052 | | - | | - | | 2,455,931 | ||||||||||||||||||||||
| | 3/1/2021 | | | | | | | | 7,718 | | 15,436 | | 30,873 | | | | | | | | 1,954,569 | ||||||||||||||||||||||
| | 3/1/2021 | | | | | | | | 2,205 | | 6,615 | | 13,230 | | | | | | | | 736,712 | ||||||||||||||||||||||
Paul Oldham |
| 2/22/2019 |
| 148,820 |
| 297,640 |
| 595,280 |
| 4,464 |
| 8,930 |
| 17,860 |
| 8,930 |
| - |
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| 927,648 | | 3/1/2021 | | 169,750 | | 339,500 | | 679,000 | | - | | - | | - | | 5,513 | | - | | - | | 613,983 |
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Neil Brinker |
| 2/22/2019 |
| 153,213 |
| 306,425 |
| 612,850 |
| 4,961 |
| 9,922 |
| 19,845 |
| 9,922 |
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| | 3/1/2021 | | | | | | | | 1,930 | | 3,859 | | 7,718 | | | | | | | | 488,627 | ||||||||||||||||||||||
| | 3/1/2021 | | | | | | | | 551 | | 1,653 | | 3,307 | | | | | | | | 184,150 | ||||||||||||||||||||||
Eduardo Bernal Acebedo | | 9/13/2021 | | 146,248 | | 292,497 | | 584,994 | | - | | - | | - | | 7,459 | | - | | - | | 656,989 | ||||||||||||||||||||||
| | 9/13/2021 | | | | | | | | 602 | | 1,205 | | 2,410 | | | | | | | | 119,954 | ||||||||||||||||||||||
| | 9/13/2021 | | | | | | | | 171 | | 514 | | 1,029 | | | | | | | | 45,317 | ||||||||||||||||||||||
Thomas McGimpsey |
| 2/22/2019 |
| 108,150 |
| 216,300 |
| 432,600 |
| 3,472 |
| 6,945 |
| 13,891 |
| 6,945 |
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| 721,447 | | 3/1/2021 | | 127,887 | | 255,755 | | 511,500 | | - | | - | | - | | 3,675 | | - | | - | | 409,285 |
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| | 3/1/2021 | | | | | | | | 1,286 | | 2,572 | | 5,145 | | | | | | | | 325,730 | ||||||||||||||||||||||
| | 3/1/2021 | | | | | | | | 367 | | 1,102 | | 2,205 | | | | | | | | 122,785 | ||||||||||||||||||||||
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Yuval Wasserman* | | 3/1/2021 | | 68,698 | | 137,397 | | 274,794 | | - | | - | | - | | - | | - | | - | | - | ||||||||||||||||||||||
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Dana Huth** | | 3/1/2021 | | - | | - | | - | | - | | - | | - | | 4,134 | | - | | - | | 460,404 | ||||||||||||||||||||||
| | 3/1/2021 | | | | | | | | 1,447 | | 2,894 | | 5,788 | | | | | | | | 366,438 | ||||||||||||||||||||||
| | 3/1/2021 | | | | | | | | 413 | | 1,240 | | 2,480 | | | | | | | | 138,098 | ||||||||||||||||||||||
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(2)Reflects the performance stock units that vest upon the Company’s achievement of certain performance goals during the three-year period 2021-2023. These awards are described in more detail above under “Components of Executive Compensation-2021 Long-Term Equity Incentive Compensation.”
(3)Reflects restricted stock units that vest in 1/3 on each anniversary of the grant date. These awards are described in more detail above under “Components of Executive Compensation-2021 Long-Term Equity Incentive Compensation.”
*Mr. Wasserman retired as President and CEO on March 1, 2021, and did not receive a 2021 grant.
2021 Outstanding Equity Awards at Fiscal Year-End The following table shows all outstanding equity awards held by the named executive officers as of December 31,
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