CORPORATE GOVERNANCE

Governance Highlights

Our corporate governance is structured in a manner that the Board believes closely aligns the Company’s interests with those of our shareholders.

Key elements of our corporate governance framework include the following:

Director Nominations

The Nominating Committee and the Board of Directors are committed to ensuring that the Board is comprised of a highly capable group of directors who collectively provide a significant breadth of experience, knowledge and ability to effectively represent the interest of shareholders, enhance shareholder value and reflect our corporate values of integrity, honesty and adherence to high ethical standards.

The Nominating Committee considers qualifications and characteristics that it from timedeems appropriate to time, deems appropriatefurther this commitment when it selects individuals to be nominated for election to the Board of Directors. These qualifications and characteristics may include, without limitation, independence, integrity, high personal and professional ethics, business experience, education and professional background, accounting and financial expertise, age,sound business judgment, an understanding of the Company’s business and operations, diversity (including gender, race, ethnicity and age, as well as diversity of skills, backgroundbusiness and experience)professional experience and skills), the ability and willingness to commit sufficient time to serve as a director, reputation, civic and community relationships, personal accomplishments and industry knowledge and experience.

In addition, priorin determining whether to nominatingnominate an existing director for re-election to the Board of Directors, the Nominating Committee will considerconsiders and reviewreviews the existing director’s past attendance at Board and committee attendance, performancemeetings and lengththe director’s participation in and contributions to the activities of the Board. 

The Nominating Committee also considers the number of other public company boards and private company boards on which each existing director and each director nominee serves, in addition to serving on the Company’s Board. Each director is expected to spend the time and effort necessary to properly discharge such director’s responsibilities as a member of the Board service.and, if applicable, any Board committee(s) on which he or she serves. Accordingly, under the Company’s Corporate Governance Guidelines, unless the Board determines that the carrying out of a director's responsibilities to the Company will not be adversely affected by the director's other directorships, directors are limited to serving on not more than two boards of other public companies in addition to the Company's Board, and not more than one board of a private company.

While the Company supports diversity at all levels of the organization, including the Board, and the Nominating Committee considers diversity when evaluating potential candidates for the Board, the Board does not have a formal policy regarding the nomination of diverse directors. The Board believes that each potential nominee should be evaluated based on his or her individual merits and experience. However, as part of its commitment to improving gender diversity on the Board, in February 2020, the Nominating Committee recommended to the Board that it appoint two new female directors, Ms. Walton and Ms. Whitmire, to serve on the Board. The Board, on the recommendation of the Nominating Committee, subsequently voted to increase its size from five directors to seven directors and to appoint Ms. Walton and Ms. Whitmire to fill the newly-created vacancies, effective as of February 10, 2020. 

The Board has not adopted any term limit or established any retirement age for directors. The Board believes that longer‐serving directors with experience and institutional knowledge bring critical skills and insights to the boardroom, and that imposing director term limits would implicitly discount the value of experience and continuity on the Board.  The Board of Directors also believes that longer‐tenured directors have a better understanding of the challenges the Company faces and are more comfortable speaking out and challenging management. Accordingly, while director tenure is taken into consideration when making nomination decisions, the Board does not impose across the board limits on director tenure because it believes that doing so could deprive it of the valuable contributions of some of its most experienced members based on an arbitrary determination. 

Majority Voting in Uncontested Director Elections

Our bylaws contain a majority voting standard for the election of directors in an uncontested election. Accordingly, each nominee must be elected by the vote of a majority of the votes cast by the shares present in person or represented by proxy. A “majority of the votes cast” means that the number of shares voted “for” a director’s election must exceed the number of votes “against” such nominee, excluding abstentions.  Abstentions do not count as a vote “for” or “against” a director.

In addition, our Board has adopted a  director resignation policy governing procedures in the event that a director does not receive a majority of the votes cast. Pursuant to the Board’s director resignation policy, if an incumbent director fails to receive the required vote for re‑election in an uncontested election, that director shall promptly tender,

to the Board or its Chairperson, his or her resignation from the Board and from those Board committees on which the director serves, conditioned upon Board acceptance. The Nominating Committee will promptly consider such resignation and then make a recommendation to the Board whether to accept or reject the resignation tendered by such director. The Board will act on the tendered resignation, taking into account the recommendation of the Nominating Committee as well as other potentially relevant factors, no later than 180 days from the date of the certification of the election results. The director whose resignation is under consideration shall not participate in the deliberations of the Nominating Committee or of the Board with respect to his or her resignation.

The Nominating Committee, in making its recommendation, and the Board, in making its decision, may consider any factors or other information that it considers appropriate and relevant, including any stated reasons why the shareholders voted against or withheld votes from such director, the director’s tenure, the director’s qualifications, the director’s past and expected contributions to the Board, and the overall composition of the current Board, including whether accepting the resignation as tendered would cause the Company to fail to meet the requirements of Directors reflects diversityany law, regulation, or rule, including but not limited to those of the Securities and Exchange Commission (“SEC”) or the listing standards of the NYSE.

Following the Board’s decision, the Company will promptly disclose the Board’s decision regarding whether to accept or reject the director's resignation offer in businessa Form 8-K furnished to the SEC. If the Board has decided to reject the tendered resignation or to pursue any additional action, then the disclosure will include the rationale behind the decision.

The Board’s director resignation policy is set forth in the Company’s Amended and professional experience and skills.Restated Corporate Governance Guidelines, which are available on the Company’s website at www.millerind.com through the “Investor Relations” link.

Independence, Board Meetings and Related Information

Independence

The Board of Directors has determined that a majority of the members of the Board of Directors are “independent,” as “independent” is defined under applicable federal securities laws and the listing standards of the NYSE. The independent directors are Messrs. Ashford, Chandler and Roberts.Roberts and Ms. Walton.

Meetings

The Board of Directors held fivesix meetings during 2015.2019.  During 2019, the Board was comprised of Messrs. Ashford, Chandler, Miller, Miller II, and Roberts. All directors serving on the Board during 2019 attended all of the meetings of the Board of Directors and the respective committees of which they arewere members. The non-management directors meet in executive sessionsessions as a part of the meetings of the Audit Committee. The presiding director at those sessions is selected by the non-management directors on a meeting-by-meeting basis. The Company does not require its directors to attend its annual meeting of shareholders. In 2015,2019, four of the Company’s directors serving on the Board during 2019 participated in the annual meeting by telephone and one director attended in person.

Communication with Directors

Interested parties may communicate with any non-management director by mailing a communication to the attention of that director at 8503 Hilltop Drive, Ooltewah, Tennessee 37363.

Committees of the Board of Directors

The Board of Directors has standing Audit, Compensation and Nominating Committees. Generally, members of these committees are elected annually by the Board of Directors, but changes to the committees may be made at the Board of Directors’ discretion at any time. These committees operate pursuant to separate written charters adopted by the Board of Directors. These charters, along with the Company’s Amended and Restated Corporate Governance Guidelines, are available on the Company’s website atwww.millerind.com through the “Investor Relations” link. In addition, copies of these charters and guidelines can be obtained upon request from the Company’s Corporate Secretary. Pursuant to the charters, each of these Board committees has the right to retain its own legal counsel and other advisors.

Audit Committee

The Audit Committee is comprised of Messrs. Ashford, Chandler and Roberts and Ms. Walton, with Mr. Roberts serving as Chairman. The Board appointed Ms. Walton to serve as a member of the Audit Committee upon her appointment to the Board, effective as of February 10, 2020. The Board of Directors has determined that each of the members of the audit committee is “financially literate” within the meaning of the listing standards of the NYSE, and that each of Messrs. Ashford, Chandler and Roberts qualifies as an “audit committee financial expert” as defined by applicable Securities and Exchange Commission (“SEC”)SEC rules.

The Audit Committee, among other things, recommends the appointment of the Company’s independent registered public accountants, reviews the scope of audits proposed by the Company’s independent registered public accountants, reviews audit reports on various aspects of corporate operations, and periodically consults with the Company’s independent registered public accountants on matters relating to internal financial controls and procedures. The Audit Committee held sixfour meetings during 2015.2019. The report of the Audit Committee is included in this proxy statement beginning on page 22.25.

Compensation Committee

The Compensation Committee is comprised of Messrs. Ashford, Chandler and Roberts and Ms. Walton, with Mr. Chandler serving as Chairman. The Board appointed Ms. Walton to serve as a member of the Compensation Committee upon her appointment to the Board, effective as of February 10, 2020. The Compensation Committee establishes, among other things, salaries, bonuses and other compensation for the Company’s executive officers, and administers the Company’s stock option and other employee benefitequity incentive plans. The Compensation Committee also advises and consults with the Board and management, as necessary, on succession planning and other significant human resources matters, as appropriate. The Compensation Committee held one meetingtwo meetings during 2015.2019. The report of the Compensation Committee is included in this proxy statement beginning on page 13.19.

Nominating Committee

The Nominating Committee is comprised of Messrs. Ashford, Chandler and Roberts and Ms. Walton, with Mr. Ashford serving as Chairman. The Board appointed Ms. Walton to serve as a member of the Nominating Committee upon her appointment to the Board, effective as of February 10, 2020. The Nominating Committee was established to evaluateassist the Board with (i) Board and committee organization, membership and function, (ii) oversight of the evaluation of director qualifications and performance, and (iii) corporate governance. As part of these responsibilities, the Nominating Committee evaluates candidates for service as directors of the Company, and to conductconducts the Board’s annual self-assessment process.process and recommends corporate governance principles for adoption by the Board. The Nominating Committee will consider candidates recommended by shareholders. Shareholder recommendations must comply with the procedures for director nominations set forth in Article I, Section 1.2, of the Company’s Bylawsbylaws and applicable law. The Nominating Committee held one meetingfour meetings during 2015.2019.

Board Leadership Structure

The Board of Directors is responsible for overseeing and directing the management of the Company. Previously, our Board of Directors had chosen to have Co-ChiefMr. William G. Miller serves as the Executive Officers one of whom also served as Chairman of the Board. In March 2011, the Board of Directors chose to separate the positions of Chairman of the Board and Chief Executive Officer. Effective March 2011, Mr. William G. Miller began serving as the executive Chairman of the Board and Mr. Jeffrey I. Badgley began serving as the sole Chief Executive Officer of the Company and Vice Chairman of the Board. In December 2013, the Board of Directors chose to appoint a Co-Chief Executive Officer of the Company. Effective December 2013, Mr. Jeffrey I. Badgley and Mr. William G. Miller II began serving as Co-Chief Executive Officers of the Company. Each of the standing committees of the Board of Directors, the Audit, Compensation and Nominating Committees, is chaired by an independent director and is comprised entirely of independent directors.

The Board of Directors believes that separating the positions of Chairman of the Board and the Co-Chief Executive Officers allows our Co-Chief Executive Officers to focus on our day-to-day business, while allowing the Chairman of the Board to lead our Board of Directors in its fundamental role of providing advice to and oversight of management. Our Board of Directors recognizes the time, effort and energy that the Co-Chief Executive Officers are required to devote to their respective positions in the current business environment, as well as the commitment required to serve as our Chairman, particularly as our Board of Director’s oversight responsibilities continue to grow. Although we do not have a policy mandating the separation of the roles of Chairman and the Co-Chief Executive Officers, our Board of Directors believes that having separate positions is the appropriate leadership structure for the Company at this time.

The Board has not appointed a lead independent director. Currently, the Board consists of fiveseven directors, threefour of whom are independent. Due to the small size of the Board and the fact that allAll independent directors serve on all committees of the Board, all of the independent directors are able to closely monitor the activities of the Company and meet regularly in executive sessions without management to discuss  the developmentdevelopments and strategy of the Company. These executive sessions allow all the independent directors to review key decisions and discuss material matters in a manner that isamong themselves.  Given the active involvement of all of the independent of our Chairmandirectors with all material matters involving the Board and our Co-Chief Executive Officers. Therefore,with management, the Board has determined that a lead independent director is not necessary at this time.time and that appointing one would risk minimizing the important contributions of the other independent directors. As the composition of the Board changes and/or grows in the future, the Board of Directors intends tomay reevaluate the need for a lead independent director.

Risk Management

Management is responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. The Board believes that full and open communication between management and the Board of Directors is essential for effective risk management and oversight. The Board receives regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, strategic, competitive and reputational risks. The Board’s risk management includes reviews of cybersecurity vulnerability and the actions necessary to enhance the security of the Company’s information systems. Additionally, senior management is available to address any questions or concerns raised by the Board on risk management-related and any other matters.

While the Board is ultimately responsible for risk oversight at the Company, our three Board committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and, in accordance with the NYSE rules, discusses policies with respect to risk assessment and risk management. The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.

Related Transactions and Business Relationships

Policy on Related Party Transactions

The Company recognizes that transactions between the Company or its subsidiaries and any of its directors or executive officers can present potential or actual conflicts of interest. Accordingly, as a general matter it is the Company’s preference to avoid such transactions. Nevertheless, the Company recognizes that there are circumstances where such transactions may be in, or not inconsistent with, the best interests of the Company. Therefore, the Company has adopted a formal policy that requires the Company’s Audit Committee to review and, if appropriate, approve or ratify any such transactions. Pursuant to the policy, the Audit Committee will review any transaction in which the Company is or will be a participant and the amount involved exceeds $120,000, and in which any of the Company’s directors, executive officers or 5% shareholders had, has or will have a direct or indirect material interest. After its review, the Audit Committee will only approve or ratify those transactions that are in, or are not inconsistent with, the best interests of the Company and its shareholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 5, 2016,March 31, 2020, certain information with respect to the Common Stock beneficially owned by (i) each director or nominee for director, (ii) the executive officers named in the Summary Compensation Table, (iii) all executive officers and directors of the Company as a group, and (iv) all shareholders known to be beneficial owners (as that term is defined under SEC rules) of more than 5% of the Common Stock. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the Common Stock owned by them.

*Less than one percent.

(1)Includes shares of Common Stock of which the named person or entity has the right to acquire beneficial ownership within 60 days of March 31, 2020 through the exercise of any stock option or other right. Unless otherwise noted, the address for each beneficial owner is the Company’s corporate headquarters located at 8503 Hilltop Drive, Ooltewah, Tennessee 37363.

(2)The percentage of beneficial ownership is based on 11,405,468 shares of Common Stock outstanding on March 31, 2020, and represents the percentage that the named person or entity would beneficially own if such person or entity, and only such person or entity, exercised all options and rights to acquire shares of Common Stock that are held by such person or entity and that are exercisable within 60 days of March 31, 2020. 

(3)Includes 8,447 shares of Common Stock held by a limited partnership of which Mr. Chandler’s children are limited partners. Mr. Chandler disclaims beneficial ownership with respect to these shares.

(4)Includes 700 shares of Common Stock held by Mr. Roberts’ spouse. Mr. Roberts disclaims beneficial ownership with respect to these shares.

(5)As reported in an amendment to Schedule 13G filed with the SEC on January 23, 2020, Royce & Associates, LP, a registered investment adviser, beneficially owned, had the sole power to vote or to direct the vote of, and had the sole power to dispose or to direct the disposition of, 1,338,777 shares as of December 31, 2019.

(6)As reported in an amendment to Schedule 13G filed with the SEC on February 5, 2020,  BlackRock Inc., a parent holding company, beneficially owned, had the sole power to vote or to direct the vote of, and had the Sole power to dispose or to direct the disposition of, 1,086,217 shares as of December 31, 2019.

(7)As reported in an amendment to Schedule 13G filed with the SEC on February 12, 2020, Dimensional Fund Advisors LP,  a registered investment adviser, beneficially owned 943,519 shares, had the sole power to vote or to direct the vote of 913,974 shares and had the sole power to dispose or to direct the disposition of 943,519 shares as of December 31, 2019. Dimensional Fund Advisors LP furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Dimensional Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Dimensional Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Company that are owned by the Dimensional Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Dimensional Funds. However, all securities reported in such Schedule 13G are owned by the Dimensional Funds. Dimensional disclaims beneficial ownership of such securities.

(8)As reported in an amendment to Schedule 13G filed with the SEC effective February 13, 2020, Hotchkis and Wiley Capital Management, LLC, a registered investment adviser,  beneficially owned 752,323 shares, had the sole power to vote or to direct the vote of 617,623 shares and had the sole power to dispose or to direct the disposition of 752,323 shares as of December 31, 2019.

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Compensation Discussion and Analysis

In 2015,2019, the Company held a shareholder advisory vote on the compensation of its named executive officers, commonly referred to as a say-on-pay vote. The Company’s shareholders overwhelmingly approved the compensation of the named executive officers with 94.69%99.2% of shareholder votes cast in favor of the say-on-pay resolution. As the Compensation Committee evaluated its compensation policies and overall objectives for 2015,2019, it took into consideration this strong support of the shareholders. As a result, the Compensation Committee decided to retain the general approach and structure of the Company’s executive compensation program, with an emphasis on the objectives described below. In the future, the Compensation Committee intends to continue to take the results of the annual say-on-pay vote into account.

Overview

This discussion and analysis addresses the material elements of the Company’s compensation program for named executive officers, including the Company’s compensation objectives and overall compensation philosophy, the compensation process and the administration of the compensation program. It is intended to complement and enhance an understanding of the compensation information presented in the “Summary Compensation Table” and other accompanying tables in this proxy statement.

As used in this proxy statement, the term “named executive officers” means,refers to the following individuals:

●William G. Miller, the Company’s Chairman;

●Jeffrey I. Badgley, the Company’s Co-Chief Executive Officer;

●William G. Miller II, the Company’s President and Co-Chief Executive Officers;Officer; 

●Deborah L. Whitmire, the Company’s Executive Vice President, Chief Financial Officer and Treasurer; Vice President and Corporate Controller; and

●Frank Madonia, the Company’s Executive Vice President, Secretary and General Counsel as of December 31, 2015. Counsel; and

●Josias W. Reyneke, the Company’s Chief Information Officer.

In this “Compensation Discussion and Analysis” section, the terms “we,” “our,” “us” and the “Committee” refer to the Compensation Committee of the Company’s Board of Directors.

Compensation Objectives and Overall Compensation Philosophy

The Company’s executive compensation program is designed to enhance Company profitability, and thus shareholder value, by aligning executive compensation with the Company’s expectations and performance, and by establishing a system that can retain and reward executive officers who contribute to the long-term success of the Company. More specifically, the overall goals of the executive compensation program include:

●offering competitive total compensation opportunities to retain talented executives;

●providing strong links between Company performance and total compensation earned – i.e., paying for performance; and

●emphasizing the long-term performance of the Company, thus enhancing shareholder value.

We believe that it is in the best interests of the Company’s shareholders and its named executive officers that the Company’s executive compensation program, and each of its elements, remains simple and straightforward. This approach should reduce the time and cost involved in setting the Company’s executive compensation policies and calculating the payments under such policies, and should enhance the transparency of, and the ability to comprehend, these policies.

The Board of Directors has reviewed our compensation policies and practices as generally applicable to our employees and determined that they do not encourage excessive risk or unnecessary risk taking and do not otherwise create risks that are reasonably likely to have a material adverse effect on the Company.

Administration

The Committee has overall responsibility with respect to approving and monitoring the Company’s executive compensation program, and operates under a written Charter, which was last amended and restated by the Company’s Board of Directors in March 2014. None of the members of the Committee has been an officer or employee of the Company, and the Board of Directors has considered and determined that all of the members are “independent,” as that term is defined under NYSE and SEC rules, and otherwise meet the criteria set forth in the Committee’s Charter.

In fulfilling its responsibilities, the Committee, among other things, establishes and approves the compensation level of each of the named executive officers, reviews and approves corporate goals and objectives relevant to the compensation of the named executive officers, evaluates the performance of the named executive officers in light of these goals and objectives, determines and approves compensation of the named executive officers based on these objectives and its evaluations, establishesevaluations. In the past, the Committee has established criteria for granting stock options to the named executive officers and the Company’s other employees, considering the recommendations of senior management, and approvesapproved such stock option grants.

We regularly review and discuss the compensation of the named executive officers with William G. Miller, the Company’s Chairman, Jeffrey I. Badgley, the Company’s Co-Chief Executive Officer, and William G. Miller II, the Company’s President and Co-Chief Executive Officer, and consult with Messrs. Miller, Badgley and Miller IIthem in evaluating the performance of the named executive officers. In addition, Mr. Miller may make recommendations to us regarding compensation for all of the named executive officers, other than for himself, and Mr. Miller II, and each of Mr. Badgley and Mr. Miller II may make recommendations to us regarding compensation for all of the named executive officers, other than for Mr. Miller, Mr. Badgley or Mr. Miller II.

themselves.

As discussed in greater detail below, the levels of each element of compensation for the named executive officers are determined based on several factors, which may include the Company’s historical performance and relative shareholder return, our informal assessment of compensation paid to executives in comparable industries, the amount and the elements of compensation provided in previous years, the termsrelative compensation levels of eachour executive officers, the importance of retaining a named executive officer, a named executive officer’s employment agreement withpotential to assume greater responsibilities in the Company,future, our expectations for the Company’s future financial performance and other matters that we deem relevant.  In setting the compensation for our Co-Chief Executive Officers, we also reviewed and considered 2011 compensation information for chief executive officers of public companies in (i) the industrial, machinery and metal products sector as defined by Standard & Poor’s with annual sales between $200 million and $600 million, and (ii) the transportation sector as defined by Salary.com with annual sales between $200 million and $1.5 billion. In addition, we consider the years and level of experience and the responsibilities of each named executive officer, his or her individual performance and the personal contributions he or she makes to the success of the Company. Leadership skills, analytical skills, organization development, public affairs and civic involvement have been and will continue to be deemed to be important qualitative factors to take into account in considering elements and levels of compensation. We have not adopted any formal or informal policy for allocating compensation between long-term and short-term elements, between cash and non-cash or among the different possible forms of non-cash compensation.

In 2015,2019, the Company’s executive compensation program again consisted primarily of base salary and annual cash performance bonuses. While the Company has not granted any stock option awards since 2008 and currently has no plans to grant any stock option awards, stock options were at one time elements of the Company’s executive compensation program and may again become part of the Company’s executive compensation program in the future. In addition to base salary and cash bonuses, the Company has provided, and will continue to provide, its named executive officers with certain benefits, such as healthcare plans, that are available to all employees.employees, and certain other perquisites that do not exceed $10,000 in the aggregate for any executive officer. While the Company has not granted any stock option awards since 2008, stock options were at one time elements of the Company’s executive compensation program and may again become part of the Company’s executive compensation program in the future.

Elements of Compensation

Base Salary. We determine the base salary for each of the named executive officers annually based on, among other things, the executive’s experience and the scope of the executive’s responsibilities, the executive’s performance and the performance of the Company, our expectations for the Company’s future financial performance, and our informal assessment of salaries paid to executives in comparable industries. The minimum levels of some of these base salaries are mandated by employment agreements with certain of the named executive officers (which areindustries, and other factors described in more detail below under the heading “Additional Discussion of Material Items in Summary Compensation Table―Employment Agreements with Named Executive Officers”).above. We believe that base salaries are an important part of the Company’s executive compensation program because they provide the named executive officers with a steady income stream that is not contingent upon the Company’s overall performance.

Under William G. Miller’s employment agreement with the Company, Mr. Miller is entitled to receive a base salary that is substantially the same as the Company’s Chief Executive Officer; however, from 1999 through 2006 he declined increases to which he was entitled under his agreement. Effective July 2007, the Compensation Committee increased Mr. Miller’s salary to match the salary of Mr. Badgley in accordance with his employment agreement. For 2010, Mr. Miller’s base salary was adjusted accordingly to match Mr. Badgley’s 2010 base salary; however, Mr. Miller has in each year since 2010 declined to increase his salary to that of Mr. Badgley.

In December 2013, when Mr. Miller II was appointedMarch 2019, the Co-Chief Executive Officer of the Company, the Compensation Committee approved a base salary for Mr. Badgley of $350,000 effective January 1, 2014 and aan annual base salary for Mr. Miller of $319,737, Mr. Badgley and Mr. Miller II of $300,000$489,250, Ms. Whitmire of $267,800, Mr. Madonia of $267,800, and Mr. Reyneke of $206,000, each effective January 1, 2014. The Compensation2019. In March 2020, the Committee approved an annual base salary increase for all executive officers of 3% (other than for Mr. Miller), which is the same salary increase applicable to all Company employees generally. As a result, the Committee approved an annual base salary for Mr. Badgley of $400,000,and Mr. Miller II of $400,000,$503,928,  

Ms. Whitmire of $275,834, Mr. Madonia of $246,750,$275,834, and Mr. MishReyneke of $222,634 and Ms. Whitmire of $200,000,$212,180, each effective January 1, 2015.

2020. Mr. Miller continued his practice of declining to accept an increase in his salary.

Annual Cash Bonuses – Co-Chief Executive Officer Cash Bonus Program. .The purpose of the Company’s annual cash bonus program for the Company’s Co-Chief Executive Officers is to align short-term incentive bonuses with the achievement of annual corporate profitability. Annual cash bonuses under this program, as opposed to grants of stock options or other equity-based awards, are designed to provide additional compensation to the Co-Chief Executive Officers, and to more immediately reward them in direct relation to the Company’s net income achieved during the performance period. The immediacy of these cash bonuses provides an incentive to the Co-Chief Executive Officers to raise their level of performance in order to increase the Company’s overall level of profitability. Thus, we believe that bonuses under the cash bonus program are an important motivating factor for the Co-Chief Executive Officers.

In 2011, in connection with Mr. Badgley becoming the Chief Executive Officer, the Committee approved a cash bonus plan for Mr. Badgley that was subsequently terminated on September 5, 2018. Prior to its termination, the plan provided an annual bonus equal to 1.0% of the first $20 million of the Company’s pretax net income, and 0.5% of pretax net income in excess of $20 million, subject to Compensation Committee discretion to decrease such amount as it deemed appropriate. For 2017, the Committee exercised its discretion under the bonus plan and determined that Mr. Badgley and Mr. Miller II, as the Co-Chief Executive Officers of the Company, would each receive an amount equal to half of the cash bonus that was payable under the plan with regard to 2017 performance. Accordingly, in March 2018, the Committee awarded each of Mr. Badgley and Mr. Miller II a cash bonus of $152,765, each with regard to 2017 performance.

On September 5, 2018, the Committee adopted a revised cash bonus program for the Company’s Co-Chief Executive Officers, effective as of January 1, 2018, which replaced the previous cash bonus plan for Mr. Badgley. The cash bonus program provides that Messrs. Badgley and Miller II shall be entitled to receive an annual cash bonus award pursuant to the following formula if the Company’s income before income taxes (excluding any currency adjustments) (“Pretax Income”) exceeds $10 million for the most recently completed fiscal year:

The Company retains the right to modify, amend or terminate the cash bonus program at any time.

In March 2019, the Committee awarded each of Mr. Badgley and Mr. Miller II a cash bonus of $299,952 under the cash bonus program, each with regard to 2018 performance, which amounts were derived from application of the formula above to the Company’s Pretax Income in 2018.  

In March 2020, the Committee awarded each of Mr. Badgley and Mr. Miller II a cash bonus of $430,777 under the cash bonus program, each with regard to 2019 performance, which amounts were derived from application of the formula above to the Company’s Pretax Income in 2019.

The amounts of all of these non-equity incentive plan cash bonuses paid to the Co-Chief Executive Officers are set forth in the “Summary Compensation Table.” 

Annual Cash Bonuses – Discretionary Cash Bonuses. We also utilize annual discretionary cash bonuses to provide additional compensation to the named executive officers and to reward them for their performance. We have not adopted any formal or informal performance or other objectives for the calculation or payment of these discretionary bonuses. Instead, in determining an annual discretionary bonus, we consider, among other things, the Company’s performance for the previous year and relative shareholder value created, discretionary bonuses awarded in previous

years, the performance of the named executive officer and his or her personal contributions to the success of the Company.

Annual discretionary cash bonuses, as opposed to grants of stock options or other equity-based awards, are designed to provide additional compensation to the named executive officers, and to more immediately reward them for their performance. The immediacy of these bonuses provides an incentive to the named executive officers to raise their level of performance, and thus the Company’s overall level of performance. Thus, we believe that discretionary cash bonuses are an important motivating factor for the named executive officers.

In 2015,March 2019, based primarily on the Company’s and the individual executive officer’s performance in 2014,2018, we determined to pay annual discretionary cash bonuses to certain of the otherfollowing named executive officers, as follows:officers: 

Cash bonuses were determined based upon the Company’s performance. The amounts of suchthe above cash bonuses paid to the named executive officers in 2019 are set forth in the “Summary Compensation Table.”

In April 2011,addition, in connection with Mr. Badgley becoming the Chief Executive Officer and Vice Chairman, the Compensation Committee approved a new cash bonus plan for Mr. Badgley that was designed to emphasize the objective of maintaining profitability during every part of the business cycle. The plan provides Mr. Badgley an annual bonus equal to 1.0% of the first $20 million of the Company’s pretax net income, and 0.5% of pretax net income in excess of $20 million, subject to Compensation Committee discretion to decrease such amount as it deems appropriate. In the event that the Company incurs an annual pretax net loss at any time that Mr. Badgley remains the CEO of the Company, then bonus amounts previously paid on equivalent pretax profit would be recovered from Mr. Badgley. These amounts may be recovered by offsetting future bonuses or salary or by direct repayment from Mr. Badgley or, in the event of Mr. Badgley’s termination from employment with the Company, payments otherwise due under his employment agreement. Mr. Badgley’s total salary and bonus compensation may not exceed $975,000 annually. In each of 2015 and 2016, the Compensation Committee exercised its discretion under the bonus plan and determined that Mr. Badgley and Mr. Miller II, as the Co-Chief Executive Officers of the Company, would each receive an amount equal to half of the cash bonus that was payable under the plan. Accordingly, in 2015, the Compensation Committee awarded (i) Mr. Badgley a cash bonus of $110,000 under the plan and (ii) Mr. Miller II an annual discretionary cash bonus of $110,000, each with regard to 2014 performance. In 2016, the Compensation Committee awarded (i) Mr. Badgley a cash bonus of $126,000 under the plan and (ii) Mr. Miller II an annual discretionary cash bonus of $126,000, each with regard to 2015 performance.

In 2016,March 2020, based primarily on the Company’s and the individual executive officer’s performance in 2015,2019, we determined to pay annual discretionary cash bonuses to certainthe following named executive officers: 

The amounts of the otherabove cash bonuses paid to the named executive officers as follows:in 2020 will be set forth in the “Summary Compensation Table” in the proxy statement for the Company’s 2021 annual meeting of shareholders.

Equity Awards. While we have not awarded equity-based compensation since granting stock options to the named executive officers in 2008, we may consider adopting a new equity incentive plan and granting equity-based awards in the future as a partBoard of Directors has adopted the Company’s overall executive compensation philosophy.

Equity incentive awards were previously granted under2016 Stock Incentive Plan, which was approved by our shareholders at the Company’s 2005 Equity Incentive Plan; however this plan expired on April 27, 2015. This plan provided us with broad discretion to fashion the terms of awards to provide eligible participants with such stock-based incentives as we deemed appropriate. It permitted2017 Annual Meeting and permits the issuance of awards in a variety of forms, including non-qualified stock options and incentive stock options, stock appreciation rights, restricted stock awards and performance shares.

In general, options previously awardedunder  Thus, we are authorized to grant equity-based awards in the 2005 Equity Incentive Plan for the purchase of 500 or more shares vest in four equal annual installments, and all options previously awarded under the 2005 Equity Incentive Plan for the purchase of fewer than 500 shares vest in two equal annual installments. All stock options previously awarded under the 2005 Equity Incentive Plan are exercisable until the tenth anniversaryfuture as a part of the grant date unless otherwise earlier terminated pursuant to the terms of the individual option agreement.

SeveranceCompany’s overall executive compensation philosophy, and Change of Control Arrangements. As discussed in more detailmay consider doing so in the “Additional Discussion of Material Items in Summary Compensation Table―Employment Agreements with Named Executive Officers” and “Potential Payments Upon Termination or Change in Control” sections below, the named executive officers may be entitled to certain benefits upon the termination of their respective employment or change in control agreements.

future.

Other Compensation. The named executive officers currently are entitled to participate in the Company’s health, life and disability insurance plans and in our 401(k) plan to the same extent that the Company’s employees are entitled to participate.

Policy with Respect to Qualifying Compensation for Deductibility

For taxable years beginning before January 1, 2018, Section 162(m) of the Internal Revenue Code imposesimposed a limit on federal income tax deductionsdeductibility for annual compensation (other than performance-based compensation) in excess of one million dollars paid by a public corporation to its Chief Executive Officer and its other three most highly compensated executive officers.officers (other than the Chief Financial Officer). Compensation in excess of one million dollars could be deducted, however, if it qualified as “performance-based compensation” within the meaning of Section 162(m) or qualified for one of the other exemptions from the deductibility limit.  The Compensation Committee does not believe that the Company’s compensation policies wouldprogram was designed to satisfy the exemption under Section 162(m).

As a result inof new tax legislation that was enacted December 22, 2017, the exemption for performance-based compensation has been repealed, effective for tax years beginning after December 31, 2017, and the number of employees who will be considered “covered employees” subject to the 162(m) limit has been expanded to include the Chief Financial Officer (who was previously excluded) and certain former named executive officers. As a result of these changes, compensation in excess of these limits$1 million paid to executive officers covered by Section 162(m)’s deduction limit will not be deductible in 2018 or future years unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The deductibility of compensation is one of the factors the

Compensation Committee considers in its compensation policies, but the Compensation Committee reserves the right to award nondeductible compensation when appropriate to accomplish otherits compensation objectives. The Compensation Committee will continue to assess the impact of Section 162(m) on its compensation practices and determine what further action, if any, is appropriate.

Report of the Compensation Committee

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained under that heading in this proxy statement. On the basis of its reviews and discussions, the Compensation Committee has recommended that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015,2019, and this proxy statement.