INFORMATION ABOUT THE BOARD OF DIRECTORS
Corporate Governance
Our Board of Directors believes that the purpose of corporate governance is to ensure that we maximize stockholder value in a manner that is consistent with both the legal requirements applicable to us and within a business model that requires our employees to conduct business with the highest standards of integrity. The Board has adopted and adheres to corporate governance principles which the Board and senior management believe promote this purpose, are sound and represent best practices. The Board reviews these governance practices, the corporate laws of the State of Delaware under which we were incorporated, the rules and listing standards of the New York Stock Exchange and the regulations of the Securities and Exchange Commission, as well as best practices recognized by governance authorities, to benchmark the standards under which it operates. The corporate governance principles adopted by the Board of Directors may be viewed on our website under Corporate Governance at www.jbtc.com/investors,https://ir.jbtc.com/leadership/board-of-directors, and are also available in print to any stockholder upon request. A request should be directed to our principal executive offices at 70 West Madison Street, Suite 4400, Chicago, Illinois 60602, Attention: Executive Vice President, General Counsel.
Stockholder Engagement
Our Board of Directors believes that stockholders should have opportunities to engage directly with Company management and the Board. The Company engages with stockholders on a variety of topics throughout the year to ensure we are addressing questions and concerns, to seek input and to provide perspective on the Company’s strategy, operating results, compensation and governance policies. Stockholder feedback from this engagement is considered by the Board of Directors and reflected in enhancements to policies and practices. The Company’s stockholder engagement program includes but is not limited to roadshows, one-on-one conferences, outreach to investors on governance and related topics, and general availability to respond to investor inquiries. The multi-faceted nature of this program allows the Company to maintain meaningful engagement with a broad audience of stockholders.stockholders who are interested in engaging directly with our management.
In addition to the opportunity for direct engagement with senior management, there are a number of ways for stockholders to effectively communicate a point of view with the Board of Directors, including the following: a) voting on Board nominees on a majority vote standard;nominees; b) providing an annual advisory vote on executive compensation; c) submitting stockholder proposals; d) participating in our Annual Meeting of Stockholders; and e) communicating in writing directly to our Board of Directors via our Lead Independent Director.Chairman of the Board.
Environmental, Social, and Corporate Governance
Our approach on Environmental, Social and Corporate Governance (ESG) issues builds on our culture and long tradition of concern for our employees’ health and safety; partnering with our customers to find ways to make better use of the earth’s precious resources; and giving backworking to create a diverse and inclusive culture where our employees can reach their full and unique potential.
Sustainability is not only part of our philosophy, it is something positive for the communitiesworld and indispensable for our industry as a whole. What we do is reduce waste, increase the recovery of products or by-products and create a more efficient industry. We want to achieve this hand-in-hand with our customers. Our technologies are key to this focus, providing solutions to maximize yield, minimize waste and preserve food in all its forms to increase shelf-life and to get more food to people that need it.
Materiality Assessment
To help us identify and assess the environmental, social and governance issues that are most important to our business and our stakeholders, we completed our first comprehensive materiality assessment in 2020. The information gained from the assessment shapes our reporting strategy and focuses our efforts on where we live and work. Our FoodTech equipment and technologies continue to deliver quality and yield maximizing performance while striving to minimize food waste, extend food product life, and maximize energy and water efficiency, in order to create shared value for our food and beverage customers. Our AeroTech equipment business offers a variety of power options, including electrically powered ground support equipment, and our passenger boarding bridge technology facilitates aircraft fuel savings and faster turnaround at gates that help customers meet their environmental objectives. A key ESG objective is to further align our business with our customers’ quality, financial, and ESG goals. We recognize the responsibility that we have tocan make a positive impact on our stakeholders, the environment, and our communities in a manner that is consistent with our fiduciary obligations to our stockholders.
At the end of 2019, we retained a consulting partner with expertise in ESG to assist us in a comprehensive evaluation to determine actions we can take and the information we can provide that will be most impactful in advancing the ESG objectives of our customers and stakeholders. We are currently gathering input from investors, customers, employees and other stakeholders to identify the most material opportunities. This will ensure that initiatives we invest in will be the most meaningful and will represent the most responsible investment of our resources.
impact. We followed these steps:
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We conducted a gap analysis comparing the priorities of key ESG benchmarks against our current priorities and compiled a list of 24 ESG issues. | Using a third-party consultant, we collected input on the relative importance of our focus on these issues from our leaders and stakeholders such as customers, employees and investors. | Combining the results of the gap analysis and stakeholder surveys, we created a materiality matrix that shows the environmental, social and governance issues that are a primary focus for our business and stakeholders. |
We categorize an issue as material if 1) it could impact our business in terms of costs, growth, risk or reputation or 2) if it is important to our stakeholders. Topics in the “critically important” category are viewed by both JBT leaders and stakeholders as potential big wins/differentiators and/or critical risks.
Based on this assessment, the current issues we have developed focus around are:
Environmental and Social Impact of Products – Managing and mitigating the impact products have on the environment and communities; strategy towards a more environmentally or socially beneficial product portfolio.
Environmental Sustainability and Climate Strategy – JBT’s approach to reducing greenhouse gas (GHG) emissions across operations while managing physical and transition risks related to climate change.
Talent Attraction & Development – Policies and practices that attract and develop top tier talent with the right skills to deliver on current and future business needs.
Diversity, Equity & Inclusion – Policies and practices that create a welcoming environment for all employees (regardless of race, color, gender, sexual orientation, backgrounds, beliefs, experiences, etc.) to fulfill their potential.
We plan to periodically update this assessment to reflect our business and our stakeholders’ expectations. These evaluations were further reviewed with the Board’s Nominating and Governance Committee, which has oversight over management’s processes to identify, assess, manage and disclose environmental, social and governance related risks and opportunities.
| ● Partnering with three organizations whose missions focus on addressing inequality, fostering diverse and inclusive organizations and societies, and serving under-resourced communities. |
Employee Health and Safety | ● In 2020, our Recordable Incident Rate (RIR) was 0.97, which is significantly better than the 2019 Bureau of Labor Statistics (BLS) average of 4.18 for the industries in which we operate. ● Our Lost Workday Care Incident Rate of 0.13 in 2020 was also substantially better than the 2019 BLS average of 2.4. |
Meetings
Our Board of Directors held 8eight meetings during 2019.2020. Each incumbent director attended at least 75% of the meetings of the Board except for Mr. Ringler, who attended 62.5% of the Board meetings. Although Mr. Ringler attended all of our regularly scheduled in-person Board meetings, he was unable to participate in three telephonic board meetings. In each of these cases, though, Mr. Ringler participated in a separate call with our Chairman and CEO, and CFO and received the same presentation as was presented in the telephonic meetings with other Board members.Board. In addition, each of our directors attended at least 75% of the meetings of the committees on which he or she served during 2019.2020. The Board of Directors has scheduled a board meeting on the day of the 20202021 Annual Meeting of Stockholders, and the Company encourages Board members to virtually attend the Annual Meeting of Stockholders. SevenAll of the eight continuing Board members serving on the Board in 2019, with the exception of Mr. Lagarrigue,2020, attended the 20192020 Annual Meeting of Stockholders.
Committees of the Board of Directors
The Board of Directors has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Committee assignments are typically reassessed annually, and will be considered at the May 20202021 Board meeting.
Each of these committees operates pursuant to a written charter setting out the functions and responsibilities of the committee, each of which may be reviewed on our website under Corporate Governance at www.jbtc.com/investors,https://ir.jbtc.com/leadership/board-of-directors, and is also available in print to stockholders upon request submitted to our principal executive offices at 70 West Madison Street, Suite 4400, Chicago, Illinois 60602, Attention: Executive Vice President, General Counsel.
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Audit Committee
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Committee Members | Primary Responsibilities | # of Meetings
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Committee Members
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Alan D. Feldman (Chair)
Barbara L. Brasier(Chair) C. Maury Devine Alan D. Feldman Lawrence V. Jackson | • Responsibilities associated with our external independent auditor, including their appointment, compensation, retention or termination, and oversight; • Review and discuss with management, our Vice President of Internal Audit and our independent auditor the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies that could significantly affect our financial statements; • Review of the scope, planning and staffing of the prospective audit and approval of estimated fees therefor; • Resolution of disagreements between management and our independent auditor regarding financial reporting; • Oversight over accounting and financial reporting processes associated with the preparation of our financial statements and filings with the Securities and Exchange Commission; • Review of reports by management and legal counsel relating to litigation and compliance with laws, internal policies and controls that are material to our financial statements; • Review and assess our financial and accounting organization and internal controls; • Review policies with respect to major risk assessment and risk management practices designed to monitor and control exposure to such risks, including cyber security risks; • Review of matters associated with auditor independence and approval of non-audit services; and • Oversight over “whistle-blower” procedures for reporting questionable accounting and audit practices. | 87
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Audit Committee members meet privately in separate sessions with representatives of our senior management, our independent public accountants and our Vice President of Internal Audit after certain Audit Committee meetings (4(5 such sessions were held following Audit Committee meetings in 2019)2020).
The Audit Committee charter gives the Audit Committee the authority and responsibility for the engagement, compensation and oversight of our independent public accountants and the review and approval in advance of the scope of audit and non-audit assignments and the related fees of the independent public accountants. The Audit Committee charter also gives this committee authority to fulfill its obligations under Securities and Exchange Commission and New York Stock Exchange requirements.
The Board of Directors has determined that all of the members of the Audit Committee (Barbara L. Brasier, C. Maury Devine, and Alan D. Feldman)Feldman and Lawrence V. Jackson) (i) are independent directors as defined by the New York Stock Exchange listing rules and satisfy the enhanced independence criteria required for audit committee service under Securities and Exchange Commission rules and the New York Stock Exchange listing rules and (ii) meet the New York Stock Exchange standard of having accounting or related financial management expertise and meet the Securities and Exchange Commission criteria for an “audit committee financial expert.”
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Compensation Committee
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Committee Members | Primary Responsibilities | # of Meetings
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Committee Members
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Polly B. Kawalek (Chair) James E. Goodwin Emmanuel Lagarrigue James M. Ringler | • ReviewingPeriodically reviewing succession plans for the Chief Executive Officer and other primarykey executive officers, annually, and reporting to the full Board on succession planning and management development; • Administering our 2017 Incentive Compensation and Stock Plan and any other predecessor plans (the “Incentive Compensation Plan”), approving and administering other equity compensation plans;
• Reviewing our overall compensation philosophies to ensure policies appropriately link management interests with those of stockholders and mitigate risks; • Approving the peer group used for compensation levels, program design and relative performance comparisons and ensuring our pay programs are competitive and enable us to attract, retain and motivate top talent; • Administering our 2017 Incentive Compensation and Stock Plan and any other predecessor plans (the “Incentive Compensation Plan”), approving and administering other equity compensation plans; • Reviewing all new employee benefit plans and fringe benefits and approving the activities related to mergers, consolidations split-ups, spin-offs or terminations of such plans; • Reviewing and approving the short- and long-term performance goals and individual objectives (as it relates to the Chief Executive Officer) compared to incentive plan terms and total incentive compensation amounts to be paid to executive officers; • Reviewing, approving and administering policies and agreements permitting recovery of prior, or forfeiture of existing unvested or unearned, executive officer compensation awards in the event of a restatement of our financial results or serious misconduct by an executive officer; • Appointing members of the Employee Benefits Plan Committee and periodically reviewing the actions taken by that committee; • Approving all executive officer pay packages, periodically reviewing executive officer perquisites and executive severance arrangements, hedging and pledging policies; • Establishing and monitoring compliance with executive stock ownership guidelines; • Reviewing the competitiveness and design of Board compensation and recommending to the full Board changes to compensation for non-employee directors; • Reviewing management’s Compensation Discussion and Analysis to be included in our annual proxy statement, issuing its report on executive compensation for inclusion in our annual report or proxy statement; • Reviewing and recommending for Board approval the frequency of advisory votes on executive compensation (“say on pay”), and reviewing the results of “say on pay” resolutions and the input received from our stockholders engagement efforts, and considering any implications thereof; and • Hiring an executive compensation consultant to advise the Committee after determining that the consultant met independence requirements. | 58
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The Board of Directors has determined that all of the members of the Compensation Committee (James E. Goodwin, Polly B. Kawalek, Emmanuel Lagarrigue and James M. Ringler) are independent directors as defined by the New York Stock Exchange listing rules and satisfy the enhanced independence criteria required for compensation committee service under Securities and Exchange Commission regulations and the New York Stock Exchange corporate governance listing standards. The Compensation Committee members meet privately in separate sessions with representatives of our compensation consultant and our Executive Vice President, Human Resources after most Compensation Committee meetings (3(5 such sessions were held following Compensation Committee meetings in 2019)2020).
Under its charter, our Compensation Committee has the authority to engage the services of outside consultants, outside lawyers, and others to assist the committee’s fulfillment of these responsibilities, and our Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”), an internationally recognized executive compensation consulting firm, as the Committee’s independent compensation consultant for 2019.2020. For 2019,2020, the Compensation Committee’s engagement agreement with Meridian provided for a scope of work that included ensuring that the Compensation Committee’s compensation recommendations were consistent with our business strategy, pay philosophy, prevailing market practices and relevant regulatory mandates and assisting the Committee’s efforts to make compensation decisions that were aligned with the interests of our stockholders. In addition, Meridian’s engagement for 20192020 included the provision of incentive compensation plan design advice as well as advising on the Company’s compensation peer group. In connection with its engagement of Meridian in 2019,2020, the Compensation Committee considered various factors bearing upon Meridian’s independence including, but not limited to, the amount of fees received by Meridian from the Company as a percentage of Meridian’s total revenue, Meridian’s policies and procedures against any ownership of our stock, as well as policies designed to prevent conflicts of interest, and the existence of any business or personal relationship with any member of the Compensation Committee or management that could impact Meridian’s independence. After reviewing these and other factors, the Compensation Committee determined that Meridian was independent and that its engagement did not present any conflicts of interest. Meridian also determined that it was independent from management and confirmed this in a written statement delivered to the Chair of the Compensation Committee. In 2019,2020, the Compensation Committee also retained external and independent legal advice in connection with its negotiation of an employmenta severance agreement with its former Chairman, President and Chief Executive Officer.
The Compensation Committee annually reviews executive pay, peer group selection criteria, compensation design practices and performance to help ensure that our total compensation program is consistent with our compensation philosophies. When determining compensation levels for executive officers for 2019,2020, the Compensation Committee utilized compensation survey data that was supplied by Meridian and Aon Hewitt. For purposes of this survey, a group of peer companies was selected by our management, reviewed by Meridian and approved by the Compensation Committee. The list is reviewed prior to each compensation survey by the Compensation Committee to ensure continuing relevancy of the peer group considering the size, industry, and financial performance of the proposed companies. With each survey, the Compensation Committee’s independent consultant collects, analyzes and reports back to the Compensation Committee on the amounts, designs, and components of compensation paid by the peer group companies, utilizing regression analysis to develop size-adjusted market values for companies with varying revenue size and to provide relevant comparisons. For our Chief Executive Officer, Chief Financial Officer and Executive Vice Presidents, the Compensation Committee also reviews data compiled annually by Meridian from proxy statement filings by peer group companies to assess pay levels and design practices for comparable executive officers.
Based on the survey market data and the additional data from public filings, the Compensation Committee reviewed the appropriateness of management’s recommendations for each of our executive officer’s base pay, annual management cash incentive and long-term incentive plan awards for 2019.2020 (other than the CEO). The Compensation Committee allocated total annual compensation to our executive officers among the various elements of short-term cash (base pay and annual cash incentive) and long-term compensation (equity incentive awards) to approximate the market 50th percentile targeted pay levels and mix identified in the survey results and in the data obtained from public filings, with appropriate differences based on individual experience, impact and performance.
The scope of authority delegated to the Compensation Committee by the Board of Directors is to decide whether or not to accept, reject or modify our management’s proposals for total compensation awards to our named executive officers. The Compensation Committee also has the authority to recommend to the
Board of Directors the amount of compensation to be paid to our non-employee directors. OurBoth our Chief Executive Officer and our Interim Chief Executive Officer participated this year in the compensation decisions for the other named
Stockholders may submit recommendations for future candidates for election to the Board of Directors for consideration by the Nominating and Governance Committee by writing to: Executive Vice President, General Counsel, John Bean Technologies Corporation, 70 West Madison Street, Suite 4400, Chicago, Illinois 60602. A letter making a director candidate recommendation must include the candidate’s name, biographical information and a summary of the candidate’s qualifications. In addition, the letter should be accompanied by a signed statement from the nominee indicating that the nominee is willing to serve as a member of the Board. To make a nomination for the 20212022 Annual Meeting, please refer to the timing
requirements specified in the section of this Proxy Statement entitled “Proposals for the 20212022 Annual Meeting of Stockholders.” All submissions from stockholders meeting these requirements will be reviewed by the Nominating and Governance Committee.
In connection with its role in recommending candidates for the Board, the Nominating and Governance Committee advises the Board with respect to the combination of skills, experience, perspective and background that its members believe are required for the effective functioning of the Board considering our current business strategies and regulatory, geographic and market environment. The Committee has not established specific, minimum qualifications for director nominees. Our Corporate Governance Guidelines provide that directors should be selected based on integrity, successful business experience, stature in their own fields of endeavor and the diversity of perspectives they bring to the Board. Our Corporate Governance Guidelines also require that a majority of our non-employee directors be active or retired senior executives, preferably chief executive, chief financial or chief operating officers or other similar senior officers of publicly-held companies. In addition, the Corporate Governance Guidelines provide that our non-employee directors also be chosen based on recognized experience in our lines of business and leadership in areas of government service, academia, finance and international trade. Nominees to be evaluated by the Nominating and Governance Committee for future vacancies on the Board will be selected by the Committee from candidates recommended by multiple sources, including business and personal contacts of the members of the Nominating and Governance Committee, recommendations by our senior management and candidates identified by independent search firms, stockholders and other sources, all of whom will be evaluated based on the same criteria. All of the current nominees for the Board are standing members of the Board that are proposed by the entire Board for re-election.
The Nominating and Governance Committee engaged in a rigorous assessment and selection process assisted by an independent search firm that led to the election of Mr. Lagarrigue and Ms. Brasier by the Board in April 2019 and Mr. Jackson in March 2020. The process commenced with a comprehensive self-assessment of the current Board members across seven skills and experience categories to inform the selection of new Board members. A Board culture assessment process was also led in conjunction with an independent search firm. Both assessments were used to develop and evaluate a slate of candidates.
The Nominating and Governance Committee will lead the Board’s oversight of the Company’s Environmental, Social and Corporate Governance initiative.
Director Independence
The Nominating and Governance Committee conducted a review of the independence of the members of the Board of Directors and its committees and reported its findings to the full Board at its February 28,25, 2021 meeting. At any given time in 2020, meeting. Our Chairman,only one of our directors who served on our Board was an employee director. Thomas W. Giacomini, our President and Chief Executive Officer Thomas W. Giacomini, isuntil September 2020, and Brian A. Deck, who was appointed to the Board and became our singlePresident and Chief Executive Officer in December 2020, were our employee director.directors during 2020; their service on our Board did not overlap. Each of our directors completes an annual questionnaire requiring disclosure of any relationships (including industrial, banking, consulting, legal, accounting, charitable or familial relationships) which could impair the independence of such director. The Nominating and Governance Committee reviewed all of the commercial transactions, relationships and arrangements between us and our subsidiaries, affiliates and executive officers with companies with whom the seven non-employee directors who served on our Board in 20192020 are affiliated or employed. The transactions, relationships and arrangements of this nature that exist and were reviewed by the Nominating and Governance Committee were the continuing service by James M. Ringler as a member of the Board of Directors of TechnipFMC plc, formerly known as FMC Technologies, Inc., the company from which we separated from in a spin-off transaction in July 2008, and the employment of Emmanuel Lagarrigue, as an executive of Schneider Electric, a supplier to various JBT businesses. TechnipFMC plc, the successor to FMC Technologies, Inc., and JBT Corporation are parties to certain agreements entered into in 2008 that pertained to the separation of the operations of FMC Technologies, Inc. and the Company, and which address, among other things, continuing indemnification obligations between
the two companies, intellectual property licensing arrangements, and sales distributor agreements. Schneider Electric supplies electrical components, control systems and software products to the Company. Over the last five years, the volume of transactions between Schneider Electric and the Company has generally remained below $1 million per year, which represents less than 0.01%0.0004% of Schneider Electric annual sales. The Company’s payments todirect spend with Schneider Electric areis estimated to be less than 0.1%1% of the Company’s expenditures ontotal direct materials.material spend. Although the Board has not adopted categorical standards of materiality,
these relationships were not deemed to be material or as impacting the independence of our non-employee directors.
Based on the report and recommendation of the Nominating and Governance Committee, the Board has determined that each of its non-employee directorsmembers (Barbara L. Brasier, C. Maury Devine, Alan D. Feldman, James E. Goodwin, Emmanuel Lagarrigue, Lawrence V. Jackson, Polly B. Kawalek Emmanuel Lagarrigue and James M. Ringler) satisfies the independence criteria set forth in the corporate governance listing standards of the New York Stock Exchange. Furthermore, the Board has determined that Lawrence V. Jackson, who joined the board in March 2020, also satisfies the independence criteria set forth in the corporate governance listing standards of the New York Stock Exchange. In addition, all of the members of the Audit Committee satisfy the enhanced independence criteria required for members of audit committees, and all of the members of the Compensation Committee satisfy the enhanced independence criteria required for members of compensation committees, under regulations adopted by the Securities and Exchange Commission and the New York Stock Exchange corporate governance listing standards.
Executive Sessions of Independent Directors
The Board of Directors holds executive sessions of only its independent directors after regularly scheduled Board of Directors meetings. James E. Goodwin was selected by the Board of Directors to serve as the presiding “lead independent director” for these executive sessions during 2019, and was re-selected to serve2020, but with the election of Alan D. Feldman as Chairman of the Board of Directors, in that capacity for 2020.June 2020, Mr. Feldman has taken over the role of leading the executive sessions.
Stockholder Communications to the Board
Stockholders and other interested parties may communicate directly with the Board of Directors, with the presiding “lead independent director”Chairman of the Board of Directors for an upcoming meeting or the independent directors as a group by submitting written correspondence c/o Lead Independent Director,Chairman of the Board of Directors, John Bean Technologies Corporation, 70 West Madison Street, Suite 4400, Chicago, Illinois 60602. The lead independent directorChairman of the Board of Directors will review any such communication at the next regularly scheduled Board meeting unless, in his or her judgment, earlier communication to the full Board is warranted.
Board Leadership Structure
The Board retains the authority to modify its Board leadership structure to address our Company’s circumstances and advance the best interests of the Company and its stockholders as and when appropriate. TheUntil such time as our Chief Executive Officer transition began this year, our Board believesbelieved that combining the role of Chief Executive Officer and the role of Chairman, together with the designation of a lead independent director, providesprovided an appropriate balance in the Company’s leadership. leadership in light of the tenure of Mr. Giacomini and his experience with our Company’s business. At such time as Mr. Deck began serving as our interim Chief Executive Officer in June 2020, our Board determined that an independent Chairman was necessary because Mr. Deck was not at that time a member of the Board of Directors. Following Mr. Deck’s appointment as our permanent Chief Executive Officer and during the consideration by the Board of his appointment as a member of the Board, our Board determined that it was still in the best interests of the Company and its stockholders for Mr. Feldman to continue in the separate role of Chairman due to his deep understanding of our business and our governance structure, to provide continuity in Board leadership and to allow Mr. Deck the ability to more fully integrate into and focus on his executive leadership role.
Our Corporate Governance Guidelines provide for the annual election of a lead independent director by a majority of the non-employee directors. The lead independent director chairshas in the past led executive sessions of independent directors, which our Corporate Governance Guidelines require to occur at least annually in conjunction with regularly scheduled Board meetings. Our Board has determined that, with the appointment of Mr. Feldman as an independent Chairman, there is no need for a lead independent director at this time; Mr. Feldman has and will lead the executive sessions of our independent directors. Our independent directors typically meet in an executive session at the conclusion of each of our regularly
scheduled Board of Director meetings and following that meeting our lead independent director provides feedback to our Chief Executive Officer to the extent desired by the independent directors. The Board’s annual self-evaluation includes questions regarding the Board’s opportunities for open communication and effectiveness of executive sessions. Our Corporate Governance Guidelines limit employee members of the Board to two seats. Thomas W. Giacomini,Brian A. Deck, our Chairman of the Board, President and Chief Executive Officer, is the only member of management currently serving on our Board. A combined Chief Executive Officer and Chairman role serves as an effective bridge between the Board and our management, and provides strong unified leadership of the Company. Currently, all other members of our Board are independent. Our three Board committees are comprised entirely of independent directors and each committee has regular interaction with a number of our senior management personnel in establishing their agendas and obtaining information from our Company’s operations.
Board Succession Planning
The Nominating and Governance Committee oversees and plans for Board membersmember succession to ensure a mix of skills, experience, tenure and diversity that promotes and supports the Company’s long-term strategy. Using a variety of sources including but not limited to an independent search firm,
recommendations from stockholders, management and our independent directors, the Nominating and Governance Committee will periodically assess the skills and qualifications of our Board members, identify any areas of desired expertise, review qualified candidates and make recommendations to the full Board in accordance with its Corporate Governance Guidelines and any other criteria adopted by the Board regarding director candidate qualifications. After careful review and consideration, the Board will nominate candidates for election or re-election. The Nominating and Governance Committee, assisted by an independent search firm, engaged in a succession planning process in 2018 and 2019 that included a Board skills and experience matrix and a cultural assessment of our Company and the Board and resulted in three new directors joining our Board in 2019 and 2020.
Diversity
Our Corporate Governance Guidelines provide that Board members will be selected based on integrity, successful business experience, stature in their own fields of endeavor, and the diversity of perspectives they bring to the Board. Our Corporate Governance Guidelines further state that consideration should also be given to candidates with experience in the Company’s lines of business and leadership in such areas as government service, academia, finance and international trade. We have from time to time engaged the services of an executive search firm, including for our recruitment of additional Board candidates in 2019 and 2020, to help us identify qualified Board candidates meeting these criteria and specifically seek director candidates who helped us meet the following parameters: experience in the food, airline or airfreight industries; industrial manufacturing background; international business exposure; financial expertise; diversity; chief executive officer or senior P&L management skills; experience on public company boards; and a sophisticated understanding of M&A transactions and integration into existing businesses. We believe we have achieved a diversity of perspectives with our current Board membership, which consists of directors who are holding or have held a variety of senior management level positions and have extensive public company board experience, broad experience across the industries in which we conduct business, international business expertise and State and Federal government service. For more information regarding the background, experience and attributes of our directors, please refer to the complete biographies of our directors that appear under “Board of Directors” in this Proxy Statement.
Role of Board in Risk Oversight
As part of its general oversight over the management of the Company, our Audit Committee periodically reviews assessments prepared by our management of the primary risks relevant to our business and the mitigation actions we implement to address these risks. The role of the Board in risk oversight is to provide guidance to management through its Audit Committee, based upon their experience and perspectives, regarding the overall effectiveness of its strategies to monitor and mitigate those risks. During Board meetings, the Board periodically receives reports directly from the Division Presidents of each of our divisions;Divisions; these updates provide our Board with a more detailed understanding of the strategies of each of our divisions and the opportunities and risks that they face. Management also provides the Board with periodic reports regarding its enterprise risk management programs, our internal audit program, our code of ethics and compliance training programs and our evaluations of internal control over financial reporting. Our Audit Committee also receives a quarterly update from our Executive Vice President, General Counsel regarding
material litigation and legal loss contingencies involving the Company as well as reports to our employeeCompany’s hotline.
In addition, our Compensation Committee periodically reviews assessments prepared by both management and Meridian of potential risks associated with our compensation programs and determines whether our compensation policies, practices and plan design provisions adequately and effectively mitigate those risks. The Compensation Committee reports its findings and recommendations, if any, to the Board.
Director Compensation
The Compensation Committee bi-annually reviews non-employee director compensation to ensure that the amount of compensation provided to non-employee directors is within appropriate parameters. No changes were made to the amount of non-employee director compensation paid in 2019. In late 2019, the Compensation Committee commissioned Meridian to conduct a peer group survey to review non-employee director compensation. The results of the survey indicated that our total non-employee director compensation
was below the peer group median. Accordingly, the Compensation Committee recommended to the full Board ana modest increase in non-employee director compensation in 2020 to realign with peer group companies, which was approved by the Board. In March 2020, however, the Board agreed to defer the implementation of this director pay increase in light of the global COVID-19 crisis.
For 2019,2020, each of our non-employee directors receivedwas eligible to receive an annual retainer of $80,000. This annual retainer is structured to provide each non-employee director with the option to receive 0%, 50%, or 100% of the value of the retainer in the form of restricted stock units (“RSUs”), provided a timely election to receive RSUs is made by a non-employee director, and the option to elect to receive any remainder in cash, payable in quarterly installments. RSUs granted as part of the 20192020 retainer had a fair market value equal to the deferred amount of the annual retainer on the date of the grant and vest in May 2020.2021. The amount of this annual retainer is allocated among fees earned or paid in cash (column (b)) and stock awards (column (c)) in the Director Compensation Table below based upon the election made by each director.
We also make an annual non-retainer equity grant to our non-employee directors of RSUs of equivalent value.RSUs. Our practice is to grant these awards on May 1 of each year. On May 1, 2019,2020, we awarded each of our non-employee directors RSUs with a value of $120,000, which is included in the amount contained in column (c) of the Director Compensation Table below. These awards will also vest in May 2020.2021.
Our non-employee directors do not receive additional cash remuneration for Board of Directors meetings or committee meetings attended, although committee chairs and the lead independent director do receive additional renumerationremuneration for these roles.roles, at competitive market levels. For 2019,2020, the chair of the Audit Committee received an additional annual fee of $20,000; the chair of the Compensation Committee received an additional annual fee of $15,000; the chair of the Nominating and Governance Committee received an additional annual fee of $10,000; and the Board of Director’s lead independent director received an additional annual fee of $30,000, and a pro-rated portion of that fee is included as fees earned or paid (column (b)) for 20192020 in the Director Compensation Table below for each chair and the lead independent director. Each non-employee director will also receive reimbursement for reasonable incidental expenses incurred in connection with the physical attendance of meetings of the Board and Board committees. During 2020, most of these meetings were conducted virtually, limiting those expenses.
In June of 2020, the Board members agreed to reduce the annual retainer payment by 20% for a period of time to align with temporary salary reductions taken by the JBT executive team. This reduction began at the end of the second quarter and ended at the end of the third quarter. Also at the end of the second quarter, Mr. Feldman began to receive an annual fee of $120,000, paid quarterly, for his service as Interim Non-Executive Chairman in lieu of the annual fee for service as Audit Committee Chair.
We have ownership requirements for our non-employee directors that are based on a multiple of five times the amount of each non-employee director’s annual retainer to be met within five years of their appointment to the Board, and each of our non-employee directors who are currently subject to this requirement is in compliance with the ownership requirements. Non-employee directors who meet the ownership guidelines may elect whether to have the RSUs they elect to receive from the annual retainer and the annual non-retainer equity grants they are awarded (i) distributed at the time of vesting, which is one year after grant date, or (ii) distributed after they complete their service on our Board. Unvested RSUs will be
settled and are payable in Common Stock upon the death or disability of a director or in the event of a change-in-control of the Company, as such term is defined in the Incentive Compensation Plan.
The following table shows all compensation awarded, paid to or earned by the non-employee members of our Board of Directors from all sources for services rendered in all of their capacities to us during 2019.2020.
Director Compensation Table
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| | Fees Earned | | | | | | | |
| | or Paid in | | Stock | | All Other | | | |
| | Cash | | Awards | | Compensation | | Total | |
| | | | | | | | | |
| | | Fees Earned | | | | | | |
| | | or Paid in | | Stock | | All Other | | |
| | | Cash | | Awards | | Compensation | | Total |
Name (1) | | ($) (2) | | ($) (3) | | ($) (4) | | ($) | | ($) (2) | | ($) (3) | | ($) (4) | | ($) |
(a) | | (b) | | (c) | | (d) | | (e) | | (b) | | (c) | | (d) | | (e) |
Barbara L. Brasier | | 33,333 | | 120,020 | | — | | 153,353 | | 78,500 | | 120,034 | | — | | 198,534 |
C. Maury Devine | | 84,167 | | 120,020 | | 2,500 | | 206,687 | | 86,000 | | 120,034 | | 5,000 | | 211,034 |
Edward L. Doheny II (5) | | 55,417 | | — | | — | | 55,417 | |
Alan D. Feldman | | 100,000 | | 120,020 | | — | | 220,020 | | 121,000 | | 120,034 | | — | | 241,034 |
James E. Goodwin | | 110,000 | | 120,020 | | — | | 230,020 | | 106,000 | | 120,034 | | — | | 226,034 |
Lawrence V. Jackson | | | 15,333 | | 160,022 | | — | | 175,355 |
Polly B. Kawalek | | 12,083 | | 200,034 | | 5,000 | | 217,117 | | 15,000 | | 200,010 | | 10,000 | | 225,010 |
Emmanuel Lagarrigue | | — | | 200,034 | | — | | 200,034 | | — | | 200,010 | | — | | 200,010 |
James M. Ringler | | 80,000 | | 120,020 | | — | | 200,020 | | 76,000 | | 120,034 | | — | | 196,034 |
| (1) | (1)
| | Brian A. Deck, our President and Chief Executive Officer, and Thomas W. Giacomini, our former Chairman, President and Chief Executive Officer, isare not included in the table as he wasthey were our employeeemployees during 20192020 and did not receive compensation for histheir services as director. The compensation paid to Mr.Messrs. Deck and Giacomini is shown in the Summary Compensation Table in this Proxy Statement. |
| (2) | (2)
| | Includes the amount of any cash portion of the director’s annual retainer each director elected to receive and additional fees paid to the chairperson of each board committee, and the lead independent director, and the Interim Non-Executive Chairman for serving that function. those respective functions. |
| (3) | (3)
| | RSU grants were made on May 1, 2019,2020, valued at $111.13$71.92 per share, the closing price of our Common Stock on May 1, 2019,2020, reflecting an aggregate grant date fair value for all of our non-employee directors of $1,000,168$1,160,212. The amount reflected above represents the fair value of the awards at grant date. Pursuant to the agreement of all directors to reduce their annual retainer, three of our directors that had elected to receive a portion of the retainer as stock voluntarily forfeited a portion of the RSUs, that were granted on May 1, 2020: Ms. Kawalek, 56; Mr. Lagarrigue, 56; and Mr. Jackson, 28. The aggregate number of outstanding RSUs held by each of our non-employee directors on December 31, 20192020 was: Ms. Brasier, 1,080;1,669; Ms. Devine, 43,867;44,456; Mr. Feldman, 54,340;54,929; Mr. Goodwin, 46,667;47,256; Mr. Jackson, 2,197; Ms. Kawalek, 59,220;60,145; Mr. Lagarrigue, 1,800;2,725; and Mr. Ringler, 45,274. 45,863. |
| (4) | (4)
| | Represents charitable contributions made in the name of directors by us during 20192020 pursuant to the matching charitable contribution program available to all of our employees and directors. Pursuant to this program, we match 100% of the charitable contributions of our employees and directors up to $10,000 in any year, although we may exercise discretion to approve matching contributions in excess of that limitation from time to time. |
| (5)
| | Mr. Doheny retired from the Board immediately prior to the 2019 Annual Meeting.
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Our non-employee directors do not participate in our employee benefit plans other than our matching program for charitable contributions.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
In 2019,2020, the members of the Compensation Committee of the Board were James E. Goodwin, Polly B. Kawalek, Emmanuel Lagarrigue, and James M. Ringler, none of whom has ever been an officer or employee of our Company. None of our executive officers has ever served on the board of directors or on the compensation committee of any other entity that has had any executive officer serving as a member of our Board of Directors.
TRANSACTIONS WITH RELATED PERSONS
During 2019,2020, we were not a participant in any transaction or series of related transactions in which any “related person” had or will have a material interest and in which the amount involved exceeded $120,000. A “related person” is any person who was in any of the following categories since the beginning of 2019:2020:
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● | | any of our directors or executive officers; |
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● | | any nominee for director; |
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● | | any immediate family member of any of our directors or executive officers or any nominee for director, with immediate family member including any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and any person (other than a tenant or an employee) sharing the household of a director or executive officer or a nominee for director; |
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● | | a security holder listed in the “Other Security Ownership” table below; or |
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● | | any immediate family member of such a security holder. |
Under its charter, the Audit Committee is responsible for reviewing and approving any transactions with “related persons”.
All of our non-employee directors and executive officers are subject to our Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics provides that each of our employees and directors is expected to avoid engaging in activities where their personal interests conflict with, or have the appearance of conflicting with, our interests. Personal interests that may give rise to conflicts of interest include commercial, industrial, banking, consulting, legal, accounting, charitable and financial relationships, and may also arise when a director or employee receives personal benefits outside of the compensation or reimbursement programs approved by the Board of Directors. These requirements also extend to immediate family members of employees and directors.
Suspected violations of our Code of Business Conduct and Ethics, including potential conflicts of interest, must be reported to the Chairman of the Board, if the suspected violation involves a director, or to the General Counsel, if the suspected violation involves an executive officer (or to the Chairman of the Board if the suspected violation involves the General Counsel), or reported to our employee hotline. The Chairman of the Board or the General Counsel, as applicable, will discuss the matter with the Chairman of the Board, or the Chair of the Audit Committee, as appropriate, for evaluation and appropriate resolution. Reports made to our employee hotline will be reported to the Board of Directors, or the Audit Committee, which will have the responsibility for determining if there is a conflict of interest and, if so, how to resolve it without compromising the best interests of us and our stockholders.
Under our Corporate Governance Guidelines, directors must disclose to the Board of Directors any potential conflict of interest they may have with respect to a matter under discussion and, if appropriate, recuse themselves and not participate in the discussion or voting on a matter on which they may have a conflict. No such matters were reviewed or approved by the Board of Directors or the Audit Committee of the Board during 2019.
Our Code of Business Conduct and Ethics also prohibits any employee or director from taking for themselves personally (including for the benefit of family members or friends) business opportunities that are discovered through the use of our property, information or position with the Company without the prior consent of the Board of Directors. No employee or director may use corporate property, information or position with the Company for improper personal gain, or may compete with us, directly or indirectly.
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2021 Proxy Statement | |
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| 2020 Proxy Statement21
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Our Code of Business Conduct and Ethics may be reviewed on our website under Corporate Governance at www.jbtc.com/investors. A waiver of any provision of our Code of Business Conduct and Ethics for a director or an executive officer may only be made by the Board of Directors, or a committee appointed by the Board, and will be promptly disclosed to the extent required by law, including the rules, regulations or listing standards of the Securities and Exchange Commission and the New York Stock Exchange.
In addition to the foregoing ethics policy, the Nominating and Governance Committee periodically reviews all commercial business relationships that exist between us and companies with which our directors are affiliated in order to determine if non-employee members of the Board are independent under the rules of the New York Stock Exchange. The Nominating and Governance Committee also reviews the request of any Board member wishing to join a public-company or private for-profit Board, while serving on our Board.
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20202021 Proxy Statement
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Proposal 2 – Say on Pay
| | | FOR each director nominee | |
Proposal Advisory Vote on Named Executive Officer Compensation | | | Board Recommendation The Board of Directors recommends a vote FOR approval of the non-binding resolution on executive compensation noted below. | √ |
PROPOSAL SUMMARY
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and narrative descriptions that accompany those tables in this Proxy Statement, is hereby approved.”
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), we are seeking an advisory vote on a non-binding resolution from our stockholders on the compensation of our executive officers whose compensation is included in the Summary Compensation Table of this Proxy Statement (our “named executive officers”). This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our compensation philosophy, policies and practices, as disclosed under the “Executive Compensation” section of this Proxy Statement.
At our Annual Meeting held in 2019,2020, our stockholders approved the compensation of our named executive officers as disclosed in our 20192020 Proxy Statement in a non-binding “say on pay” advisory vote by over 99%98 percent of the votes cast. Although the vote is non-binding, the Board of Directors and the Compensation Committee value the opinion of our stockholders, and will consider the outcome of the vote, along with other input from our stockholder engagement efforts, when making future compensation decisions for our named executive officers. We hold an advisory “say on pay” vote every year based on a previous advisory vote regarding frequency. Accordingly, we intend to hold the next advisory “say on pay” vote at our Annual Meeting in 2022.
As described in more detail in the “Compensation Discussion and Analysis” section of this Proxy Statement, we have structured our executive compensation program to attract, engage and retain talented individuals and motivate them to create long-term stockholder value by achieving performance objectives and strategic goals and appropriately managing risk. Our program is designed to:
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● | | Closely link compensation with Company financial performance targets and achievement of individual objectives |
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● | | Drive our key business strategies |
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● | | Align the interests of our executives with our stockholders, with a focus on long-term value creation |
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● | | Provide competitive compensation opportunities that attract, engage and retain talented people |
In the section of this Proxy Statement entitled “Compensation Discussion and Analysis,” we describe our executive compensation programs in more detail, including the philosophy and business strategy underpinning the programs, the individual design elements of the compensation programs, and information about how our compensation plans are administered. We encourage stockholders to review this section of the Proxy Statement.
Our compensation programs consist of elements designed to complement each other and reward achievement of short-term and long-term objectives linked to financial performance metrics. We have chosen
the selected financial performance metrics to align the compensation of our named executive officers to our business strategy.
The Compensation Committee regularly reviews best practices related to executive compensation to ensure a close alignment between our business strategy and executive compensation opportunities. We consistently review, and as appropriate make changes to, our executive compensation programs to ensure that the proportion of short- and long-term annual incentive compensation that is based upon objective business performance results remains significant, and maintain a close alignment between business performance measures for incentive compensation awards and our Company’s core strategic objectives.
For 2019,2020, the Compensation Committee set financial performance target levels for short-term incentive compensation awards that required significant year-over-year improvement over strong 20182019 results. The financial performance target levels set by the Compensation Committee for the long-term incentive compensation awards with the three-year performance period that began in 20192020 also required significant improvement and sustained high level of performance relative to our 20182019 results.
The COVID-19 pandemic has resulted and will continue to result in significant economic disruption and has adversely impacted our business. Our sales volume was significantly reduced since the onset of the pandemic, which has had a negative effect on our financial results for fiscal year 2020. Despite the impact that the pandemic had on our incentive compensation awards, the Compensation Committee did not make any adjustments to metrics or targets.
As illustrated by these actions, the Compensation Committee has strived to structure our executive compensation practices in a manner that is performance-based with a view towards maximizing long-term stockholder value.value and appropriately incentivizing performance of our management team. Our Compensation Committee and the Board of Directors believes that the policies and programs described in the “Compensation Discussion and Analysis” section of this Proxy Statement are effective in achieving our strategic objectives and have contributed to our positive financial performance.
Vote Required
In order for this proposal to be adopted by stockholders, at least a majority of the votes cast at the Annual Meeting virtually or by proxy by the stockholders entitled to vote on the matter must be voted in its favor.
Effect of Proposal
Since the required vote is advisory, the result of the vote is not binding upon the Board of Directors and will not require the Board of Directors or the Compensation Committee to take any action regarding our executive compensation practices. The Board of Directors and the Compensation Committee value the opinions of our stockholders as expressed through their votes and other communications. Although the resolution is non-binding, the Board of Directors and the Compensation Committee will carefully consider the outcome of the advisory vote on named executive officer compensation and those opinions when making future compensation decisions.
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20202021 Proxy Statement
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
Our compensation programs are designed to pay for performance, aligning our executive officers’ goals with the interests of our stockholders, while allowing us to attract and retain skilled executives in a competitive market to deliver positive business results. For 2019,2020, we continued to administer our existing short- and long-term incentive compensation programs in alignment with our financial and operational strategies. A significant portion of our named executive officers’ compensation is directly related to our business results and stock price performance. This ensures a close correlation of the financial interests of our named executive officers with the interests of our stockholders.
Named Executive Officers
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy and program, as well as the specific compensation paid during fiscal year 2020 to the executives listed below, referred to as “named executive officers”.
| ● | Brian A. Deck – President and Chief Executive Officer |
| ● | Thomas W. Giacomini – Former Chairman, President, and Chief Executive Officer |
| ● | Matthew J. Meister – Executive Vice President and Chief Financial Officer |
| ● | David C. Burdakin – Executive Vice President and President, AeroTech |
| ● | Paul E. Sternlieb – Executive Vice President and President, Protein |
| ● | Carlos Fernandez – Executive Vice President and President, Liquid Foods |
As previously disclosed, in September of 2020, Mr. Giacomini resigned from the Board of Directors and stepped down as Chief Executive Officer and President. Messrs. Deck and Meister were appointed to their respective positions in December of 2020. See “Leadership Transitions” below.
Compensation Actions in Response to COVID-19
The COVID-19 pandemic had a significant impact on our business in 2020. To mitigate the negative impact on our business, we instituted a number of cost reduction measures in 2020 including the following:
| ● | Cancellation of scheduled 2020 salary increases for most employees, including our named executive officers. |
| ● | Temporary base salary reductions of 20% for our CEO, 15% for our CFO, and 10% for our other named executive officers. |
| ● | Waiver by the Board of Directors of its scheduled compensation increase approved in 2019, and a temporary 20% reduction to the annual retainer. |
Despite the unforeseen and significant impact of COVID-19 on our financial results for 2020, we did not adjust the financial performance metrics or targets in our incentive compensation awards. Throughout the pandemic, the Compensation Committee and the Board have regularly discussed how to recognize the stamina and substantial accomplishments of management-level employees while striking a fair balance with other adverse impacts experienced by our shareholders, customers, suppliers, and employees. In making these decisions we relied on the principles of our executive compensation program, which is designed to link pay with performance, while aligning management incentives with shareholder interests and providing competitive compensation opportunities that attract and retain talented people.
2020 Performance Results
The achievement of the performance metrics used in our incentive compensation plans in 20192020 are set forth in the table below. For a description of the performance metrics and adjustments, see — “Performance Metrics Used in our Incentive Compensation Plan.” Please see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10‑K10-K for 20192020 for a full description of our 20192020 financial results.
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Performance Metrics | | | | | | | | | | |
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Short-Term Incentive Compensation | | 2019 Target | | 2019 Results (1) | | | 2020 Target | | 2020 Results (1) | |
EBITDA (in millions) | | $ | 248.8 | | $ | 262.3 | | | $ | 317.8 | | $ | 257.6 | |
EBIT Margin | | | 10.30 | % | | 11.26 | % | |
EBITDA Margin | | | | 15.7 | % | | 14.9 | % |
Average Operating Working Capital (AOWC) | | | 14.75 | % | | 15.73 | % | | | 15.5 | % | | 19.6 | % |
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Long-Term Incentive Compensation | | 2017 - 2019
Target | | 2017 - 2019
Results (1) | | | 2018 - 2020
Target | | 2018 - 2020
Results (1) | |
Cumulative Diluted EPS from Continuing Operations (EPS) | | $ | 9.55 | | $ | 10.54 | | | $ | 11.27 | | $ | 11.23 | |
Average Return On Invested Capital (ROIC) | | | 15.0 | % | | 12.4 | % | | | 14.0 | % | | 11.5 | % |
| (1) | (1)
| | EBITDA EBITand EBITDA Margin and AOWC results were adjusted to eliminate the financial impactfor purposes of acquisitions completed in 2019 and related transaction costs. EBITDA and EBIT Margin results were also adjustedshort-term incentive compensation to eliminate the financial impact of restructuring charges.charges (not including impairment), pension expense other than service cost, M&A related costs, and executive management succession costs. EPS and ROIC results were adjusted for purposes of long-term incentive compensation to account for certain financial impacts of the Tax Cuts and Jobs Act, the adoption of ASC 606 Revenue Recognition rules, restructuring charges the results from acquisitions completed in 2019(not including impairment) and related M&A transactionexecutive management succession costs in 2019. incurred during 2020. |
Our 2019 performance-based compensation2020 performance metrics for our short-term incentive compensation awards to our named executive officers had targets that required year-over-year growth in our earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and year-over-year improvements in our earnings before interest and taxes (“EBIT”)EBITDA margin and average operating working capital as a percent of sales (“AOWC”). In order to promote focus on cash flow in response to the impact of the COVID-19 pandemic, we elected to put in place a payout trigger threshold that required 90% of the established EBITDA target to be achieved in order for a payout to be made on any metric of the financial performance component of our short-term incentive compensation awards.
Demonstrating our pay-for-performance philosophy, our 20192020 financial performance and individual performance impacted performance-based compensation as follows:
Our performance with respect to EBITDA, EBITDA margin, and EBIT margin exceeded their target performanceAOWC was negatively affected by a significant drop in sales volume from the onset of the pandemic and as a result fell below the threshold levels set at the beginning of the year and resulted in annual cash incentive awards under the management incentive plan (“MIP”) above thesignificantly below target level, while AOWC results were below the target level.levels. The 75% portion of MIP awards based on these performance metrics paid out at 133%0% of the target award amounts.amounts for our named executive officers. The remaining 25% portion of MIP awards was based on performance against personal performance objectives approvedas determined by the Board in the case of Mr. GiacominiDeck and as recommended by Mr. Deck and approved by Mr. Giacominithe Board in the case of all other named executive officers. See “Determination of PPI Payout” below.
2019 Short-Term Incentive Compensation Financial Performance Metrics
2019 Short-Term Incentive Compensation Metrics | | | | | | | | | | | | | | | | | | | | | 0% Payout | | | 100% Payout | | | 250% Payout | | | 2020 | | Payout | | Performance Measures | Weight | | | of Target | | | of Target | | | of Target | | | Performance | | Result | | EBITDA | 50 | % | $ | 297.8 | | $ | 317.8 | | $ | 344.8 | | $ | 257.6 | | 0 | % | EBITDA Margin | 25 | % | | 14.9 | % | | 15.7 | % | | 16.9 | % | | 14.9 | % | 0 | % | AOWC | 25 | % | | 16.5 | % | | 15.5 | % | | 14.0 | % | | 19.6 | % | 0 | % | Financial Measures Earned Payout (75% of MIP Total) | | | | | 0 | % |
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We used a three yearthree-year measurement period for the metrics associated with our long-term incentive plan (“LTIP”) awards made to our named executive officers in 2019,2020, thus the performance-based compensation derived from LTIP awards will not be determinable until after the end of 2021.2022. The metrics for
performance-based LTIP awards issued in 20192020 established targets that require growth in cumulative EPS and strong average operating return on invested capital (“ROIC”) results over the three year period ending on December 31, 2021.2022.
The three-year performance period for the performance RSUs granted in 20172018 ended on December 31, 2019.2020. Prior to the onset of the COVID-19 pandemic, the Company was on pace to achieve a payout at the target level for these awards. However, the reduction in sales volume from the onset of the pandemic had a significant impact on the cumulative results. In February 2020,2021, the Compensation Committee evaluated the results of the three-year performance period for the performance RSUs granted in 2017. We2018 and determined that we achieved cumulative EPS of $10.54$11.23 over the three-year performance period, which represents 133%98% of our goaltarget for cumulative EPS, and 12.4%that we achieved 11.5% average ROIC over the three-year performance period, which represents 50%26% of our goaltarget for average ROIC, respectively.ROIC. The cumulative EPS measure is weighted 70% and the average ROIC measure is weighted 30%. As a result, the performance-based RSUs for the 20172018 – 20192020 period were earned at 108%76% of target.
20172018 – 20192020 Long-Term Incentive Compensation Metrics
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Performance Measures | | 0% Payout of
Target Grant | | 100% Payout
of Target Grant | | 200% Payout
of Target Grant | | 2018-2020 Performance | | 2018-2020
Performance as
a Percentage of
Target | |
3 Year Cumulative EPS | | $ | 9.29 | | $ | 11.27 | | $ | 14.75 | | $ | 11.23 | | 98 | % |
3 Year Average ROIC | | | 11.0 | % | | 14.0 | % | | 17.0 | % | | 11.5 | % | 26 | % |
Earned Payout | | | | | | | | | | | | | | 76 | % |
Leadership Transitions
On September 22, 2020, Thomas W. Giacomini resigned from the Board of Directors and stepped down as President and Chief Executive Officer following a leave of absence. On September 25, 2020, Mr. Giacomini and the Company entered into a Transition, Separation, and General Release Agreement that was described in a Form 8-K filed on September 30, 2020. The terms of that agreement are discussed below under “Separation Agreement with Mr. Giacomini.”
On June 23, 2020, the Board of Directors appointed Brian A. Deck as Interim CEO while continuing in his role as Chief Financial Officer. On September 24, 2020, we announced that Mr. Deck would continue in the Interim President and Chief Executive Officer role while the Board conducted a search to identify a permanent CEO. At the same time, the Board named Alan D. Feldman as Interim Non-Executive Chairman and appointed Matthew J. Meister as Interim Chief Financial Officer.
On December 14, 2020, the Board of Directors announced that it had appointed Mr. Deck as the Company’s President and Chief Executive Officer and also elected him to serve as a member of the Board. On the following day, December 15, 2020, we also announced that Mr. Meister had been appointed Executive Vice President and Chief Financial Officer. Compensation paid to Messrs. Deck and Meister in 2020 is described below under “Appointment of Chief Executive Officer” and “Appointment of Chief Financial Officer,” respectively.
2019 Compensation Highlights
Highlighted below are features of our executive compensation program that we continued in 2019,2020, consistent with our philosophy of aligning executive compensation opportunities with the interests of our stockholders.
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● | | Maintained strong incentive plan emphasis on business results. For 2019,2020, 75% of the MIP award that could be earned by our named executive officers was based on improvement in key business performance metrics closely tied to achievement of our Elevate strategic objectives (EBITDA, EBITEBITDA margin and AOWC), and 60% of the value of LTIP awards issued to our named executive officers in 20192020 was based on improvement in EPS and sustained ROIC over a three yearthree-year period. We changed from an EBIT margin metric to EBITDA margin for |
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| fiscal year 2020 to align with the margin that is more closely aligned with our growth through acquisition strategy. |
| ● | Set financial targets to require continued performance improvement. Our Compensation Committee established 20192020 performance targets requiring continued significant additional year-over-year growth in EBITDA, improvement in EBITEBITDA margin and reductions in AOWC. The LTIP awards issued to our named executive officers in 20192020 set aggressive targets for cumulative three-year growth in EPS while sustaining a high level of ROIC. |
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● | | Balance division performance targets and full Company performance targets for named executive officers with division management roles. For 2019,2020, performance targets for MIP awards for our named executive officers who manage business divisions were weighted 15% – 30% on corporate performance and 70% – 85% on division performance in order to appropriately balance the objectives established for the divisions these executives manage while still providing meaningful incentives for their contributions to the success of overall corporate performance objectives. Despite the enormous challenges resulting from the pandemic, a few of our individual business units within our divisions achieved business performance results that triggered incentive payouts under the MIP, although no such awards were earned by our named executive officers based on their overall Division results. |
Principles of our Executive Compensation Program
Our compensation program is designed around the following principles:
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● | | Executive compensation is performance-based. Our executive compensation program closely links a substantial portion of an executive’sexecutive’s compensation with Company financial performance targets and achievement of individual objectives. We encourage pay for performance with a short-term management incentive program (MIP) that provides for cash payments based on achievement of financial, operational and strategic goals. Annual MIP awards are calculated based on a formula that is weighted 75% to business results and 25% to performance against individual objectives. Our long-term incentive plan (LTIP) awards are |
predominantly performance-based, with 60% of long-term incentive compensation awards tied to the achievement of financial performance objectives over a three-year period. |
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● | | Performance metrics are designed to promote achievement of stretch objectives but not to incentivize undue risk-taking by our executive management team. The performance metrics in our incentive compensation plans are designed to create incentives to drive our key business strategies in our Elevate strategic plan. The performance metrics are intended to correlate with enterprise value growth and earnings growth. |
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● | | Long-term compensation incentives represent a significant portion of executive compensation. At-risk long-term compensation in the form of equity-based LTIP grants, 60% of which are contingent on financial performance metrics over a three-year period, along with stock ownership guidelines, align the interests of our named executive officers with our stockholders and provide proper motivation for enhancing both short-term and long-term stockholder value. |
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● | | Compensation opportunities are competitive. We seek to provide competitive compensation opportunities that attract and retain talented people. We target the 50th 50thpercentile or median level of the market for all elements of compensation with the possibility of above market short-term incentive and long-term incentive payments for outstanding performance. We target above the 50th50th percentile in select cases on allkey elements of compensation where appropriate based on individual experience, impact and performance. |
The following table illustrates what we do and what we do not do, consistent with our executive compensation principles:
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WHAT WE DO |
WHAT WE DO
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√ | High percentage of executive compensation is tied to performance with caps on all incentive plan payouts. |
√ | Performance metrics are designed to promote achievement of stretch objectives and alignment with value creation. |
√ | We target the 50th50th percentile or median level of the market for all elements of executive officer compensation against an appropriate peer group, and in select cases we target above the 50th50th percentile where appropriate based on individual experience, impact and performance. |
√ | Each of our executive officers is required to comply with stock ownership guidelines requiring a meaningful investment in the Company’s long-term prospects. |
√ | Our compensation programs give our Compensation Committee the right to “claw back” awards to our executive officers in the event of conduct prejudicial to the Company or a restatement of our financial results. |
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WHAT WE DON’T DO |
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x | Our executive severance agreements do not include excise tax gross-up provisions. |
x | Our executive severance agreements do not provide single-trigger change-in-control severance benefits. |
x | Our incentive programs do not encourage excessive risk taking. |
x | We do not allow our directors, executive officers or other employees to engage in any hedging or pledging transactions involving Company securities. |
x | We do not allow re-pricing of stock option awards without stockholder approval. |
x | Our cash incentive programs do not make payouts based on financial metric results below threshold level performance. |
x | We do not grant excessive perquisites to executives. |
In addition to direct compensation in the form of base salaries, short-term incentive cash awards and long-term equity awards, we provide various forms of indirect compensation. Each of our named executive officers is eligible for severance and change-in-control payments upon termination in certain
circumstances. These agreements are designed to ensure we can attract and retain executive talent and to permit our senior executives to remain focused on value creation for stockholders in the event of a potential change-in-control event. We also provide retirement benefits (primarily via defined contribution plans) and a limited number of perquisites to our named executive officers. All of these program designs are periodically reviewed against our peer group practices by our Compensation Committee with the assistance of the Committee’s independent compensation consultant. In 2019, we entered into an employment agreement with our former Chief Executive Officer. None of our other named executive officers has an employment contract.
Compensation Setting Process
Our Compensation Committee makes all final compensation decisions regarding our named executive officers. Each of our compensation plans and agreements for executive officers was reviewed and approved by our Compensation Committee. All of the members of our Compensation Committee are independent directors as defined by the listing requirements of the New York Stock Exchange. Under its charter, our Compensation Committee has the authority to engage the services of outside consultants, experts and others to assist the committee’s fulfillment of its responsibilities. In 2019,2020, the Compensation Committee engaged Meridian, an independent compensation consultant, to provide expertise on pay philosophy, prevailing market practices and relevant regulatory mandates and to assist the Committee’s efforts to make compensation decisions that were aligned with the interests of our stockholders. Our Chief Executive Officer and our Executive Vice President, Human Resources also provide input on compensation programs and policies and our Chief Executive Officer makes recommendations to the Compensation Committee with regard to compensation for our named executive officers that report to him.
Allocation of Pay Between Short- and Long-Term
Our compensation programs are designed in a manner that provides incentives to our named executive officers to achieve short- and long-term financial, operating and strategic objectives. To foster a long termlong-term view among our executive officers (i.e., longer than twelve months), our compensation programs provide longer term incentives in the form of equity incentive compensation with a three-year vesting requirement and a variable performance-based component. The ultimate value of these long-term incentives on vesting to an executive depends upon our financial performance over a three yearthree-year period and on the market value of the equity after the end of the vesting period. That value is largely dependent upon our Company’s future performance and market dynamics.
As shown in the charts below, 58%59% of the target compensation of our former Chief Executive Officer and, on average, 48%47% of the target compensation of our other named executive officers was linked to short-term and long-term performance-based incentives for 2019.2020. An additional 24%26% of our former Chief Executive Officer’s target compensation, and 17%18% (on average) of our other named executive officers’ target compensation consist of time-based LTIP awards that isare tied to the value of our Common Stock at the end of a three-year vesting period. Time-based LTIP awards are at risk of forfeiture until the vesting date. These equity grants, in combination with the three-year performance period and our executive stock ownership requirements, reflects the program’s goals of rewarding our named executive officers for long-term performance — which aligns the interests of our named executive officers with the interests of our stockholders. In total, and as noted below,
82% 85% of our Chief Executive Officer’s target compensation, and 65% of the target compensation of our other named executive officers, is “at-risk” compensation.
The information below for our CEO in the chart titled “2020 CEO Target Compensation Mix” reflects the fiscal 2020 target compensation established for Mr. Giacomini (our former Chief Executive Officer), who separated employment from the Company at the end of the third quarter of the year. For Mr. Deck, who succeeded Mr. Giacomini as Chief Executive Officer, the Compensation Committee established a target compensation for fiscal 2021 of 56% performance-based incentives, and 80% at-risk pay. The target compensation for Mr. Deck in fiscal 2021 will be $4,200,000 (consisting of $850,000 base salary, $850,000 target annual incentive, and $2,500,000 in target long-term incentive), a 24% decrease from Mr. Giacomini’s 2020 target compensation.
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2020 CEO Target Compensation Mix (1) | | 2020 Other NEO Compensation Mix (2) |
 
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| (1) | The base salary component of Mr. Giacomini’s target compensation reflects the salary actually paid to him through his last day of employment and annualized based on his annual rate of $930,000. |
| (2) | The target compensation for our other NEOs (a) includes the target compensation established for Mr. Deck at the beginning of the year as in his role as CFO; (b) excludes the special equity award and cash bonus Mr. Deck received in December connection with his appointment as President and CEO; and (c) excludes Mr. Meister, who was appointed to his role as CFO in December. |
The amounts shown above for “at-risk” Compensationcompensation include MIP cash incentives based on target award levels and performance-based and time-based LTIP equity incentives based on grant date fair value. Those target award levels are also used in the calculation of percentages of total compensation.
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Competitive Positioning of NEO Compensation
Our compensation philosophy is to generally set total target compensation for our named executive officers near the 50th percentile of compensation for similar positions at peer group companies, and incompanies. In select cases we may target above the 50th percentile where appropriate based on individual experience, impact, and performance. For our named executive officers, total target compensation includes base pay, annual cash incentive compensation (MIP), and long-term incentives (LTIP) in the form of time and performance-based RSUs. We utilize comprehensive compensation surveys and proxy data to compare each element of pay and total target compensation for each of our named executive officers against compensation of comparable positions at peer companies. Each named executive officer’s total target compensation opportunity generally is designed to approximate target benchmark levels, with differences based on individual experience, impact and performance. The allocation between the elements of compensation — base pay, annual cash incentive compensation and long-term equity award value — may vary from the market in individual cases but is established in a way that keeps total target compensation consistent with the market.
When it determined 20192020 compensation levels for our named executive officers in February 2019,2020, the Compensation Committee utilized compensation survey data and publicly disclosed proxy data supplied to the Committee by its independent consultant, Meridian. The Compensation Committee reviews this external market benchmarking data to compare our executive officer compensation against executive officer compensation paid by a peer group of industrial manufacturing and service companies. This group includes companies that are of similar size and includes companies that are engaged in the food or transportation businesses that we believed we would compete with across some of our businesses for customers, suppliers, executive talent and, ultimately, investors, and which provides a representative sample for comparison of executive pay levels, design practices, and financial and stock performance.
The revenue of these companies ranged from $784$598 million to $3.43$3.46 billion as of 20182019 fiscal year end, with a median of $1.83$2.01 billion. Although the companies included in the survey varied in revenue size and market capitalization, the survey utilized regression analysis to develop size-adjusted values for each element of compensation. The Compensation Committee reviews the peer group annually. For 20192020 named executive officer compensation, the peer group consisted of the following 24 industrial companies*,companies, which was approved by the Compensation Committee after consulting with the Committee’s independent compensation consultant, Meridian.
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AAR Corp. * | Kaman, Inc. |
Albany International Corp.*
| The Middleby Corporation
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Applied Industrial Technologies, Inc. | The Middleby Corporation |
Barnes Group | Moog Inc. |
Barnes GroupBriggs & Stratton Corporation *
| Mueller Water Products, Inc. |
Briggs & Stratton Corporation
| Rexnord Corporation
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Chart Industries, Inc. | Standex InternationalNordson Corporation
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Crane Co. | Tennant CompanyRexnord Corporation
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Curtiss-Wright Corporation | TitanStandex International Corporation *
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Donaldson Company, Inc.* | Tennant Company |
EnPro Industries, Inc. | TriMas Corporation |
Federal Signal Corporation | Valmont Industries, Inc. |
Hillenbrand Inc. | Welbilt, Inc. |
IDEX Corporation | Woodward, Inc. |
*These two companies were removed from the peer group as of September 2019 and replaced by Donaldson Company, Inc. and Nordson Corporation. | These three companies were removed from the peer group as of August 2020 and replaced by ITT Inc., SPX Corporation, and SPX FLOW, Inc. |
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Performance Metrics Used in our Incentive Compensation Plan
Incentive compensation awards to our named executive officers in 20192020 were based on performance targets tied to our year-over-year growth in EBITDA, year-over-year improvements in EBITEBITDA margin and AOWC, and our cumulative EPS and average ROIC over a three-year period. For the named executive officers with divisional responsibilities, the performance targets were tied to a blend of their divisions’ year-over-year improvement in EBITDA, EBITEBITDA margin and AOWC and overall corporate performance on such measures.
A description of each of these metrics is as follows:
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● | | EBITDA is operating income plus depreciation and amortization. EBITDA growth is one of our primary internal performance measures designed to align long-term incentive opportunities with our internal benchmark for generating operating cash flow. |
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● | | EBITEBITDA margin is operating income plus depreciation and amortization as a percentage of total revenue. We utilize EBITEBITDA margin as a performance metric because it measures our ability to convert revenue into income.
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● | | Average operating working capital (AOWC) expresses the sum of our inventory (on a first-in-first outfirst-in-first-out basis) plus accounts receivable minus accounts payable minus advance payments as a percentage of our total revenue. We use AOWC to measure the efficiency of our business in managing working capital levels, since it measures the conversion cycle of working capital to cash. |
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● | | Cumulative EPS is the sum of the most recent three years of after-tax earnings generated from continuing operations divided by the total number of our diluted shares of our outstanding Common Stock. As an incentive measure, we believe that linking sustained EPS growth to compensation helps us drive our executive officers to improve overall earnings. |
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● | | Average operating ROIC takes a three-year average of the sum of our net income and after taxafter-tax net interest (or tax impacted EBIT) as a percentage of our average invested capital. Our average invested capital is the average month end sum of debt (net of cash equivalents) and equity (adjusted for accumulated other comprehensive pension income (or loss)). We utilize average operating ROIC as a performance metric because it measures how efficiently and effectively we use capital to generate profits. |
Since our financial performance metrics are based on year-over-year improvements as well as cumulative or average improvements over a three yearthree-year period, we preserve flexibility to adjust certain of these measures, when approved by our Compensation Committee, to account for the cumulative effect of unusual or non-recurring items, such as changes in tax law or accounting principles, charges relating to restructuring our businesses, significant acquisitions and divestitures, and foreign exchange movements. To set our 20192020 targets, for purposes of making year over year comparisons we used our 20182019 results as the 20192020 baseline.In the determination of our 20192020 results for the year-over-year performance-based incentive compensation awards, we madethe Compensation Committee approved certain adjustments to account for specialunusual and non-recurring items. With respect to short-term performance metrics, we excluded the financial impact of restructuring charges (not including impairment), pension expense other than service cost, M&A related costs, and the impact of acquisitions completed in 2019 and related transactionexecutive management succession costs. For long-term performance metrics, we excluded certain financial impacts of the Tax Cuts and Jobs Act, the adoption of ASC 606 Revenue Recognition rules, restructuring charges the results from acquisitions completed in 2019(not including impairment) and related M&A transaction costs in 2019.executive management succession costs.
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Components of Compensation Program
The following table presents in summary form each of the components of our named executive officer’s compensation for 20192020 and briefly describes the purpose and characteristics of each of these components.
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Component | | Purpose | | Characteristics |
ComponentBase Salary
| | Purpose
| | Characteristics
|
Base Salary
| | Salary for level of responsibility, experience and sustained individual performance. | | Fixed cash component targeted at our peer group median (size adjusted); base salary can vary from market due to individual performance, contribution, experience, time in position and internal equity considerations. |
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Management
Incentive Plan (“MIP”) Awards | | Focus management on achievement of financial performance metrics and objectives important to the success of their divisions (as applicable) and our overall performance. | | A target MIP award is designed to provide peer group median cash compensation opportunities (size adjusted) when combined with base salary; significantly exceeding targets allows achievement of upper quartileabove median cash compensation compared with peers. 75% is based on business performance measures (“BPI”). 25% is based on personal performance measures (“PPI”). |
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Long-Term Incentive Plan (“LTIP”) Awards | | Aligns with our long-term strategic plan, focuses management on the achievement of important performance metrics and provides a retention incentive. | | A target LTIP award is designed to provide competitive total compensation compared to our peer group when combined with base salary and target MIP award. Delivered through performance-based RSUs (60%) and time-based RSUs (40%). Ultimate value depends on our performance against pre-established financial goals measured over a three yearthree-year period, and our stock price at the end of a three-year vesting period. |
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Perquisites/ Health Wellness Incentives | | Provides executive with a limited amount of selected benefits commensurate with those provided to executives at peer group companies. | | Benefits which personally benefit an employee, are not related to job performance, and are available to a limited group of employees. |
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Retirement Benefits | | Provide an appropriate level of income upon retirement. | | U.S. retirement benefits under a tax-qualified defined contribution plan (401(k) plan) and a non-qualified defined contribution plan. Additional U.S. retirement benefits for one of our long tenured executive officers through a defined benefit pension plan and a related supplemental executive retirement plan (both frozen as of December 31, 2009). |
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Potential Payments Upon Change-in-Control | | Encourages executives to operate in the best interests of stockholders in the event of a change-in-control | | Contingent in nature; payable only if an executive officer’s employment is terminated or adversely impacted as specified under the change-in-control provisions of various plans |
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Other Potential
Post-Employment Payments | | Potential payments under scenarios of death, disability, retirement, termination without cause. | | Contingent in nature; payable only if executive officer’s employment is terminated under the arrangements of various plans. |
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Base Salary
The Compensation Committee reviews competitive market data provided by its independent consultant, Meridian, in its process of determining the appropriate base salary for each executive officer. The base salaries are established relative to the market data based on the particular experience, contribution, and proficiency of each executive officer in their role.
We emphasize performance-based compensation for our named executive officers, therefore we generally provide only modest annual increases in base salary, unless an executive’s base salary is significantly lower than the comparable executive compensation market data provided by Meridian. The Compensation Committee in 2019February of 2020 reviewed the base salaries of the named executive officers relative to the market information provided by Meridian for their respective positions based on their experience, proficiency and contribution, and accordingly approved merit increases for named executive officers ranging from 4%3% to 11%9%. We emphasize performance-based compensation
As noted above in “Compensation Actions in Response to COVID-19”, the salary increases for ourthe named executive officers thereforewere cancelled prior to taking effect. Beginning in April of 2020, we generally provide only modest annual increases inimplemented base salary unless an executive’s basereductions of 20% for Mr. Giacomini, 15% for Mr. Deck, and 10% for the other named executive officers, until July of 2020. Mr. Burdakin voluntarily continued a salary is significantly lower thanreduction of 5% until October 2020, in consideration of the comparable executive compensation market data provided by Meridian.pandemic’s impact on the airline industry and the Company’s AeroTech division.
Annual Cash Incentive Compensation
Our annual cash management incentive compensation plan (“MIP”) component of our Incentive Compensation Plan is a variable cash-based incentive plan designed to focus management on performance factors important to our overall performance and to the continued success of our business units.
Payout Opportunity
Target percentage amounts for annual MIP awards are based on survey market data and peer company proxy statements. For 2019, theThe Compensation Committee set the annual MIP award target percentages (expressed as percentage of base salary) for each of our named executive officers.officers in 2020. The highest percentage, 120%130%, iswas for our Chief Executive OfficerMr. Giacomini and our other named executive officers had MIP target percentages ranging from 55%40% to 75% of base salary. Mr. Deck’s target percentage for the annual MIP incentive remained at 75% for 2020 and based on his annual salary of $515,000 as in effect prior to his becoming Interim President and Chief Executive Officer. Similarly, Mr. Meister’s target percentage for the annual MIP incentive remained at 40% for 2020 and based on his annual salary of $290,000 as in effect prior to him becoming Interim Chief Financial Officer.
Performance Measures and Weight
For 2019,2020, our annual MIP opportunity was weighted primarily toward business performance (75%), referred to as the “BPI” component, and secondarily to individual performance (25%), referred to as the “PPI” component. Our Compensation Committee reviews and approves BPI targets for our MIP award program annually utilizing measures it believes correlate highly to enterprise value growth and total stockholder returns. For MIP awards for all of our named executive officers in 2019,2020, we utilized year-over-year growth in EBITDA and year-over-year improvement in EBITEBITDA margin and AOWC, with variations in weighting designed to address specific areas of focus within different divisions. In order to promote focus on cash flow in response to impact of the COVID-19 pandemic we elected to put in place a payout trigger threshold that required 90% of the established EBITDA target to be achieved in order for a payout to be made on any metric of the BPI component of the MIP.
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● | | For our named executive officers employed in corporate and FoodTech division roles (Messrs. Giacomini, Deck, Meister, Sternlieb, and Fernandez), EBITDA was weighted at 50% of the total BPI component, with EBITEBITDA margin and AOWC each weighted at 25%. |
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● | | For our named executive officer employed in our AeroTech division (Mr. Burdakin), EBITDA was weighted at 40% of the total BPI component, with EBITEBITDA margin weighted 25% and AOWC weighted at 35%. |
Annual MIP award opportunities for our named executive officers who had division management responsibilities also utilized division MIP targets for EBITDA, EBITEBITDA margin and AOWC, with variations in corporate target weighting relative to specific corporate level responsibilities.
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● | | For Mr. Burdakin, business performance against corporate BPI targets was weighted 30% and against division BPI targets was weighted 70%. |
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● | | For Mr. Sternlieb, business performance against corporate BPI targets was weighted 15%, against FoodTech BPI targets was weighted 15%, and against Protein business BPI targets was weighted 70%. |
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| | For Mr. Fernandez, business performance against corporate BPI targets was weighted 15%, against FoodTech BPI targets was weighted 15%, and against Liquid Foods business BPI targets was weighted 70%. |
The Compensation Committee established a range from “0.00” (below(at or below threshold) to “2.50” (performance far in excess of plan) for performance against each of these measures. Achievement of target performance for any metric would result in a “1.00” BPI rating. There was a minimum level for each measure below which a participant receives 0% of the target award, and correspondingly a maximum performance level which, even if exceeded, would not generate more than 250% of the BPI portion of the target award. In between the minimum and maximum performance targets, the performance level of each measure is plotted on a predefined curve which indicates the percent of the target award that should be awarded. The performance achieved on each measure is added together and divided by the number of measures to determine the actual percentage payout of the target award amount.
The following charts provide the performance curves for the corporate BPI targets for 2019:2020:
The slope of each of the curves reflects the Compensation Committee’s desire to reward above-target performance. As performance increases from threshold to target, the awards increase, and when performance exceeds the target level of performance, awards increase more rapidly.
Determination of BPI Payout
Messrs. GiacominiDeck and DeckMeister received a corporate-wide BPI rating which was based on our consolidated results. Messrs. Burdakin, Sternlieb, and Fernandez have division management roles, and for 20192020 their BPI rating was based in part on consolidated results and in part on the results of the divisions in which they served.
For 20192020 MIP awards, the following table shows the overall Company and division performance measures used for BPI and our performance against each of these performance measures (adjusted in the manner described under “Performance Metrics Used in our Incentive Compensation Plans” above).
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Overall Company Performance Measures | Overall Company Performance Measures | Overall Company Performance Measures |
| | 0% Payout of | | | 100% Payout of | | | 250% Payout | | | 2019 | | | | BPI | |
| | Target BPI | | | Target BPI | | | of Target BPI | | | Performance | | Weight | | Payout | |
| | | 0% Payout of | | | 100% Payout of | | | 250% Payout | | | 2020 | | | | BPI |
| | | Target BPI | | | Target BPI | | | of Target BPI | | | Performance | | Weight | | Payout |
EBITDA | $ | 213.8 | | $ | 248.8 | | $ | 284.8 | | $ | 262.3 | | 50 | % | 1.48 | $ | 297.8 | | $ | 317.8 | | $ | 344.8 | | $ | 257.6 | | 50 | % | 0.00 |
EBIT Margin | | 9.2 | % | | 10.3 | % | | 11.5 | % | | 11.3 | % | 25 | % | 2.10 | |
EBITDA Margin* | | | 14.9 | % | | 15.7 | % | | 16.9 | % | | 14.9 | % | 25 | % | 0.06 |
AOWC | | 16.1 | % | | 14.8 | % | | 13.3 | % | | 15.7 | % | 25 | % | 0.26 | | 16.5 | % | | 15.5 | % | | 14.0 | % | | 19.6 | % | 25 | % | 0.00 |
Total BPI Rating | | | | | | | | | | | | | | | 1.33 | | | | | | | | | | | | | | | 0.00 |
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FoodTech Division Performance Measures | FoodTech Division Performance Measures | FoodTech Division Performance Measures |
| | 0% Payout of | | | 100% Payout of | | | 250% Payout | | | 2019 | | | | BPI | |
| | Target BPI | | | Target BPI | | | of Target BPI | | | Performance | | Weight | | Payout | |
| | | 0% Payout of | | | 100% Payout of | | | 250% Payout | | | 2020 | | | | BPI |
| | | Target BPI | | | Target BPI | | | of Target BPI | | | Performance | | Weight | | Payout |
EBITDA | $ | 200.0 | | $ | 229.0 | | $ | 259.5 | | $ | 232.3 | | 50 | % | 1.15 | $ | 261.3 | | $ | 278.3 | | $ | 300.8 | | $ | 235.9 | | 50 | % | 0.00 |
EBIT Margin | | 12.3 | % | | 13.3 | % | | 14.8 | % | | 14.6 | % | 25 | % | 2.31 | |
EBITDA Margin* | | | 19.0 | % | | 20.0 | % | | 21.2 | % | | 19.1 | % | 25 | % | 0.09 |
AOWC | | 11.8 | % | | 10.7 | % | | 9.1 | % | | 12.1 | % | 25 | % | 0.00 | | 12.7 | % | | 11.9 | % | | 10.7 | % | | 14.4 | % | 25 | % | 0.00 |
Total BPI Rating | | | | | | | | | | | | | | | 1.15 | | | | | | | | | | | | | | | 0.00 |
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AeroTech Division Performance Measures | AeroTech Division Performance Measures | AeroTech Division Performance Measures |
| | 0% Payout of | | | 100% Payout of | | | 250% Payout | | | 2019 | | | | BPI | |
| | Target BPI | | | Target BPI | | | of Target BPI | | | Performance | | Weight | | Payout | |
| | | 0% Payout of | | | 100% Payout of | | | 250% Payout | | | 2020 | | | | BPI |
| | | Target BPI | | | Target BPI | | | of Target BPI | | | Performance | | Weight | | Payout |
EBITDA | $ | 62.5 | | $ | 71.5 | | $ | 82.5 | | $ | 79.3 | | 40 | % | 2.04 | $ | 84.2 | | $ | 91.0 | | $ | 99.0 | | $ | 58.4 | | 40 | % | 0.00 |
EBIT Margin | | 11.3 | % | | 12.3 | % | | 13.8 | % | | 13.1 | % | 25 | % | 1.71 | |
EBITDA Margin | | | 13.6 | % | | 14.5 | % | | 15.6 | % | | 11.8 | % | 25 | % | 0.00 |
AOWC | | 26.8 | % | | 25.3 | % | | 22.8 | % | | 27.4 | % | 35 | % | 0.00 | | 27.7 | % | | 26.1 | % | | 24.0 | % | | 33.6 | % | 35 | % | 0.00 |
Total BPI Rating | | | | | | | | | | | | | | | 1.24 | | | | | | | | | | | | | | | 0.00 |
Our 2019 financial performance results impacted the MIP as follows:
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| | Our overall performance with respect toAlthough the results for EBITDA and EBIT margin exceeded their target performance levels, while performance with respect to AOWC improvement did not reach the target. Our aggregate performance across the three measures resulted in Management Incentive Plan (MIP) awards exceeding the target level, with the EBITDA metric having the most significant impact on those awards. The 75% portion of MIP awardsMargin were slightly above threshold for Messrs. Giacomini and Deck were based on these performance metrics and paid out at 133% of the target award amounts.
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| | Our FoodTech division’s performance with respect to EBITDA and EBIT margin exceeded its target performance levels, and AOWC was below its target performance level, resulting in a
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BPI of 115%. The 75% portion of the MIP award for Messrs. Sternlieb and Fernandez weighted performance 15% for the FoodTech division.
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| | Our Protein business’s performance with respect to EBITDA and EBIT margin exceeded its target performance levels, while AOWC improvement did not reach the target, resulting in a BPI of 129%. The 75% portion of the MIP award for Mr. Sternlieb, weighting performance 15% for theour FoodTech division performance metrics, 70% for the Protein business performance metrics, and 15% for the overall Company performance, metrics, paid out at 128%the Total BPI rating was “0” since we did not achieve the 90% of theEBITDA target award level.payout trigger.
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| | Our Liquid Foods business’s performance with respect to EBIT margin and AOWC improvement exceeded its targeted performance levels, while EBITDA growth was below its target performance level, resulting in a BPI of 1.03%. The 75% portion of the MIP award for Mr. Fernandez, weighting performance 15% for the FoodTech division performance metrics, 70% for the Liquid Foods business performance metrics, and 15% for the overall Company performance metrics, paid out at 1.09% of the target award level.
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| | Our AeroTech division’s performance with respect to EBITDA and EBIT margin exceeded the target performance levels, while performance with respect to AOWC improvement was below its target performance level, and resulted in a BPI of 1.24%. The 75% portion of the MIP award for Mr. Burdakin, weighting performance 70% for the AeroTech division performance metrics and 30% for the overall Company performance metrics for these measures paid out at 1.27% of the target award level.
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Our resulting BPI multipleperformance with respect to financial performance measures was then multipliedbelow threshold target levels for the Company overall as well as the divisions managed by our individual named executive officer’s MIP award target percentage to determineMessrs. Burdakin, Sternlieb, and Fernandez. As a result, the 75% BPI portion of MIP awards based on these performance metrics paid out at 0% of the MIPtarget award payout to that executive.amounts for each of our named executive officers.
Determination of PPI Payout
The PPI rating is based on the achievement by an executive officer of individual annualpersonal performance objectives. A broad range of factors, quantitative and qualitative in nature, may be considered in this PPI rating assessment, including corporate and operations level cost control, strategic initiatives, operational objectives regarding market development and growth, margin improvement and revenue growth as well as objectives relating to restructuring, integration and safety. These objectives differ from those utilized to determine performance ratings for establishing an executive officer’s base salary described above under “Components of Compensation Program — Base Salary.” For our 2019 MIP program, our Compensation Committee approved a PPI range from 0.00 to 2.00. For individual PPI objectives, the level of performance and resulting individual ratings on objectives required to achieve a PPI rating of 2.00 is quite high and unusual.
Our Chief Executive Officer provided the Compensation Committee his recommendation with respect to the PPI ratings for the performance of individual objectives for each of the other named executive officers. For our Chief Executive Officer, the Compensation Committee solicits feedback from the independent directors, evaluates his performance in executive session, and uses that assessment to recommend his PPI rating to the independent directors. In determining our Chief Executive Officer’s individual performance PPI rating, the independent directors evaluated his performance on a variety of objectives tied to:
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● | | JBT Strategy and Deployment; |
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● | Response to the myriad challenges related to COVID-19; |
| ● | JBT Operational Improvement Framework and Execution; and |
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2021 Proxy Statement | ·
| | Succession Planning37
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Our
Excluding Mr. Giacomini, who left the Company in September, each of our named executive officers received a PPI rating of 2.0 for 2020. The PPI ratings ranging from 1.45 to 1.75 for 2019, with an average ratingfiscal year 2020 reflected the Compensation Committee’s recognition of 1.66.our named executive officers’ extraordinary contributions in managing business operations during a period of substantial uncertainty and positioning the Company for a strong recovery and future growth. On average, the PPI portion of the annual MIP award compensation represents less than 8%9% of the total compensation paid to our named executive officers (as set forth in the Summary Compensation Table below).
Calculation of Total MIP Payout
To illustrate how the annual MIP awards are determined under our compensation programs, making the assumption that an executive officer has a base salary of $400,000, a 60% target, a BPI rating of 150%25% and a PPI rating of 125%175%, the executive officer’s annual MIP compensation payment would be calculated in the following manner:
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BPI | | | | |
$400,000 (base salary) x .60 (target) x .75 (BPI weighting) x 150% (Corporate BPI achievement) | $ | 270,000 | |
$400,000 (base salary) x .60 (target) x .75 (BPI weighting) x 25% (Corporate BPI achievement) | | $ | 45,000 |
PPI | | | | |
$400,000 (base salary) x .60 (target) x .25 (PPI weighting) x 125% (Individual PPI rating) | $ | 75,000 | |
$400,000 (base salary) x .60 (target) x .25 (PPI weighting) x 175% (Individual PPI rating) | | $ | 105,000 |
Total MIP Award Compensation: | $ | 345,000 | $ | 150,000 |
The following table sets forth the potential MIP awards for 20192020 at threshold, target and maximum performance levels for our named executive officers, and their actual MIP payouts driven by our overall financial performance in 2019.2020.
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| Target MIP | | | | | | | | | | | | | Actual MIP | |
| Award as a | | | | | | | | | | | | | Payout as a | |
| % of | | MIP Award Opportunity | | Actual MIP | | % of | |
| | | | | | | | | | | | | | | | | | |
| | Target MIP | | | | | | | | | | | | | | Actual MIP |
| | Award as a | | | | | | | | | | | | | | Payout as a |
| | % of | | MIP Award Opportunity | | Actual MIP | | % of |
Name | Base Salary | | Threshold | | Target | | Maximum | | Payout | | Target | Base Salary | | Threshold | | Target | | Maximum | | Payout | | Target |
Thomas W. Giacomini | 120 | % | | $ | 0 | | $ | 1,116,000 | | $ | 2,650,500 | | $ | 1,601,460 | | 144 | % | |
Brian A. Deck | 75 | % | | $ | 0 | | $ | 386,250 | | $ | 917,344 | | $ | 552,338 | | 143 | % | 75 | % | | $ | 0 | | $ | 386,250 | | $ | 917,344 | | $ | 193,125 | | 50 | % |
Thomas W. Giacomini (1) | | 130 | % | | $ | 0 | | $ | 1,209,000 | | $ | 2,871,375 | | | — | | — | |
Matthew J. Meister | | 40 | % | | $ | 0 | | $ | 116,000 | | $ | 275,500 | | $ | 58,000 | | 50 | % |
David C. Burdakin | 55 | % | | $ | 0 | | $ | 233,750 | | $ | 555,156 | | $ | 306,855 | | 131 | % | 55 | % | | $ | 0 | | $ | 233,750 | | $ | 555,156 | | $ | 116,875 | | 50 | % |
Paul E. Sternlieb | 60 | % | | $ | 0 | | $ | 261,000 | | $ | 619,875 | | $ | 359,854 | | 138 | % | 60 | % | | $ | 0 | | $ | 261,000 | | $ | 619,875 | | $ | 130,500 | | 50 | % |
Carlos Fernandez | 60 | % | | $ | 0 | | $ | 234,000 | | $ | 555,750 | | $ | 288,932 | | 123 | % | 60 | % | | $ | 0 | | $ | 234,000 | | $ | 555,750 | | $ | 117,000 | | 50 | % |
| 1) | Under the terms of his separation agreement, Mr. Giacomini received a severance payment that included a prorated target annual cash incentive and is reflected in the Summary Compensation Table under “All Other Compensation.” |
Long-Term Incentive Compensation
By providing our named executive officers with significant compensation opportunities in the form of long-term equity awards under the LTIP, we intend to ensure that a significant portion of our named executive officers’ total target compensation remains at risk and continues to be tied to the creation of value for our stockholders. To date, our LTIP awards have included two or more of the following types of awards: (i) performance-based RSUs, which are tied to the achievement of Company financial goals, (ii) time-based RSUs, which provide executives with an equity stake in our Company, and (iii) performance-based cash awards, which provides a future cash payment opportunity tied to the achievement of Company financial goals. The Compensation Committee reviews annually the use of performance-based cash awards in long-term incentive compensation, considering, among other things, the available shares under the Incentive Compensation Plan and the extent to which equity awards may dilute existing stockholders. Accordingly, the use of performance-based cash awards may vary from year to year; however, the Compensation Committee has a preference for performance-based equity awards due to the closer alignment of equity incentive awards with stockholder value creation. All LTIP awards made in 20192020 were stock-based awards. Each of these awards provide a retention incentive for our named executive officers because they are subject to vesting requirements and are not paid out until the end of a three-year service period. In addition, these awards provide our named executive officers the opportunity to realize financial rewards if our stock price appreciates over the long term.
Earned Payout of 20172018 – 20192020 Performance RSUs
The three-year performance period for the performance RSUs granted in 20172018 ended on December 31, 2019. In February 2020, the Compensation Committee evaluated the results of the three-year performance period for the performance RSUs granted in 2017.
2020. The table below sets forth the measures (adjusted to exclude certain unusual and non-recurring items in the manner described under “Performance Metrics Used in our Incentive Compensation Plan” above), the potential payouts and the level of achievement of the measures for the 20172018 – 20192020 performance RSUs granted to our named executive officers.
20172018 – 20192020 Performance Period
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Performance Measures | | 0% Payout of
Target Grant | | 100% Payout
of Target Grant | | 200% Payout
of Target Grant | | 2017-2019 Performance | | 2017-2019
Performance as
a Percentage of
Target | | | 0% Payout of
Target Grant | | 100% Payout
of Target Grant | | 200% Payout
of Target Grant | | 2018-2020 Performance | | 2018-2020
Performance as
a Percentage of
Target | |
3 Year Cumulative EPS | | $ | 7.87 | | $ | 9.55 | | $ | 12.50 | $ | 10.54 | | 133 | % | | $ | 9.29 | | $ | 11.27 | | $ | 14.75 | $ | 11.23 | | 98 | % |
3 Year Average ROIC | | | 10.5 | % | | 15.0 | % | | 18.3 | % | 12.4 | % | 50 | % | | | 11.0 | % | | 14.0 | % | | 17.0 | % | 11.5 | % | 26 | % |
Earned Payout | | | | | | | | | | | | | 108 | % | | | | | | | | | | | | | 76 | % |
We achieved cumulative EPS of $10.54$11.23 over the three-year performance period, which represents 133%98% of our goal for cumulative EPS, and 12.4%11.5% average ROIC over the three-year performance period, which represents 50%26% of our goal for average ROIC. The cumulative EPS measure is weighted 70% and the average ROIC measure is weighted 30%. As a result, the performance RSUs for the 20172018 – 20192020 performance period were earned at 108%76% of target.
The following table sets forth the target and maximum opportunities and the actual earned shares under the performance RSUs granted to each of our named executive officers in 20172018 (with the exception of Mr. Sternlieb,Giacomini, who separated from the company in September of 2020, and Mr. Meister, who was hired in the 4th quarterMay of 2017)2019). The earned shares will be distributed to our named executive officers on April 1, 2020,2021, subject to their continued employment through that date:
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| | LTIP Award Opportunity | | 2017-2019 Performance RSUs | |
| | | | | | | | | |
| | | LTIP Award Opportunity | | 2018-2020 Performance RSUs |
Name | | Target Number of
Shares | | Maximum Number of
Shares | | % of Target
Earned | | Number of Shares
Earned | | Target Number of
Shares | | Maximum Number of
Shares | | % of Target
Earned | | Number of Shares
Earned |
Thomas W. Giacomini | | 18,728 | | 37,456 | | 108 | % | 20,226 | |
Brian A. Deck | | 3,954 | | 7,908 | | 108 | % | 4,270 | | 3,258 | | 6,516 | | 76 | % | 2,476 |
David C. Burdakin | | 2,983 | | 5,966 | | 108 | % | 3,222 | | 2,155 | | 4,310 | | 76 | % | 1,638 |
Paul E. Sternlieb | | | 2,005 | | 4,010 | | 76 | % | 1,524 |
Carlos Fernandez | | 1,387 | | 2,774 | | 108 | % | 1,498 | | 2,005 | | 4,010 | | 76 | % | 1,524 |
Determination of 20192020 LTIP Award Size and Mix
To determine the appropriate amount of LTIP awards for our named executive officers, we target the median level of the market for long-term incentive awards, with the possibility of above market awards for experience, outstanding performance, and impact. We also consider internal equity and relative contribution among our named executive officers and make adjustments when appropriate. Using these guidelines, the Compensation Committee sets a target economic value for each named executive officer’s LTIP award. In determining the mix of awards, the Compensation Committee considers key business priorities, peer group practices, potential stockholder dilution from equity plans and the usage of shares available under the Incentive Compensation Plan.
In 2019,2020, the LTIP awards included two equity components: 60% was a performance-based RSU award and 40% was a time-based RSU award. To determine the number of shares for these equity-based LTIP awards, we divide the target economic value of the equity component by the closing share price of our Common Stock on the grant date. The grant date was the day the Compensation Committee met to approve the target values for 20192020 LTIP awards for executive officers in February 2019.
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The following table sets forth the target and maximum opportunities for the performance-based RSU awards, as well as the time-based RSU awards, granted to each of our named executive officers in 2019.2020. The actual payout of the performance-based RSU awards will be determined after the completion of the three-year performance period on December 31, 2021.2022.
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| | | Performance-based RSU | | | |
| | | | | | | |
| | | | Performance-based RSU | | |
Name | | Time-based RSU | Target | Maximum | | Total Opportunity | | Time-based RSU | Target | Maximum | | Total Opportunity |
Brian A. Deck (1) | | | 7,758 | 5,427 | 10,854 | | 18,612 |
Thomas W. Giacomini | | 14,073 | 21,110 | 42,220 | | 56,293 | | 14,472 | 21,709 | 43,418 | | 57,890 |
Brian A. Deck | | 3,574 | 5,361 | 10,722 | | 14,296 | |
Matthew J. Meister | | | 503 | 754 | 1,508 | | 2,011 |
David C. Burdakin | | 2,033 | 3,049 | 6,098 | | 8,131 | | 1,829 | 2,744 | 5,488 | | 7,317 |
Paul E. Sternlieb | | 2,234 | 3,351 | 6,702 | | 8,936 | | 2,010 | 3,015 | 6,030 | | 8,040 |
Carlos Fernandez | | 1,787 | 2,681 | 5,362 | | 7,149 | | 1,809 | 2,714 | 5,428 | | 7,237 |
| 1) | The number of time-based RSUs for Mr. Deck includes the award granted in connection with his appointment as President and Chief Executive Officer described below under “Discretionary Awards.” |
Vesting of 2019 2020 LTIP Awards
The ultimate realizable amount of 60% of the LTIP awards (the performance-based award) granted to our named executive officers in 20192020 will depend upon our achievement against specific performance metrics set by the Compensation Committee in February 20192020 for the three year period ending on December 31, 2021.2022. The percentage of the total performance-based RSU award that will be earned will be determined after the end of the three-year performance period and the payment is subject to service-based vesting requirements. This three-year performance period puts a meaningful portion of each of our named executive officer’s targeted LTIP award at risk. The other 40% of the LTIP awards granted to our named executive officers will be earned if the named executive officer completes a three-year service-based vesting requirement.
Following satisfaction of the performance conditions and completion of the vesting period, the executive receives ownership and voting rights of the shares of Common Stock underlying the LTIP award. The RSU awards have dividend equivalent rights subject to the same performance and vesting requirements as the underlying RSUs. The dividend equivalent rights are subject to forfeiture to the same extent as the underlying RSUs if performance and/or vesting conditions are not met. Vesting periods are utilized both as a retention incentive and as a means to align incentives with long-term value creation for stockholders. With the approval of the Compensation Committee, we may issue LTIP awards with reduced performance or vesting periods, though the Incentive Compensation Plan generally imposes a minimum period of one year in such circumstances.
Performance-Based LTIP Awards Granted in 20192020
For performance-based LTIP awards granted in 2019,2020, the performance goals consisted of measures for cumulative EPS growth and average ROIC over a three-year period. The Compensation Committee established a range from “0.00” (below(at or below threshold) to “2.00” (performance far in excess of plan) for performance against each of these measures. Achievement of target performance for any metric would result in a “1.00” rating. There was a minimum level for each measure below which a participant receives 0% of the target award, and correspondingly a maximum performance level which, even if exceeded, would not generate more than 200% of the target award. In between the minimum and maximum performance targets, the performance level of each measure is plotted on a predefined curve which indicates the percent of the target award that should be earned. The cumulative EPS measure is weighted 70%, and the average ROIC measure is weighted 30%, and the two weighted measures are added together to determine the actual percentage payout of the target award amount. The performance period for these measures is three years.
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The following charts provide the performance curves for the two metrics for performance-based RSU awards granted in 2019:2020:
Performance Goals and Potential Payouts for 2018 – 2020 Performance RSUs and 2019 – 2021 Performance RSUs and 2020 – 2022 Performance RSUs
We have granted performance-based equity awards with a performance period of three years since 2015, and, as a result, we have overlapping performance periods with two periodsadditional performance cycles currently in progress. The table below sets forth the measures (adjusted in the manner described under “Performance Metrics Used in our Incentive Compensation Plans” above) and the potential payouts for the 2018 – 2020 and 2019 – 2021 and 2020 – 2022 performance RSU awards to our named executive officers. The cumulative EPS measure is weighted 70% and the average ROIC measure is weighted 30%. The payout of the performance RSUs granted in 20182019 will not be determinable until after the performance period is completed on December 31, 2020,2021, and the payout of the performance RSUs granted in 20192020 will not be determinable under after the performance period is completed on December 31, 2021.2022.
2018 – 2020 Performance Period
| | | | | | | | | | |
| | 0% Payout of | | 100% Payout of | | 200% Payout of | |
Performance Measures | | Target Grant | | Target Grant | | Target Grant | |
3 Year Cumulative EPS | | $ | 9.29 | | $ | 11.27 | | $ | 14.75 | |
3 Year Average ROIC | | | 11.0 | % | | 14.0 | % | | 17.0 | % |
2019 – 2021 Performance Period
| | | | | | | | | | | |
| | 0% Payout of | | 100% Payout of | | 200% Payout of | | |
| | | | | | | | | | | |
| | | 0% Payout of | | 100% Payout of | | 200% Payout of | |
Performance Measures | | Target Grant | | Target Grant | | Target Grant | | | Target Grant | | Target Grant | | Target Grant | |
3 Year Cumulative EPS | | $ | 12.46 | | $ | 14.59 | | $ | 18.36 | | | $ | 12.46 | | $ | 14.59 | | $ | 18.36 | |
3 Year Average ROIC | | | 10.0 | % | | 13.0 | % | | 16.0 | % | | | 10.0 | % | | 13.0 | % | | 16.0 | % |
2020 – 2022 Performance Period
| | | | | | | | | | |
| | 0% Payout of | | 100% Payout of | | 200% Payout of | |
Performance Measures | | Target Grant | | Target Grant | | Target Grant | |
3 Year Cumulative EPS | | $ | 13.62 | | $ | 15.92 | | $ | 19.83 | |
3 Year Average ROIC | | | 9.1 | % | | 12.1 | % | | 15.1 | % |
Discretionary Awards
In addition to our annual incentive compensation awards, our Compensation Committee may make discretionary awards under special circumstances, including exceptional contributions not recognized by the metrics set for our MIP and LTIP awards, new hire “sign-on” bonuses, awards upon promotion and retention awards.
In 2020, Mr. Deck received a $500,000 cash bonus and a time-based restricted stock unit award with a fair market value of $500,000 that will vest in 2021. The Compensation Committee awarded this additional compensation in connection with his appointment as President and Chief Executive Officer and his strong performance during this period, and in recognition of the fact that Mr. Burdakin a one-time cashDeck’s target MIP bonus payment of $439,000 duepercentage for 2020 and his 2020 long-term incentive plan (“LTIP”) award amounts were not adjusted to take into account his exceptional contributions during 2019 as a result of his increased strategic, management,elevation into the Interim President and operational responsibilities.
Chief Executive Officer role in June 2020.
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Employment Agreement with Chief Executive Officer
On September 20,In 2019, we entered into an employment agreement with Mr. Giacomini, our Chairman, President and Chief Executive Officer. The employment agreement recognizes and further incentivizes Mr. Giacomini’s continued valuable contributions to our success and secures his continuing leadership of the Company. Pursuant to the employment agreement,provided that Mr. Giacomini willwould continue to serve as our President and Chief Executive Officer for an initiala five-year term, followed by automatic renewals for 12‑monthsuccessive one-year renewal terms unless either party gives written notice of non-renewal at least 180 days prior to the end of the applicable term. Also pursuant to the employment agreement, Mr. Giacomini will continue to serve as Chairman of the Company’s Board of Directors (the “Board”). However, if at any time the Board reasonably determines that the roles of Chairman of the Board and Chief Executive Officer should not be heldthereafter by the same individual, Mr. Giacomini may be removed as Chairman of the Board, provided that he remains in the position of President and Chief Executive Officer and continues to serve as a member of the Board.mutual agreement.
The compensation that will be provided to Mr. Giacomini under the employment agreement includes:included: (1) an annual base salary of $930,000, subject to annual review for potential increase, (2) participation in our annual management incentive compensation plan with a target of at least 120% of base salary, which maycould be increased from time to time by the Compensation Committee, (3) eligibility for grants or awards under our long-term incentive compensation program, (4) participation in our savings and retirement plans (other than our frozen pension plans), (5) participation in our welfare benefit plans and fringe benefit programs, including a financial counseling allowance, (6) vacation of no less than four weeks per year and (7) reimbursement of legal fees incurred in connection with the review of the employment agreement.
In connection with his entry into the employment agreement, Mr. Giacomini entered into a Confidential Information, Non-Competition, Non-Solicitation and Inventions Agreement with us (the “Restrictive“Restrictive Covenants Agreement”Agreement”). The Restrictive Covenants Agreement includesincluded covenants concerning non-disclosure of confidential information, non-competition, non-solicitation and invention assignment that willwould apply during Mr. Giacomini’s employment and for 24 months thereafter.
Prior to the effective date of theMr. Giacomini’s employment agreement Mr. Giacomini was a participant in our executiveprovided for severance plan and party to an executive severance agreement dated as of September 9, 2013. Upon execution of the employment agreement, Mr. Giacomini’s participationbenefits in the executive severance plan and his individual executive severance agreement were replaced by the severance benefits provided in the employment agreement.event of a qualifying termination. See “—“—Change-in-Control Benefits” and “General Executive Severance Benefits” and “Impact of Retirement on Outstanding LTIP Awards.”
Separation Agreement with Mr. Giacomini
In connection with his resignation, on September 25, 2020, Mr. Giacomini entered into a Transition, Separation, and General Release Agreement (the “Separation Agreement”) with the Company. Pursuant to the Separation Agreement, the Company agreed to provide Mr. Giacomini with (i) a cash payment of $5,200,149 reflecting the severance benefits payable under his employment agreement (consisting of two times base salary and target annual cash incentive, prorated target annual cash incentive, and welfare benefit) and (ii) a cash payment equal to the value of 13,395 shares of the Company’s common stock based on a per share value equal to the closing price of the common stock on October 1, 2020 (representing equity awards granted in 2018 and scheduled to vest in 2021 based on the forecasted performance). All other outstanding equity awards held by Mr. Giacomini at the time of his separation were forfeited. The value of the separation payment, which was paid to Mr. Giacomini’s estate, is set forth below in the Summary Compensation table under “All Other Compensation.”
Securities Trading Policy
Our insider trading policy prohibits our directors, executive officers and other employees from engaging in any transaction in which they may profit from short-term speculative swings in the value of our securities. This includes “short sales” (selling borrowed securities which the seller hopes can be purchased at a lower price in the future) or “short sales against the box” (selling owned, but not delivered securities), “put” and “call” options (publicly available rights to sell or buy securities within a certain period of time at a specified price or the like) and hedging transactions, such as zero-cost collars and forward sale contracts. In addition, our insider trading policy prohibits our directors, executive officers and other employees from engaging in any transaction involving arrangements to hold our securities in a margin account or pledging them as collateral.
Claw-Back Policy
Our Incentive Compensation Plan gives our Compensation Committee the discretion to “claw-back” or cancel all or a portion of outstanding awards in the event of misconduct prejudicial to the Company or in the event a restatement of our financial results from a prior period, whether as a result of errors, omissions or fraud, results in a prior award’s performance measures no longer being satisfied.satisfied, or at a different level. This provides the Compensation Committee with the authority to cancel all or a portion of any outstanding awards,
whether or not vested or deferred, or to require an executive officer to repay any gain realized or payment received upon the exercise or payment of a prior award.
In September 2019, our Compensation Committee adopted the John Bean Technologies Corporation Clawback Policy. Under this policy, in the event that the Company is required to make an accounting restatement to correct an error that is material to previously issued financial statements due to (i) material noncompliance with any financial reporting requirement under the U.S. federal securities laws or (ii) errors, omissions or fraud, the Compensation Committee may take such action as it deems appropriate to recover from an executive officer any or all of the excess incentive compensation that the executive officer was awarded, whether or not the executive officer engaged in misconduct that caused the need for a restatement. In addition, in the event of an executive officer’s serious misconduct, the Compensation Committee may take such action as it deems appropriate to recover from the executive officer gains realized or payments received pursuant to incentive plan awards.
“Serious misconduct” orfor this purpose means any action, failure to act or conduct which would constitute “cause” or a “disqualifying event” under an employment, severance or similar agreement with the Company or an incentive plan, severance plan or similar plan in which the executive officer participates, or any activity that is in competition with the Company’s business or material breach of any confidentiality or restrictive covenant obligations. “Excess incentive compensation” for this purpose means the amount of incentive compensation in excess of what would have been awarded to the executive officer under the circumstances reflected by the restatement. Incentive compensation covered by the clawback policy includes any cash, equity or equity-based compensation, payment or award under any incentive plan, that was granted, earned or vested based wholly or in part upon the attainment of any financial reporting measure and deemed to be received by an executive officer during the 36-month period preceding the date on which the Company is required to make the restatement, or the 12-month period preceding the serious misconduct. Any right to recoupment under the clawback policy is in addition to, and not in lieu of, other rights of recoupment available to the Company.
Our clawback policy is periodically reviewed against market best practices by the Compensation Committee, with the assistance of its independent compensation consultant, Meridan.Meridian.
Option Repricing Prohibition
Our Incentive Compensation Plan expressly prohibits lowering of the exercise price of any option or stock appreciation right after issuance under the Incentive Compensation Plan, or cancelling any option or stock appreciation right when its exercise price exceeds the fair market value of a share of our common stock in exchange for cash or another award under the Incentive Compensation Plan (except with respect to certain change-in-control transactions). The Incentive Compensation Plan also prohibits taking any other action with respect to an option or stock appreciation right issued under the Incentive Compensation Plan that would be treated as a repricing under the rules of the New York Stock Exchange without approval of our stockholders.
Impact of Section 162(m) of the Internal Revenue Code on Executive Compensation
Prior toWhen determining total direct compensation packages, the Tax Cuts and Jobs Act (“Tax Reform”)Committee considers all factors that was signed into law December 22, 2017,may have an impact on our financial performance, including tax deductibility. Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallowed alimits the amount of the tax deduction to public corporationscompanies may take for non-performance-based compensation in excess of $1 million paid in any fiscal year to certain covered employees, generally including named executive officers. Among other requirements, in order for compensation to have been considered performance-based for purposes of Section 162(m), it generally must have been paid pursuant to a plan which was approved by the company’s public stockholders.
Under the Tax Reform, effective starting with the 2018 tax year, Section 162(m) generally limitsofficers, to $1 million the U.S. federal income tax deductibility of compensation paid in oneany year to a company’s CEO or CFO, or any of its three next-highest paid executive officers, without regard to whether or not the compensation was performance-based. Grandfathered performance-based compensation is not subject to this limit on deductibility as long as such compensation meets certain requirements in the new law.
per person. While the Committee will continue to considerconsiders the tax deductibility of compensation as one of many factors, the Committee believes the Company’s interests are best served by not restricting the Committee’s discretion and flexibility to structure compensation programs that provide the named executive officers with competitive incentives to motivate and retain them, as well as reward extraordinary contributions.
Achieving these objectives may necessitate paying compensation that in certain cases is not deductible for federal income tax purposes.
Pension Plans
A longer termlonger-term element of compensation for one of our named executive officers, Mr. Fernandez, has been an Internal Revenue Service qualified defined benefit plan (the “Pension Plan”) that provides income replacement retirement benefits. At the time of our spin-off from FMC Technologies, Inc. in 2008, we
maintained the benefits package offered by our former parent company but we subsequently decided to freeze the Pension Plan effective December 31, 2009. Benefits earned as of that date were frozen; while no additional benefits will accrue for any of our U.S.-based non-bargaining unit production personnel, the benefit earned through that date will be paid when the employee retires. All employees can continue to earn service for vesting purposes and for eligibility for early retirement benefits. The pension freeze also impacts our non-qualified defined benefit plan (the “Non-Qualified Pension Plan”) described below.
The Pension Plan utilizes the same benefit calculation formula for our named executive officer covered by such plan as is used for non-bargaining unit production personnel and administrative and technical staff. One of our named executive officers, Mr. Fernandez, has significant accrued pension benefits under the pension plans as a result of his tenure with our predecessor, FMC Technologies, Inc. and its predecessor, FMC Corporation. None of the other named executive officers havehas accrued benefits under the pension plans.
Savings Plans
Most of our United States-based employees, including our named executive officers, are eligible to participate in our tax-qualified savings and investment plan (the “Qualified Savings Plan”). This plan provides an opportunity for employees to save for retirement on both a pre-tax and after-tax basis. Employees exceeding the Internal Revenue Service compensation limit for highly compensated employees can contribute between 0% and 20% of base pay and eligible incentives through pre-tax and after-tax contributions up to the maximum amount prescribed by law and the plan limits, and employees not considered highly compensated under Internal Revenue Service regulations can also contribute up to 75% of base pay and eligible incentives. In order to maintain a competitive benefit package that will attract and retain employees, we have an additional Company non-elective contribution to the Qualified Savings Plan equal to 3% of employees’ base and incentive pay. We match 50%150% of the first 6% of each employee’s contributions. The Qualified Savings Plan also provides for additional discretionary matching contribution of between 0% and 33 1/3% of the first 6%1% of each employee’s contributions depending upon the Company’s achievementand 100% of pre-determined financial performance targets.employee contributions between 1% and 6% of pay, for a total matching contribution of up to 6.5% of pay.
Our named executive officers are also eligible to participate in a pre-tax non-qualified defined contribution plan (the “Non-Qualified Savings Plan”), which provides executives and employees who may reach contribution limits imposed by the Internal Revenue Service for the Qualified Savings Plan with the opportunity to participate in a tax advantaged savings plan comparable to the Qualified Savings Plan. The investment options offered to participants in our Non-Qualified Savings Plan are similar to those offered in our Qualified Savings Plan. For a description of the Non-Qualified Savings Plan, please see “Non-Qualified Deferred Compensation Table.Table for Fiscal Year 2020.”
Change-in-Control Benefits
We entered intohad an employment agreement with Mr. Giacomini prior to his resignation, and we maintain executive severance agreements with each of our other named executive officers that provide them with compensation under certain circumstances in the event of a change-in-control in our ownership or management. The payments generally are based on a multiple of the named executive officer’s base salary and annual short-term incentive and are subject to “double-trigger” conditions, requiring both a “change of control” event and an adverse change in the executive’s employment. The agreements do not include excise tax gross-up provisions. All of our change-in-control agreements condition continuing availability of benefits on compliance with non-compete and non-solicitation provisions. These agreements are designed to ensure that we can attract and retain executive talent and to permit our senior executives to remain focused on value creation for stockholders in the event of a potential change-in-control event. See “Compensation Tables and Explanatory Information — Potential Payments Upon Termination — Potential Payments Upon Change-in-Control” for a further description of the terms and potential amounts payable under these agreements.
The benefits payable under Mr. Giacomini’s employment agreement and the other named executive officers’ executive severance agreements are comparable to benefits for which executives in similar positions at peer companies are eligible under their change-in-control agreements. The competitive nature of these benefits is reviewed and analyzed periodically by our Compensation Committee with the assistance of the Committee’s independent compensation consultant.
Unvested RSUs will vest after the occurrence of a change-in-control only if the RSUs are not assumed by the successor on the effective date of such transaction, the executive officer’s position is terminated within a period of twenty-four months, or the executive’s responsibilities, salary or location are
significantly changed. Outstanding performance-based LTIP awards that vest under these circumstances prior to the completion of the performance period will be paid at 100% of the target award within 70 days. Please see “Compensation Tables and Explanatory Information — Potential Payments Upon Termination — Potential Payments Upon Change-in-Control.”
General Executive Severance Benefits
Under Mr. Giacomini’s employment agreement, upon the termination of Mr. Giacomini’s employment by the Company for reasons other than a Disqualifying Event (as defined in the employment agreement) prior to a Change-in-Control (as defined in the employment agreement) or if Mr. Giacomini terminates his employment for Good Reason (as defined in the employment agreement), he will receive, in addition to accrued but unpaid salary and annual cash incentive, (1) a severance payment equal to two times the sum of his base salary and target annual cash incentive, (2) a prorated payment of his target annual cash incentive for the calendar year in which such termination occurs, (3) subsidized COBRA welfare benefit continuation for a period of 18 months, and (4) a lump sum payment of $20,000 less any amounts that we previously reimbursed to Mr. Giacomini for financial planning or tax preparation assistance expenses incurred in the calendar year in which such termination occurs. All such payments are conditioned on a general release of claims executed by Mr. Giacomini becoming effective.
All of our named executive officers other than Mr. Giacomini participate in our executive severance plan. Under our executive severance plan, named executive officers who lose their job through no fault of their own are entitled to receive 15 months (18 months in the case of our Chief Executive Officer and President) of severance pay (limited to base pay and the executive’s target annual cash incentive, if any), their pro-rated target annual cash incentive, through the date of termination, payment of a lump sum equivalent to the value of the employer portion of the monthly premiums for medical and dental benefits for the same severance period, outplacement services, and tax preparation and financial planning assistance for the last calendar year of employment. See “Potential Payments Upon Termination” for a further description of the terms and potential amounts payable under our executive severance plan for our named executive officers. The availability of these severance benefits is conditioned on the executive’s compliance with non-disclosure, non-compete and non-solicitation covenants. Change-in-control agreements and severance benefits are exclusive of one another, and in no circumstances would any of our named executive officers receive benefits under both a change-in-control agreement and our general executive severance plan.
Under Mr. Giacomini’s employment agreement, upon the termination of Mr. Giacomini’s employment by the Company for reasons other than a Disqualifying Event (as defined in the employment agreement) prior to a Change-in-Control (as defined in the employment agreement) or if Mr. Giacomini were to terminate his employment for Good Reason (as defined in the employment agreement), he would have received, in addition to accrued but unpaid salary and annual cash incentive, (1) a severance payment equal to two times the sum of his base salary and target annual cash incentive, (2) a prorated payment of his target annual cash incentive for the calendar year in which such termination occurs, (3) subsidized COBRA welfare benefit continuation for a period of 18 months, and (4) a lump sum payment of $20,000 less any amounts that we previously reimbursed to Mr. Giacomini for financial planning or tax preparation assistance expenses incurred in the calendar year in which such termination occurs. All such payments would have been conditioned on a general release of claims executed by Mr. Giacomini becoming effective.
Under the terms of our Incentive Compensation Plan, in the event of the death or disability of an executive during active employment with us, all outstanding LTIP awards will vest immediately and will be paid at 100% of the target award. Please see “Compensation Tables and Explanatory Information — Potential Payments Upon Termination — Potential Payment in the Event of Death, Disability or Retirement.”
Impact of Retirement on Outstanding LTIP Awards
In the event of a named executive officer’s retirement from the Company upon or after attaining age 62 and a specified number of years of service, any unvested LTIP equity or cash awards remain outstanding after retirement and vest on the originally scheduled vesting date. This permits flexibility in retirement planning, permits us to provide an incentive for the vesting period and does not penalize our employees who receive long-term cash and equity awards as incentive compensation in the three years before they retire. For awards granted prior to 2016, separation prior to attaining age 62 and 10 years of service would result in the forfeiture of unvested awards. In 2016, the Compensation Committee approved a variation to these terms, permitting the Compensation Committee to selectively grant awards that will permit unvested equity awards outstanding after retirement to vest on their originally scheduled vesting date following a retirement upon or
after attaining the age of 62 and 5 years of service. This variation was approved to allow the Company the option to offer long-term equity incentive compensation as a means of attracting and retaining personnel hired near their retirement or to incentivize existing employees who are nearing retirement but who have not been with the Company for a full ten yearten-year period.
If Mr. Giacomini’s employment ishad terminated due to his Retirement (as defined in the employment agreement) after September 9, 2023 (the tenth anniversary of his service as our Chief Executive Officer), the long-term incentive plan awards he holdsheld as of the date of such retirement will remainwould have remained eligible to become earned, vested and paid as if his employment had not terminated.
Chairperson
